Strategic Management process part II Balanced score card and strategyStrategy maps and alignment

Value proposition and strategies

Value creation = CDV + EDV Value creation strategy : CVP + EVP

Why the Balanced Scorecard? The Organization will become more strategically focused .

People at all levels have relied heavily on tactical performance measurements, such as number of maps submitted, and % of supply vendor contracts in place. Need more balanced approach to looking at performance, both tactical and strategic. Only 5% of a workforce tends to understand their companys strategy. 86% of executive teams spend less than one hour per month discussing strategy.

A Major Driver is . . . The Organizations Information Resource Planning

System (IRPS):

- Enterprise wide system for how we will evaluate success division read outs, data turnarounds, global partnerships, etc. - Must be integrated into all agency components (such as region and global outlet offices)- Designed around the Balanced Scorecard framework

The Balanced Scorecard will be the strategic view of performance for the agency, balancing out our current tactical view of performance which is already in place.

The enterprise value proposition Financial Customer Internal process Learning and growth

Some Basic Principles Quantifies the Strategy in measurable terms Strategy is summarized on a Strategy Map over four

views of performance (perspectives). Must capture a cause-effect relationship between strategic objectives over the four perspectives on the Strategy Map. Critical Components include: - Measurements - Targets - Initiatives Everything must be linked: Goals to Objectives, Objectives to Measurements, Measurements to Targets.

Building Alignment into the Planning ProcessCorporate Support Units Enterprise Strategy Map2

rocess

Board Board of Directors Of directors

Board Strategy Map

finance Enterprise Enterprise Strategy Update finance Strategy update

1

Enterprise Strategy Map3

Finance ITHR

Corporate Planning Process

Functiona Functional l Strategy Update Strategy update

Corporate Functional Strategy Map Enterprise Functional Strategy Map

Enterprise Strategy Map

4

SBU Strategy Map

8

Business Unit Functional Map

Corporate Support Units

customer Vendors/ s 6 Customers alliancesVendors/ Alliances7

SBU Strategy Map

SBU Strategy Update

Functional StrategyFinance update ITHR

Business Planning Process

5

Functional Strategy Update Support Units

Support Unit Services

Four Views of PerformanceStrategic Objectives

Strategy can be described as a

StakeholdersIf we succeed, how will we look to our stakeholders?

series of cause and effect relationships. Provides a line of sight from

Internal ProcessesTo satisfy our customers, at which processes must we excel?

strategic to operational activity working on the right things.

Learning & Growth"To execute our processes, how must our organization learn and improve?"

Agency InvestmentsIn order to succeed, what investments in people and infrastructure must we make?

The Importance of AlignmentComplete Framework for IRPSStrategyAgency Department Team/ Individual

Objectives

Measures

Alignment all the Way ThroughGoal: Improve environmental health Performance Gap: Less than Organization watershed water quality Initiative: Data Mining ResourceInnovationImproved "Cause and Effect" Knowledge

Investment Management Business ProcessesImproved Environmental Assessment Reports Justified Initiatives to Improve Water Quality Investments Available to be Allocated to Other Critical Areas

Financial ManagementDecreased Litigation Costs

Relationship ManagementEnhanced Public Confidence Increased Investment Accountability

Environmental HealthImproved Water Quality

Strategy Map: Capture a Cause Effect Relationship from the Bottom UpStakeholder More rapid and accessible services

Improved Returns on Investments

Internal Process

Economic Model Process

Reduce Re-Activities thru ABC

Establish Web Based Self Services

Learning & Growth

Expand Global Facility Reach

Leadership Development

Knowledge Management

Investments

Facilities and Fixed Assets

Human Capital

IT Infrastructure

Two Special Techniques for Building Strategy MapsGeneral Rule of Thumb to ensure strategy map is developed both vertically and horizontally

The 4 to 5 Rule

Weak

Strong

Splitting the Perspective

Way of pulling out both drivers and outcomes that match up against the core competencies of the business modelCustomer Perspective Customer Growth Timely Delivery Retention Rate Pricing Quality

Customer SatisfactionService Reputation

Outcomes Drivers

Key Benefits of Strategy Maps Articulates how the organization creates value for its constituents and

legitimizing authority Displays key priorities and relationships between outcomes (the "what") and performance enablers or drivers (the "how") Provides a clear view of "how I fit in" for sub-organizations, teams, and individuals "Cascading the scorecard throughout the organization, and clearly mapping the various units and functions back to the organization or agency-wide map is critical to leveraging and ensuring alignment"

Strategy Maps A Better Way to Communicate StrategyExecutive consensus and accountability: Building the map eliminates ambiguity and clarifies responsibility. Educate and Communicate: Build awareness and understanding of organization strategy across the workforce.

Promote Transparency: Ensure Alignment: Each sub-unit and individual link their objectives to the map. Communicate with and educate constituents, partners, oversight bodies, and the general public.

Aligning the ScorecardsOnce you have completed your strategy map, make sure it aligns with agencies or divisions you report up to. This overall alignment of scorecards throughout the entire Organization forms the Strategic Management System within IRPS. IRPS Organization ScorecardBest Business Practices Expand Global Reach Expand the Skill Base

Functional Scorecard

Lean Processes

Improve Asian Footprint

Develop the Workforce

Agency Scorecard

Process Efficiency

Grow Globally

Highly Skilled Workers

Outlet Scorecard

Streamline Processes

Continue to Expand Range

Improve Employee Competencies

Extend the Map into Measurements, Targets and Initiatives

Stakeholder

Strategy MapFaster Service Access Detailed statement of what is critical to successfully achieving the strategy How success in achieving the strategy will be measured and tracked The level of performance or rate of improvement needed Key action programs required to achieve objectives

Internal Process

Self Service Applications

Lean Processes

Objective DescriptionEliminate waste, reworks, and other errors in our processes

MeasureNumber of Reworks

Target2 per setup per month each Outlet Office

InitiativeLean / Six Sigma

Process and Value Map Analysis

L&G

Web Enable Technologies

Investments

Invest in IT

Alignment of Scorecard ComponentsMake sure the components of your scorecard fit together. We want to create a tight model for driving execution of your strategy.

GoalAchieve Agency operational efficiencies with best practices in the private sector

ObjectiveReduce Operational Service Costs by 50% over the next 5 years

MeasurementCost per Outlet Office, Cost per Region, Cost per FTE

Target5% - Year 1 10% - Year 2 15% - Year 3

InitiativeActivity Based Costing / Management

Reduce identified re-activities within primary processes by 80% over the next 3 years

Waste Volume Charts, Rework Tracking, Cycle Time End to End in S-LX (5 of 7 Regions)

Waste stream reductions of 5% each year, Reworks cut in half for next 3 years, cycle time cut by 75%

Lean / Six Sigma

Examples of Measurements by PerspectiveStakeholder / Customer 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

Internal Processes 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 Percentage employee absenteeism Hours of absenteeism Job posting response rate Personnel turnover rate Ratio of acceptances to offers Time to fill vacancy

Investments

% of facility assets fully funded for upgrading % of IT infrastructure investments approved # of new hire positions authorized for filling % of required contracts awarded and in place

Making the connection to the Baldrige CriteriaMalcolm BaldrigeLeadership Human Resource Capital Business Results Process Management Strategic Planning

Balanced ScorecardLearning & Growth Perspective Learning & Growth Perspective Measurements and Targets Internal Process Perspective Strategy Map

Customer Focus

Stakeholder / Customer Perspective

End of Chapter