11

Balanced ScorecardBalanced Scorecard

Airline & FMCG -ImplementationAirline & FMCG -Implementation

Anand SubramaniamAnand Subramaniam

22

To navigate a plane, looking at the fuel indicator is too limited – other factors impact the success of a flight; a cockpit requires a balanced measuring system !!

33

Implementation HighlightsImplementation HighlightsChallenges around Strategy Execution Challenges around Strategy Execution

What is Balance Scorecard (BSC) and why firms What is Balance Scorecard (BSC) and why firms implement it?implement it?

My Client’s (FMCG & Airlines) :My Client’s (FMCG & Airlines) :– Challenges, Challenges, – Goals, Goals, – Benefits Seeked, Benefits Seeked, – Critical Success Factors (CSF), Critical Success Factors (CSF), – Strategy MapStrategy Map– Example – themes, CSF, measures & targets,Example – themes, CSF, measures & targets,– implementation roadmap including time frames, implementation roadmap including time frames, – Project Organisation ChartProject Organisation Chart– Lessons LearntLessons Learnt

44

Is this happening at your firm ?Is this happening at your firm ?

Strategic Learning Loop

Initiatives & Programs

test the hypotheses

Output(Results)

reportingManagement Control Loopfunding

Input(Resources)

update the strategy

PERFORMANCE

85% of management teams spend less than one hour per month on

strategy issues

92% of organisations do not report on lead

indicators

60% of organizations don’t link strategy &

budgets

78% of organisations lock budgets to an annual cycle

20% of organisations take more than 16 weeks to

prepare a budget

STRATEGY

BALANCED SCORECARD

BUDGET

55

Strategy Execution ChallengesStrategy Execution Challenges

Lack of Organisation

Alignment

Lack of Organisation

Alignment

Disjointed Planning and Processes

Disjointed Planning and Processes

Unclear Visionand Strategy

Unclear Visionand Strategy

Inability to Test and Adapt PerformanceInability to Test and Adapt Performance

“I’m not sure our resources are

allocated against priorities and our

best opportunities.”

“We spend too much time and effort creating

plans instead of getting value

from the planning process”

“Our strategic, operational, and financial plans

are not aligned.”

“Our data is of poor quality and

we have disparate

systems to report on performance.”

“We are a collection of silos

that do not collaborate.”

“We do not know if our strategy is working until it is

too late.”

“We have a strategy, we

just can’t explain it that

easily.”

“Our leadership team does not

agree on our key priorities.”

“Our employees don’t have a

clear understanding of

what the strategy is and their role in it.”

“We are trying to do 100

things, rather than do 15

critical things well.”

“Recognition and rewards are not based on driving the change we

need.”

“We don’t have the right

measures. There are too many of them and we’re not sure which ones to use”

66

Vision to Outcomes – Conceptual OverviewVision to Outcomes – Conceptual Overview

BALANCED SCORECARDTranslate, Focus and Align

STRATEGIC INITIATIVESWhat are the priorities

MISSIONWhy we exist

VALUESWhat’s important to us

VISIONWhat we want to be

STRATEGYOur game plan

STRATEGIC OUTCOMES

SatisfiedSHAREHOLDERS

Delighted CUSTOMERS

Efficient & EffectivePROCESSES

Motivated & PreparedWORKFORCE

EMPOWERMENT / PERSONAL OBJECTIVESWhat I need to do

TOTAL QUALITY MANAGEMENTWhat we must improve

77

What is a Balance Scorecard (BSC)?What is a Balance Scorecard (BSC)?

The Conclusion

Measurement Must Be Linked To Strategy

StrategyBalancedScorecard

Measurement To Communicate, Not To Control

Measurement Communicates Values, Priorities & Direction

The Premise

88

BSC PerspectivesBSC Perspectives

How can we continually get How can we continually get smarter, innovate, and improve?smarter, innovate, and improve?Knowledge and Knowledge and

InnovationInnovationOrganisational Organisational

CapacityCapacity

How can we improve internal How can we improve internal processes to improve quality, processes to improve quality, timeliness, economics, and timeliness, economics, and functionality?functionality?

EfficiencyEfficiencyInternal Internal ProcessProcess

For businesses, how do we create For businesses, how do we create value for owners? value for owners?

Financial Financial PerformancePerformance

Financial Financial StewardshipStewardship

Through the eyes of our customers Through the eyes of our customers and stakeholders, how will they and stakeholders, how will they judge our products and services?judge our products and services?SatisfactionSatisfactionCustomer/ Customer/

StakeholderStakeholder

Key QuestionsKey QuestionsKey ConceptKey ConceptPerspectivePerspective

99

BSCBSC

1010

Why firm’s implement BSC? Why firm’s implement BSC? To align corporate strategy with daily operationsTo align corporate strategy with daily operations

To make informed business decisions via defined To make informed business decisions via defined reporting and analysis, to corporate best practicesreporting and analysis, to corporate best practices

To comply with regulations by disclosing corporate To comply with regulations by disclosing corporate information timelyinformation timely

To achieve the vision by building rigor To achieve the vision by building rigor

To help with innovation / new product developmentTo help with innovation / new product development

To adapt to changing technologies and marketsTo adapt to changing technologies and markets

To attract and retain talented peopleTo attract and retain talented people

A management system or a check-up for the A management system or a check-up for the business business

1111

My Client’s BSC ImplementationMy Client’s BSC Implementation

Lesson’s LearntLesson’s Learnt

1212

Challenges before BSC Challenges before BSC Measures not aligned or changed with strategy and does not Measures not aligned or changed with strategy and does not reflect critical success factors. reflect critical success factors.

Short-term focus rather than taking a long-term and the focus Short-term focus rather than taking a long-term and the focus was on what is currently being done, not what should be donewas on what is currently being done, not what should be done

Failure to measure the impact on the overall organisation Failure to measure the impact on the overall organisation

Much quantitative information could not be reduced to Much quantitative information could not be reduced to monetary amounts and some could not be quantifiedmonetary amounts and some could not be quantified

Some information provided feedback but no guidance Some information provided feedback but no guidance

Measures poorly designed and / or collected (eg. customer Measures poorly designed and / or collected (eg. customer satisfaction, employee morale) satisfaction, employee morale)

Goals were arbitrarily determined, beyond the ability of the Goals were arbitrarily determined, beyond the ability of the systemsystem

Measures produced were irrelevant, redundant, questionable, Measures produced were irrelevant, redundant, questionable, confusing (not defined) and some were manipulatedconfusing (not defined) and some were manipulated

1313

Goals seekedGoals seekedTo improve management effectiveness by having a shared To improve management effectiveness by having a shared and actionable view of the strategyand actionable view of the strategy

To provide a generic framework to translate strategy into To provide a generic framework to translate strategy into operational terms operational terms

To create a systems approach or an integrated Strategic To create a systems approach or an integrated Strategic Management Process Management Process

To provide a clear line of sight to the vision and strategy of To provide a clear line of sight to the vision and strategy of the company, providing feedback and guidancethe company, providing feedback and guidance

To provide a tool for communicating the strategy and the To provide a tool for communicating the strategy and the processes and systems required for strategy implementation processes and systems required for strategy implementation

To draw a cause and effect roadmap to stakeholder value – To draw a cause and effect roadmap to stakeholder value – shareholder, customer, and employee.shareholder, customer, and employee.

To provide a balance between current performance and long-To provide a balance between current performance and long-term competitive abilities (financial & non-financial measures)term competitive abilities (financial & non-financial measures)

1414

Benefits achievedBenefits achievedImproved management effectiveness by having a Improved management effectiveness by having a shared and actionable view of the strategyshared and actionable view of the strategy

Ensured strategic outcomes for a given set of Ensured strategic outcomes for a given set of resourcesresources

Enabled employees to work in a coordinated, Enabled employees to work in a coordinated, collaborative fashion towards organisational goalscollaborative fashion towards organisational goals

Provided timely information for informed decision-Provided timely information for informed decision-making on resource allocationmaking on resource allocation

Provided guidance on future operations & decisionsProvided guidance on future operations & decisions

BSC was utilised as an change agent, to translate BSC was utilised as an change agent, to translate the strategy into action, providing feedback and the strategy into action, providing feedback and learninglearning

1515

Lesson’s Learnt / Success CriteriaLesson’s Learnt / Success Criteria““Story of the firm’s strategy” in actionable terms.Story of the firm’s strategy” in actionable terms.Executive InvolvementExecutive Involvement - strategic decision makers - strategic decision makers validated and owned the strategy and related validated and owned the strategy and related measures measures Cause and Effect RelationshipsCause and Effect Relationships - every objective - every objective selected was analysed for cause and effect linkages selected was analysed for cause and effect linkages and to the strategy and to the strategy Balance between outcome and leading measuresBalance between outcome and leading measures - - there was a balance and facilitated anticipatory there was a balance and facilitated anticipatory management management Financial LinkageFinancial Linkage - every objective was ultimately - every objective was ultimately linked to the financial results linked to the financial results Linkage of Initiatives and MeasuresLinkage of Initiatives and Measures - each initiative - each initiative was analysed for variance, between baseline and was analysed for variance, between baseline and target. target.

1616

Strategy Map designedStrategy Map designed

Learning & Growth Perspective:

role for intangible assets – people, systems, climate and culture

Improve Shareholder Value

Productivity Strategy Revenue Growth Strategy

Improve Cost Structure

Increase Asset Utilisation

Enhance Customer Value

Create Value from New Products &

Services

Human, Information, and Organisational Capital

Shareholder ValueROCE

Cost per Unit Asset Turnover Customer Profitability

New Revenue Sources

Price

Financial Perspective:

drivers of shareholder value

Product/Service Attributes

Strategic Competencies

Strategic Technologies

Climate for Action

(Processes that Produce and

Deliver Products & Services)

(Processes that Enhance Customer

Value)

Operations Theme Customer Management

Theme

Innovation Theme Regulatory and Society Theme

Customer Value Proposition

Quality

Low Total Cost

Customer Solutions

Product Leader

Customer Satisfaction Customer Acquisition Customer Retention

Time Function Service Relations Brand

Relationship Image

� Market and Account Share

Customer Perspective:

differentiating value proposition

Internal Perspective:

how value is created and sustained

(Processes that Create New Products

& Services)

(Processes that Improve the

Environment and Communities)

1717

Example - Internal / Operations Themes Example - Internal / Operations Themes

Objective Objective Statement Measure Initiatives

•Certification Rates of allcourse.

•Charter attrition work group.

•% deploying BCT receiving deployment training across

all modules. •TBD

•Adherence to the (re) verification, (re) validation, and

(re) accreditation process.

•Incorporate audit guidance.

•Improve Access to •Products and Services

•Enhance accessibility of our products and services to our customers through innovative, cutting edge delivery.

•% of products available via online and traditional

methods (hard copy, CDs)

•Market products and service.

•Increase Organisational Efficiency and

Standardisation

•Institutionalise processes that increase our efficiency and get rid of those that don’t.

•% increase in updated policies and procedures from baseline.

•Survey employees concerning alignment and

duplication of efforts.

•Improve Joint Integration

•Posture our organisation to optimise joint integration

•Adherence to Schedule•Comprehensive and integrated program management plan.

Enhance Training & Development

•Ensure health services assets of all three •components are trained and modular and

•cutting edge to support full spectrum •operation and joint force requirements.

Inte

rna

l Pe

rsp

ect

ive

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Example - Critical Success Factors Example - Critical Success Factors Success Factor Imp. Cap. Supporting Actions

Imp. - Importance 1- Minor Relevance 10 - CriticalCap. - Current Capability 1 - Major Weakness 10 - Best Practice

Business-wideclarity on customer needs & concerns

10 3 Customer Focus Groups0800 complaint lineSystem of ‘Listening Posts’

Effective internal communications

10 7 Team Listening structureIntranet Web-sites for all projects48 hour responses to all project queries

Involvement and Participation (I&P) at all levels

8 2 Management workshop on I&P ideasPilot participative ‘event’Staff design of business forums

Demonstrable support for new culture / ethos

9 6 Regular business forumsTeam charters at all levelsOpen access to performance data

ProcessOwnership Infrastructure

7 9 Formal ownership guidelinesRegular process owners forumsCentral process design repository

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Measures & Targets - ExampleMeasures & Targets - ExampleE

mp

loye

eE

mp

loye

e

Cu

sto

me

rC

ust

om

er

What do we have to do to get What do we have to do to get there?there?

What do we have to do to get What do we have to do to get there?there?

Fin

an

cia

lF

ina

nci

al

Pro

cess

Pro

cess

Strategic GoalsStrategic Goals MeasuresMeasures

How do we know if we are How do we know if we are achieving our goals?achieving our goals?

How do we know if we are How do we know if we are achieving our goals?achieving our goals?

TargetsTargets

What will we measure our What will we measure our progress against?progress against?

What will we measure our What will we measure our progress against?progress against?

Vis

ion &

Mis

sion

Wh

at a

ctiv

ities a

re w

e d

oin

g to

reach

ou

r targ

ets

?W

hat a

ctiv

ities a

re w

e d

oin

g to

reach

ou

r targ

ets

?

InitiativesInitiatives

2020

BSC - Airways BSC - Airways Balanced Scorecard

Measurement Target

• Market Value

• Seat Revenue

• Plane Lease Cost

• 30% CAGR

• 20% CAGR

• 5% CAGR

• FAA On-Time Arrival Rating

• Customer Ranking• # Repeat Customers• # Customers

• #1

• #1• 70%• Increase

12% annual

• On Ground Time

• On-Time Departure

• 30 Minutes

• 90%

• % Ground Crew Stockholders

• Strategic Awareness

• Strategic Job Readiness

• Info System Availability

• 100%

• 100%

• Yr 1 - 0%Yr 3 - 90%Yr 5 - 100%

• 100%

Action Plan

Initiative Budget

• Customer Loyalty Program

• $XXX

• On Ground Cycle Time Optimisation

• Quality Management

• $XXX

• $XXX

• ESOP

• Ground Crew Training

• Crew Scheduling System Rollout

• CRM System

Total Budget $XXXX

• $XXX

• $XXX

• $XXX

• $XXX

Strategy Map

Theme: Operating Efficiency Objective

• Profitability

• Grow revenues

• Fewer planes

Financial Profits & RONA

Grow Revenues

Fewer Planes

• Flight is on-time

• Lowest prices

• Attract and retain more customers

CustomerAttract & Retain More Customers

On-time Service

Lowest Prices

Fast Ground Turnaround

Internal • Fast ground turnaround

• Ground crew aligned with strategy

• Develop the necessary skills

• Develop the support system

Learning

Strategic JobRamp Agent

Strategic SystemsCrew Scheduling

Ground Crew Alignment

MeasureMeasureCommunicateCommunicate ExecuteExecute

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Implementation RoadmapImplementation Roadmap

Ongoing Management

• Define and Clarify Mission & Vision

• Develop Strategic Goals

• Identify Unit Objectives/ Critical Success Factors / Architecture

• Draft Strategic Map with linkages & themes

• Develop Baseline

• Define Measures• Set Targets

• Identify Initiatives• Allocate Resources

• Get Buy-in!• Plan & Implement

Step 3 Step 4 Step 5 Step 6

Step 2

Step 1

Week 1 2 4 6 8 10 12 14 16 18

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Implementation - Steps 1 ~ 3Implementation - Steps 1 ~ 3Step 1Step 1

Develop aDevelop aBusiness CaseBusiness Case

Step 2Step 2

BuildBuildStrategicStrategic

ArchitectureArchitecture

Step 3Step 3

Draft a Draft a Strategy MapStrategy MapWith LinkagesWith LinkagesAnd ThemesAnd Themes

Step 4Step 4

Determine Measures Determine Measures and Targetsand Targets

Step 5Step 5

Select Strategic Select Strategic InitiativesInitiatives

Step 6Step 6

Plan and Plan and implementationimplementation

Week 2 4 6 8 10 12 14 16 18

Work/Inputs

• Strategy Documents

• Draft themes & linkages based on Strategic Destination

Outputs:

• Agreed upon stretch targets

• Finalised themes

• Strategy map

Agree upon stretch targets

Review and refine themes

Refine and rework draft

linkagesDiscuss next

steps

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Implementation - Step 4Implementation - Step 4Step 1Step 1

Develop aDevelop aBusiness CaseBusiness Case

Step 2Step 2

BuildBuildStrategicStrategic

ArchitectureArchitecture

Step 3Step 3

Draft a Draft a Strategy MapStrategy MapWith LinkagesWith LinkagesAnd ThemesAnd Themes

Step 4Step 4

Determine Measures Determine Measures and Targetsand Targets

Step 5Step 5

Select Strategic Select Strategic InitiativesInitiatives

Step 6Step 6

Plan and Plan and implementationimplementation

Week 2 4 6 8 10 12 14 16 18

Work/Inputs

• Refined strategy

• Existing measures assigned to objectives

• Draft measures developed

Refine and validate linkages

Review draft

measures

Design new measures

Begin targets

discussion

Plan for measures

development

Outputs:

• 90% complete linkages

• Complete measures

• Measures development plan in place

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Implementation - Step 5 & 6Implementation - Step 5 & 6Step 1Step 1

Develop aDevelop aBusiness CaseBusiness Case

Step 2Step 2

BuildBuildStrategicStrategic

ArchitectureArchitecture

Step 3Step 3

Draft a Draft a Strategy MapStrategy MapWith LinkagesWith LinkagesAnd ThemesAnd Themes

Step 4Step 4

Determine Measures Determine Measures and Targetsand Targets

Step 5Step 5

Select Strategic Select Strategic InitiativesInitiatives

Step 6Step 6

Plan and Plan and implementationimplementation

Week 2 4 6 8 10 12 14 16 18

Review and

validate linkages

and measures

Review existing

initiatives

Brainstorm new

initiatives

Align/rationalise initiatives to themes

Work/Inputs:

• Refined linkages and measures

• Inventory of existing initiatives

• Proposed new initiatives

Outputs:

• “Locked in” on objectives and linkages

• Measures defined

• Initiatives defined

• Plan for initiatives review established

• implementation

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Project Organisation Project Organisation

Vendor Engagement

Manager(part-time)

ExecutiveSponsor/Steering

Committee

VendorProjectTeam

1-2Consultants

(full-time)

ClientCoreTeam

Staffknowledgeable

of businessstrategies andorganisation

VendorProjectLeader

(full-time)

ClientProjectLeader

ExecutiveLeadership

Team

• Overall project ownership

• Consultations/workshopsas needed

• 2-4 staff

• 3- 5 days/week

• Briefings with othersas needed

• 3 days/week • 8 Half-dayworkshops

• One 90-minutebriefing/interview

• Consultations/workshopsas needed

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Lessons LearntLessons LearntMeasures must relate to the strategy and interrelatedMeasures must relate to the strategy and interrelated– Must understand how the perspectives influence each otherMust understand how the perspectives influence each other– Organisation-wide view replaces local focusOrganisation-wide view replaces local focus

Determine the critical success factorsDetermine the critical success factors– Identify long-term and short-term business objectives and prioritise them Identify long-term and short-term business objectives and prioritise them

based on business goals based on business goals

– What must be achieved to survive, or what will cause the company to fail What must be achieved to survive, or what will cause the company to fail if it is not achieved? if it is not achieved?

– Determine success factors for each of the four perspectivesDetermine success factors for each of the four perspectives

– Limit the number to items that are critical, not just interestingLimit the number to items that are critical, not just interesting

– Must understand the linkages between the activities and the goalsMust understand the linkages between the activities and the goals

Develop metrics to evaluate performanceDevelop metrics to evaluate performance– Provide feedback and also indicate risk / opportunity areasProvide feedback and also indicate risk / opportunity areas

– Metrics may be financial, non-financial, trends, surrogates, internally or Metrics may be financial, non-financial, trends, surrogates, internally or externally gatheredexternally gathered

– Should include leading and lagging measures, not too much or littleShould include leading and lagging measures, not too much or little

2727

Requires teamwork and collaborationRequires teamwork and collaboration– Different perspectives and expertise are requiredDifferent perspectives and expertise are required

– No one individual has a complete view of the organisationNo one individual has a complete view of the organisation

– Greater participation produces greater “buy-in”Greater participation produces greater “buy-in”

– Employees have a sense of ownership in the resulting scorecardEmployees have a sense of ownership in the resulting scorecard

– More likely to use the scorecard to guide their decisions More likely to use the scorecard to guide their decisions

Identify owners and assign responsibilitiesIdentify owners and assign responsibilities

Initiative must start with Senior ManagementInitiative must start with Senior Management– Who understand the overall strategy and have authority to make Who understand the overall strategy and have authority to make

strategic decisionsstrategic decisions

– Their Commitment level will determine success or failureTheir Commitment level will determine success or failure

The project may fail if senior management does not show continued interest The project may fail if senior management does not show continued interest and support in the design processand support in the design process

The scorecard will be ignored if management does not promote its use for The scorecard will be ignored if management does not promote its use for performance evaluation and guidanceperformance evaluation and guidance

Lessons Learnt (Contd.)Lessons Learnt (Contd.)

2828

Requires teamwork and collaborationRequires teamwork and collaboration– Different perspectives and expertise are requiredDifferent perspectives and expertise are required

Link to databases and IT systemLink to databases and IT system– Modify information system if necessary to collect and report the metricsModify information system if necessary to collect and report the metrics

What data is available / not available? What data is available / not available?

The scorecard should determine what data is collected and The scorecard should determine what data is collected and the data available should the data available should not determine the scorecardnot determine the scorecard

– Determine reporting proceduresDetermine reporting proceduresWho gets the information? How is it reported? How often is it reported?Who gets the information? How is it reported? How often is it reported?

Communicate to employees regularly - tactics, Communicate to employees regularly - tactics, objectives, assumptions, timetablesobjectives, assumptions, timetables– What is being measuredWhat is being measured

– Why it is being measuredWhy it is being measured

– What is expected of the employeesWhat is expected of the employees

– How to use the informationHow to use the information

Lessons Learnt (Contd.)Lessons Learnt (Contd.)

2929

Develop scorecards for lower levelsDevelop scorecards for lower levels– For staff to understand what they must do to support the level aboveFor staff to understand what they must do to support the level above

Interview senior managersInterview senior managers– Input on strategic objectives, critical success factors, possible measuresInput on strategic objectives, critical success factors, possible measures

Periodic reviews and re-alignPeriodic reviews and re-align– Has company strategy changed?Has company strategy changed?

– Are the critical success factors still valid?Are the critical success factors still valid?

– Are the activities still valid?Are the activities still valid?

– Are the metrics still valid?Are the metrics still valid?

– Analyse resultsAnalyse results

Pitfall to avoidPitfall to avoid– Senior management committed and there is consensusSenior management committed and there is consensus

– Staff buy in and regular communication between staff and managementStaff buy in and regular communication between staff and management

Lessons Learnt (Contd.)Lessons Learnt (Contd.)

3030

ROI & BSCROI & BSC

It may not be obvious to YOU or YOUR managers, how to increase sales, decrease costs, and decrease investments in a way that is consistent with the company’s strategy.

A well constructed balanced scorecard can provide YOU with a road map that indicates how YOUR company intends to increase ROI.

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Take AwayTake AwayBSC not only supports management decisions, but also identifies possibilities for change and motivates people

Reports on the performance against the corporate goals

Supports management decisions & establishes priorities regarding human and other resources

Identifies ways to improve performance

Identifies the need for adjusting processes and the flaws in supporting systems and infrastructure

Identifies the need for change in the organisational culture

Motivates people in their work by giving signals about what is important to the organisation

3232

Good LuckGood Luckhttp://www.linkedin.com/in/anandsubramaniamhttp://www.linkedin.com/in/anandsubramaniam