MGNM571

Corporate Strategy &

Entrepreneurship-I

RAJEEV GUPTA

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News Article

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• Bob Jordan, Chief Executive Officer, stated, "We are very pleased to
report all-time record quarterly revenues and net income, excluding
special items, representing a significant milestone in our pandemic
recovery. Travel demand surged in second quarter, and thus far, strong
demand trends continue in third quarter 2022.

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• "We are making meaningful progress against our 2022 priorities, and I
am very proud of our People and their heroic efforts to fight against
the pandemic. Since April, we have been delivering a more reliable
product for our Customers with cancellations representing less than
one percent of scheduled flights in May and June 2022, which is a
completion factor of more than 99 percent.

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LEARNING OBJECTIVES

Understand how to prepare a BSC and

use it for strategy Implementation

The
BALANCED
SCORECARD

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SOUTHWEST AIRLINES

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STRATEGY MAPS HELP LINK ALL PERFORMANCE METRICS TO STRATEGY

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 EXTEND THE MAP INTO MEASUREMENTS, TARGETS AND INITIATIVES

Strategy Map
Customers

Detailed statement How success in The level of Key action

Faster Service Access of what is critical achieving the performance programs
to successfully strategy will be or rate of required to
achieving the measured and improvement achieve
strategy tracked needed objectives
Self Service
Internal Process

Applications

Objective
Measure Target Initiative
Lean Processes Description
Eliminate waste, Number of Reworks 2 per setup per Lean / Six
reworks, and other month each Sigma
Process and Value errors in our Outlet Office
Map Analysis processes
L&G

Web Enable
Technologies
Financials

Invest in IT
ALIGNMENT OF SCORECARD COMPONENTS

Make sure the components of scorecard fit together. Create a tight model for
driving execution of strategy.

Goal Objective Measurement Target Initiative

Achieve Reduce Cost per Outlet 5% - Year 1 Activity Based
Agency Operational Office, Cost per 10% - Year 2 Costing /
operational Service Costs by Region 15% - Year 3 Management
efficiencies 50% over the next
with best 5 years
practices in
the private
sector Reduce identified Waste Volume Waste stream Lean / Six
re-activities within Charts, Rework reductions of 5% Sigma
primary processes Tracking, Cycle each year,
by 80% over the Time End to Start Reworks cut in
next 3 years half for next 3
years, cycle time
cut by 75%
THE STORY OF A SCORECARD

To be successful for shareholders, co. must be no1,

which means that we must return superior financial results in .......

Customers are the people who will secure these results for co. so co must
offer customers superior value by .........

To deliver this superior value co. must excel in the way people manage the
processes for .......

These processes are operated by our people. Co. must provide our people
with ....... to achieve excellent performance.

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HOW IT STARTED

• Introduced in 1992, by Robert Kaplan and David Norton

• The Balanced Scorecard is the most commonly used

framework for ensuring that agencies execute their strategies.

• Today, about 70% of the Fortune 1,000 companies utilize the

Balanced Scorecard to help manage performance.

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BALANCED SCORECARD HISTORY

Measurement Enterprise-wide
Alignment and
and Strategic
Communication
Reporting Management

1992 1996 2000

Articles in Harvard Business Review: Acceptance and Acclaim:

 “The Balanced Scorecard —  “The Balanced
Measures that Drive Scorecard” is
Performance” January - February translated into 18
1992 languages
 “Putting the Balanced Scorecard  Selected by Harvard
to Work” September - October Business Review as
1993 one of the “most
important
 “Using the Balanced Scorecard
management
as 1996 2000
a Strategic Management System” practices of the past
January - February 1996 75 years.“

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BALANCED SCORECARD

At the highest level, the Balanced Scorecard is a

framework that helps organizations put strategy at the
center of the organization by Translating strategy into
operational objectives that drive both behavior and
performance.

The Balanced Scorecard is a tool that translates an

organization's mission and strategy into a comprehensive
set of performance measures that provides the framework
for a strategic measurement and management system.

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BSC-CREATES BALANCE

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ORGANIZATIONS OFTEN HAVE A GAP BETWEEN STRATEGY AND ACTION

Strategy Is a Step In a Continuum

MISSION
Why we exist
VALUES
What’s important to us
VISION
What we want to be
STRATEGY
Our game plan

STRATEGIC OUTCOMES

Satisfied Delighted Efficient and Effective Motivated & Prepared

SHAREHOLDERS CUSTOMERS PROCESSES WORKFORCE
THE BALANCED SCORECARD IS A BRIDGE TO CLOSE THAT GAP

Strategy Is a Step In a Continuum

MISSION
Why we exist
VALUES
What’s important to us
VISION
What we want to be
STRATEGY
Our game plan
BALANCED SCORECARD
Implementation & Focus
STRATEGIC INITIATIVES
What we need to do

STRATEGIC OUTCOMES

Satisfied Delighted Efficient and Effective Motivated & Prepared

SHAREHOLDERS CUSTOMERS PROCESSES WORKFORCE
MEASUREMENT SYSTEM

Translates mission, vision and strategy through objectives

and measures

Provides a framework to describe the key elements in the

achievement of the strategy

Measures four perspectives

- Customer Relations
- Financial
- Internal Service Process
- Learning, Innovation and Growth

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MODEL BALANCED SCORECARD

Each Balanced Scorecard should be customized to match organizational

structure, strategy, and situation.

Still, all Balanced Scorecards should contain these components:

Perspectives – Groupings of organization's high-level focus areas (should take

all key "stakeholders" into account).

Objectives – Critical top-level goals derived from current strategic plan (phrased
in short, verb-noun statements, e.g. "improve customer satisfaction.")

Measures – The best indication(s) that co is on track to achieve each objective

(should have no more than 1-3 per objective).

Initiatives – Time-specific projects (e.g. with defined start- and end-dates) that
are separate from, but aligned to, strategic objectives and measures.

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FINANCIAL PERSPECTIVE

1. What financial steps are necessary to ensure the execution of our

strategy/goals?

2. Are the program’s/ department’s goals, implementation, and

execution contributing to the bottom line?

3. Are we meeting operational and financial targets?

4. Dimensions of Quality: Efficiency

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INTERNAL SERVICE PROCESS PERSPECTIVE

1. What critical processes must we excel at to satisfy our

customers/stakeholders?
2. What must be done internally to meet patient/customer
expectations?
3. Dimension of Quality:
Effectiveness
Appropriateness
Safety

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CUSTOMER PERSPECTIVE

1. Who are our target customers?

2. How do our patients/customers see us?
3. How do patients/customers rate our performance?
4. Dimension of Quality:
Accessibility
Acceptability
Continuity

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LEARNING INNOVATION AND GROWTH PERSPECTIVE

1. How can we continue to improve?

2. What capabilities and tools do our employees need to execute our
strategy/goals?
3. Dimension of Quality:
Competence
Participation

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EXAMPLES OF MEASUREMENTS BY PERSPECTIVE

Stakeholder / Customer Internal Processes

• Current customer satisfaction level
• Improvement in customer satisfaction
• Customer retention rate
• Frequency of customer contact by
customer service
• Average time to resolve a customer
inquiry
• Number of customer complaints
• Number of unscheduled maintenance calls
• Production time lost because of maintenance
problems
• Percentage of equipment maintained on
schedule
• Average number of monthly unscheduled
outages
• Mean time between failures

Learning and Growth Investments

• Percentage employee absenteeism • % of facility assets fully funded for
• Hours of absenteeism upgrading
• Job posting response rate • % of IT infrastructure investments
• Personnel turnover rate approved
• • # of new hire positions authorized for
Ratio of acceptances to offers
filling
• Time to fill vacancy
• % of required contracts awarded and in
place

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HOW SOUTHWEST AIRLINES DEVELOPED ITS BALANCED SCORECARD ANALYSIS

Strategic Theme: ‘operating efficiency’

The four perspectives

 Financial: What will drive operating efficiency?
 Answer: More customers on fewer planes.
 Customer: How will we get more customers on fewer planes?
 Answer: Attract targeted segments of customers who value price and on-time arrivals.
 Internal: What must our internal focus be?
 Answer: Fast aircraft turnaround time.
 Learning: How will our people accomplish fast turnaround?
 Answer: Educate and compensate the ground crew regarding how they contribute to the
firm’s success.

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CREDIT CARD COMPANY EXAMPLE

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THANK YOU

RAJEEV GUPTA

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