2GCActive

Management

2GC LimitedAlbany House Market StreetMaidenhead Berkshire SL6 8BE UKTel +44 (0) 1628 421506 www2GCcoukFax +44 (0) 1628 421507 Info2gccouk

Introducing the Balanced Scorecard

bull This presentation prepared by 2GC Active Management intends to provide readers with an initial overview of the issues associated with implementation of the Balanced Scorecard as a strategic management system

bull The presentation introduces the following topicsndash General management issues related to strategic controlndash The Balanced Scorecard ndash Underlying Scorecard processes and success criteria

bull It is intended for personal use and in-house presentations only copy 2GC Limited 2001

bull Supplemental notes are available on request ndash please email notes2gccouk

(V11) November 2001 Introducing the Balanced ScorecardPage 2

2GCActive

Managementcopy 2GC Limited 2001

Structure of presentation

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 3

2GCActive

Managementcopy 2GC Limited 2001

General management issuesWhat is this all about

Dilbert

(V11) November 2001 Introducing the Balanced ScorecardPage 4

2GCActive

Managementcopy 2GC Limited 2001

General management issuesImplementing Strategic Goals

Vision

97

Vision

9797

Significant strategic success

33

Significant strategic success

3333

Clear strategic

plans

80

Clear strategic

plans

8080

Some strategic success

52

Some strategic success

5252

From Strategic Performance Measurement amp Management Business Intelligence Renaissance Worldwide 1997

bull Almost all organisations have a strategic vision ndash few manage to realise it

(V11) November 2001 Introducing the Balanced ScorecardPage 5

2GCActive

Managementcopy 2GC Limited 2001

General management issuesBarriers to effective performance management

Source Based on paper by John H Lingle and William A Schiemann ldquoFrom balanced scorecard to strategic gauges Is measurement worth itldquo published in ldquoManagement Reviewrdquo Volume 85 Issue 3 Mar 1996 p 56

Fuzzy objectivesFuzzy objectives

Unjustified trust in informal Unjustified trust in informal feedback systemsfeedback systems

Entrenched measurement Entrenched measurement systemssystems

Too many measures and Too many measures and loss of focusloss of focus

(V11) November 2001 Introducing the Balanced ScorecardPage 6

2GCActive

Managementcopy 2GC Limited 2001

General management issuesRealising the need to change

Why

WhatWho

How

When

(V11) November 2001 Introducing the Balanced ScorecardPage 7

2GCActive

Managementcopy 2GC Limited 2001

What is Balanced Scorecard

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 8

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced Scorecard

bullldquoThe idea of the Scorecard is to describe the essential ingredients of business successrdquo(Olve et al ldquoPerformance Driversrdquo)

bullldquoBalanced Scorecard is one of the 15 most important management concepts ever introduced in Harvard Business Reviewrdquo(Harvard Business Review 75th Anniversary issue)

bull50 of North American companies claim to be using Balanced Scorecard(Recent survey by Bain amp Company)

One of the most dangerous forms of human error is forgetting what one is trying to to achievePaul Nitze

(V11) November 2001 Introducing the Balanced ScorecardPage 9

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced ScorecardBackground amp underlying philosophy

bullWhat is itndash Strategic communication and

performance measurement toolbullOrigins

ndash Developed from a tool developed in 1980s but some similarities with other pre-existing tools

ndash Introduced to wider audience in early 1990rsquos by R Kaplan amp D Norton in series of articles in Harvard Business Review

bullUnderlying philosophyndash Clear communication of goals and

prioritiesndash Learning amp team-working

Internal PerspectiveInternal Perspective

Learning amp Growth PerspectiveLearning amp Growth Perspective

Financial PerspectiveFinancial Perspective

Customer PerspectiveCustomer Perspective

Act

iviti

esO

utco

mes

Act

iviti

esO

utco

mes

Out

com

esO

utco

mes

Act

iviti

esA

ctiv

ities

(V11) November 2001 Introducing the Balanced ScorecardPage 10

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced ScorecardDo what needs to get donehellip

Are we doing what we set out to do

What do we want to achieve and what must we do to achieve it

Take action

Create amend strategic vision

Createchange linked strategic

objectives

Review results and cause amp effect assumptions

Balanced Scorecard

Developrevise measures amp

targets

(V11) November 2001 Introducing the Balanced ScorecardPage 11

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced ScorecardDifferent applications for Balanced Scorecard

bullldquoManagement Controlrdquo

ndash Maintain the temperature

bullldquoStrategic Controlrdquondash What temperature

7060 80

D A Y amp N I G H T

HOT OFF COOL

Assess Outcome

Set TargetHeater Run if room is below target temp

Thermostat Compare with

Target

MeasureRoom Temp

(V11) November 2001 Introducing the Balanced ScorecardPage 12

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced ScorecardStrategic control vs Management control

Organisational hierarchy

Strat

egic

emph

asis

Operational emphasis

(V11) November 2001 Introducing the Balanced ScorecardPage 13

2GCActive

Managementcopy 2GC Limited 2001

What is the Balanced Scorecard The latest Balanced Scorecard thinking

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 6

2GCActive

M anagementcopy 2GC Lim ited 1999

Balanced Scorecard DocumentationObjective M easure Supporting Initiatives

I1 Drive trade term s by channel W e will develop clear trading terms for different custom er groups W e will achieve our targetlevels of availability visibility and trade su pport via these trading terms

bull Trade customers adhering to trade standard terms amongst a sam ple of top XX customers

bull Develop standard trading terms (GG)

I2 Deliver custom er service standards Deliver timely f irst class service to the trade an d retailers

bull Cases delivered in full against order quantity

bull Orders delivered on time

bull Logistics Project (RS)bull SAP Project (PH)

I3 Im plem ent m ajor account m anagem ent programm e W e will continue to treat our custom ers as business partners W e will establish an account developm ent model to ensure high quality relationships exist w ith key account customers

bull of major accounts with a business plan bull Define ldquomajorrdquo accounts (AC)

I4 Deliver exce llent consum er propositions W e must meet consum er needs through the development and communication of an integrated brand proposition In the NPD sector we will launch new products only after they h ave m et pre-agreed qu ality image need and volume criteria

bull Brand Systems signed off by OE bull Develop core brand propositions (AC)bull NPD Process Improvement (ACAD)bull Cream ing project (AD)

I5 Deliver exce llent internal custom er service W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull SLA Qualitative Evaluations by SLA ow ners bull Logistics Project (RS)bull Factory Cost Reduction (DL)

I6 Effective m anagem ent of com pany assets W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull Total working capitalbull Fixed Asset Utilisationbull Outstanding Debtor Da ys

bull Plant ration alisation (AD)bull L4 L2 (DL)bull SAP (RS)

I7 Effective control of the business (No Surprises) W e will heighten our efforts to streamline the organisation to h elpdrive sound asset managem ent and cost reduction W e will invoke a cost conscious culture to complem ent our stream lining efforts

bull ldquoNo surprisesrdquo evaluation of actual performance against budget or forecast for- stock cover per city- sales per city- national costs

bull Analyse Risk project (PS)

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 6

2GCActive

M anagementcopy 2GC Lim ited 1999

Balanced Scorecard DocumentationObjective M easure Supporting Initiatives

I1 Drive trade term s by channel W e will develop clear trading terms for different custom er groups W e will achieve our targetlevels of availability visibility and trade su pport via these trading terms

bull Trade customers adhering to trade standard terms amongst a sam ple of top XX customers

bull Develop standard trading terms (GG)

I2 Deliver custom er service standards Deliver timely f irst class service to the trade an d retailers

bull Cases delivered in full against order quantity

bull Orders delivered on time

bull Logistics Project (RS)bull SAP Project (PH)

I3 Im plem ent m ajor account m anagem ent programm e W e will continue to treat our custom ers as business partners W e will establish an account developm ent model to ensure high quality relationships exist w ith key account customers

bull of major accounts with a business plan bull Define ldquomajorrdquo accounts (AC)

I4 Deliver exce llent consum er propositions W e must meet consum er needs through the development and communication of an integrated brand proposition In the NPD sector we will launch new products only after they h ave m et pre-agreed qu ality image need and volume criteria

bull Brand Systems signed off by OE bull Develop core brand propositions (AC)bull NPD Process Improvement (ACAD)bull Cream ing project (AD)

I5 Deliver exce llent internal custom er service W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull SLA Qualitative Evaluations by SLA ow ners bull Logistics Project (RS)bull Factory Cost Reduction (DL)

I6 Effective m anagem ent of com pany assets W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull Total working capitalbull Fixed Asset Utilisationbull Outstanding Debtor Da ys

bull Plant ration alisation (AD)bull L4 L2 (DL)bull SAP (RS)

I7 Effective control of the business (No Surprises) W e will heighten our efforts to streamline the organisation to h elpdrive sound asset managem ent and cost reduction W e will invoke a cost conscious culture to complem ent our stream lining efforts

bull ldquoNo surprisesrdquo evaluation of actual performance against budget or forecast for- stock cover per city- sales per city- national costs

bull Analyse Risk project (PS)

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 5

2GCActive

M anagementcopy 2GC Limited 1999

Strategic Linkage M odel

Fina

ncia

l Pe

rspe

ctiv

eC

usto

mer

Per

spec

tive

Lear

ning

amp G

row

th

Pe

rspe

ctiv

eIn

tern

al

Per

spec

tive

DBX Understands and Responds to m y Needs

DBX Products are m y First Choice Products

DBX Products are Good Value for Money

DBX Products are V isible and Availab le

DBX has an Excellent Consumer Franchise

Drive Trade Term s by Channel

Im plem ent Major Account Managem ent

Program m e

Effective Control of Business (No Surprises)

Sales Growth (by City by P roduct)

Gross Contribution (After City Sales and

Marketing)Asset Turn Overheads as a of

NSV

Improved Shareh older Value (ROCE)

I Have a Good Relationship with DBX

Develop Better W ork P ractices and IS

Develop and Retain P rofessional M anagers

Develop Service Agreem ents

Effective M anagem ent o f Com pany Assets

Deliver Excellent In ternal Custom er

ServiceDeliver Custom er

Service Standards

Develop Professional Custom er Oriented Skilled

Sales Force

Deliver Excellent Consum er

Propositions

Understand Im pact O f Various M arketing Levers

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 5

2GCActive

M anagementcopy 2GC Limited 1999

Strategic Linkage M odel

Fina

ncia

l Pe

rspe

ctiv

eC

usto

mer

Per

spec

tive

Lear

ning

amp G

row

th

Pe

rspe

ctiv

eIn

tern

al

Per

spec

tive

DBX Understands and Responds to m y Needs

DBX Products are m y First Choice Products

DBX Products are Good Value for Money

DBX Products are V isible and Availab le

DBX has an Excellent Consumer Franchise

Drive Trade Term s by Channel

Im plem ent Major Account Managem ent

Program m e

Effective Control of Business (No Surprises)

Sales Growth (by City by P roduct)

Gross Contribution (After City Sales and

Marketing)Asset Turn Overheads as a of

NSV

Improved Shareh older Value (ROCE)

I Have a Good Relationship with DBX

Develop Better W ork P ractices and IS

Develop and Retain P rofessional M anagers

Develop Service Agreem ents

Effective M anagem ent o f Com pany Assets

Deliver Excellent In ternal Custom er

ServiceDeliver Custom er

Service Standards

Develop Professional Custom er Oriented Skilled

Sales Force

Deliver Excellent Consum er

Propositions

Understand Im pact O f Various M arketing Levers

21 November 2001 2GC Limited Introduction to 2GC Active ManagementPage 4

2GCActive

M anagem entcopy 2GC Limited 1999

Destination Statem entSales Volume50000 MT

Distribution50 Cities

Sales Revenue pound 50 M illion

One M anufacturing Site

ROCE 7Capital Em ployed No m ore th an pound45 million

Product Manager

Marketing Director

Factory Director

Manufacturing Director

Regional Sales Manager

Sales Director

Managing Director

No m ore than 6 Core Brand ProductsMinimum sales volum esndash 5000 MT for each core brandndash 2000M T for each m ajor product

Employer of Choice ( 1 in industry and ranked in FM CG top 10)

Marketing SalesBranding Clear brand propositions systems

established for the six core brandsbull DBX has two of th e top five category product brandsbull Producthouse brand awaren ess targets in DBX city

strategies achievedM edia and promotional strategy City market share

targets achieved within agreed budgetbull M odels and measures of th e relative impact of all

m arketing levers available to assist in th e evaluation targeting of m arketing activity

Im proved Skills and Processes Standardised and transparent m arketing processes developed and agreed within DBX and with Group

bull M arketing team skills targets (b ased on extern al benchmark com parisons) achieved through training and recruitment (where applicable)

Overall DBX seen as one of top 10 FMCG Corsquos servicing key accounts in th e country (and 1 in category)

Customer M arket Focus Sales s taff achieving set targ ets in line with city s trategies for focus on custom er and market issues

bull Assess using distribution by chann el visib ility and trade prom otions

Im proved Skills and Processes Standardised and transp arent sales processes develop ed and agreed within DBX and with Group

bull Sales team skills targets (based on extern al b enchm ark comparisons) achieved through training and recruitment (where applicable)

Organisational Structurebull Clear scope and role statements exis t for all functions (including Sales

amp Marketing)bull Supporting functions (includ ing supply chain) will be achieving all

agreed service level targets with sales amp marketing

Supply ChainCost efficient supp ly chain based on flexib le p roduction lines will deliverbull Increased responsiveness to market dem ands bull Lower cycle timesbull Product channel freshness targe ts

Inform ation System sAppropriate in form ation systems that w ill meet DB Xrsquos needsbull All necessary m anagement inform ation p roduced within p re-agreed tim elines and scales

M anagementbull Senior m anagement w ill be com mitted to working on stra teg y and evalua ted on their

ab ility to coach advise guide and ensure tha t tasks are delega ted effectivelybull Professional m iddle management will exist that w ill be able to ac t m ore independently

within de fined guidelines and have the skills required for their job rolendash Succession plans for key positions wi ll existndash Recruiting and training policies will aim to raise middle manage ment competence to

meet internationa l standards

21 November 2001 2GC Limited Introduction to 2GC Active ManagementPage 4

2GCActive

M anagem entcopy 2GC Limited 1999

Destination Statem entSales Volume50000 MT

Distribution50 Cities

Sales Revenue pound 50 M illion

One M anufacturing Site

ROCE 7Capital Em ployed No m ore th an pound45 million

Product Manager

Marketing Director

Factory Director

Manufacturing Director

Regional Sales Manager

Sales Director

Managing Director

No m ore than 6 Core Brand ProductsMinimum sales volum esndash 5000 MT for each core brandndash 2000M T for each m ajor product

Employer of Choice ( 1 in industry and ranked in FM CG top 10)

Marketing SalesBranding Clear brand propositions systems

established for the six core brandsbull DBX has two of th e top five category product brandsbull Producthouse brand awaren ess targets in DBX city

strategies achievedM edia and promotional strategy City market share

targets achieved within agreed budgetbull M odels and measures of th e relative impact of all

m arketing levers available to assist in th e evaluation targeting of m arketing activity

Im proved Skills and Processes Standardised and transparent m arketing processes developed and agreed within DBX and with Group

bull M arketing team skills targets (b ased on extern al benchmark com parisons) achieved through training and recruitment (where applicable)

Overall DBX seen as one of top 10 FMCG Corsquos servicing key accounts in th e country (and 1 in category)

Customer M arket Focus Sales s taff achieving set targ ets in line with city s trategies for focus on custom er and market issues

bull Assess using distribution by chann el visib ility and trade prom otions

Im proved Skills and Processes Standardised and transp arent sales processes develop ed and agreed within DBX and with Group

bull Sales team skills targets (based on extern al b enchm ark comparisons) achieved through training and recruitment (where applicable)

Organisational Structurebull Clear scope and role statements exis t for all functions (including Sales

amp Marketing)bull Supporting functions (includ ing supply chain) will be achieving all

agreed service level targets with sales amp marketing

Supply ChainCost efficient supp ly chain based on flexib le p roduction lines will deliverbull Increased responsiveness to market dem ands bull Lower cycle timesbull Product channel freshness targe ts

Inform ation System sAppropriate in form ation systems that w ill meet DB Xrsquos needsbull All necessary m anagement inform ation p roduced within p re-agreed tim elines and scales

M anagementbull Senior m anagement w ill be com mitted to working on stra teg y and evalua ted on their

ab ility to coach advise guide and ensure tha t tasks are delega ted effectivelybull Professional m iddle management will exist that w ill be able to ac t m ore independently

within de fined guidelines and have the skills required for their job rolendash Succession plans for key positions wi ll existndash Recruiting and training policies will aim to raise middle manage ment competence to

meet internationa l standards

bullThe ldquoobjective drivenrdquoBalanced Scorecard has emerged as best practice

(V11) November 2001 Introducing the Balanced ScorecardPage 14

2GCActive

Managementcopy 2GC Limited 2001

What is Balanced ScorecardMore than just a set of goals amp measures

Balanced Scorecard design

Balanced Scorecard development

Balanced Scorecard deployment

bull Value from first application

bull Business model reflected in relationship between strategic goals

bull Corporate strategic measurement amp management tool

ndash divisionsndash business unitsndash functions

bull All management Systems aligned with strategy

bull Drive strategic behaviour into everyday decisions and operations

(V11) November 2001 Introducing the Balanced ScorecardPage 15

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard design

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 16

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designWhere to go an how to get there

bullBest practice is to use a development group that comprises the the likely users of the Balanced Scorecard

bullDesign choices should be based on jointly held perception of a strategic ldquoDestinationrdquo

bullThe design should measure progress against the organisationrsquos key strategic objectives (activities and outcomes)

bullLinks between strategic objectives should be articulated ndash these express the management teamrsquos beliefs about which activities drive which outcomes

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development Ac

tiviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

VisionVision

StrategyStrategy

Out

com

esAc

tiviti

es

(V11) November 2001 Introducing the Balanced ScorecardPage 17

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designMonitor progress in achieving goals

bullDevelopment of measures follow clarification and agreement of strategic objectives becausehellip

bullMeasures track progress in achieving those objectives against agreed targets

bullIdentify and monitor extraordinary activities and projects furthering achievement of objectives

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Out

com

es

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development A

ctiv

ities

Act

iviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

Financial Perspective

Objectives Measures Targets Initiatives

Financial Perspective

Objectives Measures Targets

Financial Perspective

Objectives Measures Targets

Financial Perspective

Objectives Measures Targets Initiatives

(V11) November 2001 Introducing the Balanced ScorecardPage 18

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designThe components of a Strategic Balanced Scorecard

bull Financial Marketndash Total NSV pound120m (nominal) ndashndash Has achieved 10 CAGR on NSndash Operating Margin gt10ndash Controllable overheads less thndash Operating Profit pound12m (nomin

Destination StatementDescription of how the organisation will be at some specific future date if the management teamrsquos strategies are successful

Fin

anci

alCu

stom

er

Best value for money

The leading and most innovative

brand

Drive Increased Demand

Profitable Sales Growth

Strategic Linkage Model (SLM)Graphic illustration of ldquocause and effectrdquo relationships between the strategic goals that must be achieved if the organisation is to reach its destination state

ObjectiveObjective DescriptionDescription

Total Shareholder Return is above Groups cost of equity over the medium to long term

Total Shareholder Return is above Groups cost of equity over the medium to long term

Minimise net tax paid and WACC in the light of operational and commercial decisions concerning the nature and sphere of Groups activities and legal constraints Optimum means

Minimise net tax paid and WACC in the light of operational and commercial decisions concerning the nature and sphere of Groups activities and legal constraints Optimum means better than equivalent payments by known Group

Measures (Freq)Measures (Freq)

bull CAGR of Total ShareholdeReturn

bull ROIC (Target gt WACC)

bull CAGR of Total ShareholderReturn

bull ROIC (Target gt WACC)

bull PampL account net tax chargea of profit for financial ye

bull WACC

bull PampL account net tax chargeda of profit for financial yea

bull WACC

Group Strategy Delivers Value

Achieve Optimum Tax Rate amp WACC

F1

F2

Objective and Measure Documentation

ndashClear and concise description of strategic objectives and the measures chosen to track their achievement

F11

F12

-30p

8

150p

18Dividend expected kept a1000 pence leading to loprevious years

Measure Value Target PerfObjective Status

Outperform capital markets

F21 200 185Increasing cash inflow froCash amp a sset

F21 200 185Increasing cash inflow froCash amp a sset

t

Progress Reporting FormatsIllustration of how (and by whom) Scorecard information will be communicated

o Initiative overviewOverview of which initiatives support which Scorecard objectives incl owners and deadlines for finalisation

(V11) November 2001 Introducing the Balanced ScorecardPage 19

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard roll-out

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 20

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard Development Development within the organisation

Country 1 Country 2

Regional Cluster(Line Management)

Country 3

Dept 1

Team

Dept 2

Country 4

Regional ClusterLine Management

Shared Service(eg Supply Chain)

Group SupportLegal Finance HR IS

Main Board

The optimal role-out

sequence is ldquoTop Downrdquo

(V11) November 2001 Introducing the Balanced ScorecardPage 21

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard DevelopmentDevelopment within the organisation

Country 1 Country 2

Regional Cluster(Line Management)

Country 3

Dept 1

Team

Dept 2

Country 4

Regional ClusterLine Management

Shared Service(eg Supply Chain)

Group SupportLegal Finance HR IS

Main Board

Corporate Balanced Scorecard

Co-ordinatingBalanced Scorecard

Support Function Balanced Scorecard

Operating Unit Balanced Scorecard

Departmental Balanced ScorecardTeam Level

Balanced Scorecard

(V11) November 2001 Introducing the Balanced ScorecardPage 22

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard DevelopmentldquoContractualrdquo agreement between management teams

What

How

What

Board level ScorecardBoard level Scorecard

Objectives

Measures amp Targets

Initiatives

Objectives

Measures amp Targets

Initiatives

Overall VisionOverall Vision

Subordinate ScorecardSubordinate Scorecard

Objectives

Measures amp Targets

Initiatives

Objectives

Measures amp Targets

Initiatives

Local VisionLocal Vision

How

TeamIndividual ScorecardTeamIndividual Scorecard

Objectives

Measures amp Targets

Initiatives

TeamIndividual Vision

TeamIndividual Vision

Strategic direction

Strategic direction

Strategy implementation

Strategy implementation

(V11) November 2001 Introducing the Balanced ScorecardPage 23

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 24

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deploymentldquoAchieving strategic goals requires activityrdquo

(V11) November 2001 Introducing the Balanced ScorecardPage 25

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Strategic alignment amp goal setting

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development Ac

tiviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

VisionVision

StrategyStrategy

Out

com

esAc

tiviti

es

(V11) November 2001 Introducing the Balanced ScorecardPage 26

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Align existing management control tools with strategy

SVA amp EVASVA amp EVAB

udge

tsB

udge

ts

BEMBEMBalanced Scorecard

ABCABC HR ToolsHR Tools

(V11) November 2001 Introducing the Balanced ScorecardPage 27

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Support two-way communication of strategyhellip

Fuzzy objectivesFuzzy objectives

Unjustified trust in informal

Unjustified trust in informal

feedback systems

feedback systemsEntren

ched m

easure

ment

Entren

ched m

easure

ment

system

s

system

s

BSC

(V11) November 2001 Introducing the Balanced ScorecardPage 28

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Everybody crafts amp monitors strategy all the timehellip

Comm

unica

tion Com

munication

Board levelScorecard

process

OperationalScorecard

process

Support function Scorecard

process

Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets

Take action

Create amend

strategic vision

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Balanced Scorecard

Developrevise measures amp

targets

Communication

(V11) November 2001 Introducing the Balanced ScorecardPage 29

2GCActive

Managementcopy 2GC Limited 2001

Success criteria

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 30

2GCActive

Managementcopy 2GC Limited 2001

Key success factorsCultural building blocks of Scorecard success

bullInclusive design process building on consensus seeking amp involvement

bullParticipative management style focused on learning open discussion and creative thinking

bullSponsorship and commitment from entire management team -top management in particular

bullldquoEmbeddingrdquo of management processes to use refresh and renew the Balanced Scorecard over time

(V11) November 2001 Introducing the Balanced ScorecardPage 31

2GCActive

Managementcopy 2GC Limited 2001

Introducing the Balanced ScorecardTo find out morehellip

bullVisit 2GCrsquos Web Sitendash We focus specifically on strategic

control and performance measurement issues and have a wide range of working papers FAQs and presentations to download on these topics

ndash The site also has a recommended reading list that covers relevant topics and the ldquoWeblinksrdquo database of relevant Internet sites

bullContact 2GCndash Let us know if you have a question

you canrsquot answer wersquoll do what we can to helphellip

bull info2gccouk

(V11) November 2001 Introducing the Balanced ScorecardPage 3

2GCActive

Managementcopy 2GC Limited 2001

General management issuesWhat is this all about

Dilbert

(V11) November 2001 Introducing the Balanced ScorecardPage 4

2GCActive

Managementcopy 2GC Limited 2001

General management issuesImplementing Strategic Goals

Vision

97

Vision

9797

Significant strategic success

33

Significant strategic success

3333

Clear strategic

plans

80

Clear strategic

plans

8080

Some strategic success

52

Some strategic success

5252

From Strategic Performance Measurement amp Management Business Intelligence Renaissance Worldwide 1997

bull Almost all organisations have a strategic vision ndash few manage to realise it

(V11) November 2001 Introducing the Balanced ScorecardPage 5

2GCActive

Managementcopy 2GC Limited 2001

General management issuesBarriers to effective performance management

Source Based on paper by John H Lingle and William A Schiemann ldquoFrom balanced scorecard to strategic gauges Is measurement worth itldquo published in ldquoManagement Reviewrdquo Volume 85 Issue 3 Mar 1996 p 56

Fuzzy objectivesFuzzy objectives

Unjustified trust in informal Unjustified trust in informal feedback systemsfeedback systems

Entrenched measurement Entrenched measurement systemssystems

Too many measures and Too many measures and loss of focusloss of focus

(V11) November 2001 Introducing the Balanced ScorecardPage 6

2GCActive

Managementcopy 2GC Limited 2001

General management issuesRealising the need to change

Why

WhatWho

How

When

(V11) November 2001 Introducing the Balanced ScorecardPage 7

2GCActive

Managementcopy 2GC Limited 2001

What is Balanced Scorecard

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 8

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced Scorecard

bullldquoThe idea of the Scorecard is to describe the essential ingredients of business successrdquo(Olve et al ldquoPerformance Driversrdquo)

bullldquoBalanced Scorecard is one of the 15 most important management concepts ever introduced in Harvard Business Reviewrdquo(Harvard Business Review 75th Anniversary issue)

bull50 of North American companies claim to be using Balanced Scorecard(Recent survey by Bain amp Company)

One of the most dangerous forms of human error is forgetting what one is trying to to achievePaul Nitze

(V11) November 2001 Introducing the Balanced ScorecardPage 9

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced ScorecardBackground amp underlying philosophy

bullWhat is itndash Strategic communication and

performance measurement toolbullOrigins

ndash Developed from a tool developed in 1980s but some similarities with other pre-existing tools

ndash Introduced to wider audience in early 1990rsquos by R Kaplan amp D Norton in series of articles in Harvard Business Review

bullUnderlying philosophyndash Clear communication of goals and

prioritiesndash Learning amp team-working

Internal PerspectiveInternal Perspective

Learning amp Growth PerspectiveLearning amp Growth Perspective

Financial PerspectiveFinancial Perspective

Customer PerspectiveCustomer Perspective

Act

iviti

esO

utco

mes

Act

iviti

esO

utco

mes

Out

com

esO

utco

mes

Act

iviti

esA

ctiv

ities

(V11) November 2001 Introducing the Balanced ScorecardPage 10

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced ScorecardDo what needs to get donehellip

Are we doing what we set out to do

What do we want to achieve and what must we do to achieve it

Take action

Create amend strategic vision

Createchange linked strategic

objectives

Review results and cause amp effect assumptions

Balanced Scorecard

Developrevise measures amp

targets

(V11) November 2001 Introducing the Balanced ScorecardPage 11

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced ScorecardDifferent applications for Balanced Scorecard

bullldquoManagement Controlrdquo

ndash Maintain the temperature

bullldquoStrategic Controlrdquondash What temperature

7060 80

D A Y amp N I G H T

HOT OFF COOL

Assess Outcome

Set TargetHeater Run if room is below target temp

Thermostat Compare with

Target

MeasureRoom Temp

(V11) November 2001 Introducing the Balanced ScorecardPage 12

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced ScorecardStrategic control vs Management control

Organisational hierarchy

Strat

egic

emph

asis

Operational emphasis

(V11) November 2001 Introducing the Balanced ScorecardPage 13

2GCActive

Managementcopy 2GC Limited 2001

What is the Balanced Scorecard The latest Balanced Scorecard thinking

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 6

2GCActive

M anagementcopy 2GC Lim ited 1999

Balanced Scorecard DocumentationObjective M easure Supporting Initiatives

I1 Drive trade term s by channel W e will develop clear trading terms for different custom er groups W e will achieve our targetlevels of availability visibility and trade su pport via these trading terms

bull Trade customers adhering to trade standard terms amongst a sam ple of top XX customers

bull Develop standard trading terms (GG)

I2 Deliver custom er service standards Deliver timely f irst class service to the trade an d retailers

bull Cases delivered in full against order quantity

bull Orders delivered on time

bull Logistics Project (RS)bull SAP Project (PH)

I3 Im plem ent m ajor account m anagem ent programm e W e will continue to treat our custom ers as business partners W e will establish an account developm ent model to ensure high quality relationships exist w ith key account customers

bull of major accounts with a business plan bull Define ldquomajorrdquo accounts (AC)

I4 Deliver exce llent consum er propositions W e must meet consum er needs through the development and communication of an integrated brand proposition In the NPD sector we will launch new products only after they h ave m et pre-agreed qu ality image need and volume criteria

bull Brand Systems signed off by OE bull Develop core brand propositions (AC)bull NPD Process Improvement (ACAD)bull Cream ing project (AD)

I5 Deliver exce llent internal custom er service W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull SLA Qualitative Evaluations by SLA ow ners bull Logistics Project (RS)bull Factory Cost Reduction (DL)

I6 Effective m anagem ent of com pany assets W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull Total working capitalbull Fixed Asset Utilisationbull Outstanding Debtor Da ys

bull Plant ration alisation (AD)bull L4 L2 (DL)bull SAP (RS)

I7 Effective control of the business (No Surprises) W e will heighten our efforts to streamline the organisation to h elpdrive sound asset managem ent and cost reduction W e will invoke a cost conscious culture to complem ent our stream lining efforts

bull ldquoNo surprisesrdquo evaluation of actual performance against budget or forecast for- stock cover per city- sales per city- national costs

bull Analyse Risk project (PS)

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 6

2GCActive

M anagementcopy 2GC Lim ited 1999

Balanced Scorecard DocumentationObjective M easure Supporting Initiatives

I1 Drive trade term s by channel W e will develop clear trading terms for different custom er groups W e will achieve our targetlevels of availability visibility and trade su pport via these trading terms

bull Trade customers adhering to trade standard terms amongst a sam ple of top XX customers

bull Develop standard trading terms (GG)

I2 Deliver custom er service standards Deliver timely f irst class service to the trade an d retailers

bull Cases delivered in full against order quantity

bull Orders delivered on time

bull Logistics Project (RS)bull SAP Project (PH)

I3 Im plem ent m ajor account m anagem ent programm e W e will continue to treat our custom ers as business partners W e will establish an account developm ent model to ensure high quality relationships exist w ith key account customers

bull of major accounts with a business plan bull Define ldquomajorrdquo accounts (AC)

I4 Deliver exce llent consum er propositions W e must meet consum er needs through the development and communication of an integrated brand proposition In the NPD sector we will launch new products only after they h ave m et pre-agreed qu ality image need and volume criteria

bull Brand Systems signed off by OE bull Develop core brand propositions (AC)bull NPD Process Improvement (ACAD)bull Cream ing project (AD)

I5 Deliver exce llent internal custom er service W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull SLA Qualitative Evaluations by SLA ow ners bull Logistics Project (RS)bull Factory Cost Reduction (DL)

I6 Effective m anagem ent of com pany assets W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull Total working capitalbull Fixed Asset Utilisationbull Outstanding Debtor Da ys

bull Plant ration alisation (AD)bull L4 L2 (DL)bull SAP (RS)

I7 Effective control of the business (No Surprises) W e will heighten our efforts to streamline the organisation to h elpdrive sound asset managem ent and cost reduction W e will invoke a cost conscious culture to complem ent our stream lining efforts

bull ldquoNo surprisesrdquo evaluation of actual performance against budget or forecast for- stock cover per city- sales per city- national costs

bull Analyse Risk project (PS)

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 5

2GCActive

M anagementcopy 2GC Limited 1999

Strategic Linkage M odel

Fina

ncia

l Pe

rspe

ctiv

eC

usto

mer

Per

spec

tive

Lear

ning

amp G

row

th

Pe

rspe

ctiv

eIn

tern

al

Per

spec

tive

DBX Understands and Responds to m y Needs

DBX Products are m y First Choice Products

DBX Products are Good Value for Money

DBX Products are V isible and Availab le

DBX has an Excellent Consumer Franchise

Drive Trade Term s by Channel

Im plem ent Major Account Managem ent

Program m e

Effective Control of Business (No Surprises)

Sales Growth (by City by P roduct)

Gross Contribution (After City Sales and

Marketing)Asset Turn Overheads as a of

NSV

Improved Shareh older Value (ROCE)

I Have a Good Relationship with DBX

Develop Better W ork P ractices and IS

Develop and Retain P rofessional M anagers

Develop Service Agreem ents

Effective M anagem ent o f Com pany Assets

Deliver Excellent In ternal Custom er

ServiceDeliver Custom er

Service Standards

Develop Professional Custom er Oriented Skilled

Sales Force

Deliver Excellent Consum er

Propositions

Understand Im pact O f Various M arketing Levers

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 5

2GCActive

M anagementcopy 2GC Limited 1999

Strategic Linkage M odel

Fina

ncia

l Pe

rspe

ctiv

eC

usto

mer

Per

spec

tive

Lear

ning

amp G

row

th

Pe

rspe

ctiv

eIn

tern

al

Per

spec

tive

DBX Understands and Responds to m y Needs

DBX Products are m y First Choice Products

DBX Products are Good Value for Money

DBX Products are V isible and Availab le

DBX has an Excellent Consumer Franchise

Drive Trade Term s by Channel

Im plem ent Major Account Managem ent

Program m e

Effective Control of Business (No Surprises)

Sales Growth (by City by P roduct)

Gross Contribution (After City Sales and

Marketing)Asset Turn Overheads as a of

NSV

Improved Shareh older Value (ROCE)

I Have a Good Relationship with DBX

Develop Better W ork P ractices and IS

Develop and Retain P rofessional M anagers

Develop Service Agreem ents

Effective M anagem ent o f Com pany Assets

Deliver Excellent In ternal Custom er

ServiceDeliver Custom er

Service Standards

Develop Professional Custom er Oriented Skilled

Sales Force

Deliver Excellent Consum er

Propositions

Understand Im pact O f Various M arketing Levers

21 November 2001 2GC Limited Introduction to 2GC Active ManagementPage 4

2GCActive

M anagem entcopy 2GC Limited 1999

Destination Statem entSales Volume50000 MT

Distribution50 Cities

Sales Revenue pound 50 M illion

One M anufacturing Site

ROCE 7Capital Em ployed No m ore th an pound45 million

Product Manager

Marketing Director

Factory Director

Manufacturing Director

Regional Sales Manager

Sales Director

Managing Director

No m ore than 6 Core Brand ProductsMinimum sales volum esndash 5000 MT for each core brandndash 2000M T for each m ajor product

Employer of Choice ( 1 in industry and ranked in FM CG top 10)

Marketing SalesBranding Clear brand propositions systems

established for the six core brandsbull DBX has two of th e top five category product brandsbull Producthouse brand awaren ess targets in DBX city

strategies achievedM edia and promotional strategy City market share

targets achieved within agreed budgetbull M odels and measures of th e relative impact of all

m arketing levers available to assist in th e evaluation targeting of m arketing activity

Im proved Skills and Processes Standardised and transparent m arketing processes developed and agreed within DBX and with Group

bull M arketing team skills targets (b ased on extern al benchmark com parisons) achieved through training and recruitment (where applicable)

Overall DBX seen as one of top 10 FMCG Corsquos servicing key accounts in th e country (and 1 in category)

Customer M arket Focus Sales s taff achieving set targ ets in line with city s trategies for focus on custom er and market issues

bull Assess using distribution by chann el visib ility and trade prom otions

Im proved Skills and Processes Standardised and transp arent sales processes develop ed and agreed within DBX and with Group

bull Sales team skills targets (based on extern al b enchm ark comparisons) achieved through training and recruitment (where applicable)

Organisational Structurebull Clear scope and role statements exis t for all functions (including Sales

amp Marketing)bull Supporting functions (includ ing supply chain) will be achieving all

agreed service level targets with sales amp marketing

Supply ChainCost efficient supp ly chain based on flexib le p roduction lines will deliverbull Increased responsiveness to market dem ands bull Lower cycle timesbull Product channel freshness targe ts

Inform ation System sAppropriate in form ation systems that w ill meet DB Xrsquos needsbull All necessary m anagement inform ation p roduced within p re-agreed tim elines and scales

M anagementbull Senior m anagement w ill be com mitted to working on stra teg y and evalua ted on their

ab ility to coach advise guide and ensure tha t tasks are delega ted effectivelybull Professional m iddle management will exist that w ill be able to ac t m ore independently

within de fined guidelines and have the skills required for their job rolendash Succession plans for key positions wi ll existndash Recruiting and training policies will aim to raise middle manage ment competence to

meet internationa l standards

21 November 2001 2GC Limited Introduction to 2GC Active ManagementPage 4

2GCActive

M anagem entcopy 2GC Limited 1999

Destination Statem entSales Volume50000 MT

Distribution50 Cities

Sales Revenue pound 50 M illion

One M anufacturing Site

ROCE 7Capital Em ployed No m ore th an pound45 million

Product Manager

Marketing Director

Factory Director

Manufacturing Director

Regional Sales Manager

Sales Director

Managing Director

No m ore than 6 Core Brand ProductsMinimum sales volum esndash 5000 MT for each core brandndash 2000M T for each m ajor product

Employer of Choice ( 1 in industry and ranked in FM CG top 10)

Marketing SalesBranding Clear brand propositions systems

established for the six core brandsbull DBX has two of th e top five category product brandsbull Producthouse brand awaren ess targets in DBX city

strategies achievedM edia and promotional strategy City market share

targets achieved within agreed budgetbull M odels and measures of th e relative impact of all

m arketing levers available to assist in th e evaluation targeting of m arketing activity

Im proved Skills and Processes Standardised and transparent m arketing processes developed and agreed within DBX and with Group

bull M arketing team skills targets (b ased on extern al benchmark com parisons) achieved through training and recruitment (where applicable)

Overall DBX seen as one of top 10 FMCG Corsquos servicing key accounts in th e country (and 1 in category)

Customer M arket Focus Sales s taff achieving set targ ets in line with city s trategies for focus on custom er and market issues

bull Assess using distribution by chann el visib ility and trade prom otions

Im proved Skills and Processes Standardised and transp arent sales processes develop ed and agreed within DBX and with Group

bull Sales team skills targets (based on extern al b enchm ark comparisons) achieved through training and recruitment (where applicable)

Organisational Structurebull Clear scope and role statements exis t for all functions (including Sales

amp Marketing)bull Supporting functions (includ ing supply chain) will be achieving all

agreed service level targets with sales amp marketing

Supply ChainCost efficient supp ly chain based on flexib le p roduction lines will deliverbull Increased responsiveness to market dem ands bull Lower cycle timesbull Product channel freshness targe ts

Inform ation System sAppropriate in form ation systems that w ill meet DB Xrsquos needsbull All necessary m anagement inform ation p roduced within p re-agreed tim elines and scales

M anagementbull Senior m anagement w ill be com mitted to working on stra teg y and evalua ted on their

ab ility to coach advise guide and ensure tha t tasks are delega ted effectivelybull Professional m iddle management will exist that w ill be able to ac t m ore independently

within de fined guidelines and have the skills required for their job rolendash Succession plans for key positions wi ll existndash Recruiting and training policies will aim to raise middle manage ment competence to

meet internationa l standards

bullThe ldquoobjective drivenrdquoBalanced Scorecard has emerged as best practice

(V11) November 2001 Introducing the Balanced ScorecardPage 14

2GCActive

Managementcopy 2GC Limited 2001

What is Balanced ScorecardMore than just a set of goals amp measures

Balanced Scorecard design

Balanced Scorecard development

Balanced Scorecard deployment

bull Value from first application

bull Business model reflected in relationship between strategic goals

bull Corporate strategic measurement amp management tool

ndash divisionsndash business unitsndash functions

bull All management Systems aligned with strategy

bull Drive strategic behaviour into everyday decisions and operations

(V11) November 2001 Introducing the Balanced ScorecardPage 15

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard design

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 16

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designWhere to go an how to get there

bullBest practice is to use a development group that comprises the the likely users of the Balanced Scorecard

bullDesign choices should be based on jointly held perception of a strategic ldquoDestinationrdquo

bullThe design should measure progress against the organisationrsquos key strategic objectives (activities and outcomes)

bullLinks between strategic objectives should be articulated ndash these express the management teamrsquos beliefs about which activities drive which outcomes

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development Ac

tiviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

VisionVision

StrategyStrategy

Out

com

esAc

tiviti

es

(V11) November 2001 Introducing the Balanced ScorecardPage 17

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designMonitor progress in achieving goals

bullDevelopment of measures follow clarification and agreement of strategic objectives becausehellip

bullMeasures track progress in achieving those objectives against agreed targets

bullIdentify and monitor extraordinary activities and projects furthering achievement of objectives

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Out

com

es

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development A

ctiv

ities

Act

iviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

Financial Perspective

Objectives Measures Targets Initiatives

Financial Perspective

Objectives Measures Targets

Financial Perspective

Objectives Measures Targets

Financial Perspective

Objectives Measures Targets Initiatives

(V11) November 2001 Introducing the Balanced ScorecardPage 18

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designThe components of a Strategic Balanced Scorecard

bull Financial Marketndash Total NSV pound120m (nominal) ndashndash Has achieved 10 CAGR on NSndash Operating Margin gt10ndash Controllable overheads less thndash Operating Profit pound12m (nomin

Destination StatementDescription of how the organisation will be at some specific future date if the management teamrsquos strategies are successful

Fin

anci

alCu

stom

er

Best value for money

The leading and most innovative

brand

Drive Increased Demand

Profitable Sales Growth

Strategic Linkage Model (SLM)Graphic illustration of ldquocause and effectrdquo relationships between the strategic goals that must be achieved if the organisation is to reach its destination state

ObjectiveObjective DescriptionDescription

Total Shareholder Return is above Groups cost of equity over the medium to long term

Total Shareholder Return is above Groups cost of equity over the medium to long term

Minimise net tax paid and WACC in the light of operational and commercial decisions concerning the nature and sphere of Groups activities and legal constraints Optimum means

Minimise net tax paid and WACC in the light of operational and commercial decisions concerning the nature and sphere of Groups activities and legal constraints Optimum means better than equivalent payments by known Group

Measures (Freq)Measures (Freq)

bull CAGR of Total ShareholdeReturn

bull ROIC (Target gt WACC)

bull CAGR of Total ShareholderReturn

bull ROIC (Target gt WACC)

bull PampL account net tax chargea of profit for financial ye

bull WACC

bull PampL account net tax chargeda of profit for financial yea

bull WACC

Group Strategy Delivers Value

Achieve Optimum Tax Rate amp WACC

F1

F2

Objective and Measure Documentation

ndashClear and concise description of strategic objectives and the measures chosen to track their achievement

F11

F12

-30p

8

150p

18Dividend expected kept a1000 pence leading to loprevious years

Measure Value Target PerfObjective Status

Outperform capital markets

F21 200 185Increasing cash inflow froCash amp a sset

F21 200 185Increasing cash inflow froCash amp a sset

t

Progress Reporting FormatsIllustration of how (and by whom) Scorecard information will be communicated

o Initiative overviewOverview of which initiatives support which Scorecard objectives incl owners and deadlines for finalisation

(V11) November 2001 Introducing the Balanced ScorecardPage 19

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard roll-out

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 20

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard Development Development within the organisation

Country 1 Country 2

Regional Cluster(Line Management)

Country 3

Dept 1

Team

Dept 2

Country 4

Regional ClusterLine Management

Shared Service(eg Supply Chain)

Group SupportLegal Finance HR IS

Main Board

The optimal role-out

sequence is ldquoTop Downrdquo

(V11) November 2001 Introducing the Balanced ScorecardPage 21

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard DevelopmentDevelopment within the organisation

Country 1 Country 2

Regional Cluster(Line Management)

Country 3

Dept 1

Team

Dept 2

Country 4

Regional ClusterLine Management

Shared Service(eg Supply Chain)

Group SupportLegal Finance HR IS

Main Board

Corporate Balanced Scorecard

Co-ordinatingBalanced Scorecard

Support Function Balanced Scorecard

Operating Unit Balanced Scorecard

Departmental Balanced ScorecardTeam Level

Balanced Scorecard

(V11) November 2001 Introducing the Balanced ScorecardPage 22

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard DevelopmentldquoContractualrdquo agreement between management teams

What

How

What

Board level ScorecardBoard level Scorecard

Objectives

Measures amp Targets

Initiatives

Objectives

Measures amp Targets

Initiatives

Overall VisionOverall Vision

Subordinate ScorecardSubordinate Scorecard

Objectives

Measures amp Targets

Initiatives

Objectives

Measures amp Targets

Initiatives

Local VisionLocal Vision

How

TeamIndividual ScorecardTeamIndividual Scorecard

Objectives

Measures amp Targets

Initiatives

TeamIndividual Vision

TeamIndividual Vision

Strategic direction

Strategic direction

Strategy implementation

Strategy implementation

(V11) November 2001 Introducing the Balanced ScorecardPage 23

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 24

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deploymentldquoAchieving strategic goals requires activityrdquo

(V11) November 2001 Introducing the Balanced ScorecardPage 25

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Strategic alignment amp goal setting

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development Ac

tiviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

VisionVision

StrategyStrategy

Out

com

esAc

tiviti

es

(V11) November 2001 Introducing the Balanced ScorecardPage 26

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Align existing management control tools with strategy

SVA amp EVASVA amp EVAB

udge

tsB

udge

ts

BEMBEMBalanced Scorecard

ABCABC HR ToolsHR Tools

(V11) November 2001 Introducing the Balanced ScorecardPage 27

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Support two-way communication of strategyhellip

Fuzzy objectivesFuzzy objectives

Unjustified trust in informal

Unjustified trust in informal

feedback systems

feedback systemsEntren

ched m

easure

ment

Entren

ched m

easure

ment

system

s

system

s

BSC

(V11) November 2001 Introducing the Balanced ScorecardPage 28

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Everybody crafts amp monitors strategy all the timehellip

Comm

unica

tion Com

munication

Board levelScorecard

process

OperationalScorecard

process

Support function Scorecard

process

Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets

Take action

Create amend

strategic vision

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Balanced Scorecard

Developrevise measures amp

targets

Communication

(V11) November 2001 Introducing the Balanced ScorecardPage 29

2GCActive

Managementcopy 2GC Limited 2001

Success criteria

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 30

2GCActive

Managementcopy 2GC Limited 2001

Key success factorsCultural building blocks of Scorecard success

bullInclusive design process building on consensus seeking amp involvement

bullParticipative management style focused on learning open discussion and creative thinking

bullSponsorship and commitment from entire management team -top management in particular

bullldquoEmbeddingrdquo of management processes to use refresh and renew the Balanced Scorecard over time

(V11) November 2001 Introducing the Balanced ScorecardPage 31

2GCActive

Managementcopy 2GC Limited 2001

Introducing the Balanced ScorecardTo find out morehellip

bullVisit 2GCrsquos Web Sitendash We focus specifically on strategic

control and performance measurement issues and have a wide range of working papers FAQs and presentations to download on these topics

ndash The site also has a recommended reading list that covers relevant topics and the ldquoWeblinksrdquo database of relevant Internet sites

bullContact 2GCndash Let us know if you have a question

you canrsquot answer wersquoll do what we can to helphellip

bull info2gccouk

(V11) November 2001 Introducing the Balanced ScorecardPage 4

2GCActive

Managementcopy 2GC Limited 2001

General management issuesImplementing Strategic Goals

Vision

97

Vision

9797

Significant strategic success

33

Significant strategic success

3333

Clear strategic

plans

80

Clear strategic

plans

8080

Some strategic success

52

Some strategic success

5252

From Strategic Performance Measurement amp Management Business Intelligence Renaissance Worldwide 1997

bull Almost all organisations have a strategic vision ndash few manage to realise it

(V11) November 2001 Introducing the Balanced ScorecardPage 5

2GCActive

Managementcopy 2GC Limited 2001

General management issuesBarriers to effective performance management

Source Based on paper by John H Lingle and William A Schiemann ldquoFrom balanced scorecard to strategic gauges Is measurement worth itldquo published in ldquoManagement Reviewrdquo Volume 85 Issue 3 Mar 1996 p 56

Fuzzy objectivesFuzzy objectives

Unjustified trust in informal Unjustified trust in informal feedback systemsfeedback systems

Entrenched measurement Entrenched measurement systemssystems

Too many measures and Too many measures and loss of focusloss of focus

(V11) November 2001 Introducing the Balanced ScorecardPage 6

2GCActive

Managementcopy 2GC Limited 2001

General management issuesRealising the need to change

Why

WhatWho

How

When

(V11) November 2001 Introducing the Balanced ScorecardPage 7

2GCActive

Managementcopy 2GC Limited 2001

What is Balanced Scorecard

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 8

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced Scorecard

bullldquoThe idea of the Scorecard is to describe the essential ingredients of business successrdquo(Olve et al ldquoPerformance Driversrdquo)

bullldquoBalanced Scorecard is one of the 15 most important management concepts ever introduced in Harvard Business Reviewrdquo(Harvard Business Review 75th Anniversary issue)

bull50 of North American companies claim to be using Balanced Scorecard(Recent survey by Bain amp Company)

One of the most dangerous forms of human error is forgetting what one is trying to to achievePaul Nitze

(V11) November 2001 Introducing the Balanced ScorecardPage 9

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced ScorecardBackground amp underlying philosophy

bullWhat is itndash Strategic communication and

performance measurement toolbullOrigins

ndash Developed from a tool developed in 1980s but some similarities with other pre-existing tools

ndash Introduced to wider audience in early 1990rsquos by R Kaplan amp D Norton in series of articles in Harvard Business Review

bullUnderlying philosophyndash Clear communication of goals and

prioritiesndash Learning amp team-working

Internal PerspectiveInternal Perspective

Learning amp Growth PerspectiveLearning amp Growth Perspective

Financial PerspectiveFinancial Perspective

Customer PerspectiveCustomer Perspective

Act

iviti

esO

utco

mes

Act

iviti

esO

utco

mes

Out

com

esO

utco

mes

Act

iviti

esA

ctiv

ities

(V11) November 2001 Introducing the Balanced ScorecardPage 10

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced ScorecardDo what needs to get donehellip

Are we doing what we set out to do

What do we want to achieve and what must we do to achieve it

Take action

Create amend strategic vision

Createchange linked strategic

objectives

Review results and cause amp effect assumptions

Balanced Scorecard

Developrevise measures amp

targets

(V11) November 2001 Introducing the Balanced ScorecardPage 11

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced ScorecardDifferent applications for Balanced Scorecard

bullldquoManagement Controlrdquo

ndash Maintain the temperature

bullldquoStrategic Controlrdquondash What temperature

7060 80

D A Y amp N I G H T

HOT OFF COOL

Assess Outcome

Set TargetHeater Run if room is below target temp

Thermostat Compare with

Target

MeasureRoom Temp

(V11) November 2001 Introducing the Balanced ScorecardPage 12

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced ScorecardStrategic control vs Management control

Organisational hierarchy

Strat

egic

emph

asis

Operational emphasis

(V11) November 2001 Introducing the Balanced ScorecardPage 13

2GCActive

Managementcopy 2GC Limited 2001

What is the Balanced Scorecard The latest Balanced Scorecard thinking

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 6

2GCActive

M anagementcopy 2GC Lim ited 1999

Balanced Scorecard DocumentationObjective M easure Supporting Initiatives

I1 Drive trade term s by channel W e will develop clear trading terms for different custom er groups W e will achieve our targetlevels of availability visibility and trade su pport via these trading terms

bull Trade customers adhering to trade standard terms amongst a sam ple of top XX customers

bull Develop standard trading terms (GG)

I2 Deliver custom er service standards Deliver timely f irst class service to the trade an d retailers

bull Cases delivered in full against order quantity

bull Orders delivered on time

bull Logistics Project (RS)bull SAP Project (PH)

I3 Im plem ent m ajor account m anagem ent programm e W e will continue to treat our custom ers as business partners W e will establish an account developm ent model to ensure high quality relationships exist w ith key account customers

bull of major accounts with a business plan bull Define ldquomajorrdquo accounts (AC)

I4 Deliver exce llent consum er propositions W e must meet consum er needs through the development and communication of an integrated brand proposition In the NPD sector we will launch new products only after they h ave m et pre-agreed qu ality image need and volume criteria

bull Brand Systems signed off by OE bull Develop core brand propositions (AC)bull NPD Process Improvement (ACAD)bull Cream ing project (AD)

I5 Deliver exce llent internal custom er service W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull SLA Qualitative Evaluations by SLA ow ners bull Logistics Project (RS)bull Factory Cost Reduction (DL)

I6 Effective m anagem ent of com pany assets W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull Total working capitalbull Fixed Asset Utilisationbull Outstanding Debtor Da ys

bull Plant ration alisation (AD)bull L4 L2 (DL)bull SAP (RS)

I7 Effective control of the business (No Surprises) W e will heighten our efforts to streamline the organisation to h elpdrive sound asset managem ent and cost reduction W e will invoke a cost conscious culture to complem ent our stream lining efforts

bull ldquoNo surprisesrdquo evaluation of actual performance against budget or forecast for- stock cover per city- sales per city- national costs

bull Analyse Risk project (PS)

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 6

2GCActive

M anagementcopy 2GC Lim ited 1999

Balanced Scorecard DocumentationObjective M easure Supporting Initiatives

I1 Drive trade term s by channel W e will develop clear trading terms for different custom er groups W e will achieve our targetlevels of availability visibility and trade su pport via these trading terms

bull Trade customers adhering to trade standard terms amongst a sam ple of top XX customers

bull Develop standard trading terms (GG)

I2 Deliver custom er service standards Deliver timely f irst class service to the trade an d retailers

bull Cases delivered in full against order quantity

bull Orders delivered on time

bull Logistics Project (RS)bull SAP Project (PH)

I3 Im plem ent m ajor account m anagem ent programm e W e will continue to treat our custom ers as business partners W e will establish an account developm ent model to ensure high quality relationships exist w ith key account customers

bull of major accounts with a business plan bull Define ldquomajorrdquo accounts (AC)

I4 Deliver exce llent consum er propositions W e must meet consum er needs through the development and communication of an integrated brand proposition In the NPD sector we will launch new products only after they h ave m et pre-agreed qu ality image need and volume criteria

bull Brand Systems signed off by OE bull Develop core brand propositions (AC)bull NPD Process Improvement (ACAD)bull Cream ing project (AD)

I5 Deliver exce llent internal custom er service W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull SLA Qualitative Evaluations by SLA ow ners bull Logistics Project (RS)bull Factory Cost Reduction (DL)

I6 Effective m anagem ent of com pany assets W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull Total working capitalbull Fixed Asset Utilisationbull Outstanding Debtor Da ys

bull Plant ration alisation (AD)bull L4 L2 (DL)bull SAP (RS)

I7 Effective control of the business (No Surprises) W e will heighten our efforts to streamline the organisation to h elpdrive sound asset managem ent and cost reduction W e will invoke a cost conscious culture to complem ent our stream lining efforts

bull ldquoNo surprisesrdquo evaluation of actual performance against budget or forecast for- stock cover per city- sales per city- national costs

bull Analyse Risk project (PS)

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 5

2GCActive

M anagementcopy 2GC Limited 1999

Strategic Linkage M odel

Fina

ncia

l Pe

rspe

ctiv

eC

usto

mer

Per

spec

tive

Lear

ning

amp G

row

th

Pe

rspe

ctiv

eIn

tern

al

Per

spec

tive

DBX Understands and Responds to m y Needs

DBX Products are m y First Choice Products

DBX Products are Good Value for Money

DBX Products are V isible and Availab le

DBX has an Excellent Consumer Franchise

Drive Trade Term s by Channel

Im plem ent Major Account Managem ent

Program m e

Effective Control of Business (No Surprises)

Sales Growth (by City by P roduct)

Gross Contribution (After City Sales and

Marketing)Asset Turn Overheads as a of

NSV

Improved Shareh older Value (ROCE)

I Have a Good Relationship with DBX

Develop Better W ork P ractices and IS

Develop and Retain P rofessional M anagers

Develop Service Agreem ents

Effective M anagem ent o f Com pany Assets

Deliver Excellent In ternal Custom er

ServiceDeliver Custom er

Service Standards

Develop Professional Custom er Oriented Skilled

Sales Force

Deliver Excellent Consum er

Propositions

Understand Im pact O f Various M arketing Levers

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 5

2GCActive

M anagementcopy 2GC Limited 1999

Strategic Linkage M odel

Fina

ncia

l Pe

rspe

ctiv

eC

usto

mer

Per

spec

tive

Lear

ning

amp G

row

th

Pe

rspe

ctiv

eIn

tern

al

Per

spec

tive

DBX Understands and Responds to m y Needs

DBX Products are m y First Choice Products

DBX Products are Good Value for Money

DBX Products are V isible and Availab le

DBX has an Excellent Consumer Franchise

Drive Trade Term s by Channel

Im plem ent Major Account Managem ent

Program m e

Effective Control of Business (No Surprises)

Sales Growth (by City by P roduct)

Gross Contribution (After City Sales and

Marketing)Asset Turn Overheads as a of

NSV

Improved Shareh older Value (ROCE)

I Have a Good Relationship with DBX

Develop Better W ork P ractices and IS

Develop and Retain P rofessional M anagers

Develop Service Agreem ents

Effective M anagem ent o f Com pany Assets

Deliver Excellent In ternal Custom er

ServiceDeliver Custom er

Service Standards

Develop Professional Custom er Oriented Skilled

Sales Force

Deliver Excellent Consum er

Propositions

Understand Im pact O f Various M arketing Levers

21 November 2001 2GC Limited Introduction to 2GC Active ManagementPage 4

2GCActive

M anagem entcopy 2GC Limited 1999

Destination Statem entSales Volume50000 MT

Distribution50 Cities

Sales Revenue pound 50 M illion

One M anufacturing Site

ROCE 7Capital Em ployed No m ore th an pound45 million

Product Manager

Marketing Director

Factory Director

Manufacturing Director

Regional Sales Manager

Sales Director

Managing Director

No m ore than 6 Core Brand ProductsMinimum sales volum esndash 5000 MT for each core brandndash 2000M T for each m ajor product

Employer of Choice ( 1 in industry and ranked in FM CG top 10)

Marketing SalesBranding Clear brand propositions systems

established for the six core brandsbull DBX has two of th e top five category product brandsbull Producthouse brand awaren ess targets in DBX city

strategies achievedM edia and promotional strategy City market share

targets achieved within agreed budgetbull M odels and measures of th e relative impact of all

m arketing levers available to assist in th e evaluation targeting of m arketing activity

Im proved Skills and Processes Standardised and transparent m arketing processes developed and agreed within DBX and with Group

bull M arketing team skills targets (b ased on extern al benchmark com parisons) achieved through training and recruitment (where applicable)

Overall DBX seen as one of top 10 FMCG Corsquos servicing key accounts in th e country (and 1 in category)

Customer M arket Focus Sales s taff achieving set targ ets in line with city s trategies for focus on custom er and market issues

bull Assess using distribution by chann el visib ility and trade prom otions

Im proved Skills and Processes Standardised and transp arent sales processes develop ed and agreed within DBX and with Group

bull Sales team skills targets (based on extern al b enchm ark comparisons) achieved through training and recruitment (where applicable)

Organisational Structurebull Clear scope and role statements exis t for all functions (including Sales

amp Marketing)bull Supporting functions (includ ing supply chain) will be achieving all

agreed service level targets with sales amp marketing

Supply ChainCost efficient supp ly chain based on flexib le p roduction lines will deliverbull Increased responsiveness to market dem ands bull Lower cycle timesbull Product channel freshness targe ts

Inform ation System sAppropriate in form ation systems that w ill meet DB Xrsquos needsbull All necessary m anagement inform ation p roduced within p re-agreed tim elines and scales

M anagementbull Senior m anagement w ill be com mitted to working on stra teg y and evalua ted on their

ab ility to coach advise guide and ensure tha t tasks are delega ted effectivelybull Professional m iddle management will exist that w ill be able to ac t m ore independently

within de fined guidelines and have the skills required for their job rolendash Succession plans for key positions wi ll existndash Recruiting and training policies will aim to raise middle manage ment competence to

meet internationa l standards

21 November 2001 2GC Limited Introduction to 2GC Active ManagementPage 4

2GCActive

M anagem entcopy 2GC Limited 1999

Destination Statem entSales Volume50000 MT

Distribution50 Cities

Sales Revenue pound 50 M illion

One M anufacturing Site

ROCE 7Capital Em ployed No m ore th an pound45 million

Product Manager

Marketing Director

Factory Director

Manufacturing Director

Regional Sales Manager

Sales Director

Managing Director

No m ore than 6 Core Brand ProductsMinimum sales volum esndash 5000 MT for each core brandndash 2000M T for each m ajor product

Employer of Choice ( 1 in industry and ranked in FM CG top 10)

Marketing SalesBranding Clear brand propositions systems

established for the six core brandsbull DBX has two of th e top five category product brandsbull Producthouse brand awaren ess targets in DBX city

strategies achievedM edia and promotional strategy City market share

targets achieved within agreed budgetbull M odels and measures of th e relative impact of all

m arketing levers available to assist in th e evaluation targeting of m arketing activity

Im proved Skills and Processes Standardised and transparent m arketing processes developed and agreed within DBX and with Group

bull M arketing team skills targets (b ased on extern al benchmark com parisons) achieved through training and recruitment (where applicable)

Overall DBX seen as one of top 10 FMCG Corsquos servicing key accounts in th e country (and 1 in category)

Customer M arket Focus Sales s taff achieving set targ ets in line with city s trategies for focus on custom er and market issues

bull Assess using distribution by chann el visib ility and trade prom otions

Im proved Skills and Processes Standardised and transp arent sales processes develop ed and agreed within DBX and with Group

bull Sales team skills targets (based on extern al b enchm ark comparisons) achieved through training and recruitment (where applicable)

Organisational Structurebull Clear scope and role statements exis t for all functions (including Sales

amp Marketing)bull Supporting functions (includ ing supply chain) will be achieving all

agreed service level targets with sales amp marketing

Supply ChainCost efficient supp ly chain based on flexib le p roduction lines will deliverbull Increased responsiveness to market dem ands bull Lower cycle timesbull Product channel freshness targe ts

Inform ation System sAppropriate in form ation systems that w ill meet DB Xrsquos needsbull All necessary m anagement inform ation p roduced within p re-agreed tim elines and scales

M anagementbull Senior m anagement w ill be com mitted to working on stra teg y and evalua ted on their

ab ility to coach advise guide and ensure tha t tasks are delega ted effectivelybull Professional m iddle management will exist that w ill be able to ac t m ore independently

within de fined guidelines and have the skills required for their job rolendash Succession plans for key positions wi ll existndash Recruiting and training policies will aim to raise middle manage ment competence to

meet internationa l standards

bullThe ldquoobjective drivenrdquoBalanced Scorecard has emerged as best practice

(V11) November 2001 Introducing the Balanced ScorecardPage 14

2GCActive

Managementcopy 2GC Limited 2001

What is Balanced ScorecardMore than just a set of goals amp measures

Balanced Scorecard design

Balanced Scorecard development

Balanced Scorecard deployment

bull Value from first application

bull Business model reflected in relationship between strategic goals

bull Corporate strategic measurement amp management tool

ndash divisionsndash business unitsndash functions

bull All management Systems aligned with strategy

bull Drive strategic behaviour into everyday decisions and operations

(V11) November 2001 Introducing the Balanced ScorecardPage 15

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard design

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 16

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designWhere to go an how to get there

bullBest practice is to use a development group that comprises the the likely users of the Balanced Scorecard

bullDesign choices should be based on jointly held perception of a strategic ldquoDestinationrdquo

bullThe design should measure progress against the organisationrsquos key strategic objectives (activities and outcomes)

bullLinks between strategic objectives should be articulated ndash these express the management teamrsquos beliefs about which activities drive which outcomes

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development Ac

tiviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

VisionVision

StrategyStrategy

Out

com

esAc

tiviti

es

(V11) November 2001 Introducing the Balanced ScorecardPage 17

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designMonitor progress in achieving goals

bullDevelopment of measures follow clarification and agreement of strategic objectives becausehellip

bullMeasures track progress in achieving those objectives against agreed targets

bullIdentify and monitor extraordinary activities and projects furthering achievement of objectives

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Out

com

es

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development A

ctiv

ities

Act

iviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

Financial Perspective

Objectives Measures Targets Initiatives

Financial Perspective

Objectives Measures Targets

Financial Perspective

Objectives Measures Targets

Financial Perspective

Objectives Measures Targets Initiatives

(V11) November 2001 Introducing the Balanced ScorecardPage 18

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designThe components of a Strategic Balanced Scorecard

bull Financial Marketndash Total NSV pound120m (nominal) ndashndash Has achieved 10 CAGR on NSndash Operating Margin gt10ndash Controllable overheads less thndash Operating Profit pound12m (nomin

Destination StatementDescription of how the organisation will be at some specific future date if the management teamrsquos strategies are successful

Fin

anci

alCu

stom

er

Best value for money

The leading and most innovative

brand

Drive Increased Demand

Profitable Sales Growth

Strategic Linkage Model (SLM)Graphic illustration of ldquocause and effectrdquo relationships between the strategic goals that must be achieved if the organisation is to reach its destination state

ObjectiveObjective DescriptionDescription

Total Shareholder Return is above Groups cost of equity over the medium to long term

Total Shareholder Return is above Groups cost of equity over the medium to long term

Minimise net tax paid and WACC in the light of operational and commercial decisions concerning the nature and sphere of Groups activities and legal constraints Optimum means

Minimise net tax paid and WACC in the light of operational and commercial decisions concerning the nature and sphere of Groups activities and legal constraints Optimum means better than equivalent payments by known Group

Measures (Freq)Measures (Freq)

bull CAGR of Total ShareholdeReturn

bull ROIC (Target gt WACC)

bull CAGR of Total ShareholderReturn

bull ROIC (Target gt WACC)

bull PampL account net tax chargea of profit for financial ye

bull WACC

bull PampL account net tax chargeda of profit for financial yea

bull WACC

Group Strategy Delivers Value

Achieve Optimum Tax Rate amp WACC

F1

F2

Objective and Measure Documentation

ndashClear and concise description of strategic objectives and the measures chosen to track their achievement

F11

F12

-30p

8

150p

18Dividend expected kept a1000 pence leading to loprevious years

Measure Value Target PerfObjective Status

Outperform capital markets

F21 200 185Increasing cash inflow froCash amp a sset

F21 200 185Increasing cash inflow froCash amp a sset

t

Progress Reporting FormatsIllustration of how (and by whom) Scorecard information will be communicated

o Initiative overviewOverview of which initiatives support which Scorecard objectives incl owners and deadlines for finalisation

(V11) November 2001 Introducing the Balanced ScorecardPage 19

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard roll-out

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 20

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard Development Development within the organisation

Country 1 Country 2

Regional Cluster(Line Management)

Country 3

Dept 1

Team

Dept 2

Country 4

Regional ClusterLine Management

Shared Service(eg Supply Chain)

Group SupportLegal Finance HR IS

Main Board

The optimal role-out

sequence is ldquoTop Downrdquo

(V11) November 2001 Introducing the Balanced ScorecardPage 21

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard DevelopmentDevelopment within the organisation

Country 1 Country 2

Regional Cluster(Line Management)

Country 3

Dept 1

Team

Dept 2

Country 4

Regional ClusterLine Management

Shared Service(eg Supply Chain)

Group SupportLegal Finance HR IS

Main Board

Corporate Balanced Scorecard

Co-ordinatingBalanced Scorecard

Support Function Balanced Scorecard

Operating Unit Balanced Scorecard

Departmental Balanced ScorecardTeam Level

Balanced Scorecard

(V11) November 2001 Introducing the Balanced ScorecardPage 22

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard DevelopmentldquoContractualrdquo agreement between management teams

What

How

What

Board level ScorecardBoard level Scorecard

Objectives

Measures amp Targets

Initiatives

Objectives

Measures amp Targets

Initiatives

Overall VisionOverall Vision

Subordinate ScorecardSubordinate Scorecard

Objectives

Measures amp Targets

Initiatives

Objectives

Measures amp Targets

Initiatives

Local VisionLocal Vision

How

TeamIndividual ScorecardTeamIndividual Scorecard

Objectives

Measures amp Targets

Initiatives

TeamIndividual Vision

TeamIndividual Vision

Strategic direction

Strategic direction

Strategy implementation

Strategy implementation

(V11) November 2001 Introducing the Balanced ScorecardPage 23

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 24

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deploymentldquoAchieving strategic goals requires activityrdquo

(V11) November 2001 Introducing the Balanced ScorecardPage 25

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Strategic alignment amp goal setting

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development Ac

tiviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

VisionVision

StrategyStrategy

Out

com

esAc

tiviti

es

(V11) November 2001 Introducing the Balanced ScorecardPage 26

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Align existing management control tools with strategy

SVA amp EVASVA amp EVAB

udge

tsB

udge

ts

BEMBEMBalanced Scorecard

ABCABC HR ToolsHR Tools

(V11) November 2001 Introducing the Balanced ScorecardPage 27

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Support two-way communication of strategyhellip

Fuzzy objectivesFuzzy objectives

Unjustified trust in informal

Unjustified trust in informal

feedback systems

feedback systemsEntren

ched m

easure

ment

Entren

ched m

easure

ment

system

s

system

s

BSC

(V11) November 2001 Introducing the Balanced ScorecardPage 28

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Everybody crafts amp monitors strategy all the timehellip

Comm

unica

tion Com

munication

Board levelScorecard

process

OperationalScorecard

process

Support function Scorecard

process

Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets

Take action

Create amend

strategic vision

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Balanced Scorecard

Developrevise measures amp

targets

Communication

(V11) November 2001 Introducing the Balanced ScorecardPage 29

2GCActive

Managementcopy 2GC Limited 2001

Success criteria

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 30

2GCActive

Managementcopy 2GC Limited 2001

Key success factorsCultural building blocks of Scorecard success

bullInclusive design process building on consensus seeking amp involvement

bullParticipative management style focused on learning open discussion and creative thinking

bullSponsorship and commitment from entire management team -top management in particular

bullldquoEmbeddingrdquo of management processes to use refresh and renew the Balanced Scorecard over time

(V11) November 2001 Introducing the Balanced ScorecardPage 31

2GCActive

Managementcopy 2GC Limited 2001

Introducing the Balanced ScorecardTo find out morehellip

bullVisit 2GCrsquos Web Sitendash We focus specifically on strategic

control and performance measurement issues and have a wide range of working papers FAQs and presentations to download on these topics

ndash The site also has a recommended reading list that covers relevant topics and the ldquoWeblinksrdquo database of relevant Internet sites

bullContact 2GCndash Let us know if you have a question

you canrsquot answer wersquoll do what we can to helphellip

bull info2gccouk

(V11) November 2001 Introducing the Balanced ScorecardPage 5

2GCActive

Managementcopy 2GC Limited 2001

General management issuesBarriers to effective performance management

Source Based on paper by John H Lingle and William A Schiemann ldquoFrom balanced scorecard to strategic gauges Is measurement worth itldquo published in ldquoManagement Reviewrdquo Volume 85 Issue 3 Mar 1996 p 56

Fuzzy objectivesFuzzy objectives

Unjustified trust in informal Unjustified trust in informal feedback systemsfeedback systems

Entrenched measurement Entrenched measurement systemssystems

Too many measures and Too many measures and loss of focusloss of focus

(V11) November 2001 Introducing the Balanced ScorecardPage 6

2GCActive

Managementcopy 2GC Limited 2001

General management issuesRealising the need to change

Why

WhatWho

How

When

(V11) November 2001 Introducing the Balanced ScorecardPage 7

2GCActive

Managementcopy 2GC Limited 2001

What is Balanced Scorecard

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 8

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced Scorecard

bullldquoThe idea of the Scorecard is to describe the essential ingredients of business successrdquo(Olve et al ldquoPerformance Driversrdquo)

bullldquoBalanced Scorecard is one of the 15 most important management concepts ever introduced in Harvard Business Reviewrdquo(Harvard Business Review 75th Anniversary issue)

bull50 of North American companies claim to be using Balanced Scorecard(Recent survey by Bain amp Company)

One of the most dangerous forms of human error is forgetting what one is trying to to achievePaul Nitze

(V11) November 2001 Introducing the Balanced ScorecardPage 9

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced ScorecardBackground amp underlying philosophy

bullWhat is itndash Strategic communication and

performance measurement toolbullOrigins

ndash Developed from a tool developed in 1980s but some similarities with other pre-existing tools

ndash Introduced to wider audience in early 1990rsquos by R Kaplan amp D Norton in series of articles in Harvard Business Review

bullUnderlying philosophyndash Clear communication of goals and

prioritiesndash Learning amp team-working

Internal PerspectiveInternal Perspective

Learning amp Growth PerspectiveLearning amp Growth Perspective

Financial PerspectiveFinancial Perspective

Customer PerspectiveCustomer Perspective

Act

iviti

esO

utco

mes

Act

iviti

esO

utco

mes

Out

com

esO

utco

mes

Act

iviti

esA

ctiv

ities

(V11) November 2001 Introducing the Balanced ScorecardPage 10

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced ScorecardDo what needs to get donehellip

Are we doing what we set out to do

What do we want to achieve and what must we do to achieve it

Take action

Create amend strategic vision

Createchange linked strategic

objectives

Review results and cause amp effect assumptions

Balanced Scorecard

Developrevise measures amp

targets

(V11) November 2001 Introducing the Balanced ScorecardPage 11

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced ScorecardDifferent applications for Balanced Scorecard

bullldquoManagement Controlrdquo

ndash Maintain the temperature

bullldquoStrategic Controlrdquondash What temperature

7060 80

D A Y amp N I G H T

HOT OFF COOL

Assess Outcome

Set TargetHeater Run if room is below target temp

Thermostat Compare with

Target

MeasureRoom Temp

(V11) November 2001 Introducing the Balanced ScorecardPage 12

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced ScorecardStrategic control vs Management control

Organisational hierarchy

Strat

egic

emph

asis

Operational emphasis

(V11) November 2001 Introducing the Balanced ScorecardPage 13

2GCActive

Managementcopy 2GC Limited 2001

What is the Balanced Scorecard The latest Balanced Scorecard thinking

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 6

2GCActive

M anagementcopy 2GC Lim ited 1999

Balanced Scorecard DocumentationObjective M easure Supporting Initiatives

I1 Drive trade term s by channel W e will develop clear trading terms for different custom er groups W e will achieve our targetlevels of availability visibility and trade su pport via these trading terms

bull Trade customers adhering to trade standard terms amongst a sam ple of top XX customers

bull Develop standard trading terms (GG)

I2 Deliver custom er service standards Deliver timely f irst class service to the trade an d retailers

bull Cases delivered in full against order quantity

bull Orders delivered on time

bull Logistics Project (RS)bull SAP Project (PH)

I3 Im plem ent m ajor account m anagem ent programm e W e will continue to treat our custom ers as business partners W e will establish an account developm ent model to ensure high quality relationships exist w ith key account customers

bull of major accounts with a business plan bull Define ldquomajorrdquo accounts (AC)

I4 Deliver exce llent consum er propositions W e must meet consum er needs through the development and communication of an integrated brand proposition In the NPD sector we will launch new products only after they h ave m et pre-agreed qu ality image need and volume criteria

bull Brand Systems signed off by OE bull Develop core brand propositions (AC)bull NPD Process Improvement (ACAD)bull Cream ing project (AD)

I5 Deliver exce llent internal custom er service W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull SLA Qualitative Evaluations by SLA ow ners bull Logistics Project (RS)bull Factory Cost Reduction (DL)

I6 Effective m anagem ent of com pany assets W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull Total working capitalbull Fixed Asset Utilisationbull Outstanding Debtor Da ys

bull Plant ration alisation (AD)bull L4 L2 (DL)bull SAP (RS)

I7 Effective control of the business (No Surprises) W e will heighten our efforts to streamline the organisation to h elpdrive sound asset managem ent and cost reduction W e will invoke a cost conscious culture to complem ent our stream lining efforts

bull ldquoNo surprisesrdquo evaluation of actual performance against budget or forecast for- stock cover per city- sales per city- national costs

bull Analyse Risk project (PS)

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 6

2GCActive

M anagementcopy 2GC Lim ited 1999

Balanced Scorecard DocumentationObjective M easure Supporting Initiatives

I1 Drive trade term s by channel W e will develop clear trading terms for different custom er groups W e will achieve our targetlevels of availability visibility and trade su pport via these trading terms

bull Trade customers adhering to trade standard terms amongst a sam ple of top XX customers

bull Develop standard trading terms (GG)

I2 Deliver custom er service standards Deliver timely f irst class service to the trade an d retailers

bull Cases delivered in full against order quantity

bull Orders delivered on time

bull Logistics Project (RS)bull SAP Project (PH)

I3 Im plem ent m ajor account m anagem ent programm e W e will continue to treat our custom ers as business partners W e will establish an account developm ent model to ensure high quality relationships exist w ith key account customers

bull of major accounts with a business plan bull Define ldquomajorrdquo accounts (AC)

I4 Deliver exce llent consum er propositions W e must meet consum er needs through the development and communication of an integrated brand proposition In the NPD sector we will launch new products only after they h ave m et pre-agreed qu ality image need and volume criteria

bull Brand Systems signed off by OE bull Develop core brand propositions (AC)bull NPD Process Improvement (ACAD)bull Cream ing project (AD)

I5 Deliver exce llent internal custom er service W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull SLA Qualitative Evaluations by SLA ow ners bull Logistics Project (RS)bull Factory Cost Reduction (DL)

I6 Effective m anagem ent of com pany assets W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull Total working capitalbull Fixed Asset Utilisationbull Outstanding Debtor Da ys

bull Plant ration alisation (AD)bull L4 L2 (DL)bull SAP (RS)

I7 Effective control of the business (No Surprises) W e will heighten our efforts to streamline the organisation to h elpdrive sound asset managem ent and cost reduction W e will invoke a cost conscious culture to complem ent our stream lining efforts

bull ldquoNo surprisesrdquo evaluation of actual performance against budget or forecast for- stock cover per city- sales per city- national costs

bull Analyse Risk project (PS)

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 5

2GCActive

M anagementcopy 2GC Limited 1999

Strategic Linkage M odel

Fina

ncia

l Pe

rspe

ctiv

eC

usto

mer

Per

spec

tive

Lear

ning

amp G

row

th

Pe

rspe

ctiv

eIn

tern

al

Per

spec

tive

DBX Understands and Responds to m y Needs

DBX Products are m y First Choice Products

DBX Products are Good Value for Money

DBX Products are V isible and Availab le

DBX has an Excellent Consumer Franchise

Drive Trade Term s by Channel

Im plem ent Major Account Managem ent

Program m e

Effective Control of Business (No Surprises)

Sales Growth (by City by P roduct)

Gross Contribution (After City Sales and

Marketing)Asset Turn Overheads as a of

NSV

Improved Shareh older Value (ROCE)

I Have a Good Relationship with DBX

Develop Better W ork P ractices and IS

Develop and Retain P rofessional M anagers

Develop Service Agreem ents

Effective M anagem ent o f Com pany Assets

Deliver Excellent In ternal Custom er

ServiceDeliver Custom er

Service Standards

Develop Professional Custom er Oriented Skilled

Sales Force

Deliver Excellent Consum er

Propositions

Understand Im pact O f Various M arketing Levers

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 5

2GCActive

M anagementcopy 2GC Limited 1999

Strategic Linkage M odel

Fina

ncia

l Pe

rspe

ctiv

eC

usto

mer

Per

spec

tive

Lear

ning

amp G

row

th

Pe

rspe

ctiv

eIn

tern

al

Per

spec

tive

DBX Understands and Responds to m y Needs

DBX Products are m y First Choice Products

DBX Products are Good Value for Money

DBX Products are V isible and Availab le

DBX has an Excellent Consumer Franchise

Drive Trade Term s by Channel

Im plem ent Major Account Managem ent

Program m e

Effective Control of Business (No Surprises)

Sales Growth (by City by P roduct)

Gross Contribution (After City Sales and

Marketing)Asset Turn Overheads as a of

NSV

Improved Shareh older Value (ROCE)

I Have a Good Relationship with DBX

Develop Better W ork P ractices and IS

Develop and Retain P rofessional M anagers

Develop Service Agreem ents

Effective M anagem ent o f Com pany Assets

Deliver Excellent In ternal Custom er

ServiceDeliver Custom er

Service Standards

Develop Professional Custom er Oriented Skilled

Sales Force

Deliver Excellent Consum er

Propositions

Understand Im pact O f Various M arketing Levers

21 November 2001 2GC Limited Introduction to 2GC Active ManagementPage 4

2GCActive

M anagem entcopy 2GC Limited 1999

Destination Statem entSales Volume50000 MT

Distribution50 Cities

Sales Revenue pound 50 M illion

One M anufacturing Site

ROCE 7Capital Em ployed No m ore th an pound45 million

Product Manager

Marketing Director

Factory Director

Manufacturing Director

Regional Sales Manager

Sales Director

Managing Director

No m ore than 6 Core Brand ProductsMinimum sales volum esndash 5000 MT for each core brandndash 2000M T for each m ajor product

Employer of Choice ( 1 in industry and ranked in FM CG top 10)

Marketing SalesBranding Clear brand propositions systems

established for the six core brandsbull DBX has two of th e top five category product brandsbull Producthouse brand awaren ess targets in DBX city

strategies achievedM edia and promotional strategy City market share

targets achieved within agreed budgetbull M odels and measures of th e relative impact of all

m arketing levers available to assist in th e evaluation targeting of m arketing activity

Im proved Skills and Processes Standardised and transparent m arketing processes developed and agreed within DBX and with Group

bull M arketing team skills targets (b ased on extern al benchmark com parisons) achieved through training and recruitment (where applicable)

Overall DBX seen as one of top 10 FMCG Corsquos servicing key accounts in th e country (and 1 in category)

Customer M arket Focus Sales s taff achieving set targ ets in line with city s trategies for focus on custom er and market issues

bull Assess using distribution by chann el visib ility and trade prom otions

Im proved Skills and Processes Standardised and transp arent sales processes develop ed and agreed within DBX and with Group

bull Sales team skills targets (based on extern al b enchm ark comparisons) achieved through training and recruitment (where applicable)

Organisational Structurebull Clear scope and role statements exis t for all functions (including Sales

amp Marketing)bull Supporting functions (includ ing supply chain) will be achieving all

agreed service level targets with sales amp marketing

Supply ChainCost efficient supp ly chain based on flexib le p roduction lines will deliverbull Increased responsiveness to market dem ands bull Lower cycle timesbull Product channel freshness targe ts

Inform ation System sAppropriate in form ation systems that w ill meet DB Xrsquos needsbull All necessary m anagement inform ation p roduced within p re-agreed tim elines and scales

M anagementbull Senior m anagement w ill be com mitted to working on stra teg y and evalua ted on their

ab ility to coach advise guide and ensure tha t tasks are delega ted effectivelybull Professional m iddle management will exist that w ill be able to ac t m ore independently

within de fined guidelines and have the skills required for their job rolendash Succession plans for key positions wi ll existndash Recruiting and training policies will aim to raise middle manage ment competence to

meet internationa l standards

21 November 2001 2GC Limited Introduction to 2GC Active ManagementPage 4

2GCActive

M anagem entcopy 2GC Limited 1999

Destination Statem entSales Volume50000 MT

Distribution50 Cities

Sales Revenue pound 50 M illion

One M anufacturing Site

ROCE 7Capital Em ployed No m ore th an pound45 million

Product Manager

Marketing Director

Factory Director

Manufacturing Director

Regional Sales Manager

Sales Director

Managing Director

No m ore than 6 Core Brand ProductsMinimum sales volum esndash 5000 MT for each core brandndash 2000M T for each m ajor product

Employer of Choice ( 1 in industry and ranked in FM CG top 10)

Marketing SalesBranding Clear brand propositions systems

established for the six core brandsbull DBX has two of th e top five category product brandsbull Producthouse brand awaren ess targets in DBX city

strategies achievedM edia and promotional strategy City market share

targets achieved within agreed budgetbull M odels and measures of th e relative impact of all

m arketing levers available to assist in th e evaluation targeting of m arketing activity

Im proved Skills and Processes Standardised and transparent m arketing processes developed and agreed within DBX and with Group

bull M arketing team skills targets (b ased on extern al benchmark com parisons) achieved through training and recruitment (where applicable)

Overall DBX seen as one of top 10 FMCG Corsquos servicing key accounts in th e country (and 1 in category)

Customer M arket Focus Sales s taff achieving set targ ets in line with city s trategies for focus on custom er and market issues

bull Assess using distribution by chann el visib ility and trade prom otions

Im proved Skills and Processes Standardised and transp arent sales processes develop ed and agreed within DBX and with Group

bull Sales team skills targets (based on extern al b enchm ark comparisons) achieved through training and recruitment (where applicable)

Organisational Structurebull Clear scope and role statements exis t for all functions (including Sales

amp Marketing)bull Supporting functions (includ ing supply chain) will be achieving all

agreed service level targets with sales amp marketing

Supply ChainCost efficient supp ly chain based on flexib le p roduction lines will deliverbull Increased responsiveness to market dem ands bull Lower cycle timesbull Product channel freshness targe ts

Inform ation System sAppropriate in form ation systems that w ill meet DB Xrsquos needsbull All necessary m anagement inform ation p roduced within p re-agreed tim elines and scales

M anagementbull Senior m anagement w ill be com mitted to working on stra teg y and evalua ted on their

ab ility to coach advise guide and ensure tha t tasks are delega ted effectivelybull Professional m iddle management will exist that w ill be able to ac t m ore independently

within de fined guidelines and have the skills required for their job rolendash Succession plans for key positions wi ll existndash Recruiting and training policies will aim to raise middle manage ment competence to

meet internationa l standards

bullThe ldquoobjective drivenrdquoBalanced Scorecard has emerged as best practice

(V11) November 2001 Introducing the Balanced ScorecardPage 14

2GCActive

Managementcopy 2GC Limited 2001

What is Balanced ScorecardMore than just a set of goals amp measures

Balanced Scorecard design

Balanced Scorecard development

Balanced Scorecard deployment

bull Value from first application

bull Business model reflected in relationship between strategic goals

bull Corporate strategic measurement amp management tool

ndash divisionsndash business unitsndash functions

bull All management Systems aligned with strategy

bull Drive strategic behaviour into everyday decisions and operations

(V11) November 2001 Introducing the Balanced ScorecardPage 15

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard design

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 16

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designWhere to go an how to get there

bullBest practice is to use a development group that comprises the the likely users of the Balanced Scorecard

bullDesign choices should be based on jointly held perception of a strategic ldquoDestinationrdquo

bullThe design should measure progress against the organisationrsquos key strategic objectives (activities and outcomes)

bullLinks between strategic objectives should be articulated ndash these express the management teamrsquos beliefs about which activities drive which outcomes

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development Ac

tiviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

VisionVision

StrategyStrategy

Out

com

esAc

tiviti

es

(V11) November 2001 Introducing the Balanced ScorecardPage 17

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designMonitor progress in achieving goals

bullDevelopment of measures follow clarification and agreement of strategic objectives becausehellip

bullMeasures track progress in achieving those objectives against agreed targets

bullIdentify and monitor extraordinary activities and projects furthering achievement of objectives

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Out

com

es

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development A

ctiv

ities

Act

iviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

Financial Perspective

Objectives Measures Targets Initiatives

Financial Perspective

Objectives Measures Targets

Financial Perspective

Objectives Measures Targets

Financial Perspective

Objectives Measures Targets Initiatives

(V11) November 2001 Introducing the Balanced ScorecardPage 18

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designThe components of a Strategic Balanced Scorecard

bull Financial Marketndash Total NSV pound120m (nominal) ndashndash Has achieved 10 CAGR on NSndash Operating Margin gt10ndash Controllable overheads less thndash Operating Profit pound12m (nomin

Destination StatementDescription of how the organisation will be at some specific future date if the management teamrsquos strategies are successful

Fin

anci

alCu

stom

er

Best value for money

The leading and most innovative

brand

Drive Increased Demand

Profitable Sales Growth

Strategic Linkage Model (SLM)Graphic illustration of ldquocause and effectrdquo relationships between the strategic goals that must be achieved if the organisation is to reach its destination state

ObjectiveObjective DescriptionDescription

Total Shareholder Return is above Groups cost of equity over the medium to long term

Total Shareholder Return is above Groups cost of equity over the medium to long term

Minimise net tax paid and WACC in the light of operational and commercial decisions concerning the nature and sphere of Groups activities and legal constraints Optimum means

Minimise net tax paid and WACC in the light of operational and commercial decisions concerning the nature and sphere of Groups activities and legal constraints Optimum means better than equivalent payments by known Group

Measures (Freq)Measures (Freq)

bull CAGR of Total ShareholdeReturn

bull ROIC (Target gt WACC)

bull CAGR of Total ShareholderReturn

bull ROIC (Target gt WACC)

bull PampL account net tax chargea of profit for financial ye

bull WACC

bull PampL account net tax chargeda of profit for financial yea

bull WACC

Group Strategy Delivers Value

Achieve Optimum Tax Rate amp WACC

F1

F2

Objective and Measure Documentation

ndashClear and concise description of strategic objectives and the measures chosen to track their achievement

F11

F12

-30p

8

150p

18Dividend expected kept a1000 pence leading to loprevious years

Measure Value Target PerfObjective Status

Outperform capital markets

F21 200 185Increasing cash inflow froCash amp a sset

F21 200 185Increasing cash inflow froCash amp a sset

t

Progress Reporting FormatsIllustration of how (and by whom) Scorecard information will be communicated

o Initiative overviewOverview of which initiatives support which Scorecard objectives incl owners and deadlines for finalisation

(V11) November 2001 Introducing the Balanced ScorecardPage 19

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard roll-out

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 20

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard Development Development within the organisation

Country 1 Country 2

Regional Cluster(Line Management)

Country 3

Dept 1

Team

Dept 2

Country 4

Regional ClusterLine Management

Shared Service(eg Supply Chain)

Group SupportLegal Finance HR IS

Main Board

The optimal role-out

sequence is ldquoTop Downrdquo

(V11) November 2001 Introducing the Balanced ScorecardPage 21

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard DevelopmentDevelopment within the organisation

Country 1 Country 2

Regional Cluster(Line Management)

Country 3

Dept 1

Team

Dept 2

Country 4

Regional ClusterLine Management

Shared Service(eg Supply Chain)

Group SupportLegal Finance HR IS

Main Board

Corporate Balanced Scorecard

Co-ordinatingBalanced Scorecard

Support Function Balanced Scorecard

Operating Unit Balanced Scorecard

Departmental Balanced ScorecardTeam Level

Balanced Scorecard

(V11) November 2001 Introducing the Balanced ScorecardPage 22

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard DevelopmentldquoContractualrdquo agreement between management teams

What

How

What

Board level ScorecardBoard level Scorecard

Objectives

Measures amp Targets

Initiatives

Objectives

Measures amp Targets

Initiatives

Overall VisionOverall Vision

Subordinate ScorecardSubordinate Scorecard

Objectives

Measures amp Targets

Initiatives

Objectives

Measures amp Targets

Initiatives

Local VisionLocal Vision

How

TeamIndividual ScorecardTeamIndividual Scorecard

Objectives

Measures amp Targets

Initiatives

TeamIndividual Vision

TeamIndividual Vision

Strategic direction

Strategic direction

Strategy implementation

Strategy implementation

(V11) November 2001 Introducing the Balanced ScorecardPage 23

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 24

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deploymentldquoAchieving strategic goals requires activityrdquo

(V11) November 2001 Introducing the Balanced ScorecardPage 25

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Strategic alignment amp goal setting

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development Ac

tiviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

VisionVision

StrategyStrategy

Out

com

esAc

tiviti

es

(V11) November 2001 Introducing the Balanced ScorecardPage 26

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Align existing management control tools with strategy

SVA amp EVASVA amp EVAB

udge

tsB

udge

ts

BEMBEMBalanced Scorecard

ABCABC HR ToolsHR Tools

(V11) November 2001 Introducing the Balanced ScorecardPage 27

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Support two-way communication of strategyhellip

Fuzzy objectivesFuzzy objectives

Unjustified trust in informal

Unjustified trust in informal

feedback systems

feedback systemsEntren

ched m

easure

ment

Entren

ched m

easure

ment

system

s

system

s

BSC

(V11) November 2001 Introducing the Balanced ScorecardPage 28

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Everybody crafts amp monitors strategy all the timehellip

Comm

unica

tion Com

munication

Board levelScorecard

process

OperationalScorecard

process

Support function Scorecard

process

Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets

Take action

Create amend

strategic vision

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Balanced Scorecard

Developrevise measures amp

targets

Communication

(V11) November 2001 Introducing the Balanced ScorecardPage 29

2GCActive

Managementcopy 2GC Limited 2001

Success criteria

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 30

2GCActive

Managementcopy 2GC Limited 2001

Key success factorsCultural building blocks of Scorecard success

bullInclusive design process building on consensus seeking amp involvement

bullParticipative management style focused on learning open discussion and creative thinking

bullSponsorship and commitment from entire management team -top management in particular

bullldquoEmbeddingrdquo of management processes to use refresh and renew the Balanced Scorecard over time

(V11) November 2001 Introducing the Balanced ScorecardPage 31

2GCActive

Managementcopy 2GC Limited 2001

Introducing the Balanced ScorecardTo find out morehellip

bullVisit 2GCrsquos Web Sitendash We focus specifically on strategic

control and performance measurement issues and have a wide range of working papers FAQs and presentations to download on these topics

ndash The site also has a recommended reading list that covers relevant topics and the ldquoWeblinksrdquo database of relevant Internet sites

bullContact 2GCndash Let us know if you have a question

you canrsquot answer wersquoll do what we can to helphellip

bull info2gccouk

(V11) November 2001 Introducing the Balanced ScorecardPage 6

2GCActive

Managementcopy 2GC Limited 2001

General management issuesRealising the need to change

Why

WhatWho

How

When

(V11) November 2001 Introducing the Balanced ScorecardPage 7

2GCActive

Managementcopy 2GC Limited 2001

What is Balanced Scorecard

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 8

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced Scorecard

bullldquoThe idea of the Scorecard is to describe the essential ingredients of business successrdquo(Olve et al ldquoPerformance Driversrdquo)

bullldquoBalanced Scorecard is one of the 15 most important management concepts ever introduced in Harvard Business Reviewrdquo(Harvard Business Review 75th Anniversary issue)

bull50 of North American companies claim to be using Balanced Scorecard(Recent survey by Bain amp Company)

One of the most dangerous forms of human error is forgetting what one is trying to to achievePaul Nitze

(V11) November 2001 Introducing the Balanced ScorecardPage 9

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced ScorecardBackground amp underlying philosophy

bullWhat is itndash Strategic communication and

performance measurement toolbullOrigins

ndash Developed from a tool developed in 1980s but some similarities with other pre-existing tools

ndash Introduced to wider audience in early 1990rsquos by R Kaplan amp D Norton in series of articles in Harvard Business Review

bullUnderlying philosophyndash Clear communication of goals and

prioritiesndash Learning amp team-working

Internal PerspectiveInternal Perspective

Learning amp Growth PerspectiveLearning amp Growth Perspective

Financial PerspectiveFinancial Perspective

Customer PerspectiveCustomer Perspective

Act

iviti

esO

utco

mes

Act

iviti

esO

utco

mes

Out

com

esO

utco

mes

Act

iviti

esA

ctiv

ities

(V11) November 2001 Introducing the Balanced ScorecardPage 10

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced ScorecardDo what needs to get donehellip

Are we doing what we set out to do

What do we want to achieve and what must we do to achieve it

Take action

Create amend strategic vision

Createchange linked strategic

objectives

Review results and cause amp effect assumptions

Balanced Scorecard

Developrevise measures amp

targets

(V11) November 2001 Introducing the Balanced ScorecardPage 11

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced ScorecardDifferent applications for Balanced Scorecard

bullldquoManagement Controlrdquo

ndash Maintain the temperature

bullldquoStrategic Controlrdquondash What temperature

7060 80

D A Y amp N I G H T

HOT OFF COOL

Assess Outcome

Set TargetHeater Run if room is below target temp

Thermostat Compare with

Target

MeasureRoom Temp

(V11) November 2001 Introducing the Balanced ScorecardPage 12

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced ScorecardStrategic control vs Management control

Organisational hierarchy

Strat

egic

emph

asis

Operational emphasis

(V11) November 2001 Introducing the Balanced ScorecardPage 13

2GCActive

Managementcopy 2GC Limited 2001

What is the Balanced Scorecard The latest Balanced Scorecard thinking

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 6

2GCActive

M anagementcopy 2GC Lim ited 1999

Balanced Scorecard DocumentationObjective M easure Supporting Initiatives

I1 Drive trade term s by channel W e will develop clear trading terms for different custom er groups W e will achieve our targetlevels of availability visibility and trade su pport via these trading terms

bull Trade customers adhering to trade standard terms amongst a sam ple of top XX customers

bull Develop standard trading terms (GG)

I2 Deliver custom er service standards Deliver timely f irst class service to the trade an d retailers

bull Cases delivered in full against order quantity

bull Orders delivered on time

bull Logistics Project (RS)bull SAP Project (PH)

I3 Im plem ent m ajor account m anagem ent programm e W e will continue to treat our custom ers as business partners W e will establish an account developm ent model to ensure high quality relationships exist w ith key account customers

bull of major accounts with a business plan bull Define ldquomajorrdquo accounts (AC)

I4 Deliver exce llent consum er propositions W e must meet consum er needs through the development and communication of an integrated brand proposition In the NPD sector we will launch new products only after they h ave m et pre-agreed qu ality image need and volume criteria

bull Brand Systems signed off by OE bull Develop core brand propositions (AC)bull NPD Process Improvement (ACAD)bull Cream ing project (AD)

I5 Deliver exce llent internal custom er service W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull SLA Qualitative Evaluations by SLA ow ners bull Logistics Project (RS)bull Factory Cost Reduction (DL)

I6 Effective m anagem ent of com pany assets W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull Total working capitalbull Fixed Asset Utilisationbull Outstanding Debtor Da ys

bull Plant ration alisation (AD)bull L4 L2 (DL)bull SAP (RS)

I7 Effective control of the business (No Surprises) W e will heighten our efforts to streamline the organisation to h elpdrive sound asset managem ent and cost reduction W e will invoke a cost conscious culture to complem ent our stream lining efforts

bull ldquoNo surprisesrdquo evaluation of actual performance against budget or forecast for- stock cover per city- sales per city- national costs

bull Analyse Risk project (PS)

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 6

2GCActive

M anagementcopy 2GC Lim ited 1999

Balanced Scorecard DocumentationObjective M easure Supporting Initiatives

I1 Drive trade term s by channel W e will develop clear trading terms for different custom er groups W e will achieve our targetlevels of availability visibility and trade su pport via these trading terms

bull Trade customers adhering to trade standard terms amongst a sam ple of top XX customers

bull Develop standard trading terms (GG)

I2 Deliver custom er service standards Deliver timely f irst class service to the trade an d retailers

bull Cases delivered in full against order quantity

bull Orders delivered on time

bull Logistics Project (RS)bull SAP Project (PH)

I3 Im plem ent m ajor account m anagem ent programm e W e will continue to treat our custom ers as business partners W e will establish an account developm ent model to ensure high quality relationships exist w ith key account customers

bull of major accounts with a business plan bull Define ldquomajorrdquo accounts (AC)

I4 Deliver exce llent consum er propositions W e must meet consum er needs through the development and communication of an integrated brand proposition In the NPD sector we will launch new products only after they h ave m et pre-agreed qu ality image need and volume criteria

bull Brand Systems signed off by OE bull Develop core brand propositions (AC)bull NPD Process Improvement (ACAD)bull Cream ing project (AD)

I5 Deliver exce llent internal custom er service W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull SLA Qualitative Evaluations by SLA ow ners bull Logistics Project (RS)bull Factory Cost Reduction (DL)

I6 Effective m anagem ent of com pany assets W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull Total working capitalbull Fixed Asset Utilisationbull Outstanding Debtor Da ys

bull Plant ration alisation (AD)bull L4 L2 (DL)bull SAP (RS)

I7 Effective control of the business (No Surprises) W e will heighten our efforts to streamline the organisation to h elpdrive sound asset managem ent and cost reduction W e will invoke a cost conscious culture to complem ent our stream lining efforts

bull ldquoNo surprisesrdquo evaluation of actual performance against budget or forecast for- stock cover per city- sales per city- national costs

bull Analyse Risk project (PS)

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 5

2GCActive

M anagementcopy 2GC Limited 1999

Strategic Linkage M odel

Fina

ncia

l Pe

rspe

ctiv

eC

usto

mer

Per

spec

tive

Lear

ning

amp G

row

th

Pe

rspe

ctiv

eIn

tern

al

Per

spec

tive

DBX Understands and Responds to m y Needs

DBX Products are m y First Choice Products

DBX Products are Good Value for Money

DBX Products are V isible and Availab le

DBX has an Excellent Consumer Franchise

Drive Trade Term s by Channel

Im plem ent Major Account Managem ent

Program m e

Effective Control of Business (No Surprises)

Sales Growth (by City by P roduct)

Gross Contribution (After City Sales and

Marketing)Asset Turn Overheads as a of

NSV

Improved Shareh older Value (ROCE)

I Have a Good Relationship with DBX

Develop Better W ork P ractices and IS

Develop and Retain P rofessional M anagers

Develop Service Agreem ents

Effective M anagem ent o f Com pany Assets

Deliver Excellent In ternal Custom er

ServiceDeliver Custom er

Service Standards

Develop Professional Custom er Oriented Skilled

Sales Force

Deliver Excellent Consum er

Propositions

Understand Im pact O f Various M arketing Levers

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 5

2GCActive

M anagementcopy 2GC Limited 1999

Strategic Linkage M odel

Fina

ncia

l Pe

rspe

ctiv

eC

usto

mer

Per

spec

tive

Lear

ning

amp G

row

th

Pe

rspe

ctiv

eIn

tern

al

Per

spec

tive

DBX Understands and Responds to m y Needs

DBX Products are m y First Choice Products

DBX Products are Good Value for Money

DBX Products are V isible and Availab le

DBX has an Excellent Consumer Franchise

Drive Trade Term s by Channel

Im plem ent Major Account Managem ent

Program m e

Effective Control of Business (No Surprises)

Sales Growth (by City by P roduct)

Gross Contribution (After City Sales and

Marketing)Asset Turn Overheads as a of

NSV

Improved Shareh older Value (ROCE)

I Have a Good Relationship with DBX

Develop Better W ork P ractices and IS

Develop and Retain P rofessional M anagers

Develop Service Agreem ents

Effective M anagem ent o f Com pany Assets

Deliver Excellent In ternal Custom er

ServiceDeliver Custom er

Service Standards

Develop Professional Custom er Oriented Skilled

Sales Force

Deliver Excellent Consum er

Propositions

Understand Im pact O f Various M arketing Levers

21 November 2001 2GC Limited Introduction to 2GC Active ManagementPage 4

2GCActive

M anagem entcopy 2GC Limited 1999

Destination Statem entSales Volume50000 MT

Distribution50 Cities

Sales Revenue pound 50 M illion

One M anufacturing Site

ROCE 7Capital Em ployed No m ore th an pound45 million

Product Manager

Marketing Director

Factory Director

Manufacturing Director

Regional Sales Manager

Sales Director

Managing Director

No m ore than 6 Core Brand ProductsMinimum sales volum esndash 5000 MT for each core brandndash 2000M T for each m ajor product

Employer of Choice ( 1 in industry and ranked in FM CG top 10)

Marketing SalesBranding Clear brand propositions systems

established for the six core brandsbull DBX has two of th e top five category product brandsbull Producthouse brand awaren ess targets in DBX city

strategies achievedM edia and promotional strategy City market share

targets achieved within agreed budgetbull M odels and measures of th e relative impact of all

m arketing levers available to assist in th e evaluation targeting of m arketing activity

Im proved Skills and Processes Standardised and transparent m arketing processes developed and agreed within DBX and with Group

bull M arketing team skills targets (b ased on extern al benchmark com parisons) achieved through training and recruitment (where applicable)

Overall DBX seen as one of top 10 FMCG Corsquos servicing key accounts in th e country (and 1 in category)

Customer M arket Focus Sales s taff achieving set targ ets in line with city s trategies for focus on custom er and market issues

bull Assess using distribution by chann el visib ility and trade prom otions

Im proved Skills and Processes Standardised and transp arent sales processes develop ed and agreed within DBX and with Group

bull Sales team skills targets (based on extern al b enchm ark comparisons) achieved through training and recruitment (where applicable)

Organisational Structurebull Clear scope and role statements exis t for all functions (including Sales

amp Marketing)bull Supporting functions (includ ing supply chain) will be achieving all

agreed service level targets with sales amp marketing

Supply ChainCost efficient supp ly chain based on flexib le p roduction lines will deliverbull Increased responsiveness to market dem ands bull Lower cycle timesbull Product channel freshness targe ts

Inform ation System sAppropriate in form ation systems that w ill meet DB Xrsquos needsbull All necessary m anagement inform ation p roduced within p re-agreed tim elines and scales

M anagementbull Senior m anagement w ill be com mitted to working on stra teg y and evalua ted on their

ab ility to coach advise guide and ensure tha t tasks are delega ted effectivelybull Professional m iddle management will exist that w ill be able to ac t m ore independently

within de fined guidelines and have the skills required for their job rolendash Succession plans for key positions wi ll existndash Recruiting and training policies will aim to raise middle manage ment competence to

meet internationa l standards

21 November 2001 2GC Limited Introduction to 2GC Active ManagementPage 4

2GCActive

M anagem entcopy 2GC Limited 1999

Destination Statem entSales Volume50000 MT

Distribution50 Cities

Sales Revenue pound 50 M illion

One M anufacturing Site

ROCE 7Capital Em ployed No m ore th an pound45 million

Product Manager

Marketing Director

Factory Director

Manufacturing Director

Regional Sales Manager

Sales Director

Managing Director

No m ore than 6 Core Brand ProductsMinimum sales volum esndash 5000 MT for each core brandndash 2000M T for each m ajor product

Employer of Choice ( 1 in industry and ranked in FM CG top 10)

Marketing SalesBranding Clear brand propositions systems

established for the six core brandsbull DBX has two of th e top five category product brandsbull Producthouse brand awaren ess targets in DBX city

strategies achievedM edia and promotional strategy City market share

targets achieved within agreed budgetbull M odels and measures of th e relative impact of all

m arketing levers available to assist in th e evaluation targeting of m arketing activity

Im proved Skills and Processes Standardised and transparent m arketing processes developed and agreed within DBX and with Group

bull M arketing team skills targets (b ased on extern al benchmark com parisons) achieved through training and recruitment (where applicable)

Overall DBX seen as one of top 10 FMCG Corsquos servicing key accounts in th e country (and 1 in category)

Customer M arket Focus Sales s taff achieving set targ ets in line with city s trategies for focus on custom er and market issues

bull Assess using distribution by chann el visib ility and trade prom otions

Im proved Skills and Processes Standardised and transp arent sales processes develop ed and agreed within DBX and with Group

bull Sales team skills targets (based on extern al b enchm ark comparisons) achieved through training and recruitment (where applicable)

Organisational Structurebull Clear scope and role statements exis t for all functions (including Sales

amp Marketing)bull Supporting functions (includ ing supply chain) will be achieving all

agreed service level targets with sales amp marketing

Supply ChainCost efficient supp ly chain based on flexib le p roduction lines will deliverbull Increased responsiveness to market dem ands bull Lower cycle timesbull Product channel freshness targe ts

Inform ation System sAppropriate in form ation systems that w ill meet DB Xrsquos needsbull All necessary m anagement inform ation p roduced within p re-agreed tim elines and scales

M anagementbull Senior m anagement w ill be com mitted to working on stra teg y and evalua ted on their

ab ility to coach advise guide and ensure tha t tasks are delega ted effectivelybull Professional m iddle management will exist that w ill be able to ac t m ore independently

within de fined guidelines and have the skills required for their job rolendash Succession plans for key positions wi ll existndash Recruiting and training policies will aim to raise middle manage ment competence to

meet internationa l standards

bullThe ldquoobjective drivenrdquoBalanced Scorecard has emerged as best practice

(V11) November 2001 Introducing the Balanced ScorecardPage 14

2GCActive

Managementcopy 2GC Limited 2001

What is Balanced ScorecardMore than just a set of goals amp measures

Balanced Scorecard design

Balanced Scorecard development

Balanced Scorecard deployment

bull Value from first application

bull Business model reflected in relationship between strategic goals

bull Corporate strategic measurement amp management tool

ndash divisionsndash business unitsndash functions

bull All management Systems aligned with strategy

bull Drive strategic behaviour into everyday decisions and operations

(V11) November 2001 Introducing the Balanced ScorecardPage 15

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard design

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 16

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designWhere to go an how to get there

bullBest practice is to use a development group that comprises the the likely users of the Balanced Scorecard

bullDesign choices should be based on jointly held perception of a strategic ldquoDestinationrdquo

bullThe design should measure progress against the organisationrsquos key strategic objectives (activities and outcomes)

bullLinks between strategic objectives should be articulated ndash these express the management teamrsquos beliefs about which activities drive which outcomes

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development Ac

tiviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

VisionVision

StrategyStrategy

Out

com

esAc

tiviti

es

(V11) November 2001 Introducing the Balanced ScorecardPage 17

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designMonitor progress in achieving goals

bullDevelopment of measures follow clarification and agreement of strategic objectives becausehellip

bullMeasures track progress in achieving those objectives against agreed targets

bullIdentify and monitor extraordinary activities and projects furthering achievement of objectives

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Out

com

es

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development A

ctiv

ities

Act

iviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

Financial Perspective

Objectives Measures Targets Initiatives

Financial Perspective

Objectives Measures Targets

Financial Perspective

Objectives Measures Targets

Financial Perspective

Objectives Measures Targets Initiatives

(V11) November 2001 Introducing the Balanced ScorecardPage 18

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designThe components of a Strategic Balanced Scorecard

bull Financial Marketndash Total NSV pound120m (nominal) ndashndash Has achieved 10 CAGR on NSndash Operating Margin gt10ndash Controllable overheads less thndash Operating Profit pound12m (nomin

Destination StatementDescription of how the organisation will be at some specific future date if the management teamrsquos strategies are successful

Fin

anci

alCu

stom

er

Best value for money

The leading and most innovative

brand

Drive Increased Demand

Profitable Sales Growth

Strategic Linkage Model (SLM)Graphic illustration of ldquocause and effectrdquo relationships between the strategic goals that must be achieved if the organisation is to reach its destination state

ObjectiveObjective DescriptionDescription

Total Shareholder Return is above Groups cost of equity over the medium to long term

Total Shareholder Return is above Groups cost of equity over the medium to long term

Minimise net tax paid and WACC in the light of operational and commercial decisions concerning the nature and sphere of Groups activities and legal constraints Optimum means

Minimise net tax paid and WACC in the light of operational and commercial decisions concerning the nature and sphere of Groups activities and legal constraints Optimum means better than equivalent payments by known Group

Measures (Freq)Measures (Freq)

bull CAGR of Total ShareholdeReturn

bull ROIC (Target gt WACC)

bull CAGR of Total ShareholderReturn

bull ROIC (Target gt WACC)

bull PampL account net tax chargea of profit for financial ye

bull WACC

bull PampL account net tax chargeda of profit for financial yea

bull WACC

Group Strategy Delivers Value

Achieve Optimum Tax Rate amp WACC

F1

F2

Objective and Measure Documentation

ndashClear and concise description of strategic objectives and the measures chosen to track their achievement

F11

F12

-30p

8

150p

18Dividend expected kept a1000 pence leading to loprevious years

Measure Value Target PerfObjective Status

Outperform capital markets

F21 200 185Increasing cash inflow froCash amp a sset

F21 200 185Increasing cash inflow froCash amp a sset

t

Progress Reporting FormatsIllustration of how (and by whom) Scorecard information will be communicated

o Initiative overviewOverview of which initiatives support which Scorecard objectives incl owners and deadlines for finalisation

(V11) November 2001 Introducing the Balanced ScorecardPage 19

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard roll-out

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 20

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard Development Development within the organisation

Country 1 Country 2

Regional Cluster(Line Management)

Country 3

Dept 1

Team

Dept 2

Country 4

Regional ClusterLine Management

Shared Service(eg Supply Chain)

Group SupportLegal Finance HR IS

Main Board

The optimal role-out

sequence is ldquoTop Downrdquo

(V11) November 2001 Introducing the Balanced ScorecardPage 21

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard DevelopmentDevelopment within the organisation

Country 1 Country 2

Regional Cluster(Line Management)

Country 3

Dept 1

Team

Dept 2

Country 4

Regional ClusterLine Management

Shared Service(eg Supply Chain)

Group SupportLegal Finance HR IS

Main Board

Corporate Balanced Scorecard

Co-ordinatingBalanced Scorecard

Support Function Balanced Scorecard

Operating Unit Balanced Scorecard

Departmental Balanced ScorecardTeam Level

Balanced Scorecard

(V11) November 2001 Introducing the Balanced ScorecardPage 22

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard DevelopmentldquoContractualrdquo agreement between management teams

What

How

What

Board level ScorecardBoard level Scorecard

Objectives

Measures amp Targets

Initiatives

Objectives

Measures amp Targets

Initiatives

Overall VisionOverall Vision

Subordinate ScorecardSubordinate Scorecard

Objectives

Measures amp Targets

Initiatives

Objectives

Measures amp Targets

Initiatives

Local VisionLocal Vision

How

TeamIndividual ScorecardTeamIndividual Scorecard

Objectives

Measures amp Targets

Initiatives

TeamIndividual Vision

TeamIndividual Vision

Strategic direction

Strategic direction

Strategy implementation

Strategy implementation

(V11) November 2001 Introducing the Balanced ScorecardPage 23

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 24

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deploymentldquoAchieving strategic goals requires activityrdquo

(V11) November 2001 Introducing the Balanced ScorecardPage 25

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Strategic alignment amp goal setting

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development Ac

tiviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

VisionVision

StrategyStrategy

Out

com

esAc

tiviti

es

(V11) November 2001 Introducing the Balanced ScorecardPage 26

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Align existing management control tools with strategy

SVA amp EVASVA amp EVAB

udge

tsB

udge

ts

BEMBEMBalanced Scorecard

ABCABC HR ToolsHR Tools

(V11) November 2001 Introducing the Balanced ScorecardPage 27

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Support two-way communication of strategyhellip

Fuzzy objectivesFuzzy objectives

Unjustified trust in informal

Unjustified trust in informal

feedback systems

feedback systemsEntren

ched m

easure

ment

Entren

ched m

easure

ment

system

s

system

s

BSC

(V11) November 2001 Introducing the Balanced ScorecardPage 28

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Everybody crafts amp monitors strategy all the timehellip

Comm

unica

tion Com

munication

Board levelScorecard

process

OperationalScorecard

process

Support function Scorecard

process

Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets

Take action

Create amend

strategic vision

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Balanced Scorecard

Developrevise measures amp

targets

Communication

(V11) November 2001 Introducing the Balanced ScorecardPage 29

2GCActive

Managementcopy 2GC Limited 2001

Success criteria

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 30

2GCActive

Managementcopy 2GC Limited 2001

Key success factorsCultural building blocks of Scorecard success

bullInclusive design process building on consensus seeking amp involvement

bullParticipative management style focused on learning open discussion and creative thinking

bullSponsorship and commitment from entire management team -top management in particular

bullldquoEmbeddingrdquo of management processes to use refresh and renew the Balanced Scorecard over time

(V11) November 2001 Introducing the Balanced ScorecardPage 31

2GCActive

Managementcopy 2GC Limited 2001

Introducing the Balanced ScorecardTo find out morehellip

bullVisit 2GCrsquos Web Sitendash We focus specifically on strategic

control and performance measurement issues and have a wide range of working papers FAQs and presentations to download on these topics

ndash The site also has a recommended reading list that covers relevant topics and the ldquoWeblinksrdquo database of relevant Internet sites

bullContact 2GCndash Let us know if you have a question

you canrsquot answer wersquoll do what we can to helphellip

bull info2gccouk

(V11) November 2001 Introducing the Balanced ScorecardPage 7

2GCActive

Managementcopy 2GC Limited 2001

What is Balanced Scorecard

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 8

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced Scorecard

bullldquoThe idea of the Scorecard is to describe the essential ingredients of business successrdquo(Olve et al ldquoPerformance Driversrdquo)

bullldquoBalanced Scorecard is one of the 15 most important management concepts ever introduced in Harvard Business Reviewrdquo(Harvard Business Review 75th Anniversary issue)

bull50 of North American companies claim to be using Balanced Scorecard(Recent survey by Bain amp Company)

One of the most dangerous forms of human error is forgetting what one is trying to to achievePaul Nitze

(V11) November 2001 Introducing the Balanced ScorecardPage 9

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced ScorecardBackground amp underlying philosophy

bullWhat is itndash Strategic communication and

performance measurement toolbullOrigins

ndash Developed from a tool developed in 1980s but some similarities with other pre-existing tools

ndash Introduced to wider audience in early 1990rsquos by R Kaplan amp D Norton in series of articles in Harvard Business Review

bullUnderlying philosophyndash Clear communication of goals and

prioritiesndash Learning amp team-working

Internal PerspectiveInternal Perspective

Learning amp Growth PerspectiveLearning amp Growth Perspective

Financial PerspectiveFinancial Perspective

Customer PerspectiveCustomer Perspective

Act

iviti

esO

utco

mes

Act

iviti

esO

utco

mes

Out

com

esO

utco

mes

Act

iviti

esA

ctiv

ities

(V11) November 2001 Introducing the Balanced ScorecardPage 10

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced ScorecardDo what needs to get donehellip

Are we doing what we set out to do

What do we want to achieve and what must we do to achieve it

Take action

Create amend strategic vision

Createchange linked strategic

objectives

Review results and cause amp effect assumptions

Balanced Scorecard

Developrevise measures amp

targets

(V11) November 2001 Introducing the Balanced ScorecardPage 11

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced ScorecardDifferent applications for Balanced Scorecard

bullldquoManagement Controlrdquo

ndash Maintain the temperature

bullldquoStrategic Controlrdquondash What temperature

7060 80

D A Y amp N I G H T

HOT OFF COOL

Assess Outcome

Set TargetHeater Run if room is below target temp

Thermostat Compare with

Target

MeasureRoom Temp

(V11) November 2001 Introducing the Balanced ScorecardPage 12

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced ScorecardStrategic control vs Management control

Organisational hierarchy

Strat

egic

emph

asis

Operational emphasis

(V11) November 2001 Introducing the Balanced ScorecardPage 13

2GCActive

Managementcopy 2GC Limited 2001

What is the Balanced Scorecard The latest Balanced Scorecard thinking

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 6

2GCActive

M anagementcopy 2GC Lim ited 1999

Balanced Scorecard DocumentationObjective M easure Supporting Initiatives

I1 Drive trade term s by channel W e will develop clear trading terms for different custom er groups W e will achieve our targetlevels of availability visibility and trade su pport via these trading terms

bull Trade customers adhering to trade standard terms amongst a sam ple of top XX customers

bull Develop standard trading terms (GG)

I2 Deliver custom er service standards Deliver timely f irst class service to the trade an d retailers

bull Cases delivered in full against order quantity

bull Orders delivered on time

bull Logistics Project (RS)bull SAP Project (PH)

I3 Im plem ent m ajor account m anagem ent programm e W e will continue to treat our custom ers as business partners W e will establish an account developm ent model to ensure high quality relationships exist w ith key account customers

bull of major accounts with a business plan bull Define ldquomajorrdquo accounts (AC)

I4 Deliver exce llent consum er propositions W e must meet consum er needs through the development and communication of an integrated brand proposition In the NPD sector we will launch new products only after they h ave m et pre-agreed qu ality image need and volume criteria

bull Brand Systems signed off by OE bull Develop core brand propositions (AC)bull NPD Process Improvement (ACAD)bull Cream ing project (AD)

I5 Deliver exce llent internal custom er service W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull SLA Qualitative Evaluations by SLA ow ners bull Logistics Project (RS)bull Factory Cost Reduction (DL)

I6 Effective m anagem ent of com pany assets W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull Total working capitalbull Fixed Asset Utilisationbull Outstanding Debtor Da ys

bull Plant ration alisation (AD)bull L4 L2 (DL)bull SAP (RS)

I7 Effective control of the business (No Surprises) W e will heighten our efforts to streamline the organisation to h elpdrive sound asset managem ent and cost reduction W e will invoke a cost conscious culture to complem ent our stream lining efforts

bull ldquoNo surprisesrdquo evaluation of actual performance against budget or forecast for- stock cover per city- sales per city- national costs

bull Analyse Risk project (PS)

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 6

2GCActive

M anagementcopy 2GC Lim ited 1999

Balanced Scorecard DocumentationObjective M easure Supporting Initiatives

I1 Drive trade term s by channel W e will develop clear trading terms for different custom er groups W e will achieve our targetlevels of availability visibility and trade su pport via these trading terms

bull Trade customers adhering to trade standard terms amongst a sam ple of top XX customers

bull Develop standard trading terms (GG)

I2 Deliver custom er service standards Deliver timely f irst class service to the trade an d retailers

bull Cases delivered in full against order quantity

bull Orders delivered on time

bull Logistics Project (RS)bull SAP Project (PH)

I3 Im plem ent m ajor account m anagem ent programm e W e will continue to treat our custom ers as business partners W e will establish an account developm ent model to ensure high quality relationships exist w ith key account customers

bull of major accounts with a business plan bull Define ldquomajorrdquo accounts (AC)

I4 Deliver exce llent consum er propositions W e must meet consum er needs through the development and communication of an integrated brand proposition In the NPD sector we will launch new products only after they h ave m et pre-agreed qu ality image need and volume criteria

bull Brand Systems signed off by OE bull Develop core brand propositions (AC)bull NPD Process Improvement (ACAD)bull Cream ing project (AD)

I5 Deliver exce llent internal custom er service W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull SLA Qualitative Evaluations by SLA ow ners bull Logistics Project (RS)bull Factory Cost Reduction (DL)

I6 Effective m anagem ent of com pany assets W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull Total working capitalbull Fixed Asset Utilisationbull Outstanding Debtor Da ys

bull Plant ration alisation (AD)bull L4 L2 (DL)bull SAP (RS)

I7 Effective control of the business (No Surprises) W e will heighten our efforts to streamline the organisation to h elpdrive sound asset managem ent and cost reduction W e will invoke a cost conscious culture to complem ent our stream lining efforts

bull ldquoNo surprisesrdquo evaluation of actual performance against budget or forecast for- stock cover per city- sales per city- national costs

bull Analyse Risk project (PS)

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 5

2GCActive

M anagementcopy 2GC Limited 1999

Strategic Linkage M odel

Fina

ncia

l Pe

rspe

ctiv

eC

usto

mer

Per

spec

tive

Lear

ning

amp G

row

th

Pe

rspe

ctiv

eIn

tern

al

Per

spec

tive

DBX Understands and Responds to m y Needs

DBX Products are m y First Choice Products

DBX Products are Good Value for Money

DBX Products are V isible and Availab le

DBX has an Excellent Consumer Franchise

Drive Trade Term s by Channel

Im plem ent Major Account Managem ent

Program m e

Effective Control of Business (No Surprises)

Sales Growth (by City by P roduct)

Gross Contribution (After City Sales and

Marketing)Asset Turn Overheads as a of

NSV

Improved Shareh older Value (ROCE)

I Have a Good Relationship with DBX

Develop Better W ork P ractices and IS

Develop and Retain P rofessional M anagers

Develop Service Agreem ents

Effective M anagem ent o f Com pany Assets

Deliver Excellent In ternal Custom er

ServiceDeliver Custom er

Service Standards

Develop Professional Custom er Oriented Skilled

Sales Force

Deliver Excellent Consum er

Propositions

Understand Im pact O f Various M arketing Levers

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 5

2GCActive

M anagementcopy 2GC Limited 1999

Strategic Linkage M odel

Fina

ncia

l Pe

rspe

ctiv

eC

usto

mer

Per

spec

tive

Lear

ning

amp G

row

th

Pe

rspe

ctiv

eIn

tern

al

Per

spec

tive

DBX Understands and Responds to m y Needs

DBX Products are m y First Choice Products

DBX Products are Good Value for Money

DBX Products are V isible and Availab le

DBX has an Excellent Consumer Franchise

Drive Trade Term s by Channel

Im plem ent Major Account Managem ent

Program m e

Effective Control of Business (No Surprises)

Sales Growth (by City by P roduct)

Gross Contribution (After City Sales and

Marketing)Asset Turn Overheads as a of

NSV

Improved Shareh older Value (ROCE)

I Have a Good Relationship with DBX

Develop Better W ork P ractices and IS

Develop and Retain P rofessional M anagers

Develop Service Agreem ents

Effective M anagem ent o f Com pany Assets

Deliver Excellent In ternal Custom er

ServiceDeliver Custom er

Service Standards

Develop Professional Custom er Oriented Skilled

Sales Force

Deliver Excellent Consum er

Propositions

Understand Im pact O f Various M arketing Levers

21 November 2001 2GC Limited Introduction to 2GC Active ManagementPage 4

2GCActive

M anagem entcopy 2GC Limited 1999

Destination Statem entSales Volume50000 MT

Distribution50 Cities

Sales Revenue pound 50 M illion

One M anufacturing Site

ROCE 7Capital Em ployed No m ore th an pound45 million

Product Manager

Marketing Director

Factory Director

Manufacturing Director

Regional Sales Manager

Sales Director

Managing Director

No m ore than 6 Core Brand ProductsMinimum sales volum esndash 5000 MT for each core brandndash 2000M T for each m ajor product

Employer of Choice ( 1 in industry and ranked in FM CG top 10)

Marketing SalesBranding Clear brand propositions systems

established for the six core brandsbull DBX has two of th e top five category product brandsbull Producthouse brand awaren ess targets in DBX city

strategies achievedM edia and promotional strategy City market share

targets achieved within agreed budgetbull M odels and measures of th e relative impact of all

m arketing levers available to assist in th e evaluation targeting of m arketing activity

Im proved Skills and Processes Standardised and transparent m arketing processes developed and agreed within DBX and with Group

bull M arketing team skills targets (b ased on extern al benchmark com parisons) achieved through training and recruitment (where applicable)

Overall DBX seen as one of top 10 FMCG Corsquos servicing key accounts in th e country (and 1 in category)

Customer M arket Focus Sales s taff achieving set targ ets in line with city s trategies for focus on custom er and market issues

bull Assess using distribution by chann el visib ility and trade prom otions

Im proved Skills and Processes Standardised and transp arent sales processes develop ed and agreed within DBX and with Group

bull Sales team skills targets (based on extern al b enchm ark comparisons) achieved through training and recruitment (where applicable)

Organisational Structurebull Clear scope and role statements exis t for all functions (including Sales

amp Marketing)bull Supporting functions (includ ing supply chain) will be achieving all

agreed service level targets with sales amp marketing

Supply ChainCost efficient supp ly chain based on flexib le p roduction lines will deliverbull Increased responsiveness to market dem ands bull Lower cycle timesbull Product channel freshness targe ts

Inform ation System sAppropriate in form ation systems that w ill meet DB Xrsquos needsbull All necessary m anagement inform ation p roduced within p re-agreed tim elines and scales

M anagementbull Senior m anagement w ill be com mitted to working on stra teg y and evalua ted on their

ab ility to coach advise guide and ensure tha t tasks are delega ted effectivelybull Professional m iddle management will exist that w ill be able to ac t m ore independently

within de fined guidelines and have the skills required for their job rolendash Succession plans for key positions wi ll existndash Recruiting and training policies will aim to raise middle manage ment competence to

meet internationa l standards

21 November 2001 2GC Limited Introduction to 2GC Active ManagementPage 4

2GCActive

M anagem entcopy 2GC Limited 1999

Destination Statem entSales Volume50000 MT

Distribution50 Cities

Sales Revenue pound 50 M illion

One M anufacturing Site

ROCE 7Capital Em ployed No m ore th an pound45 million

Product Manager

Marketing Director

Factory Director

Manufacturing Director

Regional Sales Manager

Sales Director

Managing Director

No m ore than 6 Core Brand ProductsMinimum sales volum esndash 5000 MT for each core brandndash 2000M T for each m ajor product

Employer of Choice ( 1 in industry and ranked in FM CG top 10)

Marketing SalesBranding Clear brand propositions systems

established for the six core brandsbull DBX has two of th e top five category product brandsbull Producthouse brand awaren ess targets in DBX city

strategies achievedM edia and promotional strategy City market share

targets achieved within agreed budgetbull M odels and measures of th e relative impact of all

m arketing levers available to assist in th e evaluation targeting of m arketing activity

Im proved Skills and Processes Standardised and transparent m arketing processes developed and agreed within DBX and with Group

bull M arketing team skills targets (b ased on extern al benchmark com parisons) achieved through training and recruitment (where applicable)

Overall DBX seen as one of top 10 FMCG Corsquos servicing key accounts in th e country (and 1 in category)

Customer M arket Focus Sales s taff achieving set targ ets in line with city s trategies for focus on custom er and market issues

bull Assess using distribution by chann el visib ility and trade prom otions

Im proved Skills and Processes Standardised and transp arent sales processes develop ed and agreed within DBX and with Group

bull Sales team skills targets (based on extern al b enchm ark comparisons) achieved through training and recruitment (where applicable)

Organisational Structurebull Clear scope and role statements exis t for all functions (including Sales

amp Marketing)bull Supporting functions (includ ing supply chain) will be achieving all

agreed service level targets with sales amp marketing

Supply ChainCost efficient supp ly chain based on flexib le p roduction lines will deliverbull Increased responsiveness to market dem ands bull Lower cycle timesbull Product channel freshness targe ts

Inform ation System sAppropriate in form ation systems that w ill meet DB Xrsquos needsbull All necessary m anagement inform ation p roduced within p re-agreed tim elines and scales

M anagementbull Senior m anagement w ill be com mitted to working on stra teg y and evalua ted on their

ab ility to coach advise guide and ensure tha t tasks are delega ted effectivelybull Professional m iddle management will exist that w ill be able to ac t m ore independently

within de fined guidelines and have the skills required for their job rolendash Succession plans for key positions wi ll existndash Recruiting and training policies will aim to raise middle manage ment competence to

meet internationa l standards

bullThe ldquoobjective drivenrdquoBalanced Scorecard has emerged as best practice

(V11) November 2001 Introducing the Balanced ScorecardPage 14

2GCActive

Managementcopy 2GC Limited 2001

What is Balanced ScorecardMore than just a set of goals amp measures

Balanced Scorecard design

Balanced Scorecard development

Balanced Scorecard deployment

bull Value from first application

bull Business model reflected in relationship between strategic goals

bull Corporate strategic measurement amp management tool

ndash divisionsndash business unitsndash functions

bull All management Systems aligned with strategy

bull Drive strategic behaviour into everyday decisions and operations

(V11) November 2001 Introducing the Balanced ScorecardPage 15

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard design

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 16

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designWhere to go an how to get there

bullBest practice is to use a development group that comprises the the likely users of the Balanced Scorecard

bullDesign choices should be based on jointly held perception of a strategic ldquoDestinationrdquo

bullThe design should measure progress against the organisationrsquos key strategic objectives (activities and outcomes)

bullLinks between strategic objectives should be articulated ndash these express the management teamrsquos beliefs about which activities drive which outcomes

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development Ac

tiviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

VisionVision

StrategyStrategy

Out

com

esAc

tiviti

es

(V11) November 2001 Introducing the Balanced ScorecardPage 17

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designMonitor progress in achieving goals

bullDevelopment of measures follow clarification and agreement of strategic objectives becausehellip

bullMeasures track progress in achieving those objectives against agreed targets

bullIdentify and monitor extraordinary activities and projects furthering achievement of objectives

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Out

com

es

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development A

ctiv

ities

Act

iviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

Financial Perspective

Objectives Measures Targets Initiatives

Financial Perspective

Objectives Measures Targets

Financial Perspective

Objectives Measures Targets

Financial Perspective

Objectives Measures Targets Initiatives

(V11) November 2001 Introducing the Balanced ScorecardPage 18

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designThe components of a Strategic Balanced Scorecard

bull Financial Marketndash Total NSV pound120m (nominal) ndashndash Has achieved 10 CAGR on NSndash Operating Margin gt10ndash Controllable overheads less thndash Operating Profit pound12m (nomin

Destination StatementDescription of how the organisation will be at some specific future date if the management teamrsquos strategies are successful

Fin

anci

alCu

stom

er

Best value for money

The leading and most innovative

brand

Drive Increased Demand

Profitable Sales Growth

Strategic Linkage Model (SLM)Graphic illustration of ldquocause and effectrdquo relationships between the strategic goals that must be achieved if the organisation is to reach its destination state

ObjectiveObjective DescriptionDescription

Total Shareholder Return is above Groups cost of equity over the medium to long term

Total Shareholder Return is above Groups cost of equity over the medium to long term

Minimise net tax paid and WACC in the light of operational and commercial decisions concerning the nature and sphere of Groups activities and legal constraints Optimum means

Minimise net tax paid and WACC in the light of operational and commercial decisions concerning the nature and sphere of Groups activities and legal constraints Optimum means better than equivalent payments by known Group

Measures (Freq)Measures (Freq)

bull CAGR of Total ShareholdeReturn

bull ROIC (Target gt WACC)

bull CAGR of Total ShareholderReturn

bull ROIC (Target gt WACC)

bull PampL account net tax chargea of profit for financial ye

bull WACC

bull PampL account net tax chargeda of profit for financial yea

bull WACC

Group Strategy Delivers Value

Achieve Optimum Tax Rate amp WACC

F1

F2

Objective and Measure Documentation

ndashClear and concise description of strategic objectives and the measures chosen to track their achievement

F11

F12

-30p

8

150p

18Dividend expected kept a1000 pence leading to loprevious years

Measure Value Target PerfObjective Status

Outperform capital markets

F21 200 185Increasing cash inflow froCash amp a sset

F21 200 185Increasing cash inflow froCash amp a sset

t

Progress Reporting FormatsIllustration of how (and by whom) Scorecard information will be communicated

o Initiative overviewOverview of which initiatives support which Scorecard objectives incl owners and deadlines for finalisation

(V11) November 2001 Introducing the Balanced ScorecardPage 19

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard roll-out

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 20

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard Development Development within the organisation

Country 1 Country 2

Regional Cluster(Line Management)

Country 3

Dept 1

Team

Dept 2

Country 4

Regional ClusterLine Management

Shared Service(eg Supply Chain)

Group SupportLegal Finance HR IS

Main Board

The optimal role-out

sequence is ldquoTop Downrdquo

(V11) November 2001 Introducing the Balanced ScorecardPage 21

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard DevelopmentDevelopment within the organisation

Country 1 Country 2

Regional Cluster(Line Management)

Country 3

Dept 1

Team

Dept 2

Country 4

Regional ClusterLine Management

Shared Service(eg Supply Chain)

Group SupportLegal Finance HR IS

Main Board

Corporate Balanced Scorecard

Co-ordinatingBalanced Scorecard

Support Function Balanced Scorecard

Operating Unit Balanced Scorecard

Departmental Balanced ScorecardTeam Level

Balanced Scorecard

(V11) November 2001 Introducing the Balanced ScorecardPage 22

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard DevelopmentldquoContractualrdquo agreement between management teams

What

How

What

Board level ScorecardBoard level Scorecard

Objectives

Measures amp Targets

Initiatives

Objectives

Measures amp Targets

Initiatives

Overall VisionOverall Vision

Subordinate ScorecardSubordinate Scorecard

Objectives

Measures amp Targets

Initiatives

Objectives

Measures amp Targets

Initiatives

Local VisionLocal Vision

How

TeamIndividual ScorecardTeamIndividual Scorecard

Objectives

Measures amp Targets

Initiatives

TeamIndividual Vision

TeamIndividual Vision

Strategic direction

Strategic direction

Strategy implementation

Strategy implementation

(V11) November 2001 Introducing the Balanced ScorecardPage 23

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 24

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deploymentldquoAchieving strategic goals requires activityrdquo

(V11) November 2001 Introducing the Balanced ScorecardPage 25

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Strategic alignment amp goal setting

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development Ac

tiviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

VisionVision

StrategyStrategy

Out

com

esAc

tiviti

es

(V11) November 2001 Introducing the Balanced ScorecardPage 26

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Align existing management control tools with strategy

SVA amp EVASVA amp EVAB

udge

tsB

udge

ts

BEMBEMBalanced Scorecard

ABCABC HR ToolsHR Tools

(V11) November 2001 Introducing the Balanced ScorecardPage 27

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Support two-way communication of strategyhellip

Fuzzy objectivesFuzzy objectives

Unjustified trust in informal

Unjustified trust in informal

feedback systems

feedback systemsEntren

ched m

easure

ment

Entren

ched m

easure

ment

system

s

system

s

BSC

(V11) November 2001 Introducing the Balanced ScorecardPage 28

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Everybody crafts amp monitors strategy all the timehellip

Comm

unica

tion Com

munication

Board levelScorecard

process

OperationalScorecard

process

Support function Scorecard

process

Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets

Take action

Create amend

strategic vision

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Balanced Scorecard

Developrevise measures amp

targets

Communication

(V11) November 2001 Introducing the Balanced ScorecardPage 29

2GCActive

Managementcopy 2GC Limited 2001

Success criteria

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 30

2GCActive

Managementcopy 2GC Limited 2001

Key success factorsCultural building blocks of Scorecard success

bullInclusive design process building on consensus seeking amp involvement

bullParticipative management style focused on learning open discussion and creative thinking

bullSponsorship and commitment from entire management team -top management in particular

bullldquoEmbeddingrdquo of management processes to use refresh and renew the Balanced Scorecard over time

(V11) November 2001 Introducing the Balanced ScorecardPage 31

2GCActive

Managementcopy 2GC Limited 2001

Introducing the Balanced ScorecardTo find out morehellip

bullVisit 2GCrsquos Web Sitendash We focus specifically on strategic

control and performance measurement issues and have a wide range of working papers FAQs and presentations to download on these topics

ndash The site also has a recommended reading list that covers relevant topics and the ldquoWeblinksrdquo database of relevant Internet sites

bullContact 2GCndash Let us know if you have a question

you canrsquot answer wersquoll do what we can to helphellip

bull info2gccouk

(V11) November 2001 Introducing the Balanced ScorecardPage 8

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced Scorecard

bullldquoThe idea of the Scorecard is to describe the essential ingredients of business successrdquo(Olve et al ldquoPerformance Driversrdquo)

bullldquoBalanced Scorecard is one of the 15 most important management concepts ever introduced in Harvard Business Reviewrdquo(Harvard Business Review 75th Anniversary issue)

bull50 of North American companies claim to be using Balanced Scorecard(Recent survey by Bain amp Company)

One of the most dangerous forms of human error is forgetting what one is trying to to achievePaul Nitze

(V11) November 2001 Introducing the Balanced ScorecardPage 9

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced ScorecardBackground amp underlying philosophy

bullWhat is itndash Strategic communication and

performance measurement toolbullOrigins

ndash Developed from a tool developed in 1980s but some similarities with other pre-existing tools

ndash Introduced to wider audience in early 1990rsquos by R Kaplan amp D Norton in series of articles in Harvard Business Review

bullUnderlying philosophyndash Clear communication of goals and

prioritiesndash Learning amp team-working

Internal PerspectiveInternal Perspective

Learning amp Growth PerspectiveLearning amp Growth Perspective

Financial PerspectiveFinancial Perspective

Customer PerspectiveCustomer Perspective

Act

iviti

esO

utco

mes

Act

iviti

esO

utco

mes

Out

com

esO

utco

mes

Act

iviti

esA

ctiv

ities

(V11) November 2001 Introducing the Balanced ScorecardPage 10

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced ScorecardDo what needs to get donehellip

Are we doing what we set out to do

What do we want to achieve and what must we do to achieve it

Take action

Create amend strategic vision

Createchange linked strategic

objectives

Review results and cause amp effect assumptions

Balanced Scorecard

Developrevise measures amp

targets

(V11) November 2001 Introducing the Balanced ScorecardPage 11

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced ScorecardDifferent applications for Balanced Scorecard

bullldquoManagement Controlrdquo

ndash Maintain the temperature

bullldquoStrategic Controlrdquondash What temperature

7060 80

D A Y amp N I G H T

HOT OFF COOL

Assess Outcome

Set TargetHeater Run if room is below target temp

Thermostat Compare with

Target

MeasureRoom Temp

(V11) November 2001 Introducing the Balanced ScorecardPage 12

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced ScorecardStrategic control vs Management control

Organisational hierarchy

Strat

egic

emph

asis

Operational emphasis

(V11) November 2001 Introducing the Balanced ScorecardPage 13

2GCActive

Managementcopy 2GC Limited 2001

What is the Balanced Scorecard The latest Balanced Scorecard thinking

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 6

2GCActive

M anagementcopy 2GC Lim ited 1999

Balanced Scorecard DocumentationObjective M easure Supporting Initiatives

I1 Drive trade term s by channel W e will develop clear trading terms for different custom er groups W e will achieve our targetlevels of availability visibility and trade su pport via these trading terms

bull Trade customers adhering to trade standard terms amongst a sam ple of top XX customers

bull Develop standard trading terms (GG)

I2 Deliver custom er service standards Deliver timely f irst class service to the trade an d retailers

bull Cases delivered in full against order quantity

bull Orders delivered on time

bull Logistics Project (RS)bull SAP Project (PH)

I3 Im plem ent m ajor account m anagem ent programm e W e will continue to treat our custom ers as business partners W e will establish an account developm ent model to ensure high quality relationships exist w ith key account customers

bull of major accounts with a business plan bull Define ldquomajorrdquo accounts (AC)

I4 Deliver exce llent consum er propositions W e must meet consum er needs through the development and communication of an integrated brand proposition In the NPD sector we will launch new products only after they h ave m et pre-agreed qu ality image need and volume criteria

bull Brand Systems signed off by OE bull Develop core brand propositions (AC)bull NPD Process Improvement (ACAD)bull Cream ing project (AD)

I5 Deliver exce llent internal custom er service W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull SLA Qualitative Evaluations by SLA ow ners bull Logistics Project (RS)bull Factory Cost Reduction (DL)

I6 Effective m anagem ent of com pany assets W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull Total working capitalbull Fixed Asset Utilisationbull Outstanding Debtor Da ys

bull Plant ration alisation (AD)bull L4 L2 (DL)bull SAP (RS)

I7 Effective control of the business (No Surprises) W e will heighten our efforts to streamline the organisation to h elpdrive sound asset managem ent and cost reduction W e will invoke a cost conscious culture to complem ent our stream lining efforts

bull ldquoNo surprisesrdquo evaluation of actual performance against budget or forecast for- stock cover per city- sales per city- national costs

bull Analyse Risk project (PS)

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 6

2GCActive

M anagementcopy 2GC Lim ited 1999

Balanced Scorecard DocumentationObjective M easure Supporting Initiatives

I1 Drive trade term s by channel W e will develop clear trading terms for different custom er groups W e will achieve our targetlevels of availability visibility and trade su pport via these trading terms

bull Trade customers adhering to trade standard terms amongst a sam ple of top XX customers

bull Develop standard trading terms (GG)

I2 Deliver custom er service standards Deliver timely f irst class service to the trade an d retailers

bull Cases delivered in full against order quantity

bull Orders delivered on time

bull Logistics Project (RS)bull SAP Project (PH)

I3 Im plem ent m ajor account m anagem ent programm e W e will continue to treat our custom ers as business partners W e will establish an account developm ent model to ensure high quality relationships exist w ith key account customers

bull of major accounts with a business plan bull Define ldquomajorrdquo accounts (AC)

I4 Deliver exce llent consum er propositions W e must meet consum er needs through the development and communication of an integrated brand proposition In the NPD sector we will launch new products only after they h ave m et pre-agreed qu ality image need and volume criteria

bull Brand Systems signed off by OE bull Develop core brand propositions (AC)bull NPD Process Improvement (ACAD)bull Cream ing project (AD)

I5 Deliver exce llent internal custom er service W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull SLA Qualitative Evaluations by SLA ow ners bull Logistics Project (RS)bull Factory Cost Reduction (DL)

I6 Effective m anagem ent of com pany assets W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull Total working capitalbull Fixed Asset Utilisationbull Outstanding Debtor Da ys

bull Plant ration alisation (AD)bull L4 L2 (DL)bull SAP (RS)

I7 Effective control of the business (No Surprises) W e will heighten our efforts to streamline the organisation to h elpdrive sound asset managem ent and cost reduction W e will invoke a cost conscious culture to complem ent our stream lining efforts

bull ldquoNo surprisesrdquo evaluation of actual performance against budget or forecast for- stock cover per city- sales per city- national costs

bull Analyse Risk project (PS)

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 5

2GCActive

M anagementcopy 2GC Limited 1999

Strategic Linkage M odel

Fina

ncia

l Pe

rspe

ctiv

eC

usto

mer

Per

spec

tive

Lear

ning

amp G

row

th

Pe

rspe

ctiv

eIn

tern

al

Per

spec

tive

DBX Understands and Responds to m y Needs

DBX Products are m y First Choice Products

DBX Products are Good Value for Money

DBX Products are V isible and Availab le

DBX has an Excellent Consumer Franchise

Drive Trade Term s by Channel

Im plem ent Major Account Managem ent

Program m e

Effective Control of Business (No Surprises)

Sales Growth (by City by P roduct)

Gross Contribution (After City Sales and

Marketing)Asset Turn Overheads as a of

NSV

Improved Shareh older Value (ROCE)

I Have a Good Relationship with DBX

Develop Better W ork P ractices and IS

Develop and Retain P rofessional M anagers

Develop Service Agreem ents

Effective M anagem ent o f Com pany Assets

Deliver Excellent In ternal Custom er

ServiceDeliver Custom er

Service Standards

Develop Professional Custom er Oriented Skilled

Sales Force

Deliver Excellent Consum er

Propositions

Understand Im pact O f Various M arketing Levers

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 5

2GCActive

M anagementcopy 2GC Limited 1999

Strategic Linkage M odel

Fina

ncia

l Pe

rspe

ctiv

eC

usto

mer

Per

spec

tive

Lear

ning

amp G

row

th

Pe

rspe

ctiv

eIn

tern

al

Per

spec

tive

DBX Understands and Responds to m y Needs

DBX Products are m y First Choice Products

DBX Products are Good Value for Money

DBX Products are V isible and Availab le

DBX has an Excellent Consumer Franchise

Drive Trade Term s by Channel

Im plem ent Major Account Managem ent

Program m e

Effective Control of Business (No Surprises)

Sales Growth (by City by P roduct)

Gross Contribution (After City Sales and

Marketing)Asset Turn Overheads as a of

NSV

Improved Shareh older Value (ROCE)

I Have a Good Relationship with DBX

Develop Better W ork P ractices and IS

Develop and Retain P rofessional M anagers

Develop Service Agreem ents

Effective M anagem ent o f Com pany Assets

Deliver Excellent In ternal Custom er

ServiceDeliver Custom er

Service Standards

Develop Professional Custom er Oriented Skilled

Sales Force

Deliver Excellent Consum er

Propositions

Understand Im pact O f Various M arketing Levers

21 November 2001 2GC Limited Introduction to 2GC Active ManagementPage 4

2GCActive

M anagem entcopy 2GC Limited 1999

Destination Statem entSales Volume50000 MT

Distribution50 Cities

Sales Revenue pound 50 M illion

One M anufacturing Site

ROCE 7Capital Em ployed No m ore th an pound45 million

Product Manager

Marketing Director

Factory Director

Manufacturing Director

Regional Sales Manager

Sales Director

Managing Director

No m ore than 6 Core Brand ProductsMinimum sales volum esndash 5000 MT for each core brandndash 2000M T for each m ajor product

Employer of Choice ( 1 in industry and ranked in FM CG top 10)

Marketing SalesBranding Clear brand propositions systems

established for the six core brandsbull DBX has two of th e top five category product brandsbull Producthouse brand awaren ess targets in DBX city

strategies achievedM edia and promotional strategy City market share

targets achieved within agreed budgetbull M odels and measures of th e relative impact of all

m arketing levers available to assist in th e evaluation targeting of m arketing activity

Im proved Skills and Processes Standardised and transparent m arketing processes developed and agreed within DBX and with Group

bull M arketing team skills targets (b ased on extern al benchmark com parisons) achieved through training and recruitment (where applicable)

Overall DBX seen as one of top 10 FMCG Corsquos servicing key accounts in th e country (and 1 in category)

Customer M arket Focus Sales s taff achieving set targ ets in line with city s trategies for focus on custom er and market issues

bull Assess using distribution by chann el visib ility and trade prom otions

Im proved Skills and Processes Standardised and transp arent sales processes develop ed and agreed within DBX and with Group

bull Sales team skills targets (based on extern al b enchm ark comparisons) achieved through training and recruitment (where applicable)

Organisational Structurebull Clear scope and role statements exis t for all functions (including Sales

amp Marketing)bull Supporting functions (includ ing supply chain) will be achieving all

agreed service level targets with sales amp marketing

Supply ChainCost efficient supp ly chain based on flexib le p roduction lines will deliverbull Increased responsiveness to market dem ands bull Lower cycle timesbull Product channel freshness targe ts

Inform ation System sAppropriate in form ation systems that w ill meet DB Xrsquos needsbull All necessary m anagement inform ation p roduced within p re-agreed tim elines and scales

M anagementbull Senior m anagement w ill be com mitted to working on stra teg y and evalua ted on their

ab ility to coach advise guide and ensure tha t tasks are delega ted effectivelybull Professional m iddle management will exist that w ill be able to ac t m ore independently

within de fined guidelines and have the skills required for their job rolendash Succession plans for key positions wi ll existndash Recruiting and training policies will aim to raise middle manage ment competence to

meet internationa l standards

21 November 2001 2GC Limited Introduction to 2GC Active ManagementPage 4

2GCActive

M anagem entcopy 2GC Limited 1999

Destination Statem entSales Volume50000 MT

Distribution50 Cities

Sales Revenue pound 50 M illion

One M anufacturing Site

ROCE 7Capital Em ployed No m ore th an pound45 million

Product Manager

Marketing Director

Factory Director

Manufacturing Director

Regional Sales Manager

Sales Director

Managing Director

No m ore than 6 Core Brand ProductsMinimum sales volum esndash 5000 MT for each core brandndash 2000M T for each m ajor product

Employer of Choice ( 1 in industry and ranked in FM CG top 10)

Marketing SalesBranding Clear brand propositions systems

established for the six core brandsbull DBX has two of th e top five category product brandsbull Producthouse brand awaren ess targets in DBX city

strategies achievedM edia and promotional strategy City market share

targets achieved within agreed budgetbull M odels and measures of th e relative impact of all

m arketing levers available to assist in th e evaluation targeting of m arketing activity

Im proved Skills and Processes Standardised and transparent m arketing processes developed and agreed within DBX and with Group

bull M arketing team skills targets (b ased on extern al benchmark com parisons) achieved through training and recruitment (where applicable)

Overall DBX seen as one of top 10 FMCG Corsquos servicing key accounts in th e country (and 1 in category)

Customer M arket Focus Sales s taff achieving set targ ets in line with city s trategies for focus on custom er and market issues

bull Assess using distribution by chann el visib ility and trade prom otions

Im proved Skills and Processes Standardised and transp arent sales processes develop ed and agreed within DBX and with Group

bull Sales team skills targets (based on extern al b enchm ark comparisons) achieved through training and recruitment (where applicable)

Organisational Structurebull Clear scope and role statements exis t for all functions (including Sales

amp Marketing)bull Supporting functions (includ ing supply chain) will be achieving all

agreed service level targets with sales amp marketing

Supply ChainCost efficient supp ly chain based on flexib le p roduction lines will deliverbull Increased responsiveness to market dem ands bull Lower cycle timesbull Product channel freshness targe ts

Inform ation System sAppropriate in form ation systems that w ill meet DB Xrsquos needsbull All necessary m anagement inform ation p roduced within p re-agreed tim elines and scales

M anagementbull Senior m anagement w ill be com mitted to working on stra teg y and evalua ted on their

ab ility to coach advise guide and ensure tha t tasks are delega ted effectivelybull Professional m iddle management will exist that w ill be able to ac t m ore independently

within de fined guidelines and have the skills required for their job rolendash Succession plans for key positions wi ll existndash Recruiting and training policies will aim to raise middle manage ment competence to

meet internationa l standards

bullThe ldquoobjective drivenrdquoBalanced Scorecard has emerged as best practice

(V11) November 2001 Introducing the Balanced ScorecardPage 14

2GCActive

Managementcopy 2GC Limited 2001

What is Balanced ScorecardMore than just a set of goals amp measures

Balanced Scorecard design

Balanced Scorecard development

Balanced Scorecard deployment

bull Value from first application

bull Business model reflected in relationship between strategic goals

bull Corporate strategic measurement amp management tool

ndash divisionsndash business unitsndash functions

bull All management Systems aligned with strategy

bull Drive strategic behaviour into everyday decisions and operations

(V11) November 2001 Introducing the Balanced ScorecardPage 15

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard design

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 16

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designWhere to go an how to get there

bullBest practice is to use a development group that comprises the the likely users of the Balanced Scorecard

bullDesign choices should be based on jointly held perception of a strategic ldquoDestinationrdquo

bullThe design should measure progress against the organisationrsquos key strategic objectives (activities and outcomes)

bullLinks between strategic objectives should be articulated ndash these express the management teamrsquos beliefs about which activities drive which outcomes

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development Ac

tiviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

VisionVision

StrategyStrategy

Out

com

esAc

tiviti

es

(V11) November 2001 Introducing the Balanced ScorecardPage 17

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designMonitor progress in achieving goals

bullDevelopment of measures follow clarification and agreement of strategic objectives becausehellip

bullMeasures track progress in achieving those objectives against agreed targets

bullIdentify and monitor extraordinary activities and projects furthering achievement of objectives

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Out

com

es

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development A

ctiv

ities

Act

iviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

Financial Perspective

Objectives Measures Targets Initiatives

Financial Perspective

Objectives Measures Targets

Financial Perspective

Objectives Measures Targets

Financial Perspective

Objectives Measures Targets Initiatives

(V11) November 2001 Introducing the Balanced ScorecardPage 18

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designThe components of a Strategic Balanced Scorecard

bull Financial Marketndash Total NSV pound120m (nominal) ndashndash Has achieved 10 CAGR on NSndash Operating Margin gt10ndash Controllable overheads less thndash Operating Profit pound12m (nomin

Destination StatementDescription of how the organisation will be at some specific future date if the management teamrsquos strategies are successful

Fin

anci

alCu

stom

er

Best value for money

The leading and most innovative

brand

Drive Increased Demand

Profitable Sales Growth

Strategic Linkage Model (SLM)Graphic illustration of ldquocause and effectrdquo relationships between the strategic goals that must be achieved if the organisation is to reach its destination state

ObjectiveObjective DescriptionDescription

Total Shareholder Return is above Groups cost of equity over the medium to long term

Total Shareholder Return is above Groups cost of equity over the medium to long term

Minimise net tax paid and WACC in the light of operational and commercial decisions concerning the nature and sphere of Groups activities and legal constraints Optimum means

Minimise net tax paid and WACC in the light of operational and commercial decisions concerning the nature and sphere of Groups activities and legal constraints Optimum means better than equivalent payments by known Group

Measures (Freq)Measures (Freq)

bull CAGR of Total ShareholdeReturn

bull ROIC (Target gt WACC)

bull CAGR of Total ShareholderReturn

bull ROIC (Target gt WACC)

bull PampL account net tax chargea of profit for financial ye

bull WACC

bull PampL account net tax chargeda of profit for financial yea

bull WACC

Group Strategy Delivers Value

Achieve Optimum Tax Rate amp WACC

F1

F2

Objective and Measure Documentation

ndashClear and concise description of strategic objectives and the measures chosen to track their achievement

F11

F12

-30p

8

150p

18Dividend expected kept a1000 pence leading to loprevious years

Measure Value Target PerfObjective Status

Outperform capital markets

F21 200 185Increasing cash inflow froCash amp a sset

F21 200 185Increasing cash inflow froCash amp a sset

t

Progress Reporting FormatsIllustration of how (and by whom) Scorecard information will be communicated

o Initiative overviewOverview of which initiatives support which Scorecard objectives incl owners and deadlines for finalisation

(V11) November 2001 Introducing the Balanced ScorecardPage 19

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard roll-out

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 20

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard Development Development within the organisation

Country 1 Country 2

Regional Cluster(Line Management)

Country 3

Dept 1

Team

Dept 2

Country 4

Regional ClusterLine Management

Shared Service(eg Supply Chain)

Group SupportLegal Finance HR IS

Main Board

The optimal role-out

sequence is ldquoTop Downrdquo

(V11) November 2001 Introducing the Balanced ScorecardPage 21

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard DevelopmentDevelopment within the organisation

Country 1 Country 2

Regional Cluster(Line Management)

Country 3

Dept 1

Team

Dept 2

Country 4

Regional ClusterLine Management

Shared Service(eg Supply Chain)

Group SupportLegal Finance HR IS

Main Board

Corporate Balanced Scorecard

Co-ordinatingBalanced Scorecard

Support Function Balanced Scorecard

Operating Unit Balanced Scorecard

Departmental Balanced ScorecardTeam Level

Balanced Scorecard

(V11) November 2001 Introducing the Balanced ScorecardPage 22

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard DevelopmentldquoContractualrdquo agreement between management teams

What

How

What

Board level ScorecardBoard level Scorecard

Objectives

Measures amp Targets

Initiatives

Objectives

Measures amp Targets

Initiatives

Overall VisionOverall Vision

Subordinate ScorecardSubordinate Scorecard

Objectives

Measures amp Targets

Initiatives

Objectives

Measures amp Targets

Initiatives

Local VisionLocal Vision

How

TeamIndividual ScorecardTeamIndividual Scorecard

Objectives

Measures amp Targets

Initiatives

TeamIndividual Vision

TeamIndividual Vision

Strategic direction

Strategic direction

Strategy implementation

Strategy implementation

(V11) November 2001 Introducing the Balanced ScorecardPage 23

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 24

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deploymentldquoAchieving strategic goals requires activityrdquo

(V11) November 2001 Introducing the Balanced ScorecardPage 25

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Strategic alignment amp goal setting

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development Ac

tiviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

VisionVision

StrategyStrategy

Out

com

esAc

tiviti

es

(V11) November 2001 Introducing the Balanced ScorecardPage 26

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Align existing management control tools with strategy

SVA amp EVASVA amp EVAB

udge

tsB

udge

ts

BEMBEMBalanced Scorecard

ABCABC HR ToolsHR Tools

(V11) November 2001 Introducing the Balanced ScorecardPage 27

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Support two-way communication of strategyhellip

Fuzzy objectivesFuzzy objectives

Unjustified trust in informal

Unjustified trust in informal

feedback systems

feedback systemsEntren

ched m

easure

ment

Entren

ched m

easure

ment

system

s

system

s

BSC

(V11) November 2001 Introducing the Balanced ScorecardPage 28

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Everybody crafts amp monitors strategy all the timehellip

Comm

unica

tion Com

munication

Board levelScorecard

process

OperationalScorecard

process

Support function Scorecard

process

Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets

Take action

Create amend

strategic vision

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Balanced Scorecard

Developrevise measures amp

targets

Communication

(V11) November 2001 Introducing the Balanced ScorecardPage 29

2GCActive

Managementcopy 2GC Limited 2001

Success criteria

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 30

2GCActive

Managementcopy 2GC Limited 2001

Key success factorsCultural building blocks of Scorecard success

bullInclusive design process building on consensus seeking amp involvement

bullParticipative management style focused on learning open discussion and creative thinking

bullSponsorship and commitment from entire management team -top management in particular

bullldquoEmbeddingrdquo of management processes to use refresh and renew the Balanced Scorecard over time

(V11) November 2001 Introducing the Balanced ScorecardPage 31

2GCActive

Managementcopy 2GC Limited 2001

Introducing the Balanced ScorecardTo find out morehellip

bullVisit 2GCrsquos Web Sitendash We focus specifically on strategic

control and performance measurement issues and have a wide range of working papers FAQs and presentations to download on these topics

ndash The site also has a recommended reading list that covers relevant topics and the ldquoWeblinksrdquo database of relevant Internet sites

bullContact 2GCndash Let us know if you have a question

you canrsquot answer wersquoll do what we can to helphellip

bull info2gccouk

(V11) November 2001 Introducing the Balanced ScorecardPage 9

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced ScorecardBackground amp underlying philosophy

bullWhat is itndash Strategic communication and

performance measurement toolbullOrigins

ndash Developed from a tool developed in 1980s but some similarities with other pre-existing tools

ndash Introduced to wider audience in early 1990rsquos by R Kaplan amp D Norton in series of articles in Harvard Business Review

bullUnderlying philosophyndash Clear communication of goals and

prioritiesndash Learning amp team-working

Internal PerspectiveInternal Perspective

Learning amp Growth PerspectiveLearning amp Growth Perspective

Financial PerspectiveFinancial Perspective

Customer PerspectiveCustomer Perspective

Act

iviti

esO

utco

mes

Act

iviti

esO

utco

mes

Out

com

esO

utco

mes

Act

iviti

esA

ctiv

ities

(V11) November 2001 Introducing the Balanced ScorecardPage 10

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced ScorecardDo what needs to get donehellip

Are we doing what we set out to do

What do we want to achieve and what must we do to achieve it

Take action

Create amend strategic vision

Createchange linked strategic

objectives

Review results and cause amp effect assumptions

Balanced Scorecard

Developrevise measures amp

targets

(V11) November 2001 Introducing the Balanced ScorecardPage 11

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced ScorecardDifferent applications for Balanced Scorecard

bullldquoManagement Controlrdquo

ndash Maintain the temperature

bullldquoStrategic Controlrdquondash What temperature

7060 80

D A Y amp N I G H T

HOT OFF COOL

Assess Outcome

Set TargetHeater Run if room is below target temp

Thermostat Compare with

Target

MeasureRoom Temp

(V11) November 2001 Introducing the Balanced ScorecardPage 12

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced ScorecardStrategic control vs Management control

Organisational hierarchy

Strat

egic

emph

asis

Operational emphasis

(V11) November 2001 Introducing the Balanced ScorecardPage 13

2GCActive

Managementcopy 2GC Limited 2001

What is the Balanced Scorecard The latest Balanced Scorecard thinking

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 6

2GCActive

M anagementcopy 2GC Lim ited 1999

Balanced Scorecard DocumentationObjective M easure Supporting Initiatives

I1 Drive trade term s by channel W e will develop clear trading terms for different custom er groups W e will achieve our targetlevels of availability visibility and trade su pport via these trading terms

bull Trade customers adhering to trade standard terms amongst a sam ple of top XX customers

bull Develop standard trading terms (GG)

I2 Deliver custom er service standards Deliver timely f irst class service to the trade an d retailers

bull Cases delivered in full against order quantity

bull Orders delivered on time

bull Logistics Project (RS)bull SAP Project (PH)

I3 Im plem ent m ajor account m anagem ent programm e W e will continue to treat our custom ers as business partners W e will establish an account developm ent model to ensure high quality relationships exist w ith key account customers

bull of major accounts with a business plan bull Define ldquomajorrdquo accounts (AC)

I4 Deliver exce llent consum er propositions W e must meet consum er needs through the development and communication of an integrated brand proposition In the NPD sector we will launch new products only after they h ave m et pre-agreed qu ality image need and volume criteria

bull Brand Systems signed off by OE bull Develop core brand propositions (AC)bull NPD Process Improvement (ACAD)bull Cream ing project (AD)

I5 Deliver exce llent internal custom er service W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull SLA Qualitative Evaluations by SLA ow ners bull Logistics Project (RS)bull Factory Cost Reduction (DL)

I6 Effective m anagem ent of com pany assets W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull Total working capitalbull Fixed Asset Utilisationbull Outstanding Debtor Da ys

bull Plant ration alisation (AD)bull L4 L2 (DL)bull SAP (RS)

I7 Effective control of the business (No Surprises) W e will heighten our efforts to streamline the organisation to h elpdrive sound asset managem ent and cost reduction W e will invoke a cost conscious culture to complem ent our stream lining efforts

bull ldquoNo surprisesrdquo evaluation of actual performance against budget or forecast for- stock cover per city- sales per city- national costs

bull Analyse Risk project (PS)

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 6

2GCActive

M anagementcopy 2GC Lim ited 1999

Balanced Scorecard DocumentationObjective M easure Supporting Initiatives

I1 Drive trade term s by channel W e will develop clear trading terms for different custom er groups W e will achieve our targetlevels of availability visibility and trade su pport via these trading terms

bull Trade customers adhering to trade standard terms amongst a sam ple of top XX customers

bull Develop standard trading terms (GG)

I2 Deliver custom er service standards Deliver timely f irst class service to the trade an d retailers

bull Cases delivered in full against order quantity

bull Orders delivered on time

bull Logistics Project (RS)bull SAP Project (PH)

I3 Im plem ent m ajor account m anagem ent programm e W e will continue to treat our custom ers as business partners W e will establish an account developm ent model to ensure high quality relationships exist w ith key account customers

bull of major accounts with a business plan bull Define ldquomajorrdquo accounts (AC)

I4 Deliver exce llent consum er propositions W e must meet consum er needs through the development and communication of an integrated brand proposition In the NPD sector we will launch new products only after they h ave m et pre-agreed qu ality image need and volume criteria

bull Brand Systems signed off by OE bull Develop core brand propositions (AC)bull NPD Process Improvement (ACAD)bull Cream ing project (AD)

I5 Deliver exce llent internal custom er service W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull SLA Qualitative Evaluations by SLA ow ners bull Logistics Project (RS)bull Factory Cost Reduction (DL)

I6 Effective m anagem ent of com pany assets W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull Total working capitalbull Fixed Asset Utilisationbull Outstanding Debtor Da ys

bull Plant ration alisation (AD)bull L4 L2 (DL)bull SAP (RS)

I7 Effective control of the business (No Surprises) W e will heighten our efforts to streamline the organisation to h elpdrive sound asset managem ent and cost reduction W e will invoke a cost conscious culture to complem ent our stream lining efforts

bull ldquoNo surprisesrdquo evaluation of actual performance against budget or forecast for- stock cover per city- sales per city- national costs

bull Analyse Risk project (PS)

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 5

2GCActive

M anagementcopy 2GC Limited 1999

Strategic Linkage M odel

Fina

ncia

l Pe

rspe

ctiv

eC

usto

mer

Per

spec

tive

Lear

ning

amp G

row

th

Pe

rspe

ctiv

eIn

tern

al

Per

spec

tive

DBX Understands and Responds to m y Needs

DBX Products are m y First Choice Products

DBX Products are Good Value for Money

DBX Products are V isible and Availab le

DBX has an Excellent Consumer Franchise

Drive Trade Term s by Channel

Im plem ent Major Account Managem ent

Program m e

Effective Control of Business (No Surprises)

Sales Growth (by City by P roduct)

Gross Contribution (After City Sales and

Marketing)Asset Turn Overheads as a of

NSV

Improved Shareh older Value (ROCE)

I Have a Good Relationship with DBX

Develop Better W ork P ractices and IS

Develop and Retain P rofessional M anagers

Develop Service Agreem ents

Effective M anagem ent o f Com pany Assets

Deliver Excellent In ternal Custom er

ServiceDeliver Custom er

Service Standards

Develop Professional Custom er Oriented Skilled

Sales Force

Deliver Excellent Consum er

Propositions

Understand Im pact O f Various M arketing Levers

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 5

2GCActive

M anagementcopy 2GC Limited 1999

Strategic Linkage M odel

Fina

ncia

l Pe

rspe

ctiv

eC

usto

mer

Per

spec

tive

Lear

ning

amp G

row

th

Pe

rspe

ctiv

eIn

tern

al

Per

spec

tive

DBX Understands and Responds to m y Needs

DBX Products are m y First Choice Products

DBX Products are Good Value for Money

DBX Products are V isible and Availab le

DBX has an Excellent Consumer Franchise

Drive Trade Term s by Channel

Im plem ent Major Account Managem ent

Program m e

Effective Control of Business (No Surprises)

Sales Growth (by City by P roduct)

Gross Contribution (After City Sales and

Marketing)Asset Turn Overheads as a of

NSV

Improved Shareh older Value (ROCE)

I Have a Good Relationship with DBX

Develop Better W ork P ractices and IS

Develop and Retain P rofessional M anagers

Develop Service Agreem ents

Effective M anagem ent o f Com pany Assets

Deliver Excellent In ternal Custom er

ServiceDeliver Custom er

Service Standards

Develop Professional Custom er Oriented Skilled

Sales Force

Deliver Excellent Consum er

Propositions

Understand Im pact O f Various M arketing Levers

21 November 2001 2GC Limited Introduction to 2GC Active ManagementPage 4

2GCActive

M anagem entcopy 2GC Limited 1999

Destination Statem entSales Volume50000 MT

Distribution50 Cities

Sales Revenue pound 50 M illion

One M anufacturing Site

ROCE 7Capital Em ployed No m ore th an pound45 million

Product Manager

Marketing Director

Factory Director

Manufacturing Director

Regional Sales Manager

Sales Director

Managing Director

No m ore than 6 Core Brand ProductsMinimum sales volum esndash 5000 MT for each core brandndash 2000M T for each m ajor product

Employer of Choice ( 1 in industry and ranked in FM CG top 10)

Marketing SalesBranding Clear brand propositions systems

established for the six core brandsbull DBX has two of th e top five category product brandsbull Producthouse brand awaren ess targets in DBX city

strategies achievedM edia and promotional strategy City market share

targets achieved within agreed budgetbull M odels and measures of th e relative impact of all

m arketing levers available to assist in th e evaluation targeting of m arketing activity

Im proved Skills and Processes Standardised and transparent m arketing processes developed and agreed within DBX and with Group

bull M arketing team skills targets (b ased on extern al benchmark com parisons) achieved through training and recruitment (where applicable)

Overall DBX seen as one of top 10 FMCG Corsquos servicing key accounts in th e country (and 1 in category)

Customer M arket Focus Sales s taff achieving set targ ets in line with city s trategies for focus on custom er and market issues

bull Assess using distribution by chann el visib ility and trade prom otions

Im proved Skills and Processes Standardised and transp arent sales processes develop ed and agreed within DBX and with Group

bull Sales team skills targets (based on extern al b enchm ark comparisons) achieved through training and recruitment (where applicable)

Organisational Structurebull Clear scope and role statements exis t for all functions (including Sales

amp Marketing)bull Supporting functions (includ ing supply chain) will be achieving all

agreed service level targets with sales amp marketing

Supply ChainCost efficient supp ly chain based on flexib le p roduction lines will deliverbull Increased responsiveness to market dem ands bull Lower cycle timesbull Product channel freshness targe ts

Inform ation System sAppropriate in form ation systems that w ill meet DB Xrsquos needsbull All necessary m anagement inform ation p roduced within p re-agreed tim elines and scales

M anagementbull Senior m anagement w ill be com mitted to working on stra teg y and evalua ted on their

ab ility to coach advise guide and ensure tha t tasks are delega ted effectivelybull Professional m iddle management will exist that w ill be able to ac t m ore independently

within de fined guidelines and have the skills required for their job rolendash Succession plans for key positions wi ll existndash Recruiting and training policies will aim to raise middle manage ment competence to

meet internationa l standards

21 November 2001 2GC Limited Introduction to 2GC Active ManagementPage 4

2GCActive

M anagem entcopy 2GC Limited 1999

Destination Statem entSales Volume50000 MT

Distribution50 Cities

Sales Revenue pound 50 M illion

One M anufacturing Site

ROCE 7Capital Em ployed No m ore th an pound45 million

Product Manager

Marketing Director

Factory Director

Manufacturing Director

Regional Sales Manager

Sales Director

Managing Director

No m ore than 6 Core Brand ProductsMinimum sales volum esndash 5000 MT for each core brandndash 2000M T for each m ajor product

Employer of Choice ( 1 in industry and ranked in FM CG top 10)

Marketing SalesBranding Clear brand propositions systems

established for the six core brandsbull DBX has two of th e top five category product brandsbull Producthouse brand awaren ess targets in DBX city

strategies achievedM edia and promotional strategy City market share

targets achieved within agreed budgetbull M odels and measures of th e relative impact of all

m arketing levers available to assist in th e evaluation targeting of m arketing activity

Im proved Skills and Processes Standardised and transparent m arketing processes developed and agreed within DBX and with Group

bull M arketing team skills targets (b ased on extern al benchmark com parisons) achieved through training and recruitment (where applicable)

Overall DBX seen as one of top 10 FMCG Corsquos servicing key accounts in th e country (and 1 in category)

Customer M arket Focus Sales s taff achieving set targ ets in line with city s trategies for focus on custom er and market issues

bull Assess using distribution by chann el visib ility and trade prom otions

Im proved Skills and Processes Standardised and transp arent sales processes develop ed and agreed within DBX and with Group

bull Sales team skills targets (based on extern al b enchm ark comparisons) achieved through training and recruitment (where applicable)

Organisational Structurebull Clear scope and role statements exis t for all functions (including Sales

amp Marketing)bull Supporting functions (includ ing supply chain) will be achieving all

agreed service level targets with sales amp marketing

Supply ChainCost efficient supp ly chain based on flexib le p roduction lines will deliverbull Increased responsiveness to market dem ands bull Lower cycle timesbull Product channel freshness targe ts

Inform ation System sAppropriate in form ation systems that w ill meet DB Xrsquos needsbull All necessary m anagement inform ation p roduced within p re-agreed tim elines and scales

M anagementbull Senior m anagement w ill be com mitted to working on stra teg y and evalua ted on their

ab ility to coach advise guide and ensure tha t tasks are delega ted effectivelybull Professional m iddle management will exist that w ill be able to ac t m ore independently

within de fined guidelines and have the skills required for their job rolendash Succession plans for key positions wi ll existndash Recruiting and training policies will aim to raise middle manage ment competence to

meet internationa l standards

bullThe ldquoobjective drivenrdquoBalanced Scorecard has emerged as best practice

(V11) November 2001 Introducing the Balanced ScorecardPage 14

2GCActive

Managementcopy 2GC Limited 2001

What is Balanced ScorecardMore than just a set of goals amp measures

Balanced Scorecard design

Balanced Scorecard development

Balanced Scorecard deployment

bull Value from first application

bull Business model reflected in relationship between strategic goals

bull Corporate strategic measurement amp management tool

ndash divisionsndash business unitsndash functions

bull All management Systems aligned with strategy

bull Drive strategic behaviour into everyday decisions and operations

(V11) November 2001 Introducing the Balanced ScorecardPage 15

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard design

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 16

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designWhere to go an how to get there

bullBest practice is to use a development group that comprises the the likely users of the Balanced Scorecard

bullDesign choices should be based on jointly held perception of a strategic ldquoDestinationrdquo

bullThe design should measure progress against the organisationrsquos key strategic objectives (activities and outcomes)

bullLinks between strategic objectives should be articulated ndash these express the management teamrsquos beliefs about which activities drive which outcomes

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development Ac

tiviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

VisionVision

StrategyStrategy

Out

com

esAc

tiviti

es

(V11) November 2001 Introducing the Balanced ScorecardPage 17

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designMonitor progress in achieving goals

bullDevelopment of measures follow clarification and agreement of strategic objectives becausehellip

bullMeasures track progress in achieving those objectives against agreed targets

bullIdentify and monitor extraordinary activities and projects furthering achievement of objectives

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Out

com

es

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development A

ctiv

ities

Act

iviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

Financial Perspective

Objectives Measures Targets Initiatives

Financial Perspective

Objectives Measures Targets

Financial Perspective

Objectives Measures Targets

Financial Perspective

Objectives Measures Targets Initiatives

(V11) November 2001 Introducing the Balanced ScorecardPage 18

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designThe components of a Strategic Balanced Scorecard

bull Financial Marketndash Total NSV pound120m (nominal) ndashndash Has achieved 10 CAGR on NSndash Operating Margin gt10ndash Controllable overheads less thndash Operating Profit pound12m (nomin

Destination StatementDescription of how the organisation will be at some specific future date if the management teamrsquos strategies are successful

Fin

anci

alCu

stom

er

Best value for money

The leading and most innovative

brand

Drive Increased Demand

Profitable Sales Growth

Strategic Linkage Model (SLM)Graphic illustration of ldquocause and effectrdquo relationships between the strategic goals that must be achieved if the organisation is to reach its destination state

ObjectiveObjective DescriptionDescription

Total Shareholder Return is above Groups cost of equity over the medium to long term

Total Shareholder Return is above Groups cost of equity over the medium to long term

Minimise net tax paid and WACC in the light of operational and commercial decisions concerning the nature and sphere of Groups activities and legal constraints Optimum means

Minimise net tax paid and WACC in the light of operational and commercial decisions concerning the nature and sphere of Groups activities and legal constraints Optimum means better than equivalent payments by known Group

Measures (Freq)Measures (Freq)

bull CAGR of Total ShareholdeReturn

bull ROIC (Target gt WACC)

bull CAGR of Total ShareholderReturn

bull ROIC (Target gt WACC)

bull PampL account net tax chargea of profit for financial ye

bull WACC

bull PampL account net tax chargeda of profit for financial yea

bull WACC

Group Strategy Delivers Value

Achieve Optimum Tax Rate amp WACC

F1

F2

Objective and Measure Documentation

ndashClear and concise description of strategic objectives and the measures chosen to track their achievement

F11

F12

-30p

8

150p

18Dividend expected kept a1000 pence leading to loprevious years

Measure Value Target PerfObjective Status

Outperform capital markets

F21 200 185Increasing cash inflow froCash amp a sset

F21 200 185Increasing cash inflow froCash amp a sset

t

Progress Reporting FormatsIllustration of how (and by whom) Scorecard information will be communicated

o Initiative overviewOverview of which initiatives support which Scorecard objectives incl owners and deadlines for finalisation

(V11) November 2001 Introducing the Balanced ScorecardPage 19

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard roll-out

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 20

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard Development Development within the organisation

Country 1 Country 2

Regional Cluster(Line Management)

Country 3

Dept 1

Team

Dept 2

Country 4

Regional ClusterLine Management

Shared Service(eg Supply Chain)

Group SupportLegal Finance HR IS

Main Board

The optimal role-out

sequence is ldquoTop Downrdquo

(V11) November 2001 Introducing the Balanced ScorecardPage 21

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard DevelopmentDevelopment within the organisation

Country 1 Country 2

Regional Cluster(Line Management)

Country 3

Dept 1

Team

Dept 2

Country 4

Regional ClusterLine Management

Shared Service(eg Supply Chain)

Group SupportLegal Finance HR IS

Main Board

Corporate Balanced Scorecard

Co-ordinatingBalanced Scorecard

Support Function Balanced Scorecard

Operating Unit Balanced Scorecard

Departmental Balanced ScorecardTeam Level

Balanced Scorecard

(V11) November 2001 Introducing the Balanced ScorecardPage 22

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard DevelopmentldquoContractualrdquo agreement between management teams

What

How

What

Board level ScorecardBoard level Scorecard

Objectives

Measures amp Targets

Initiatives

Objectives

Measures amp Targets

Initiatives

Overall VisionOverall Vision

Subordinate ScorecardSubordinate Scorecard

Objectives

Measures amp Targets

Initiatives

Objectives

Measures amp Targets

Initiatives

Local VisionLocal Vision

How

TeamIndividual ScorecardTeamIndividual Scorecard

Objectives

Measures amp Targets

Initiatives

TeamIndividual Vision

TeamIndividual Vision

Strategic direction

Strategic direction

Strategy implementation

Strategy implementation

(V11) November 2001 Introducing the Balanced ScorecardPage 23

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 24

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deploymentldquoAchieving strategic goals requires activityrdquo

(V11) November 2001 Introducing the Balanced ScorecardPage 25

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Strategic alignment amp goal setting

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development Ac

tiviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

VisionVision

StrategyStrategy

Out

com

esAc

tiviti

es

(V11) November 2001 Introducing the Balanced ScorecardPage 26

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Align existing management control tools with strategy

SVA amp EVASVA amp EVAB

udge

tsB

udge

ts

BEMBEMBalanced Scorecard

ABCABC HR ToolsHR Tools

(V11) November 2001 Introducing the Balanced ScorecardPage 27

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Support two-way communication of strategyhellip

Fuzzy objectivesFuzzy objectives

Unjustified trust in informal

Unjustified trust in informal

feedback systems

feedback systemsEntren

ched m

easure

ment

Entren

ched m

easure

ment

system

s

system

s

BSC

(V11) November 2001 Introducing the Balanced ScorecardPage 28

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Everybody crafts amp monitors strategy all the timehellip

Comm

unica

tion Com

munication

Board levelScorecard

process

OperationalScorecard

process

Support function Scorecard

process

Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets

Take action

Create amend

strategic vision

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Balanced Scorecard

Developrevise measures amp

targets

Communication

(V11) November 2001 Introducing the Balanced ScorecardPage 29

2GCActive

Managementcopy 2GC Limited 2001

Success criteria

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 30

2GCActive

Managementcopy 2GC Limited 2001

Key success factorsCultural building blocks of Scorecard success

bullInclusive design process building on consensus seeking amp involvement

bullParticipative management style focused on learning open discussion and creative thinking

bullSponsorship and commitment from entire management team -top management in particular

bullldquoEmbeddingrdquo of management processes to use refresh and renew the Balanced Scorecard over time

(V11) November 2001 Introducing the Balanced ScorecardPage 31

2GCActive

Managementcopy 2GC Limited 2001

Introducing the Balanced ScorecardTo find out morehellip

bullVisit 2GCrsquos Web Sitendash We focus specifically on strategic

control and performance measurement issues and have a wide range of working papers FAQs and presentations to download on these topics

ndash The site also has a recommended reading list that covers relevant topics and the ldquoWeblinksrdquo database of relevant Internet sites

bullContact 2GCndash Let us know if you have a question

you canrsquot answer wersquoll do what we can to helphellip

bull info2gccouk

(V11) November 2001 Introducing the Balanced ScorecardPage 10

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced ScorecardDo what needs to get donehellip

Are we doing what we set out to do

What do we want to achieve and what must we do to achieve it

Take action

Create amend strategic vision

Createchange linked strategic

objectives

Review results and cause amp effect assumptions

Balanced Scorecard

Developrevise measures amp

targets

(V11) November 2001 Introducing the Balanced ScorecardPage 11

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced ScorecardDifferent applications for Balanced Scorecard

bullldquoManagement Controlrdquo

ndash Maintain the temperature

bullldquoStrategic Controlrdquondash What temperature

7060 80

D A Y amp N I G H T

HOT OFF COOL

Assess Outcome

Set TargetHeater Run if room is below target temp

Thermostat Compare with

Target

MeasureRoom Temp

(V11) November 2001 Introducing the Balanced ScorecardPage 12

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced ScorecardStrategic control vs Management control

Organisational hierarchy

Strat

egic

emph

asis

Operational emphasis

(V11) November 2001 Introducing the Balanced ScorecardPage 13

2GCActive

Managementcopy 2GC Limited 2001

What is the Balanced Scorecard The latest Balanced Scorecard thinking

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 6

2GCActive

M anagementcopy 2GC Lim ited 1999

Balanced Scorecard DocumentationObjective M easure Supporting Initiatives

I1 Drive trade term s by channel W e will develop clear trading terms for different custom er groups W e will achieve our targetlevels of availability visibility and trade su pport via these trading terms

bull Trade customers adhering to trade standard terms amongst a sam ple of top XX customers

bull Develop standard trading terms (GG)

I2 Deliver custom er service standards Deliver timely f irst class service to the trade an d retailers

bull Cases delivered in full against order quantity

bull Orders delivered on time

bull Logistics Project (RS)bull SAP Project (PH)

I3 Im plem ent m ajor account m anagem ent programm e W e will continue to treat our custom ers as business partners W e will establish an account developm ent model to ensure high quality relationships exist w ith key account customers

bull of major accounts with a business plan bull Define ldquomajorrdquo accounts (AC)

I4 Deliver exce llent consum er propositions W e must meet consum er needs through the development and communication of an integrated brand proposition In the NPD sector we will launch new products only after they h ave m et pre-agreed qu ality image need and volume criteria

bull Brand Systems signed off by OE bull Develop core brand propositions (AC)bull NPD Process Improvement (ACAD)bull Cream ing project (AD)

I5 Deliver exce llent internal custom er service W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull SLA Qualitative Evaluations by SLA ow ners bull Logistics Project (RS)bull Factory Cost Reduction (DL)

I6 Effective m anagem ent of com pany assets W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull Total working capitalbull Fixed Asset Utilisationbull Outstanding Debtor Da ys

bull Plant ration alisation (AD)bull L4 L2 (DL)bull SAP (RS)

I7 Effective control of the business (No Surprises) W e will heighten our efforts to streamline the organisation to h elpdrive sound asset managem ent and cost reduction W e will invoke a cost conscious culture to complem ent our stream lining efforts

bull ldquoNo surprisesrdquo evaluation of actual performance against budget or forecast for- stock cover per city- sales per city- national costs

bull Analyse Risk project (PS)

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 6

2GCActive

M anagementcopy 2GC Lim ited 1999

Balanced Scorecard DocumentationObjective M easure Supporting Initiatives

I1 Drive trade term s by channel W e will develop clear trading terms for different custom er groups W e will achieve our targetlevels of availability visibility and trade su pport via these trading terms

bull Trade customers adhering to trade standard terms amongst a sam ple of top XX customers

bull Develop standard trading terms (GG)

I2 Deliver custom er service standards Deliver timely f irst class service to the trade an d retailers

bull Cases delivered in full against order quantity

bull Orders delivered on time

bull Logistics Project (RS)bull SAP Project (PH)

I3 Im plem ent m ajor account m anagem ent programm e W e will continue to treat our custom ers as business partners W e will establish an account developm ent model to ensure high quality relationships exist w ith key account customers

bull of major accounts with a business plan bull Define ldquomajorrdquo accounts (AC)

I4 Deliver exce llent consum er propositions W e must meet consum er needs through the development and communication of an integrated brand proposition In the NPD sector we will launch new products only after they h ave m et pre-agreed qu ality image need and volume criteria

bull Brand Systems signed off by OE bull Develop core brand propositions (AC)bull NPD Process Improvement (ACAD)bull Cream ing project (AD)

I5 Deliver exce llent internal custom er service W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull SLA Qualitative Evaluations by SLA ow ners bull Logistics Project (RS)bull Factory Cost Reduction (DL)

I6 Effective m anagem ent of com pany assets W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull Total working capitalbull Fixed Asset Utilisationbull Outstanding Debtor Da ys

bull Plant ration alisation (AD)bull L4 L2 (DL)bull SAP (RS)

I7 Effective control of the business (No Surprises) W e will heighten our efforts to streamline the organisation to h elpdrive sound asset managem ent and cost reduction W e will invoke a cost conscious culture to complem ent our stream lining efforts

bull ldquoNo surprisesrdquo evaluation of actual performance against budget or forecast for- stock cover per city- sales per city- national costs

bull Analyse Risk project (PS)

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 5

2GCActive

M anagementcopy 2GC Limited 1999

Strategic Linkage M odel

Fina

ncia

l Pe

rspe

ctiv

eC

usto

mer

Per

spec

tive

Lear

ning

amp G

row

th

Pe

rspe

ctiv

eIn

tern

al

Per

spec

tive

DBX Understands and Responds to m y Needs

DBX Products are m y First Choice Products

DBX Products are Good Value for Money

DBX Products are V isible and Availab le

DBX has an Excellent Consumer Franchise

Drive Trade Term s by Channel

Im plem ent Major Account Managem ent

Program m e

Effective Control of Business (No Surprises)

Sales Growth (by City by P roduct)

Gross Contribution (After City Sales and

Marketing)Asset Turn Overheads as a of

NSV

Improved Shareh older Value (ROCE)

I Have a Good Relationship with DBX

Develop Better W ork P ractices and IS

Develop and Retain P rofessional M anagers

Develop Service Agreem ents

Effective M anagem ent o f Com pany Assets

Deliver Excellent In ternal Custom er

ServiceDeliver Custom er

Service Standards

Develop Professional Custom er Oriented Skilled

Sales Force

Deliver Excellent Consum er

Propositions

Understand Im pact O f Various M arketing Levers

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 5

2GCActive

M anagementcopy 2GC Limited 1999

Strategic Linkage M odel

Fina

ncia

l Pe

rspe

ctiv

eC

usto

mer

Per

spec

tive

Lear

ning

amp G

row

th

Pe

rspe

ctiv

eIn

tern

al

Per

spec

tive

DBX Understands and Responds to m y Needs

DBX Products are m y First Choice Products

DBX Products are Good Value for Money

DBX Products are V isible and Availab le

DBX has an Excellent Consumer Franchise

Drive Trade Term s by Channel

Im plem ent Major Account Managem ent

Program m e

Effective Control of Business (No Surprises)

Sales Growth (by City by P roduct)

Gross Contribution (After City Sales and

Marketing)Asset Turn Overheads as a of

NSV

Improved Shareh older Value (ROCE)

I Have a Good Relationship with DBX

Develop Better W ork P ractices and IS

Develop and Retain P rofessional M anagers

Develop Service Agreem ents

Effective M anagem ent o f Com pany Assets

Deliver Excellent In ternal Custom er

ServiceDeliver Custom er

Service Standards

Develop Professional Custom er Oriented Skilled

Sales Force

Deliver Excellent Consum er

Propositions

Understand Im pact O f Various M arketing Levers

21 November 2001 2GC Limited Introduction to 2GC Active ManagementPage 4

2GCActive

M anagem entcopy 2GC Limited 1999

Destination Statem entSales Volume50000 MT

Distribution50 Cities

Sales Revenue pound 50 M illion

One M anufacturing Site

ROCE 7Capital Em ployed No m ore th an pound45 million

Product Manager

Marketing Director

Factory Director

Manufacturing Director

Regional Sales Manager

Sales Director

Managing Director

No m ore than 6 Core Brand ProductsMinimum sales volum esndash 5000 MT for each core brandndash 2000M T for each m ajor product

Employer of Choice ( 1 in industry and ranked in FM CG top 10)

Marketing SalesBranding Clear brand propositions systems

established for the six core brandsbull DBX has two of th e top five category product brandsbull Producthouse brand awaren ess targets in DBX city

strategies achievedM edia and promotional strategy City market share

targets achieved within agreed budgetbull M odels and measures of th e relative impact of all

m arketing levers available to assist in th e evaluation targeting of m arketing activity

Im proved Skills and Processes Standardised and transparent m arketing processes developed and agreed within DBX and with Group

bull M arketing team skills targets (b ased on extern al benchmark com parisons) achieved through training and recruitment (where applicable)

Overall DBX seen as one of top 10 FMCG Corsquos servicing key accounts in th e country (and 1 in category)

Customer M arket Focus Sales s taff achieving set targ ets in line with city s trategies for focus on custom er and market issues

bull Assess using distribution by chann el visib ility and trade prom otions

Im proved Skills and Processes Standardised and transp arent sales processes develop ed and agreed within DBX and with Group

bull Sales team skills targets (based on extern al b enchm ark comparisons) achieved through training and recruitment (where applicable)

Organisational Structurebull Clear scope and role statements exis t for all functions (including Sales

amp Marketing)bull Supporting functions (includ ing supply chain) will be achieving all

agreed service level targets with sales amp marketing

Supply ChainCost efficient supp ly chain based on flexib le p roduction lines will deliverbull Increased responsiveness to market dem ands bull Lower cycle timesbull Product channel freshness targe ts

Inform ation System sAppropriate in form ation systems that w ill meet DB Xrsquos needsbull All necessary m anagement inform ation p roduced within p re-agreed tim elines and scales

M anagementbull Senior m anagement w ill be com mitted to working on stra teg y and evalua ted on their

ab ility to coach advise guide and ensure tha t tasks are delega ted effectivelybull Professional m iddle management will exist that w ill be able to ac t m ore independently

within de fined guidelines and have the skills required for their job rolendash Succession plans for key positions wi ll existndash Recruiting and training policies will aim to raise middle manage ment competence to

meet internationa l standards

21 November 2001 2GC Limited Introduction to 2GC Active ManagementPage 4

2GCActive

M anagem entcopy 2GC Limited 1999

Destination Statem entSales Volume50000 MT

Distribution50 Cities

Sales Revenue pound 50 M illion

One M anufacturing Site

ROCE 7Capital Em ployed No m ore th an pound45 million

Product Manager

Marketing Director

Factory Director

Manufacturing Director

Regional Sales Manager

Sales Director

Managing Director

No m ore than 6 Core Brand ProductsMinimum sales volum esndash 5000 MT for each core brandndash 2000M T for each m ajor product

Employer of Choice ( 1 in industry and ranked in FM CG top 10)

Marketing SalesBranding Clear brand propositions systems

established for the six core brandsbull DBX has two of th e top five category product brandsbull Producthouse brand awaren ess targets in DBX city

strategies achievedM edia and promotional strategy City market share

targets achieved within agreed budgetbull M odels and measures of th e relative impact of all

m arketing levers available to assist in th e evaluation targeting of m arketing activity

Im proved Skills and Processes Standardised and transparent m arketing processes developed and agreed within DBX and with Group

bull M arketing team skills targets (b ased on extern al benchmark com parisons) achieved through training and recruitment (where applicable)

Overall DBX seen as one of top 10 FMCG Corsquos servicing key accounts in th e country (and 1 in category)

Customer M arket Focus Sales s taff achieving set targ ets in line with city s trategies for focus on custom er and market issues

bull Assess using distribution by chann el visib ility and trade prom otions

Im proved Skills and Processes Standardised and transp arent sales processes develop ed and agreed within DBX and with Group

bull Sales team skills targets (based on extern al b enchm ark comparisons) achieved through training and recruitment (where applicable)

Organisational Structurebull Clear scope and role statements exis t for all functions (including Sales

amp Marketing)bull Supporting functions (includ ing supply chain) will be achieving all

agreed service level targets with sales amp marketing

Supply ChainCost efficient supp ly chain based on flexib le p roduction lines will deliverbull Increased responsiveness to market dem ands bull Lower cycle timesbull Product channel freshness targe ts

Inform ation System sAppropriate in form ation systems that w ill meet DB Xrsquos needsbull All necessary m anagement inform ation p roduced within p re-agreed tim elines and scales

M anagementbull Senior m anagement w ill be com mitted to working on stra teg y and evalua ted on their

ab ility to coach advise guide and ensure tha t tasks are delega ted effectivelybull Professional m iddle management will exist that w ill be able to ac t m ore independently

within de fined guidelines and have the skills required for their job rolendash Succession plans for key positions wi ll existndash Recruiting and training policies will aim to raise middle manage ment competence to

meet internationa l standards

bullThe ldquoobjective drivenrdquoBalanced Scorecard has emerged as best practice

(V11) November 2001 Introducing the Balanced ScorecardPage 14

2GCActive

Managementcopy 2GC Limited 2001

What is Balanced ScorecardMore than just a set of goals amp measures

Balanced Scorecard design

Balanced Scorecard development

Balanced Scorecard deployment

bull Value from first application

bull Business model reflected in relationship between strategic goals

bull Corporate strategic measurement amp management tool

ndash divisionsndash business unitsndash functions

bull All management Systems aligned with strategy

bull Drive strategic behaviour into everyday decisions and operations

(V11) November 2001 Introducing the Balanced ScorecardPage 15

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard design

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 16

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designWhere to go an how to get there

bullBest practice is to use a development group that comprises the the likely users of the Balanced Scorecard

bullDesign choices should be based on jointly held perception of a strategic ldquoDestinationrdquo

bullThe design should measure progress against the organisationrsquos key strategic objectives (activities and outcomes)

bullLinks between strategic objectives should be articulated ndash these express the management teamrsquos beliefs about which activities drive which outcomes

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development Ac

tiviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

VisionVision

StrategyStrategy

Out

com

esAc

tiviti

es

(V11) November 2001 Introducing the Balanced ScorecardPage 17

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designMonitor progress in achieving goals

bullDevelopment of measures follow clarification and agreement of strategic objectives becausehellip

bullMeasures track progress in achieving those objectives against agreed targets

bullIdentify and monitor extraordinary activities and projects furthering achievement of objectives

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Out

com

es

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development A

ctiv

ities

Act

iviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

Financial Perspective

Objectives Measures Targets Initiatives

Financial Perspective

Objectives Measures Targets

Financial Perspective

Objectives Measures Targets

Financial Perspective

Objectives Measures Targets Initiatives

(V11) November 2001 Introducing the Balanced ScorecardPage 18

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designThe components of a Strategic Balanced Scorecard

bull Financial Marketndash Total NSV pound120m (nominal) ndashndash Has achieved 10 CAGR on NSndash Operating Margin gt10ndash Controllable overheads less thndash Operating Profit pound12m (nomin

Destination StatementDescription of how the organisation will be at some specific future date if the management teamrsquos strategies are successful

Fin

anci

alCu

stom

er

Best value for money

The leading and most innovative

brand

Drive Increased Demand

Profitable Sales Growth

Strategic Linkage Model (SLM)Graphic illustration of ldquocause and effectrdquo relationships between the strategic goals that must be achieved if the organisation is to reach its destination state

ObjectiveObjective DescriptionDescription

Total Shareholder Return is above Groups cost of equity over the medium to long term

Total Shareholder Return is above Groups cost of equity over the medium to long term

Minimise net tax paid and WACC in the light of operational and commercial decisions concerning the nature and sphere of Groups activities and legal constraints Optimum means

Minimise net tax paid and WACC in the light of operational and commercial decisions concerning the nature and sphere of Groups activities and legal constraints Optimum means better than equivalent payments by known Group

Measures (Freq)Measures (Freq)

bull CAGR of Total ShareholdeReturn

bull ROIC (Target gt WACC)

bull CAGR of Total ShareholderReturn

bull ROIC (Target gt WACC)

bull PampL account net tax chargea of profit for financial ye

bull WACC

bull PampL account net tax chargeda of profit for financial yea

bull WACC

Group Strategy Delivers Value

Achieve Optimum Tax Rate amp WACC

F1

F2

Objective and Measure Documentation

ndashClear and concise description of strategic objectives and the measures chosen to track their achievement

F11

F12

-30p

8

150p

18Dividend expected kept a1000 pence leading to loprevious years

Measure Value Target PerfObjective Status

Outperform capital markets

F21 200 185Increasing cash inflow froCash amp a sset

F21 200 185Increasing cash inflow froCash amp a sset

t

Progress Reporting FormatsIllustration of how (and by whom) Scorecard information will be communicated

o Initiative overviewOverview of which initiatives support which Scorecard objectives incl owners and deadlines for finalisation

(V11) November 2001 Introducing the Balanced ScorecardPage 19

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard roll-out

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 20

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard Development Development within the organisation

Country 1 Country 2

Regional Cluster(Line Management)

Country 3

Dept 1

Team

Dept 2

Country 4

Regional ClusterLine Management

Shared Service(eg Supply Chain)

Group SupportLegal Finance HR IS

Main Board

The optimal role-out

sequence is ldquoTop Downrdquo

(V11) November 2001 Introducing the Balanced ScorecardPage 21

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard DevelopmentDevelopment within the organisation

Country 1 Country 2

Regional Cluster(Line Management)

Country 3

Dept 1

Team

Dept 2

Country 4

Regional ClusterLine Management

Shared Service(eg Supply Chain)

Group SupportLegal Finance HR IS

Main Board

Corporate Balanced Scorecard

Co-ordinatingBalanced Scorecard

Support Function Balanced Scorecard

Operating Unit Balanced Scorecard

Departmental Balanced ScorecardTeam Level

Balanced Scorecard

(V11) November 2001 Introducing the Balanced ScorecardPage 22

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard DevelopmentldquoContractualrdquo agreement between management teams

What

How

What

Board level ScorecardBoard level Scorecard

Objectives

Measures amp Targets

Initiatives

Objectives

Measures amp Targets

Initiatives

Overall VisionOverall Vision

Subordinate ScorecardSubordinate Scorecard

Objectives

Measures amp Targets

Initiatives

Objectives

Measures amp Targets

Initiatives

Local VisionLocal Vision

How

TeamIndividual ScorecardTeamIndividual Scorecard

Objectives

Measures amp Targets

Initiatives

TeamIndividual Vision

TeamIndividual Vision

Strategic direction

Strategic direction

Strategy implementation

Strategy implementation

(V11) November 2001 Introducing the Balanced ScorecardPage 23

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 24

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deploymentldquoAchieving strategic goals requires activityrdquo

(V11) November 2001 Introducing the Balanced ScorecardPage 25

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Strategic alignment amp goal setting

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development Ac

tiviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

VisionVision

StrategyStrategy

Out

com

esAc

tiviti

es

(V11) November 2001 Introducing the Balanced ScorecardPage 26

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Align existing management control tools with strategy

SVA amp EVASVA amp EVAB

udge

tsB

udge

ts

BEMBEMBalanced Scorecard

ABCABC HR ToolsHR Tools

(V11) November 2001 Introducing the Balanced ScorecardPage 27

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Support two-way communication of strategyhellip

Fuzzy objectivesFuzzy objectives

Unjustified trust in informal

Unjustified trust in informal

feedback systems

feedback systemsEntren

ched m

easure

ment

Entren

ched m

easure

ment

system

s

system

s

BSC

(V11) November 2001 Introducing the Balanced ScorecardPage 28

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Everybody crafts amp monitors strategy all the timehellip

Comm

unica

tion Com

munication

Board levelScorecard

process

OperationalScorecard

process

Support function Scorecard

process

Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets

Take action

Create amend

strategic vision

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Balanced Scorecard

Developrevise measures amp

targets

Communication

(V11) November 2001 Introducing the Balanced ScorecardPage 29

2GCActive

Managementcopy 2GC Limited 2001

Success criteria

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 30

2GCActive

Managementcopy 2GC Limited 2001

Key success factorsCultural building blocks of Scorecard success

bullInclusive design process building on consensus seeking amp involvement

bullParticipative management style focused on learning open discussion and creative thinking

bullSponsorship and commitment from entire management team -top management in particular

bullldquoEmbeddingrdquo of management processes to use refresh and renew the Balanced Scorecard over time

(V11) November 2001 Introducing the Balanced ScorecardPage 31

2GCActive

Managementcopy 2GC Limited 2001

Introducing the Balanced ScorecardTo find out morehellip

bullVisit 2GCrsquos Web Sitendash We focus specifically on strategic

control and performance measurement issues and have a wide range of working papers FAQs and presentations to download on these topics

ndash The site also has a recommended reading list that covers relevant topics and the ldquoWeblinksrdquo database of relevant Internet sites

bullContact 2GCndash Let us know if you have a question

you canrsquot answer wersquoll do what we can to helphellip

bull info2gccouk

(V11) November 2001 Introducing the Balanced ScorecardPage 11

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced ScorecardDifferent applications for Balanced Scorecard

bullldquoManagement Controlrdquo

ndash Maintain the temperature

bullldquoStrategic Controlrdquondash What temperature

7060 80

D A Y amp N I G H T

HOT OFF COOL

Assess Outcome

Set TargetHeater Run if room is below target temp

Thermostat Compare with

Target

MeasureRoom Temp

(V11) November 2001 Introducing the Balanced ScorecardPage 12

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced ScorecardStrategic control vs Management control

Organisational hierarchy

Strat

egic

emph

asis

Operational emphasis

(V11) November 2001 Introducing the Balanced ScorecardPage 13

2GCActive

Managementcopy 2GC Limited 2001

What is the Balanced Scorecard The latest Balanced Scorecard thinking

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 6

2GCActive

M anagementcopy 2GC Lim ited 1999

Balanced Scorecard DocumentationObjective M easure Supporting Initiatives

I1 Drive trade term s by channel W e will develop clear trading terms for different custom er groups W e will achieve our targetlevels of availability visibility and trade su pport via these trading terms

bull Trade customers adhering to trade standard terms amongst a sam ple of top XX customers

bull Develop standard trading terms (GG)

I2 Deliver custom er service standards Deliver timely f irst class service to the trade an d retailers

bull Cases delivered in full against order quantity

bull Orders delivered on time

bull Logistics Project (RS)bull SAP Project (PH)

I3 Im plem ent m ajor account m anagem ent programm e W e will continue to treat our custom ers as business partners W e will establish an account developm ent model to ensure high quality relationships exist w ith key account customers

bull of major accounts with a business plan bull Define ldquomajorrdquo accounts (AC)

I4 Deliver exce llent consum er propositions W e must meet consum er needs through the development and communication of an integrated brand proposition In the NPD sector we will launch new products only after they h ave m et pre-agreed qu ality image need and volume criteria

bull Brand Systems signed off by OE bull Develop core brand propositions (AC)bull NPD Process Improvement (ACAD)bull Cream ing project (AD)

I5 Deliver exce llent internal custom er service W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull SLA Qualitative Evaluations by SLA ow ners bull Logistics Project (RS)bull Factory Cost Reduction (DL)

I6 Effective m anagem ent of com pany assets W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull Total working capitalbull Fixed Asset Utilisationbull Outstanding Debtor Da ys

bull Plant ration alisation (AD)bull L4 L2 (DL)bull SAP (RS)

I7 Effective control of the business (No Surprises) W e will heighten our efforts to streamline the organisation to h elpdrive sound asset managem ent and cost reduction W e will invoke a cost conscious culture to complem ent our stream lining efforts

bull ldquoNo surprisesrdquo evaluation of actual performance against budget or forecast for- stock cover per city- sales per city- national costs

bull Analyse Risk project (PS)

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 6

2GCActive

M anagementcopy 2GC Lim ited 1999

Balanced Scorecard DocumentationObjective M easure Supporting Initiatives

I1 Drive trade term s by channel W e will develop clear trading terms for different custom er groups W e will achieve our targetlevels of availability visibility and trade su pport via these trading terms

bull Trade customers adhering to trade standard terms amongst a sam ple of top XX customers

bull Develop standard trading terms (GG)

I2 Deliver custom er service standards Deliver timely f irst class service to the trade an d retailers

bull Cases delivered in full against order quantity

bull Orders delivered on time

bull Logistics Project (RS)bull SAP Project (PH)

I3 Im plem ent m ajor account m anagem ent programm e W e will continue to treat our custom ers as business partners W e will establish an account developm ent model to ensure high quality relationships exist w ith key account customers

bull of major accounts with a business plan bull Define ldquomajorrdquo accounts (AC)

I4 Deliver exce llent consum er propositions W e must meet consum er needs through the development and communication of an integrated brand proposition In the NPD sector we will launch new products only after they h ave m et pre-agreed qu ality image need and volume criteria

bull Brand Systems signed off by OE bull Develop core brand propositions (AC)bull NPD Process Improvement (ACAD)bull Cream ing project (AD)

I5 Deliver exce llent internal custom er service W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull SLA Qualitative Evaluations by SLA ow ners bull Logistics Project (RS)bull Factory Cost Reduction (DL)

I6 Effective m anagem ent of com pany assets W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull Total working capitalbull Fixed Asset Utilisationbull Outstanding Debtor Da ys

bull Plant ration alisation (AD)bull L4 L2 (DL)bull SAP (RS)

I7 Effective control of the business (No Surprises) W e will heighten our efforts to streamline the organisation to h elpdrive sound asset managem ent and cost reduction W e will invoke a cost conscious culture to complem ent our stream lining efforts

bull ldquoNo surprisesrdquo evaluation of actual performance against budget or forecast for- stock cover per city- sales per city- national costs

bull Analyse Risk project (PS)

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 5

2GCActive

M anagementcopy 2GC Limited 1999

Strategic Linkage M odel

Fina

ncia

l Pe

rspe

ctiv

eC

usto

mer

Per

spec

tive

Lear

ning

amp G

row

th

Pe

rspe

ctiv

eIn

tern

al

Per

spec

tive

DBX Understands and Responds to m y Needs

DBX Products are m y First Choice Products

DBX Products are Good Value for Money

DBX Products are V isible and Availab le

DBX has an Excellent Consumer Franchise

Drive Trade Term s by Channel

Im plem ent Major Account Managem ent

Program m e

Effective Control of Business (No Surprises)

Sales Growth (by City by P roduct)

Gross Contribution (After City Sales and

Marketing)Asset Turn Overheads as a of

NSV

Improved Shareh older Value (ROCE)

I Have a Good Relationship with DBX

Develop Better W ork P ractices and IS

Develop and Retain P rofessional M anagers

Develop Service Agreem ents

Effective M anagem ent o f Com pany Assets

Deliver Excellent In ternal Custom er

ServiceDeliver Custom er

Service Standards

Develop Professional Custom er Oriented Skilled

Sales Force

Deliver Excellent Consum er

Propositions

Understand Im pact O f Various M arketing Levers

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 5

2GCActive

M anagementcopy 2GC Limited 1999

Strategic Linkage M odel

Fina

ncia

l Pe

rspe

ctiv

eC

usto

mer

Per

spec

tive

Lear

ning

amp G

row

th

Pe

rspe

ctiv

eIn

tern

al

Per

spec

tive

DBX Understands and Responds to m y Needs

DBX Products are m y First Choice Products

DBX Products are Good Value for Money

DBX Products are V isible and Availab le

DBX has an Excellent Consumer Franchise

Drive Trade Term s by Channel

Im plem ent Major Account Managem ent

Program m e

Effective Control of Business (No Surprises)

Sales Growth (by City by P roduct)

Gross Contribution (After City Sales and

Marketing)Asset Turn Overheads as a of

NSV

Improved Shareh older Value (ROCE)

I Have a Good Relationship with DBX

Develop Better W ork P ractices and IS

Develop and Retain P rofessional M anagers

Develop Service Agreem ents

Effective M anagem ent o f Com pany Assets

Deliver Excellent In ternal Custom er

ServiceDeliver Custom er

Service Standards

Develop Professional Custom er Oriented Skilled

Sales Force

Deliver Excellent Consum er

Propositions

Understand Im pact O f Various M arketing Levers

21 November 2001 2GC Limited Introduction to 2GC Active ManagementPage 4

2GCActive

M anagem entcopy 2GC Limited 1999

Destination Statem entSales Volume50000 MT

Distribution50 Cities

Sales Revenue pound 50 M illion

One M anufacturing Site

ROCE 7Capital Em ployed No m ore th an pound45 million

Product Manager

Marketing Director

Factory Director

Manufacturing Director

Regional Sales Manager

Sales Director

Managing Director

No m ore than 6 Core Brand ProductsMinimum sales volum esndash 5000 MT for each core brandndash 2000M T for each m ajor product

Employer of Choice ( 1 in industry and ranked in FM CG top 10)

Marketing SalesBranding Clear brand propositions systems

established for the six core brandsbull DBX has two of th e top five category product brandsbull Producthouse brand awaren ess targets in DBX city

strategies achievedM edia and promotional strategy City market share

targets achieved within agreed budgetbull M odels and measures of th e relative impact of all

m arketing levers available to assist in th e evaluation targeting of m arketing activity

Im proved Skills and Processes Standardised and transparent m arketing processes developed and agreed within DBX and with Group

bull M arketing team skills targets (b ased on extern al benchmark com parisons) achieved through training and recruitment (where applicable)

Overall DBX seen as one of top 10 FMCG Corsquos servicing key accounts in th e country (and 1 in category)

Customer M arket Focus Sales s taff achieving set targ ets in line with city s trategies for focus on custom er and market issues

bull Assess using distribution by chann el visib ility and trade prom otions

Im proved Skills and Processes Standardised and transp arent sales processes develop ed and agreed within DBX and with Group

bull Sales team skills targets (based on extern al b enchm ark comparisons) achieved through training and recruitment (where applicable)

Organisational Structurebull Clear scope and role statements exis t for all functions (including Sales

amp Marketing)bull Supporting functions (includ ing supply chain) will be achieving all

agreed service level targets with sales amp marketing

Supply ChainCost efficient supp ly chain based on flexib le p roduction lines will deliverbull Increased responsiveness to market dem ands bull Lower cycle timesbull Product channel freshness targe ts

Inform ation System sAppropriate in form ation systems that w ill meet DB Xrsquos needsbull All necessary m anagement inform ation p roduced within p re-agreed tim elines and scales

M anagementbull Senior m anagement w ill be com mitted to working on stra teg y and evalua ted on their

ab ility to coach advise guide and ensure tha t tasks are delega ted effectivelybull Professional m iddle management will exist that w ill be able to ac t m ore independently

within de fined guidelines and have the skills required for their job rolendash Succession plans for key positions wi ll existndash Recruiting and training policies will aim to raise middle manage ment competence to

meet internationa l standards

21 November 2001 2GC Limited Introduction to 2GC Active ManagementPage 4

2GCActive

M anagem entcopy 2GC Limited 1999

Destination Statem entSales Volume50000 MT

Distribution50 Cities

Sales Revenue pound 50 M illion

One M anufacturing Site

ROCE 7Capital Em ployed No m ore th an pound45 million

Product Manager

Marketing Director

Factory Director

Manufacturing Director

Regional Sales Manager

Sales Director

Managing Director

No m ore than 6 Core Brand ProductsMinimum sales volum esndash 5000 MT for each core brandndash 2000M T for each m ajor product

Employer of Choice ( 1 in industry and ranked in FM CG top 10)

Marketing SalesBranding Clear brand propositions systems

established for the six core brandsbull DBX has two of th e top five category product brandsbull Producthouse brand awaren ess targets in DBX city

strategies achievedM edia and promotional strategy City market share

targets achieved within agreed budgetbull M odels and measures of th e relative impact of all

m arketing levers available to assist in th e evaluation targeting of m arketing activity

Im proved Skills and Processes Standardised and transparent m arketing processes developed and agreed within DBX and with Group

bull M arketing team skills targets (b ased on extern al benchmark com parisons) achieved through training and recruitment (where applicable)

Overall DBX seen as one of top 10 FMCG Corsquos servicing key accounts in th e country (and 1 in category)

Customer M arket Focus Sales s taff achieving set targ ets in line with city s trategies for focus on custom er and market issues

bull Assess using distribution by chann el visib ility and trade prom otions

Im proved Skills and Processes Standardised and transp arent sales processes develop ed and agreed within DBX and with Group

bull Sales team skills targets (based on extern al b enchm ark comparisons) achieved through training and recruitment (where applicable)

Organisational Structurebull Clear scope and role statements exis t for all functions (including Sales

amp Marketing)bull Supporting functions (includ ing supply chain) will be achieving all

agreed service level targets with sales amp marketing

Supply ChainCost efficient supp ly chain based on flexib le p roduction lines will deliverbull Increased responsiveness to market dem ands bull Lower cycle timesbull Product channel freshness targe ts

Inform ation System sAppropriate in form ation systems that w ill meet DB Xrsquos needsbull All necessary m anagement inform ation p roduced within p re-agreed tim elines and scales

M anagementbull Senior m anagement w ill be com mitted to working on stra teg y and evalua ted on their

ab ility to coach advise guide and ensure tha t tasks are delega ted effectivelybull Professional m iddle management will exist that w ill be able to ac t m ore independently

within de fined guidelines and have the skills required for their job rolendash Succession plans for key positions wi ll existndash Recruiting and training policies will aim to raise middle manage ment competence to

meet internationa l standards

bullThe ldquoobjective drivenrdquoBalanced Scorecard has emerged as best practice

(V11) November 2001 Introducing the Balanced ScorecardPage 14

2GCActive

Managementcopy 2GC Limited 2001

What is Balanced ScorecardMore than just a set of goals amp measures

Balanced Scorecard design

Balanced Scorecard development

Balanced Scorecard deployment

bull Value from first application

bull Business model reflected in relationship between strategic goals

bull Corporate strategic measurement amp management tool

ndash divisionsndash business unitsndash functions

bull All management Systems aligned with strategy

bull Drive strategic behaviour into everyday decisions and operations

(V11) November 2001 Introducing the Balanced ScorecardPage 15

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard design

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 16

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designWhere to go an how to get there

bullBest practice is to use a development group that comprises the the likely users of the Balanced Scorecard

bullDesign choices should be based on jointly held perception of a strategic ldquoDestinationrdquo

bullThe design should measure progress against the organisationrsquos key strategic objectives (activities and outcomes)

bullLinks between strategic objectives should be articulated ndash these express the management teamrsquos beliefs about which activities drive which outcomes

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development Ac

tiviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

VisionVision

StrategyStrategy

Out

com

esAc

tiviti

es

(V11) November 2001 Introducing the Balanced ScorecardPage 17

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designMonitor progress in achieving goals

bullDevelopment of measures follow clarification and agreement of strategic objectives becausehellip

bullMeasures track progress in achieving those objectives against agreed targets

bullIdentify and monitor extraordinary activities and projects furthering achievement of objectives

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Out

com

es

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development A

ctiv

ities

Act

iviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

Financial Perspective

Objectives Measures Targets Initiatives

Financial Perspective

Objectives Measures Targets

Financial Perspective

Objectives Measures Targets

Financial Perspective

Objectives Measures Targets Initiatives

(V11) November 2001 Introducing the Balanced ScorecardPage 18

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designThe components of a Strategic Balanced Scorecard

bull Financial Marketndash Total NSV pound120m (nominal) ndashndash Has achieved 10 CAGR on NSndash Operating Margin gt10ndash Controllable overheads less thndash Operating Profit pound12m (nomin

Destination StatementDescription of how the organisation will be at some specific future date if the management teamrsquos strategies are successful

Fin

anci

alCu

stom

er

Best value for money

The leading and most innovative

brand

Drive Increased Demand

Profitable Sales Growth

Strategic Linkage Model (SLM)Graphic illustration of ldquocause and effectrdquo relationships between the strategic goals that must be achieved if the organisation is to reach its destination state

ObjectiveObjective DescriptionDescription

Total Shareholder Return is above Groups cost of equity over the medium to long term

Total Shareholder Return is above Groups cost of equity over the medium to long term

Minimise net tax paid and WACC in the light of operational and commercial decisions concerning the nature and sphere of Groups activities and legal constraints Optimum means

Minimise net tax paid and WACC in the light of operational and commercial decisions concerning the nature and sphere of Groups activities and legal constraints Optimum means better than equivalent payments by known Group

Measures (Freq)Measures (Freq)

bull CAGR of Total ShareholdeReturn

bull ROIC (Target gt WACC)

bull CAGR of Total ShareholderReturn

bull ROIC (Target gt WACC)

bull PampL account net tax chargea of profit for financial ye

bull WACC

bull PampL account net tax chargeda of profit for financial yea

bull WACC

Group Strategy Delivers Value

Achieve Optimum Tax Rate amp WACC

F1

F2

Objective and Measure Documentation

ndashClear and concise description of strategic objectives and the measures chosen to track their achievement

F11

F12

-30p

8

150p

18Dividend expected kept a1000 pence leading to loprevious years

Measure Value Target PerfObjective Status

Outperform capital markets

F21 200 185Increasing cash inflow froCash amp a sset

F21 200 185Increasing cash inflow froCash amp a sset

t

Progress Reporting FormatsIllustration of how (and by whom) Scorecard information will be communicated

o Initiative overviewOverview of which initiatives support which Scorecard objectives incl owners and deadlines for finalisation

(V11) November 2001 Introducing the Balanced ScorecardPage 19

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard roll-out

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 20

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard Development Development within the organisation

Country 1 Country 2

Regional Cluster(Line Management)

Country 3

Dept 1

Team

Dept 2

Country 4

Regional ClusterLine Management

Shared Service(eg Supply Chain)

Group SupportLegal Finance HR IS

Main Board

The optimal role-out

sequence is ldquoTop Downrdquo

(V11) November 2001 Introducing the Balanced ScorecardPage 21

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard DevelopmentDevelopment within the organisation

Country 1 Country 2

Regional Cluster(Line Management)

Country 3

Dept 1

Team

Dept 2

Country 4

Regional ClusterLine Management

Shared Service(eg Supply Chain)

Group SupportLegal Finance HR IS

Main Board

Corporate Balanced Scorecard

Co-ordinatingBalanced Scorecard

Support Function Balanced Scorecard

Operating Unit Balanced Scorecard

Departmental Balanced ScorecardTeam Level

Balanced Scorecard

(V11) November 2001 Introducing the Balanced ScorecardPage 22

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard DevelopmentldquoContractualrdquo agreement between management teams

What

How

What

Board level ScorecardBoard level Scorecard

Objectives

Measures amp Targets

Initiatives

Objectives

Measures amp Targets

Initiatives

Overall VisionOverall Vision

Subordinate ScorecardSubordinate Scorecard

Objectives

Measures amp Targets

Initiatives

Objectives

Measures amp Targets

Initiatives

Local VisionLocal Vision

How

TeamIndividual ScorecardTeamIndividual Scorecard

Objectives

Measures amp Targets

Initiatives

TeamIndividual Vision

TeamIndividual Vision

Strategic direction

Strategic direction

Strategy implementation

Strategy implementation

(V11) November 2001 Introducing the Balanced ScorecardPage 23

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 24

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deploymentldquoAchieving strategic goals requires activityrdquo

(V11) November 2001 Introducing the Balanced ScorecardPage 25

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Strategic alignment amp goal setting

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development Ac

tiviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

VisionVision

StrategyStrategy

Out

com

esAc

tiviti

es

(V11) November 2001 Introducing the Balanced ScorecardPage 26

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Align existing management control tools with strategy

SVA amp EVASVA amp EVAB

udge

tsB

udge

ts

BEMBEMBalanced Scorecard

ABCABC HR ToolsHR Tools

(V11) November 2001 Introducing the Balanced ScorecardPage 27

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Support two-way communication of strategyhellip

Fuzzy objectivesFuzzy objectives

Unjustified trust in informal

Unjustified trust in informal

feedback systems

feedback systemsEntren

ched m

easure

ment

Entren

ched m

easure

ment

system

s

system

s

BSC

(V11) November 2001 Introducing the Balanced ScorecardPage 28

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Everybody crafts amp monitors strategy all the timehellip

Comm

unica

tion Com

munication

Board levelScorecard

process

OperationalScorecard

process

Support function Scorecard

process

Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets

Take action

Create amend

strategic vision

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Balanced Scorecard

Developrevise measures amp

targets

Communication

(V11) November 2001 Introducing the Balanced ScorecardPage 29

2GCActive

Managementcopy 2GC Limited 2001

Success criteria

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 30

2GCActive

Managementcopy 2GC Limited 2001

Key success factorsCultural building blocks of Scorecard success

bullInclusive design process building on consensus seeking amp involvement

bullParticipative management style focused on learning open discussion and creative thinking

bullSponsorship and commitment from entire management team -top management in particular

bullldquoEmbeddingrdquo of management processes to use refresh and renew the Balanced Scorecard over time

(V11) November 2001 Introducing the Balanced ScorecardPage 31

2GCActive

Managementcopy 2GC Limited 2001

Introducing the Balanced ScorecardTo find out morehellip

bullVisit 2GCrsquos Web Sitendash We focus specifically on strategic

control and performance measurement issues and have a wide range of working papers FAQs and presentations to download on these topics

ndash The site also has a recommended reading list that covers relevant topics and the ldquoWeblinksrdquo database of relevant Internet sites

bullContact 2GCndash Let us know if you have a question

you canrsquot answer wersquoll do what we can to helphellip

bull info2gccouk

(V11) November 2001 Introducing the Balanced ScorecardPage 12

2GCActive

Managementcopy 2GC Limited 2001

What is a Balanced ScorecardStrategic control vs Management control

Organisational hierarchy

Strat

egic

emph

asis

Operational emphasis

(V11) November 2001 Introducing the Balanced ScorecardPage 13

2GCActive

Managementcopy 2GC Limited 2001

What is the Balanced Scorecard The latest Balanced Scorecard thinking

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 6

2GCActive

M anagementcopy 2GC Lim ited 1999

Balanced Scorecard DocumentationObjective M easure Supporting Initiatives

I1 Drive trade term s by channel W e will develop clear trading terms for different custom er groups W e will achieve our targetlevels of availability visibility and trade su pport via these trading terms

bull Trade customers adhering to trade standard terms amongst a sam ple of top XX customers

bull Develop standard trading terms (GG)

I2 Deliver custom er service standards Deliver timely f irst class service to the trade an d retailers

bull Cases delivered in full against order quantity

bull Orders delivered on time

bull Logistics Project (RS)bull SAP Project (PH)

I3 Im plem ent m ajor account m anagem ent programm e W e will continue to treat our custom ers as business partners W e will establish an account developm ent model to ensure high quality relationships exist w ith key account customers

bull of major accounts with a business plan bull Define ldquomajorrdquo accounts (AC)

I4 Deliver exce llent consum er propositions W e must meet consum er needs through the development and communication of an integrated brand proposition In the NPD sector we will launch new products only after they h ave m et pre-agreed qu ality image need and volume criteria

bull Brand Systems signed off by OE bull Develop core brand propositions (AC)bull NPD Process Improvement (ACAD)bull Cream ing project (AD)

I5 Deliver exce llent internal custom er service W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull SLA Qualitative Evaluations by SLA ow ners bull Logistics Project (RS)bull Factory Cost Reduction (DL)

I6 Effective m anagem ent of com pany assets W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull Total working capitalbull Fixed Asset Utilisationbull Outstanding Debtor Da ys

bull Plant ration alisation (AD)bull L4 L2 (DL)bull SAP (RS)

I7 Effective control of the business (No Surprises) W e will heighten our efforts to streamline the organisation to h elpdrive sound asset managem ent and cost reduction W e will invoke a cost conscious culture to complem ent our stream lining efforts

bull ldquoNo surprisesrdquo evaluation of actual performance against budget or forecast for- stock cover per city- sales per city- national costs

bull Analyse Risk project (PS)

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 6

2GCActive

M anagementcopy 2GC Lim ited 1999

Balanced Scorecard DocumentationObjective M easure Supporting Initiatives

I1 Drive trade term s by channel W e will develop clear trading terms for different custom er groups W e will achieve our targetlevels of availability visibility and trade su pport via these trading terms

bull Trade customers adhering to trade standard terms amongst a sam ple of top XX customers

bull Develop standard trading terms (GG)

I2 Deliver custom er service standards Deliver timely f irst class service to the trade an d retailers

bull Cases delivered in full against order quantity

bull Orders delivered on time

bull Logistics Project (RS)bull SAP Project (PH)

I3 Im plem ent m ajor account m anagem ent programm e W e will continue to treat our custom ers as business partners W e will establish an account developm ent model to ensure high quality relationships exist w ith key account customers

bull of major accounts with a business plan bull Define ldquomajorrdquo accounts (AC)

I4 Deliver exce llent consum er propositions W e must meet consum er needs through the development and communication of an integrated brand proposition In the NPD sector we will launch new products only after they h ave m et pre-agreed qu ality image need and volume criteria

bull Brand Systems signed off by OE bull Develop core brand propositions (AC)bull NPD Process Improvement (ACAD)bull Cream ing project (AD)

I5 Deliver exce llent internal custom er service W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull SLA Qualitative Evaluations by SLA ow ners bull Logistics Project (RS)bull Factory Cost Reduction (DL)

I6 Effective m anagem ent of com pany assets W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull Total working capitalbull Fixed Asset Utilisationbull Outstanding Debtor Da ys

bull Plant ration alisation (AD)bull L4 L2 (DL)bull SAP (RS)

I7 Effective control of the business (No Surprises) W e will heighten our efforts to streamline the organisation to h elpdrive sound asset managem ent and cost reduction W e will invoke a cost conscious culture to complem ent our stream lining efforts

bull ldquoNo surprisesrdquo evaluation of actual performance against budget or forecast for- stock cover per city- sales per city- national costs

bull Analyse Risk project (PS)

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 5

2GCActive

M anagementcopy 2GC Limited 1999

Strategic Linkage M odel

Fina

ncia

l Pe

rspe

ctiv

eC

usto

mer

Per

spec

tive

Lear

ning

amp G

row

th

Pe

rspe

ctiv

eIn

tern

al

Per

spec

tive

DBX Understands and Responds to m y Needs

DBX Products are m y First Choice Products

DBX Products are Good Value for Money

DBX Products are V isible and Availab le

DBX has an Excellent Consumer Franchise

Drive Trade Term s by Channel

Im plem ent Major Account Managem ent

Program m e

Effective Control of Business (No Surprises)

Sales Growth (by City by P roduct)

Gross Contribution (After City Sales and

Marketing)Asset Turn Overheads as a of

NSV

Improved Shareh older Value (ROCE)

I Have a Good Relationship with DBX

Develop Better W ork P ractices and IS

Develop and Retain P rofessional M anagers

Develop Service Agreem ents

Effective M anagem ent o f Com pany Assets

Deliver Excellent In ternal Custom er

ServiceDeliver Custom er

Service Standards

Develop Professional Custom er Oriented Skilled

Sales Force

Deliver Excellent Consum er

Propositions

Understand Im pact O f Various M arketing Levers

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 5

2GCActive

M anagementcopy 2GC Limited 1999

Strategic Linkage M odel

Fina

ncia

l Pe

rspe

ctiv

eC

usto

mer

Per

spec

tive

Lear

ning

amp G

row

th

Pe

rspe

ctiv

eIn

tern

al

Per

spec

tive

DBX Understands and Responds to m y Needs

DBX Products are m y First Choice Products

DBX Products are Good Value for Money

DBX Products are V isible and Availab le

DBX has an Excellent Consumer Franchise

Drive Trade Term s by Channel

Im plem ent Major Account Managem ent

Program m e

Effective Control of Business (No Surprises)

Sales Growth (by City by P roduct)

Gross Contribution (After City Sales and

Marketing)Asset Turn Overheads as a of

NSV

Improved Shareh older Value (ROCE)

I Have a Good Relationship with DBX

Develop Better W ork P ractices and IS

Develop and Retain P rofessional M anagers

Develop Service Agreem ents

Effective M anagem ent o f Com pany Assets

Deliver Excellent In ternal Custom er

ServiceDeliver Custom er

Service Standards

Develop Professional Custom er Oriented Skilled

Sales Force

Deliver Excellent Consum er

Propositions

Understand Im pact O f Various M arketing Levers

21 November 2001 2GC Limited Introduction to 2GC Active ManagementPage 4

2GCActive

M anagem entcopy 2GC Limited 1999

Destination Statem entSales Volume50000 MT

Distribution50 Cities

Sales Revenue pound 50 M illion

One M anufacturing Site

ROCE 7Capital Em ployed No m ore th an pound45 million

Product Manager

Marketing Director

Factory Director

Manufacturing Director

Regional Sales Manager

Sales Director

Managing Director

No m ore than 6 Core Brand ProductsMinimum sales volum esndash 5000 MT for each core brandndash 2000M T for each m ajor product

Employer of Choice ( 1 in industry and ranked in FM CG top 10)

Marketing SalesBranding Clear brand propositions systems

established for the six core brandsbull DBX has two of th e top five category product brandsbull Producthouse brand awaren ess targets in DBX city

strategies achievedM edia and promotional strategy City market share

targets achieved within agreed budgetbull M odels and measures of th e relative impact of all

m arketing levers available to assist in th e evaluation targeting of m arketing activity

Im proved Skills and Processes Standardised and transparent m arketing processes developed and agreed within DBX and with Group

bull M arketing team skills targets (b ased on extern al benchmark com parisons) achieved through training and recruitment (where applicable)

Overall DBX seen as one of top 10 FMCG Corsquos servicing key accounts in th e country (and 1 in category)

Customer M arket Focus Sales s taff achieving set targ ets in line with city s trategies for focus on custom er and market issues

bull Assess using distribution by chann el visib ility and trade prom otions

Im proved Skills and Processes Standardised and transp arent sales processes develop ed and agreed within DBX and with Group

bull Sales team skills targets (based on extern al b enchm ark comparisons) achieved through training and recruitment (where applicable)

Organisational Structurebull Clear scope and role statements exis t for all functions (including Sales

amp Marketing)bull Supporting functions (includ ing supply chain) will be achieving all

agreed service level targets with sales amp marketing

Supply ChainCost efficient supp ly chain based on flexib le p roduction lines will deliverbull Increased responsiveness to market dem ands bull Lower cycle timesbull Product channel freshness targe ts

Inform ation System sAppropriate in form ation systems that w ill meet DB Xrsquos needsbull All necessary m anagement inform ation p roduced within p re-agreed tim elines and scales

M anagementbull Senior m anagement w ill be com mitted to working on stra teg y and evalua ted on their

ab ility to coach advise guide and ensure tha t tasks are delega ted effectivelybull Professional m iddle management will exist that w ill be able to ac t m ore independently

within de fined guidelines and have the skills required for their job rolendash Succession plans for key positions wi ll existndash Recruiting and training policies will aim to raise middle manage ment competence to

meet internationa l standards

21 November 2001 2GC Limited Introduction to 2GC Active ManagementPage 4

2GCActive

M anagem entcopy 2GC Limited 1999

Destination Statem entSales Volume50000 MT

Distribution50 Cities

Sales Revenue pound 50 M illion

One M anufacturing Site

ROCE 7Capital Em ployed No m ore th an pound45 million

Product Manager

Marketing Director

Factory Director

Manufacturing Director

Regional Sales Manager

Sales Director

Managing Director

No m ore than 6 Core Brand ProductsMinimum sales volum esndash 5000 MT for each core brandndash 2000M T for each m ajor product

Employer of Choice ( 1 in industry and ranked in FM CG top 10)

Marketing SalesBranding Clear brand propositions systems

established for the six core brandsbull DBX has two of th e top five category product brandsbull Producthouse brand awaren ess targets in DBX city

strategies achievedM edia and promotional strategy City market share

targets achieved within agreed budgetbull M odels and measures of th e relative impact of all

m arketing levers available to assist in th e evaluation targeting of m arketing activity

Im proved Skills and Processes Standardised and transparent m arketing processes developed and agreed within DBX and with Group

bull M arketing team skills targets (b ased on extern al benchmark com parisons) achieved through training and recruitment (where applicable)

Overall DBX seen as one of top 10 FMCG Corsquos servicing key accounts in th e country (and 1 in category)

Customer M arket Focus Sales s taff achieving set targ ets in line with city s trategies for focus on custom er and market issues

bull Assess using distribution by chann el visib ility and trade prom otions

Im proved Skills and Processes Standardised and transp arent sales processes develop ed and agreed within DBX and with Group

bull Sales team skills targets (based on extern al b enchm ark comparisons) achieved through training and recruitment (where applicable)

Organisational Structurebull Clear scope and role statements exis t for all functions (including Sales

amp Marketing)bull Supporting functions (includ ing supply chain) will be achieving all

agreed service level targets with sales amp marketing

Supply ChainCost efficient supp ly chain based on flexib le p roduction lines will deliverbull Increased responsiveness to market dem ands bull Lower cycle timesbull Product channel freshness targe ts

Inform ation System sAppropriate in form ation systems that w ill meet DB Xrsquos needsbull All necessary m anagement inform ation p roduced within p re-agreed tim elines and scales

M anagementbull Senior m anagement w ill be com mitted to working on stra teg y and evalua ted on their

ab ility to coach advise guide and ensure tha t tasks are delega ted effectivelybull Professional m iddle management will exist that w ill be able to ac t m ore independently

within de fined guidelines and have the skills required for their job rolendash Succession plans for key positions wi ll existndash Recruiting and training policies will aim to raise middle manage ment competence to

meet internationa l standards

bullThe ldquoobjective drivenrdquoBalanced Scorecard has emerged as best practice

(V11) November 2001 Introducing the Balanced ScorecardPage 14

2GCActive

Managementcopy 2GC Limited 2001

What is Balanced ScorecardMore than just a set of goals amp measures

Balanced Scorecard design

Balanced Scorecard development

Balanced Scorecard deployment

bull Value from first application

bull Business model reflected in relationship between strategic goals

bull Corporate strategic measurement amp management tool

ndash divisionsndash business unitsndash functions

bull All management Systems aligned with strategy

bull Drive strategic behaviour into everyday decisions and operations

(V11) November 2001 Introducing the Balanced ScorecardPage 15

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard design

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 16

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designWhere to go an how to get there

bullBest practice is to use a development group that comprises the the likely users of the Balanced Scorecard

bullDesign choices should be based on jointly held perception of a strategic ldquoDestinationrdquo

bullThe design should measure progress against the organisationrsquos key strategic objectives (activities and outcomes)

bullLinks between strategic objectives should be articulated ndash these express the management teamrsquos beliefs about which activities drive which outcomes

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development Ac

tiviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

VisionVision

StrategyStrategy

Out

com

esAc

tiviti

es

(V11) November 2001 Introducing the Balanced ScorecardPage 17

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designMonitor progress in achieving goals

bullDevelopment of measures follow clarification and agreement of strategic objectives becausehellip

bullMeasures track progress in achieving those objectives against agreed targets

bullIdentify and monitor extraordinary activities and projects furthering achievement of objectives

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Out

com

es

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development A

ctiv

ities

Act

iviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

Financial Perspective

Objectives Measures Targets Initiatives

Financial Perspective

Objectives Measures Targets

Financial Perspective

Objectives Measures Targets

Financial Perspective

Objectives Measures Targets Initiatives

(V11) November 2001 Introducing the Balanced ScorecardPage 18

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designThe components of a Strategic Balanced Scorecard

bull Financial Marketndash Total NSV pound120m (nominal) ndashndash Has achieved 10 CAGR on NSndash Operating Margin gt10ndash Controllable overheads less thndash Operating Profit pound12m (nomin

Destination StatementDescription of how the organisation will be at some specific future date if the management teamrsquos strategies are successful

Fin

anci

alCu

stom

er

Best value for money

The leading and most innovative

brand

Drive Increased Demand

Profitable Sales Growth

Strategic Linkage Model (SLM)Graphic illustration of ldquocause and effectrdquo relationships between the strategic goals that must be achieved if the organisation is to reach its destination state

ObjectiveObjective DescriptionDescription

Total Shareholder Return is above Groups cost of equity over the medium to long term

Total Shareholder Return is above Groups cost of equity over the medium to long term

Minimise net tax paid and WACC in the light of operational and commercial decisions concerning the nature and sphere of Groups activities and legal constraints Optimum means

Minimise net tax paid and WACC in the light of operational and commercial decisions concerning the nature and sphere of Groups activities and legal constraints Optimum means better than equivalent payments by known Group

Measures (Freq)Measures (Freq)

bull CAGR of Total ShareholdeReturn

bull ROIC (Target gt WACC)

bull CAGR of Total ShareholderReturn

bull ROIC (Target gt WACC)

bull PampL account net tax chargea of profit for financial ye

bull WACC

bull PampL account net tax chargeda of profit for financial yea

bull WACC

Group Strategy Delivers Value

Achieve Optimum Tax Rate amp WACC

F1

F2

Objective and Measure Documentation

ndashClear and concise description of strategic objectives and the measures chosen to track their achievement

F11

F12

-30p

8

150p

18Dividend expected kept a1000 pence leading to loprevious years

Measure Value Target PerfObjective Status

Outperform capital markets

F21 200 185Increasing cash inflow froCash amp a sset

F21 200 185Increasing cash inflow froCash amp a sset

t

Progress Reporting FormatsIllustration of how (and by whom) Scorecard information will be communicated

o Initiative overviewOverview of which initiatives support which Scorecard objectives incl owners and deadlines for finalisation

(V11) November 2001 Introducing the Balanced ScorecardPage 19

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard roll-out

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 20

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard Development Development within the organisation

Country 1 Country 2

Regional Cluster(Line Management)

Country 3

Dept 1

Team

Dept 2

Country 4

Regional ClusterLine Management

Shared Service(eg Supply Chain)

Group SupportLegal Finance HR IS

Main Board

The optimal role-out

sequence is ldquoTop Downrdquo

(V11) November 2001 Introducing the Balanced ScorecardPage 21

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard DevelopmentDevelopment within the organisation

Country 1 Country 2

Regional Cluster(Line Management)

Country 3

Dept 1

Team

Dept 2

Country 4

Regional ClusterLine Management

Shared Service(eg Supply Chain)

Group SupportLegal Finance HR IS

Main Board

Corporate Balanced Scorecard

Co-ordinatingBalanced Scorecard

Support Function Balanced Scorecard

Operating Unit Balanced Scorecard

Departmental Balanced ScorecardTeam Level

Balanced Scorecard

(V11) November 2001 Introducing the Balanced ScorecardPage 22

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard DevelopmentldquoContractualrdquo agreement between management teams

What

How

What

Board level ScorecardBoard level Scorecard

Objectives

Measures amp Targets

Initiatives

Objectives

Measures amp Targets

Initiatives

Overall VisionOverall Vision

Subordinate ScorecardSubordinate Scorecard

Objectives

Measures amp Targets

Initiatives

Objectives

Measures amp Targets

Initiatives

Local VisionLocal Vision

How

TeamIndividual ScorecardTeamIndividual Scorecard

Objectives

Measures amp Targets

Initiatives

TeamIndividual Vision

TeamIndividual Vision

Strategic direction

Strategic direction

Strategy implementation

Strategy implementation

(V11) November 2001 Introducing the Balanced ScorecardPage 23

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 24

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deploymentldquoAchieving strategic goals requires activityrdquo

(V11) November 2001 Introducing the Balanced ScorecardPage 25

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Strategic alignment amp goal setting

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development Ac

tiviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

VisionVision

StrategyStrategy

Out

com

esAc

tiviti

es

(V11) November 2001 Introducing the Balanced ScorecardPage 26

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Align existing management control tools with strategy

SVA amp EVASVA amp EVAB

udge

tsB

udge

ts

BEMBEMBalanced Scorecard

ABCABC HR ToolsHR Tools

(V11) November 2001 Introducing the Balanced ScorecardPage 27

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Support two-way communication of strategyhellip

Fuzzy objectivesFuzzy objectives

Unjustified trust in informal

Unjustified trust in informal

feedback systems

feedback systemsEntren

ched m

easure

ment

Entren

ched m

easure

ment

system

s

system

s

BSC

(V11) November 2001 Introducing the Balanced ScorecardPage 28

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Everybody crafts amp monitors strategy all the timehellip

Comm

unica

tion Com

munication

Board levelScorecard

process

OperationalScorecard

process

Support function Scorecard

process

Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets

Take action

Create amend

strategic vision

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Balanced Scorecard

Developrevise measures amp

targets

Communication

(V11) November 2001 Introducing the Balanced ScorecardPage 29

2GCActive

Managementcopy 2GC Limited 2001

Success criteria

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 30

2GCActive

Managementcopy 2GC Limited 2001

Key success factorsCultural building blocks of Scorecard success

bullInclusive design process building on consensus seeking amp involvement

bullParticipative management style focused on learning open discussion and creative thinking

bullSponsorship and commitment from entire management team -top management in particular

bullldquoEmbeddingrdquo of management processes to use refresh and renew the Balanced Scorecard over time

(V11) November 2001 Introducing the Balanced ScorecardPage 31

2GCActive

Managementcopy 2GC Limited 2001

Introducing the Balanced ScorecardTo find out morehellip

bullVisit 2GCrsquos Web Sitendash We focus specifically on strategic

control and performance measurement issues and have a wide range of working papers FAQs and presentations to download on these topics

ndash The site also has a recommended reading list that covers relevant topics and the ldquoWeblinksrdquo database of relevant Internet sites

bullContact 2GCndash Let us know if you have a question

you canrsquot answer wersquoll do what we can to helphellip

bull info2gccouk

(V11) November 2001 Introducing the Balanced ScorecardPage 13

2GCActive

Managementcopy 2GC Limited 2001

What is the Balanced Scorecard The latest Balanced Scorecard thinking

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 6

2GCActive

M anagementcopy 2GC Lim ited 1999

Balanced Scorecard DocumentationObjective M easure Supporting Initiatives

I1 Drive trade term s by channel W e will develop clear trading terms for different custom er groups W e will achieve our targetlevels of availability visibility and trade su pport via these trading terms

bull Trade customers adhering to trade standard terms amongst a sam ple of top XX customers

bull Develop standard trading terms (GG)

I2 Deliver custom er service standards Deliver timely f irst class service to the trade an d retailers

bull Cases delivered in full against order quantity

bull Orders delivered on time

bull Logistics Project (RS)bull SAP Project (PH)

I3 Im plem ent m ajor account m anagem ent programm e W e will continue to treat our custom ers as business partners W e will establish an account developm ent model to ensure high quality relationships exist w ith key account customers

bull of major accounts with a business plan bull Define ldquomajorrdquo accounts (AC)

I4 Deliver exce llent consum er propositions W e must meet consum er needs through the development and communication of an integrated brand proposition In the NPD sector we will launch new products only after they h ave m et pre-agreed qu ality image need and volume criteria

bull Brand Systems signed off by OE bull Develop core brand propositions (AC)bull NPD Process Improvement (ACAD)bull Cream ing project (AD)

I5 Deliver exce llent internal custom er service W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull SLA Qualitative Evaluations by SLA ow ners bull Logistics Project (RS)bull Factory Cost Reduction (DL)

I6 Effective m anagem ent of com pany assets W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull Total working capitalbull Fixed Asset Utilisationbull Outstanding Debtor Da ys

bull Plant ration alisation (AD)bull L4 L2 (DL)bull SAP (RS)

I7 Effective control of the business (No Surprises) W e will heighten our efforts to streamline the organisation to h elpdrive sound asset managem ent and cost reduction W e will invoke a cost conscious culture to complem ent our stream lining efforts

bull ldquoNo surprisesrdquo evaluation of actual performance against budget or forecast for- stock cover per city- sales per city- national costs

bull Analyse Risk project (PS)

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 6

2GCActive

M anagementcopy 2GC Lim ited 1999

Balanced Scorecard DocumentationObjective M easure Supporting Initiatives

I1 Drive trade term s by channel W e will develop clear trading terms for different custom er groups W e will achieve our targetlevels of availability visibility and trade su pport via these trading terms

bull Trade customers adhering to trade standard terms amongst a sam ple of top XX customers

bull Develop standard trading terms (GG)

I2 Deliver custom er service standards Deliver timely f irst class service to the trade an d retailers

bull Cases delivered in full against order quantity

bull Orders delivered on time

bull Logistics Project (RS)bull SAP Project (PH)

I3 Im plem ent m ajor account m anagem ent programm e W e will continue to treat our custom ers as business partners W e will establish an account developm ent model to ensure high quality relationships exist w ith key account customers

bull of major accounts with a business plan bull Define ldquomajorrdquo accounts (AC)

I4 Deliver exce llent consum er propositions W e must meet consum er needs through the development and communication of an integrated brand proposition In the NPD sector we will launch new products only after they h ave m et pre-agreed qu ality image need and volume criteria

bull Brand Systems signed off by OE bull Develop core brand propositions (AC)bull NPD Process Improvement (ACAD)bull Cream ing project (AD)

I5 Deliver exce llent internal custom er service W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull SLA Qualitative Evaluations by SLA ow ners bull Logistics Project (RS)bull Factory Cost Reduction (DL)

I6 Effective m anagem ent of com pany assets W e will monitor service level agreem ents between the support functions and sales and m arketing W e will develop a su pport organisation that will drive the achievement of marketin g an d sales objectives

bull Total working capitalbull Fixed Asset Utilisationbull Outstanding Debtor Da ys

bull Plant ration alisation (AD)bull L4 L2 (DL)bull SAP (RS)

I7 Effective control of the business (No Surprises) W e will heighten our efforts to streamline the organisation to h elpdrive sound asset managem ent and cost reduction W e will invoke a cost conscious culture to complem ent our stream lining efforts

bull ldquoNo surprisesrdquo evaluation of actual performance against budget or forecast for- stock cover per city- sales per city- national costs

bull Analyse Risk project (PS)

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 5

2GCActive

M anagementcopy 2GC Limited 1999

Strategic Linkage M odel

Fina

ncia

l Pe

rspe

ctiv

eC

usto

mer

Per

spec

tive

Lear

ning

amp G

row

th

Pe

rspe

ctiv

eIn

tern

al

Per

spec

tive

DBX Understands and Responds to m y Needs

DBX Products are m y First Choice Products

DBX Products are Good Value for Money

DBX Products are V isible and Availab le

DBX has an Excellent Consumer Franchise

Drive Trade Term s by Channel

Im plem ent Major Account Managem ent

Program m e

Effective Control of Business (No Surprises)

Sales Growth (by City by P roduct)

Gross Contribution (After City Sales and

Marketing)Asset Turn Overheads as a of

NSV

Improved Shareh older Value (ROCE)

I Have a Good Relationship with DBX

Develop Better W ork P ractices and IS

Develop and Retain P rofessional M anagers

Develop Service Agreem ents

Effective M anagem ent o f Com pany Assets

Deliver Excellent In ternal Custom er

ServiceDeliver Custom er

Service Standards

Develop Professional Custom er Oriented Skilled

Sales Force

Deliver Excellent Consum er

Propositions

Understand Im pact O f Various M arketing Levers

29 February 2000 2GC Limited Introduction to 2GC Active ManagementPage 5

2GCActive

M anagementcopy 2GC Limited 1999

Strategic Linkage M odel

Fina

ncia

l Pe

rspe

ctiv

eC

usto

mer

Per

spec

tive

Lear

ning

amp G

row

th

Pe

rspe

ctiv

eIn

tern

al

Per

spec

tive

DBX Understands and Responds to m y Needs

DBX Products are m y First Choice Products

DBX Products are Good Value for Money

DBX Products are V isible and Availab le

DBX has an Excellent Consumer Franchise

Drive Trade Term s by Channel

Im plem ent Major Account Managem ent

Program m e

Effective Control of Business (No Surprises)

Sales Growth (by City by P roduct)

Gross Contribution (After City Sales and

Marketing)Asset Turn Overheads as a of

NSV

Improved Shareh older Value (ROCE)

I Have a Good Relationship with DBX

Develop Better W ork P ractices and IS

Develop and Retain P rofessional M anagers

Develop Service Agreem ents

Effective M anagem ent o f Com pany Assets

Deliver Excellent In ternal Custom er

ServiceDeliver Custom er

Service Standards

Develop Professional Custom er Oriented Skilled

Sales Force

Deliver Excellent Consum er

Propositions

Understand Im pact O f Various M arketing Levers

21 November 2001 2GC Limited Introduction to 2GC Active ManagementPage 4

2GCActive

M anagem entcopy 2GC Limited 1999

Destination Statem entSales Volume50000 MT

Distribution50 Cities

Sales Revenue pound 50 M illion

One M anufacturing Site

ROCE 7Capital Em ployed No m ore th an pound45 million

Product Manager

Marketing Director

Factory Director

Manufacturing Director

Regional Sales Manager

Sales Director

Managing Director

No m ore than 6 Core Brand ProductsMinimum sales volum esndash 5000 MT for each core brandndash 2000M T for each m ajor product

Employer of Choice ( 1 in industry and ranked in FM CG top 10)

Marketing SalesBranding Clear brand propositions systems

established for the six core brandsbull DBX has two of th e top five category product brandsbull Producthouse brand awaren ess targets in DBX city

strategies achievedM edia and promotional strategy City market share

targets achieved within agreed budgetbull M odels and measures of th e relative impact of all

m arketing levers available to assist in th e evaluation targeting of m arketing activity

Im proved Skills and Processes Standardised and transparent m arketing processes developed and agreed within DBX and with Group

bull M arketing team skills targets (b ased on extern al benchmark com parisons) achieved through training and recruitment (where applicable)

Overall DBX seen as one of top 10 FMCG Corsquos servicing key accounts in th e country (and 1 in category)

Customer M arket Focus Sales s taff achieving set targ ets in line with city s trategies for focus on custom er and market issues

bull Assess using distribution by chann el visib ility and trade prom otions

Im proved Skills and Processes Standardised and transp arent sales processes develop ed and agreed within DBX and with Group

bull Sales team skills targets (based on extern al b enchm ark comparisons) achieved through training and recruitment (where applicable)

Organisational Structurebull Clear scope and role statements exis t for all functions (including Sales

amp Marketing)bull Supporting functions (includ ing supply chain) will be achieving all

agreed service level targets with sales amp marketing

Supply ChainCost efficient supp ly chain based on flexib le p roduction lines will deliverbull Increased responsiveness to market dem ands bull Lower cycle timesbull Product channel freshness targe ts

Inform ation System sAppropriate in form ation systems that w ill meet DB Xrsquos needsbull All necessary m anagement inform ation p roduced within p re-agreed tim elines and scales

M anagementbull Senior m anagement w ill be com mitted to working on stra teg y and evalua ted on their

ab ility to coach advise guide and ensure tha t tasks are delega ted effectivelybull Professional m iddle management will exist that w ill be able to ac t m ore independently

within de fined guidelines and have the skills required for their job rolendash Succession plans for key positions wi ll existndash Recruiting and training policies will aim to raise middle manage ment competence to

meet internationa l standards

21 November 2001 2GC Limited Introduction to 2GC Active ManagementPage 4

2GCActive

M anagem entcopy 2GC Limited 1999

Destination Statem entSales Volume50000 MT

Distribution50 Cities

Sales Revenue pound 50 M illion

One M anufacturing Site

ROCE 7Capital Em ployed No m ore th an pound45 million

Product Manager

Marketing Director

Factory Director

Manufacturing Director

Regional Sales Manager

Sales Director

Managing Director

No m ore than 6 Core Brand ProductsMinimum sales volum esndash 5000 MT for each core brandndash 2000M T for each m ajor product

Employer of Choice ( 1 in industry and ranked in FM CG top 10)

Marketing SalesBranding Clear brand propositions systems

established for the six core brandsbull DBX has two of th e top five category product brandsbull Producthouse brand awaren ess targets in DBX city

strategies achievedM edia and promotional strategy City market share

targets achieved within agreed budgetbull M odels and measures of th e relative impact of all

m arketing levers available to assist in th e evaluation targeting of m arketing activity

Im proved Skills and Processes Standardised and transparent m arketing processes developed and agreed within DBX and with Group

bull M arketing team skills targets (b ased on extern al benchmark com parisons) achieved through training and recruitment (where applicable)

Overall DBX seen as one of top 10 FMCG Corsquos servicing key accounts in th e country (and 1 in category)

Customer M arket Focus Sales s taff achieving set targ ets in line with city s trategies for focus on custom er and market issues

bull Assess using distribution by chann el visib ility and trade prom otions

Im proved Skills and Processes Standardised and transp arent sales processes develop ed and agreed within DBX and with Group

bull Sales team skills targets (based on extern al b enchm ark comparisons) achieved through training and recruitment (where applicable)

Organisational Structurebull Clear scope and role statements exis t for all functions (including Sales

amp Marketing)bull Supporting functions (includ ing supply chain) will be achieving all

agreed service level targets with sales amp marketing

Supply ChainCost efficient supp ly chain based on flexib le p roduction lines will deliverbull Increased responsiveness to market dem ands bull Lower cycle timesbull Product channel freshness targe ts

Inform ation System sAppropriate in form ation systems that w ill meet DB Xrsquos needsbull All necessary m anagement inform ation p roduced within p re-agreed tim elines and scales

M anagementbull Senior m anagement w ill be com mitted to working on stra teg y and evalua ted on their

ab ility to coach advise guide and ensure tha t tasks are delega ted effectivelybull Professional m iddle management will exist that w ill be able to ac t m ore independently

within de fined guidelines and have the skills required for their job rolendash Succession plans for key positions wi ll existndash Recruiting and training policies will aim to raise middle manage ment competence to

meet internationa l standards

bullThe ldquoobjective drivenrdquoBalanced Scorecard has emerged as best practice

(V11) November 2001 Introducing the Balanced ScorecardPage 14

2GCActive

Managementcopy 2GC Limited 2001

What is Balanced ScorecardMore than just a set of goals amp measures

Balanced Scorecard design

Balanced Scorecard development

Balanced Scorecard deployment

bull Value from first application

bull Business model reflected in relationship between strategic goals

bull Corporate strategic measurement amp management tool

ndash divisionsndash business unitsndash functions

bull All management Systems aligned with strategy

bull Drive strategic behaviour into everyday decisions and operations

(V11) November 2001 Introducing the Balanced ScorecardPage 15

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard design

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 16

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designWhere to go an how to get there

bullBest practice is to use a development group that comprises the the likely users of the Balanced Scorecard

bullDesign choices should be based on jointly held perception of a strategic ldquoDestinationrdquo

bullThe design should measure progress against the organisationrsquos key strategic objectives (activities and outcomes)

bullLinks between strategic objectives should be articulated ndash these express the management teamrsquos beliefs about which activities drive which outcomes

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development Ac

tiviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

VisionVision

StrategyStrategy

Out

com

esAc

tiviti

es

(V11) November 2001 Introducing the Balanced ScorecardPage 17

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designMonitor progress in achieving goals

bullDevelopment of measures follow clarification and agreement of strategic objectives becausehellip

bullMeasures track progress in achieving those objectives against agreed targets

bullIdentify and monitor extraordinary activities and projects furthering achievement of objectives

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Out

com

es

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development A

ctiv

ities

Act

iviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

Financial Perspective

Objectives Measures Targets Initiatives

Financial Perspective

Objectives Measures Targets

Financial Perspective

Objectives Measures Targets

Financial Perspective

Objectives Measures Targets Initiatives

(V11) November 2001 Introducing the Balanced ScorecardPage 18

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designThe components of a Strategic Balanced Scorecard

bull Financial Marketndash Total NSV pound120m (nominal) ndashndash Has achieved 10 CAGR on NSndash Operating Margin gt10ndash Controllable overheads less thndash Operating Profit pound12m (nomin

Destination StatementDescription of how the organisation will be at some specific future date if the management teamrsquos strategies are successful

Fin

anci

alCu

stom

er

Best value for money

The leading and most innovative

brand

Drive Increased Demand

Profitable Sales Growth

Strategic Linkage Model (SLM)Graphic illustration of ldquocause and effectrdquo relationships between the strategic goals that must be achieved if the organisation is to reach its destination state

ObjectiveObjective DescriptionDescription

Total Shareholder Return is above Groups cost of equity over the medium to long term

Total Shareholder Return is above Groups cost of equity over the medium to long term

Minimise net tax paid and WACC in the light of operational and commercial decisions concerning the nature and sphere of Groups activities and legal constraints Optimum means

Minimise net tax paid and WACC in the light of operational and commercial decisions concerning the nature and sphere of Groups activities and legal constraints Optimum means better than equivalent payments by known Group

Measures (Freq)Measures (Freq)

bull CAGR of Total ShareholdeReturn

bull ROIC (Target gt WACC)

bull CAGR of Total ShareholderReturn

bull ROIC (Target gt WACC)

bull PampL account net tax chargea of profit for financial ye

bull WACC

bull PampL account net tax chargeda of profit for financial yea

bull WACC

Group Strategy Delivers Value

Achieve Optimum Tax Rate amp WACC

F1

F2

Objective and Measure Documentation

ndashClear and concise description of strategic objectives and the measures chosen to track their achievement

F11

F12

-30p

8

150p

18Dividend expected kept a1000 pence leading to loprevious years

Measure Value Target PerfObjective Status

Outperform capital markets

F21 200 185Increasing cash inflow froCash amp a sset

F21 200 185Increasing cash inflow froCash amp a sset

t

Progress Reporting FormatsIllustration of how (and by whom) Scorecard information will be communicated

o Initiative overviewOverview of which initiatives support which Scorecard objectives incl owners and deadlines for finalisation

(V11) November 2001 Introducing the Balanced ScorecardPage 19

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard roll-out

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 20

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard Development Development within the organisation

Country 1 Country 2

Regional Cluster(Line Management)

Country 3

Dept 1

Team

Dept 2

Country 4

Regional ClusterLine Management

Shared Service(eg Supply Chain)

Group SupportLegal Finance HR IS

Main Board

The optimal role-out

sequence is ldquoTop Downrdquo

(V11) November 2001 Introducing the Balanced ScorecardPage 21

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard DevelopmentDevelopment within the organisation

Country 1 Country 2

Regional Cluster(Line Management)

Country 3

Dept 1

Team

Dept 2

Country 4

Regional ClusterLine Management

Shared Service(eg Supply Chain)

Group SupportLegal Finance HR IS

Main Board

Corporate Balanced Scorecard

Co-ordinatingBalanced Scorecard

Support Function Balanced Scorecard

Operating Unit Balanced Scorecard

Departmental Balanced ScorecardTeam Level

Balanced Scorecard

(V11) November 2001 Introducing the Balanced ScorecardPage 22

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard DevelopmentldquoContractualrdquo agreement between management teams

What

How

What

Board level ScorecardBoard level Scorecard

Objectives

Measures amp Targets

Initiatives

Objectives

Measures amp Targets

Initiatives

Overall VisionOverall Vision

Subordinate ScorecardSubordinate Scorecard

Objectives

Measures amp Targets

Initiatives

Objectives

Measures amp Targets

Initiatives

Local VisionLocal Vision

How

TeamIndividual ScorecardTeamIndividual Scorecard

Objectives

Measures amp Targets

Initiatives

TeamIndividual Vision

TeamIndividual Vision

Strategic direction

Strategic direction

Strategy implementation

Strategy implementation

(V11) November 2001 Introducing the Balanced ScorecardPage 23

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 24

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deploymentldquoAchieving strategic goals requires activityrdquo

(V11) November 2001 Introducing the Balanced ScorecardPage 25

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Strategic alignment amp goal setting

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development Ac

tiviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

VisionVision

StrategyStrategy

Out

com

esAc

tiviti

es

(V11) November 2001 Introducing the Balanced ScorecardPage 26

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Align existing management control tools with strategy

SVA amp EVASVA amp EVAB

udge

tsB

udge

ts

BEMBEMBalanced Scorecard

ABCABC HR ToolsHR Tools

(V11) November 2001 Introducing the Balanced ScorecardPage 27

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Support two-way communication of strategyhellip

Fuzzy objectivesFuzzy objectives

Unjustified trust in informal

Unjustified trust in informal

feedback systems

feedback systemsEntren

ched m

easure

ment

Entren

ched m

easure

ment

system

s

system

s

BSC

(V11) November 2001 Introducing the Balanced ScorecardPage 28

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Everybody crafts amp monitors strategy all the timehellip

Comm

unica

tion Com

munication

Board levelScorecard

process

OperationalScorecard

process

Support function Scorecard

process

Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets

Take action

Create amend

strategic vision

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Balanced Scorecard

Developrevise measures amp

targets

Communication

(V11) November 2001 Introducing the Balanced ScorecardPage 29

2GCActive

Managementcopy 2GC Limited 2001

Success criteria

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 30

2GCActive

Managementcopy 2GC Limited 2001

Key success factorsCultural building blocks of Scorecard success

bullInclusive design process building on consensus seeking amp involvement

bullParticipative management style focused on learning open discussion and creative thinking

bullSponsorship and commitment from entire management team -top management in particular

bullldquoEmbeddingrdquo of management processes to use refresh and renew the Balanced Scorecard over time

(V11) November 2001 Introducing the Balanced ScorecardPage 31

2GCActive

Managementcopy 2GC Limited 2001

Introducing the Balanced ScorecardTo find out morehellip

bullVisit 2GCrsquos Web Sitendash We focus specifically on strategic

control and performance measurement issues and have a wide range of working papers FAQs and presentations to download on these topics

ndash The site also has a recommended reading list that covers relevant topics and the ldquoWeblinksrdquo database of relevant Internet sites

bullContact 2GCndash Let us know if you have a question

you canrsquot answer wersquoll do what we can to helphellip

bull info2gccouk

(V11) November 2001 Introducing the Balanced ScorecardPage 14

2GCActive

Managementcopy 2GC Limited 2001

What is Balanced ScorecardMore than just a set of goals amp measures

Balanced Scorecard design

Balanced Scorecard development

Balanced Scorecard deployment

bull Value from first application

bull Business model reflected in relationship between strategic goals

bull Corporate strategic measurement amp management tool

ndash divisionsndash business unitsndash functions

bull All management Systems aligned with strategy

bull Drive strategic behaviour into everyday decisions and operations

(V11) November 2001 Introducing the Balanced ScorecardPage 15

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard design

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 16

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designWhere to go an how to get there

bullBest practice is to use a development group that comprises the the likely users of the Balanced Scorecard

bullDesign choices should be based on jointly held perception of a strategic ldquoDestinationrdquo

bullThe design should measure progress against the organisationrsquos key strategic objectives (activities and outcomes)

bullLinks between strategic objectives should be articulated ndash these express the management teamrsquos beliefs about which activities drive which outcomes

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development Ac

tiviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

VisionVision

StrategyStrategy

Out

com

esAc

tiviti

es

(V11) November 2001 Introducing the Balanced ScorecardPage 17

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designMonitor progress in achieving goals

bullDevelopment of measures follow clarification and agreement of strategic objectives becausehellip

bullMeasures track progress in achieving those objectives against agreed targets

bullIdentify and monitor extraordinary activities and projects furthering achievement of objectives

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Out

com

es

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development A

ctiv

ities

Act

iviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

Financial Perspective

Objectives Measures Targets Initiatives

Financial Perspective

Objectives Measures Targets

Financial Perspective

Objectives Measures Targets

Financial Perspective

Objectives Measures Targets Initiatives

(V11) November 2001 Introducing the Balanced ScorecardPage 18

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designThe components of a Strategic Balanced Scorecard

bull Financial Marketndash Total NSV pound120m (nominal) ndashndash Has achieved 10 CAGR on NSndash Operating Margin gt10ndash Controllable overheads less thndash Operating Profit pound12m (nomin

Destination StatementDescription of how the organisation will be at some specific future date if the management teamrsquos strategies are successful

Fin

anci

alCu

stom

er

Best value for money

The leading and most innovative

brand

Drive Increased Demand

Profitable Sales Growth

Strategic Linkage Model (SLM)Graphic illustration of ldquocause and effectrdquo relationships between the strategic goals that must be achieved if the organisation is to reach its destination state

ObjectiveObjective DescriptionDescription

Total Shareholder Return is above Groups cost of equity over the medium to long term

Total Shareholder Return is above Groups cost of equity over the medium to long term

Minimise net tax paid and WACC in the light of operational and commercial decisions concerning the nature and sphere of Groups activities and legal constraints Optimum means

Minimise net tax paid and WACC in the light of operational and commercial decisions concerning the nature and sphere of Groups activities and legal constraints Optimum means better than equivalent payments by known Group

Measures (Freq)Measures (Freq)

bull CAGR of Total ShareholdeReturn

bull ROIC (Target gt WACC)

bull CAGR of Total ShareholderReturn

bull ROIC (Target gt WACC)

bull PampL account net tax chargea of profit for financial ye

bull WACC

bull PampL account net tax chargeda of profit for financial yea

bull WACC

Group Strategy Delivers Value

Achieve Optimum Tax Rate amp WACC

F1

F2

Objective and Measure Documentation

ndashClear and concise description of strategic objectives and the measures chosen to track their achievement

F11

F12

-30p

8

150p

18Dividend expected kept a1000 pence leading to loprevious years

Measure Value Target PerfObjective Status

Outperform capital markets

F21 200 185Increasing cash inflow froCash amp a sset

F21 200 185Increasing cash inflow froCash amp a sset

t

Progress Reporting FormatsIllustration of how (and by whom) Scorecard information will be communicated

o Initiative overviewOverview of which initiatives support which Scorecard objectives incl owners and deadlines for finalisation

(V11) November 2001 Introducing the Balanced ScorecardPage 19

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard roll-out

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 20

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard Development Development within the organisation

Country 1 Country 2

Regional Cluster(Line Management)

Country 3

Dept 1

Team

Dept 2

Country 4

Regional ClusterLine Management

Shared Service(eg Supply Chain)

Group SupportLegal Finance HR IS

Main Board

The optimal role-out

sequence is ldquoTop Downrdquo

(V11) November 2001 Introducing the Balanced ScorecardPage 21

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard DevelopmentDevelopment within the organisation

Country 1 Country 2

Regional Cluster(Line Management)

Country 3

Dept 1

Team

Dept 2

Country 4

Regional ClusterLine Management

Shared Service(eg Supply Chain)

Group SupportLegal Finance HR IS

Main Board

Corporate Balanced Scorecard

Co-ordinatingBalanced Scorecard

Support Function Balanced Scorecard

Operating Unit Balanced Scorecard

Departmental Balanced ScorecardTeam Level

Balanced Scorecard

(V11) November 2001 Introducing the Balanced ScorecardPage 22

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard DevelopmentldquoContractualrdquo agreement between management teams

What

How

What

Board level ScorecardBoard level Scorecard

Objectives

Measures amp Targets

Initiatives

Objectives

Measures amp Targets

Initiatives

Overall VisionOverall Vision

Subordinate ScorecardSubordinate Scorecard

Objectives

Measures amp Targets

Initiatives

Objectives

Measures amp Targets

Initiatives

Local VisionLocal Vision

How

TeamIndividual ScorecardTeamIndividual Scorecard

Objectives

Measures amp Targets

Initiatives

TeamIndividual Vision

TeamIndividual Vision

Strategic direction

Strategic direction

Strategy implementation

Strategy implementation

(V11) November 2001 Introducing the Balanced ScorecardPage 23

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 24

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deploymentldquoAchieving strategic goals requires activityrdquo

(V11) November 2001 Introducing the Balanced ScorecardPage 25

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Strategic alignment amp goal setting

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development Ac

tiviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

VisionVision

StrategyStrategy

Out

com

esAc

tiviti

es

(V11) November 2001 Introducing the Balanced ScorecardPage 26

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Align existing management control tools with strategy

SVA amp EVASVA amp EVAB

udge

tsB

udge

ts

BEMBEMBalanced Scorecard

ABCABC HR ToolsHR Tools

(V11) November 2001 Introducing the Balanced ScorecardPage 27

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Support two-way communication of strategyhellip

Fuzzy objectivesFuzzy objectives

Unjustified trust in informal

Unjustified trust in informal

feedback systems

feedback systemsEntren

ched m

easure

ment

Entren

ched m

easure

ment

system

s

system

s

BSC

(V11) November 2001 Introducing the Balanced ScorecardPage 28

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Everybody crafts amp monitors strategy all the timehellip

Comm

unica

tion Com

munication

Board levelScorecard

process

OperationalScorecard

process

Support function Scorecard

process

Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets

Take action

Create amend

strategic vision

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Balanced Scorecard

Developrevise measures amp

targets

Communication

(V11) November 2001 Introducing the Balanced ScorecardPage 29

2GCActive

Managementcopy 2GC Limited 2001

Success criteria

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 30

2GCActive

Managementcopy 2GC Limited 2001

Key success factorsCultural building blocks of Scorecard success

bullInclusive design process building on consensus seeking amp involvement

bullParticipative management style focused on learning open discussion and creative thinking

bullSponsorship and commitment from entire management team -top management in particular

bullldquoEmbeddingrdquo of management processes to use refresh and renew the Balanced Scorecard over time

(V11) November 2001 Introducing the Balanced ScorecardPage 31

2GCActive

Managementcopy 2GC Limited 2001

Introducing the Balanced ScorecardTo find out morehellip

bullVisit 2GCrsquos Web Sitendash We focus specifically on strategic

control and performance measurement issues and have a wide range of working papers FAQs and presentations to download on these topics

ndash The site also has a recommended reading list that covers relevant topics and the ldquoWeblinksrdquo database of relevant Internet sites

bullContact 2GCndash Let us know if you have a question

you canrsquot answer wersquoll do what we can to helphellip

bull info2gccouk

(V11) November 2001 Introducing the Balanced ScorecardPage 15

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard design

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 16

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designWhere to go an how to get there

bullBest practice is to use a development group that comprises the the likely users of the Balanced Scorecard

bullDesign choices should be based on jointly held perception of a strategic ldquoDestinationrdquo

bullThe design should measure progress against the organisationrsquos key strategic objectives (activities and outcomes)

bullLinks between strategic objectives should be articulated ndash these express the management teamrsquos beliefs about which activities drive which outcomes

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development Ac

tiviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

VisionVision

StrategyStrategy

Out

com

esAc

tiviti

es

(V11) November 2001 Introducing the Balanced ScorecardPage 17

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designMonitor progress in achieving goals

bullDevelopment of measures follow clarification and agreement of strategic objectives becausehellip

bullMeasures track progress in achieving those objectives against agreed targets

bullIdentify and monitor extraordinary activities and projects furthering achievement of objectives

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Out

com

es

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development A

ctiv

ities

Act

iviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

Financial Perspective

Objectives Measures Targets Initiatives

Financial Perspective

Objectives Measures Targets

Financial Perspective

Objectives Measures Targets

Financial Perspective

Objectives Measures Targets Initiatives

(V11) November 2001 Introducing the Balanced ScorecardPage 18

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designThe components of a Strategic Balanced Scorecard

bull Financial Marketndash Total NSV pound120m (nominal) ndashndash Has achieved 10 CAGR on NSndash Operating Margin gt10ndash Controllable overheads less thndash Operating Profit pound12m (nomin

Destination StatementDescription of how the organisation will be at some specific future date if the management teamrsquos strategies are successful

Fin

anci

alCu

stom

er

Best value for money

The leading and most innovative

brand

Drive Increased Demand

Profitable Sales Growth

Strategic Linkage Model (SLM)Graphic illustration of ldquocause and effectrdquo relationships between the strategic goals that must be achieved if the organisation is to reach its destination state

ObjectiveObjective DescriptionDescription

Total Shareholder Return is above Groups cost of equity over the medium to long term

Total Shareholder Return is above Groups cost of equity over the medium to long term

Minimise net tax paid and WACC in the light of operational and commercial decisions concerning the nature and sphere of Groups activities and legal constraints Optimum means

Minimise net tax paid and WACC in the light of operational and commercial decisions concerning the nature and sphere of Groups activities and legal constraints Optimum means better than equivalent payments by known Group

Measures (Freq)Measures (Freq)

bull CAGR of Total ShareholdeReturn

bull ROIC (Target gt WACC)

bull CAGR of Total ShareholderReturn

bull ROIC (Target gt WACC)

bull PampL account net tax chargea of profit for financial ye

bull WACC

bull PampL account net tax chargeda of profit for financial yea

bull WACC

Group Strategy Delivers Value

Achieve Optimum Tax Rate amp WACC

F1

F2

Objective and Measure Documentation

ndashClear and concise description of strategic objectives and the measures chosen to track their achievement

F11

F12

-30p

8

150p

18Dividend expected kept a1000 pence leading to loprevious years

Measure Value Target PerfObjective Status

Outperform capital markets

F21 200 185Increasing cash inflow froCash amp a sset

F21 200 185Increasing cash inflow froCash amp a sset

t

Progress Reporting FormatsIllustration of how (and by whom) Scorecard information will be communicated

o Initiative overviewOverview of which initiatives support which Scorecard objectives incl owners and deadlines for finalisation

(V11) November 2001 Introducing the Balanced ScorecardPage 19

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard roll-out

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 20

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard Development Development within the organisation

Country 1 Country 2

Regional Cluster(Line Management)

Country 3

Dept 1

Team

Dept 2

Country 4

Regional ClusterLine Management

Shared Service(eg Supply Chain)

Group SupportLegal Finance HR IS

Main Board

The optimal role-out

sequence is ldquoTop Downrdquo

(V11) November 2001 Introducing the Balanced ScorecardPage 21

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard DevelopmentDevelopment within the organisation

Country 1 Country 2

Regional Cluster(Line Management)

Country 3

Dept 1

Team

Dept 2

Country 4

Regional ClusterLine Management

Shared Service(eg Supply Chain)

Group SupportLegal Finance HR IS

Main Board

Corporate Balanced Scorecard

Co-ordinatingBalanced Scorecard

Support Function Balanced Scorecard

Operating Unit Balanced Scorecard

Departmental Balanced ScorecardTeam Level

Balanced Scorecard

(V11) November 2001 Introducing the Balanced ScorecardPage 22

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard DevelopmentldquoContractualrdquo agreement between management teams

What

How

What

Board level ScorecardBoard level Scorecard

Objectives

Measures amp Targets

Initiatives

Objectives

Measures amp Targets

Initiatives

Overall VisionOverall Vision

Subordinate ScorecardSubordinate Scorecard

Objectives

Measures amp Targets

Initiatives

Objectives

Measures amp Targets

Initiatives

Local VisionLocal Vision

How

TeamIndividual ScorecardTeamIndividual Scorecard

Objectives

Measures amp Targets

Initiatives

TeamIndividual Vision

TeamIndividual Vision

Strategic direction

Strategic direction

Strategy implementation

Strategy implementation

(V11) November 2001 Introducing the Balanced ScorecardPage 23

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 24

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deploymentldquoAchieving strategic goals requires activityrdquo

(V11) November 2001 Introducing the Balanced ScorecardPage 25

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Strategic alignment amp goal setting

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development Ac

tiviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

VisionVision

StrategyStrategy

Out

com

esAc

tiviti

es

(V11) November 2001 Introducing the Balanced ScorecardPage 26

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Align existing management control tools with strategy

SVA amp EVASVA amp EVAB

udge

tsB

udge

ts

BEMBEMBalanced Scorecard

ABCABC HR ToolsHR Tools

(V11) November 2001 Introducing the Balanced ScorecardPage 27

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Support two-way communication of strategyhellip

Fuzzy objectivesFuzzy objectives

Unjustified trust in informal

Unjustified trust in informal

feedback systems

feedback systemsEntren

ched m

easure

ment

Entren

ched m

easure

ment

system

s

system

s

BSC

(V11) November 2001 Introducing the Balanced ScorecardPage 28

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Everybody crafts amp monitors strategy all the timehellip

Comm

unica

tion Com

munication

Board levelScorecard

process

OperationalScorecard

process

Support function Scorecard

process

Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets

Take action

Create amend

strategic vision

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Balanced Scorecard

Developrevise measures amp

targets

Communication

(V11) November 2001 Introducing the Balanced ScorecardPage 29

2GCActive

Managementcopy 2GC Limited 2001

Success criteria

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 30

2GCActive

Managementcopy 2GC Limited 2001

Key success factorsCultural building blocks of Scorecard success

bullInclusive design process building on consensus seeking amp involvement

bullParticipative management style focused on learning open discussion and creative thinking

bullSponsorship and commitment from entire management team -top management in particular

bullldquoEmbeddingrdquo of management processes to use refresh and renew the Balanced Scorecard over time

(V11) November 2001 Introducing the Balanced ScorecardPage 31

2GCActive

Managementcopy 2GC Limited 2001

Introducing the Balanced ScorecardTo find out morehellip

bullVisit 2GCrsquos Web Sitendash We focus specifically on strategic

control and performance measurement issues and have a wide range of working papers FAQs and presentations to download on these topics

ndash The site also has a recommended reading list that covers relevant topics and the ldquoWeblinksrdquo database of relevant Internet sites

bullContact 2GCndash Let us know if you have a question

you canrsquot answer wersquoll do what we can to helphellip

bull info2gccouk

(V11) November 2001 Introducing the Balanced ScorecardPage 16

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designWhere to go an how to get there

bullBest practice is to use a development group that comprises the the likely users of the Balanced Scorecard

bullDesign choices should be based on jointly held perception of a strategic ldquoDestinationrdquo

bullThe design should measure progress against the organisationrsquos key strategic objectives (activities and outcomes)

bullLinks between strategic objectives should be articulated ndash these express the management teamrsquos beliefs about which activities drive which outcomes

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development Ac

tiviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

VisionVision

StrategyStrategy

Out

com

esAc

tiviti

es

(V11) November 2001 Introducing the Balanced ScorecardPage 17

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designMonitor progress in achieving goals

bullDevelopment of measures follow clarification and agreement of strategic objectives becausehellip

bullMeasures track progress in achieving those objectives against agreed targets

bullIdentify and monitor extraordinary activities and projects furthering achievement of objectives

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Out

com

es

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development A

ctiv

ities

Act

iviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

Financial Perspective

Objectives Measures Targets Initiatives

Financial Perspective

Objectives Measures Targets

Financial Perspective

Objectives Measures Targets

Financial Perspective

Objectives Measures Targets Initiatives

(V11) November 2001 Introducing the Balanced ScorecardPage 18

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designThe components of a Strategic Balanced Scorecard

bull Financial Marketndash Total NSV pound120m (nominal) ndashndash Has achieved 10 CAGR on NSndash Operating Margin gt10ndash Controllable overheads less thndash Operating Profit pound12m (nomin

Destination StatementDescription of how the organisation will be at some specific future date if the management teamrsquos strategies are successful

Fin

anci

alCu

stom

er

Best value for money

The leading and most innovative

brand

Drive Increased Demand

Profitable Sales Growth

Strategic Linkage Model (SLM)Graphic illustration of ldquocause and effectrdquo relationships between the strategic goals that must be achieved if the organisation is to reach its destination state

ObjectiveObjective DescriptionDescription

Total Shareholder Return is above Groups cost of equity over the medium to long term

Total Shareholder Return is above Groups cost of equity over the medium to long term

Minimise net tax paid and WACC in the light of operational and commercial decisions concerning the nature and sphere of Groups activities and legal constraints Optimum means

Minimise net tax paid and WACC in the light of operational and commercial decisions concerning the nature and sphere of Groups activities and legal constraints Optimum means better than equivalent payments by known Group

Measures (Freq)Measures (Freq)

bull CAGR of Total ShareholdeReturn

bull ROIC (Target gt WACC)

bull CAGR of Total ShareholderReturn

bull ROIC (Target gt WACC)

bull PampL account net tax chargea of profit for financial ye

bull WACC

bull PampL account net tax chargeda of profit for financial yea

bull WACC

Group Strategy Delivers Value

Achieve Optimum Tax Rate amp WACC

F1

F2

Objective and Measure Documentation

ndashClear and concise description of strategic objectives and the measures chosen to track their achievement

F11

F12

-30p

8

150p

18Dividend expected kept a1000 pence leading to loprevious years

Measure Value Target PerfObjective Status

Outperform capital markets

F21 200 185Increasing cash inflow froCash amp a sset

F21 200 185Increasing cash inflow froCash amp a sset

t

Progress Reporting FormatsIllustration of how (and by whom) Scorecard information will be communicated

o Initiative overviewOverview of which initiatives support which Scorecard objectives incl owners and deadlines for finalisation

(V11) November 2001 Introducing the Balanced ScorecardPage 19

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard roll-out

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 20

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard Development Development within the organisation

Country 1 Country 2

Regional Cluster(Line Management)

Country 3

Dept 1

Team

Dept 2

Country 4

Regional ClusterLine Management

Shared Service(eg Supply Chain)

Group SupportLegal Finance HR IS

Main Board

The optimal role-out

sequence is ldquoTop Downrdquo

(V11) November 2001 Introducing the Balanced ScorecardPage 21

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard DevelopmentDevelopment within the organisation

Country 1 Country 2

Regional Cluster(Line Management)

Country 3

Dept 1

Team

Dept 2

Country 4

Regional ClusterLine Management

Shared Service(eg Supply Chain)

Group SupportLegal Finance HR IS

Main Board

Corporate Balanced Scorecard

Co-ordinatingBalanced Scorecard

Support Function Balanced Scorecard

Operating Unit Balanced Scorecard

Departmental Balanced ScorecardTeam Level

Balanced Scorecard

(V11) November 2001 Introducing the Balanced ScorecardPage 22

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard DevelopmentldquoContractualrdquo agreement between management teams

What

How

What

Board level ScorecardBoard level Scorecard

Objectives

Measures amp Targets

Initiatives

Objectives

Measures amp Targets

Initiatives

Overall VisionOverall Vision

Subordinate ScorecardSubordinate Scorecard

Objectives

Measures amp Targets

Initiatives

Objectives

Measures amp Targets

Initiatives

Local VisionLocal Vision

How

TeamIndividual ScorecardTeamIndividual Scorecard

Objectives

Measures amp Targets

Initiatives

TeamIndividual Vision

TeamIndividual Vision

Strategic direction

Strategic direction

Strategy implementation

Strategy implementation

(V11) November 2001 Introducing the Balanced ScorecardPage 23

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 24

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deploymentldquoAchieving strategic goals requires activityrdquo

(V11) November 2001 Introducing the Balanced ScorecardPage 25

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Strategic alignment amp goal setting

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development Ac

tiviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

VisionVision

StrategyStrategy

Out

com

esAc

tiviti

es

(V11) November 2001 Introducing the Balanced ScorecardPage 26

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Align existing management control tools with strategy

SVA amp EVASVA amp EVAB

udge

tsB

udge

ts

BEMBEMBalanced Scorecard

ABCABC HR ToolsHR Tools

(V11) November 2001 Introducing the Balanced ScorecardPage 27

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Support two-way communication of strategyhellip

Fuzzy objectivesFuzzy objectives

Unjustified trust in informal

Unjustified trust in informal

feedback systems

feedback systemsEntren

ched m

easure

ment

Entren

ched m

easure

ment

system

s

system

s

BSC

(V11) November 2001 Introducing the Balanced ScorecardPage 28

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Everybody crafts amp monitors strategy all the timehellip

Comm

unica

tion Com

munication

Board levelScorecard

process

OperationalScorecard

process

Support function Scorecard

process

Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets

Take action

Create amend

strategic vision

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Balanced Scorecard

Developrevise measures amp

targets

Communication

(V11) November 2001 Introducing the Balanced ScorecardPage 29

2GCActive

Managementcopy 2GC Limited 2001

Success criteria

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 30

2GCActive

Managementcopy 2GC Limited 2001

Key success factorsCultural building blocks of Scorecard success

bullInclusive design process building on consensus seeking amp involvement

bullParticipative management style focused on learning open discussion and creative thinking

bullSponsorship and commitment from entire management team -top management in particular

bullldquoEmbeddingrdquo of management processes to use refresh and renew the Balanced Scorecard over time

(V11) November 2001 Introducing the Balanced ScorecardPage 31

2GCActive

Managementcopy 2GC Limited 2001

Introducing the Balanced ScorecardTo find out morehellip

bullVisit 2GCrsquos Web Sitendash We focus specifically on strategic

control and performance measurement issues and have a wide range of working papers FAQs and presentations to download on these topics

ndash The site also has a recommended reading list that covers relevant topics and the ldquoWeblinksrdquo database of relevant Internet sites

bullContact 2GCndash Let us know if you have a question

you canrsquot answer wersquoll do what we can to helphellip

bull info2gccouk

(V11) November 2001 Introducing the Balanced ScorecardPage 17

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designMonitor progress in achieving goals

bullDevelopment of measures follow clarification and agreement of strategic objectives becausehellip

bullMeasures track progress in achieving those objectives against agreed targets

bullIdentify and monitor extraordinary activities and projects furthering achievement of objectives

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Out

com

es

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development A

ctiv

ities

Act

iviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

Financial Perspective

Objectives Measures Targets Initiatives

Financial Perspective

Objectives Measures Targets

Financial Perspective

Objectives Measures Targets

Financial Perspective

Objectives Measures Targets Initiatives

(V11) November 2001 Introducing the Balanced ScorecardPage 18

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designThe components of a Strategic Balanced Scorecard

bull Financial Marketndash Total NSV pound120m (nominal) ndashndash Has achieved 10 CAGR on NSndash Operating Margin gt10ndash Controllable overheads less thndash Operating Profit pound12m (nomin

Destination StatementDescription of how the organisation will be at some specific future date if the management teamrsquos strategies are successful

Fin

anci

alCu

stom

er

Best value for money

The leading and most innovative

brand

Drive Increased Demand

Profitable Sales Growth

Strategic Linkage Model (SLM)Graphic illustration of ldquocause and effectrdquo relationships between the strategic goals that must be achieved if the organisation is to reach its destination state

ObjectiveObjective DescriptionDescription

Total Shareholder Return is above Groups cost of equity over the medium to long term

Total Shareholder Return is above Groups cost of equity over the medium to long term

Minimise net tax paid and WACC in the light of operational and commercial decisions concerning the nature and sphere of Groups activities and legal constraints Optimum means

Minimise net tax paid and WACC in the light of operational and commercial decisions concerning the nature and sphere of Groups activities and legal constraints Optimum means better than equivalent payments by known Group

Measures (Freq)Measures (Freq)

bull CAGR of Total ShareholdeReturn

bull ROIC (Target gt WACC)

bull CAGR of Total ShareholderReturn

bull ROIC (Target gt WACC)

bull PampL account net tax chargea of profit for financial ye

bull WACC

bull PampL account net tax chargeda of profit for financial yea

bull WACC

Group Strategy Delivers Value

Achieve Optimum Tax Rate amp WACC

F1

F2

Objective and Measure Documentation

ndashClear and concise description of strategic objectives and the measures chosen to track their achievement

F11

F12

-30p

8

150p

18Dividend expected kept a1000 pence leading to loprevious years

Measure Value Target PerfObjective Status

Outperform capital markets

F21 200 185Increasing cash inflow froCash amp a sset

F21 200 185Increasing cash inflow froCash amp a sset

t

Progress Reporting FormatsIllustration of how (and by whom) Scorecard information will be communicated

o Initiative overviewOverview of which initiatives support which Scorecard objectives incl owners and deadlines for finalisation

(V11) November 2001 Introducing the Balanced ScorecardPage 19

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard roll-out

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 20

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard Development Development within the organisation

Country 1 Country 2

Regional Cluster(Line Management)

Country 3

Dept 1

Team

Dept 2

Country 4

Regional ClusterLine Management

Shared Service(eg Supply Chain)

Group SupportLegal Finance HR IS

Main Board

The optimal role-out

sequence is ldquoTop Downrdquo

(V11) November 2001 Introducing the Balanced ScorecardPage 21

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard DevelopmentDevelopment within the organisation

Country 1 Country 2

Regional Cluster(Line Management)

Country 3

Dept 1

Team

Dept 2

Country 4

Regional ClusterLine Management

Shared Service(eg Supply Chain)

Group SupportLegal Finance HR IS

Main Board

Corporate Balanced Scorecard

Co-ordinatingBalanced Scorecard

Support Function Balanced Scorecard

Operating Unit Balanced Scorecard

Departmental Balanced ScorecardTeam Level

Balanced Scorecard

(V11) November 2001 Introducing the Balanced ScorecardPage 22

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard DevelopmentldquoContractualrdquo agreement between management teams

What

How

What

Board level ScorecardBoard level Scorecard

Objectives

Measures amp Targets

Initiatives

Objectives

Measures amp Targets

Initiatives

Overall VisionOverall Vision

Subordinate ScorecardSubordinate Scorecard

Objectives

Measures amp Targets

Initiatives

Objectives

Measures amp Targets

Initiatives

Local VisionLocal Vision

How

TeamIndividual ScorecardTeamIndividual Scorecard

Objectives

Measures amp Targets

Initiatives

TeamIndividual Vision

TeamIndividual Vision

Strategic direction

Strategic direction

Strategy implementation

Strategy implementation

(V11) November 2001 Introducing the Balanced ScorecardPage 23

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 24

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deploymentldquoAchieving strategic goals requires activityrdquo

(V11) November 2001 Introducing the Balanced ScorecardPage 25

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Strategic alignment amp goal setting

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development Ac

tiviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

VisionVision

StrategyStrategy

Out

com

esAc

tiviti

es

(V11) November 2001 Introducing the Balanced ScorecardPage 26

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Align existing management control tools with strategy

SVA amp EVASVA amp EVAB

udge

tsB

udge

ts

BEMBEMBalanced Scorecard

ABCABC HR ToolsHR Tools

(V11) November 2001 Introducing the Balanced ScorecardPage 27

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Support two-way communication of strategyhellip

Fuzzy objectivesFuzzy objectives

Unjustified trust in informal

Unjustified trust in informal

feedback systems

feedback systemsEntren

ched m

easure

ment

Entren

ched m

easure

ment

system

s

system

s

BSC

(V11) November 2001 Introducing the Balanced ScorecardPage 28

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Everybody crafts amp monitors strategy all the timehellip

Comm

unica

tion Com

munication

Board levelScorecard

process

OperationalScorecard

process

Support function Scorecard

process

Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets

Take action

Create amend

strategic vision

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Balanced Scorecard

Developrevise measures amp

targets

Communication

(V11) November 2001 Introducing the Balanced ScorecardPage 29

2GCActive

Managementcopy 2GC Limited 2001

Success criteria

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 30

2GCActive

Managementcopy 2GC Limited 2001

Key success factorsCultural building blocks of Scorecard success

bullInclusive design process building on consensus seeking amp involvement

bullParticipative management style focused on learning open discussion and creative thinking

bullSponsorship and commitment from entire management team -top management in particular

bullldquoEmbeddingrdquo of management processes to use refresh and renew the Balanced Scorecard over time

(V11) November 2001 Introducing the Balanced ScorecardPage 31

2GCActive

Managementcopy 2GC Limited 2001

Introducing the Balanced ScorecardTo find out morehellip

bullVisit 2GCrsquos Web Sitendash We focus specifically on strategic

control and performance measurement issues and have a wide range of working papers FAQs and presentations to download on these topics

ndash The site also has a recommended reading list that covers relevant topics and the ldquoWeblinksrdquo database of relevant Internet sites

bullContact 2GCndash Let us know if you have a question

you canrsquot answer wersquoll do what we can to helphellip

bull info2gccouk

(V11) November 2001 Introducing the Balanced ScorecardPage 18

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard designThe components of a Strategic Balanced Scorecard

bull Financial Marketndash Total NSV pound120m (nominal) ndashndash Has achieved 10 CAGR on NSndash Operating Margin gt10ndash Controllable overheads less thndash Operating Profit pound12m (nomin

Destination StatementDescription of how the organisation will be at some specific future date if the management teamrsquos strategies are successful

Fin

anci

alCu

stom

er

Best value for money

The leading and most innovative

brand

Drive Increased Demand

Profitable Sales Growth

Strategic Linkage Model (SLM)Graphic illustration of ldquocause and effectrdquo relationships between the strategic goals that must be achieved if the organisation is to reach its destination state

ObjectiveObjective DescriptionDescription

Total Shareholder Return is above Groups cost of equity over the medium to long term

Total Shareholder Return is above Groups cost of equity over the medium to long term

Minimise net tax paid and WACC in the light of operational and commercial decisions concerning the nature and sphere of Groups activities and legal constraints Optimum means

Minimise net tax paid and WACC in the light of operational and commercial decisions concerning the nature and sphere of Groups activities and legal constraints Optimum means better than equivalent payments by known Group

Measures (Freq)Measures (Freq)

bull CAGR of Total ShareholdeReturn

bull ROIC (Target gt WACC)

bull CAGR of Total ShareholderReturn

bull ROIC (Target gt WACC)

bull PampL account net tax chargea of profit for financial ye

bull WACC

bull PampL account net tax chargeda of profit for financial yea

bull WACC

Group Strategy Delivers Value

Achieve Optimum Tax Rate amp WACC

F1

F2

Objective and Measure Documentation

ndashClear and concise description of strategic objectives and the measures chosen to track their achievement

F11

F12

-30p

8

150p

18Dividend expected kept a1000 pence leading to loprevious years

Measure Value Target PerfObjective Status

Outperform capital markets

F21 200 185Increasing cash inflow froCash amp a sset

F21 200 185Increasing cash inflow froCash amp a sset

t

Progress Reporting FormatsIllustration of how (and by whom) Scorecard information will be communicated

o Initiative overviewOverview of which initiatives support which Scorecard objectives incl owners and deadlines for finalisation

(V11) November 2001 Introducing the Balanced ScorecardPage 19

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard roll-out

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 20

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard Development Development within the organisation

Country 1 Country 2

Regional Cluster(Line Management)

Country 3

Dept 1

Team

Dept 2

Country 4

Regional ClusterLine Management

Shared Service(eg Supply Chain)

Group SupportLegal Finance HR IS

Main Board

The optimal role-out

sequence is ldquoTop Downrdquo

(V11) November 2001 Introducing the Balanced ScorecardPage 21

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard DevelopmentDevelopment within the organisation

Country 1 Country 2

Regional Cluster(Line Management)

Country 3

Dept 1

Team

Dept 2

Country 4

Regional ClusterLine Management

Shared Service(eg Supply Chain)

Group SupportLegal Finance HR IS

Main Board

Corporate Balanced Scorecard

Co-ordinatingBalanced Scorecard

Support Function Balanced Scorecard

Operating Unit Balanced Scorecard

Departmental Balanced ScorecardTeam Level

Balanced Scorecard

(V11) November 2001 Introducing the Balanced ScorecardPage 22

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard DevelopmentldquoContractualrdquo agreement between management teams

What

How

What

Board level ScorecardBoard level Scorecard

Objectives

Measures amp Targets

Initiatives

Objectives

Measures amp Targets

Initiatives

Overall VisionOverall Vision

Subordinate ScorecardSubordinate Scorecard

Objectives

Measures amp Targets

Initiatives

Objectives

Measures amp Targets

Initiatives

Local VisionLocal Vision

How

TeamIndividual ScorecardTeamIndividual Scorecard

Objectives

Measures amp Targets

Initiatives

TeamIndividual Vision

TeamIndividual Vision

Strategic direction

Strategic direction

Strategy implementation

Strategy implementation

(V11) November 2001 Introducing the Balanced ScorecardPage 23

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 24

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deploymentldquoAchieving strategic goals requires activityrdquo

(V11) November 2001 Introducing the Balanced ScorecardPage 25

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Strategic alignment amp goal setting

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development Ac

tiviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

VisionVision

StrategyStrategy

Out

com

esAc

tiviti

es

(V11) November 2001 Introducing the Balanced ScorecardPage 26

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Align existing management control tools with strategy

SVA amp EVASVA amp EVAB

udge

tsB

udge

ts

BEMBEMBalanced Scorecard

ABCABC HR ToolsHR Tools

(V11) November 2001 Introducing the Balanced ScorecardPage 27

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Support two-way communication of strategyhellip

Fuzzy objectivesFuzzy objectives

Unjustified trust in informal

Unjustified trust in informal

feedback systems

feedback systemsEntren

ched m

easure

ment

Entren

ched m

easure

ment

system

s

system

s

BSC

(V11) November 2001 Introducing the Balanced ScorecardPage 28

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Everybody crafts amp monitors strategy all the timehellip

Comm

unica

tion Com

munication

Board levelScorecard

process

OperationalScorecard

process

Support function Scorecard

process

Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets

Take action

Create amend

strategic vision

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Balanced Scorecard

Developrevise measures amp

targets

Communication

(V11) November 2001 Introducing the Balanced ScorecardPage 29

2GCActive

Managementcopy 2GC Limited 2001

Success criteria

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 30

2GCActive

Managementcopy 2GC Limited 2001

Key success factorsCultural building blocks of Scorecard success

bullInclusive design process building on consensus seeking amp involvement

bullParticipative management style focused on learning open discussion and creative thinking

bullSponsorship and commitment from entire management team -top management in particular

bullldquoEmbeddingrdquo of management processes to use refresh and renew the Balanced Scorecard over time

(V11) November 2001 Introducing the Balanced ScorecardPage 31

2GCActive

Managementcopy 2GC Limited 2001

Introducing the Balanced ScorecardTo find out morehellip

bullVisit 2GCrsquos Web Sitendash We focus specifically on strategic

control and performance measurement issues and have a wide range of working papers FAQs and presentations to download on these topics

ndash The site also has a recommended reading list that covers relevant topics and the ldquoWeblinksrdquo database of relevant Internet sites

bullContact 2GCndash Let us know if you have a question

you canrsquot answer wersquoll do what we can to helphellip

bull info2gccouk

(V11) November 2001 Introducing the Balanced ScorecardPage 19

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard roll-out

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 20

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard Development Development within the organisation

Country 1 Country 2

Regional Cluster(Line Management)

Country 3

Dept 1

Team

Dept 2

Country 4

Regional ClusterLine Management

Shared Service(eg Supply Chain)

Group SupportLegal Finance HR IS

Main Board

The optimal role-out

sequence is ldquoTop Downrdquo

(V11) November 2001 Introducing the Balanced ScorecardPage 21

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard DevelopmentDevelopment within the organisation

Country 1 Country 2

Regional Cluster(Line Management)

Country 3

Dept 1

Team

Dept 2

Country 4

Regional ClusterLine Management

Shared Service(eg Supply Chain)

Group SupportLegal Finance HR IS

Main Board

Corporate Balanced Scorecard

Co-ordinatingBalanced Scorecard

Support Function Balanced Scorecard

Operating Unit Balanced Scorecard

Departmental Balanced ScorecardTeam Level

Balanced Scorecard

(V11) November 2001 Introducing the Balanced ScorecardPage 22

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard DevelopmentldquoContractualrdquo agreement between management teams

What

How

What

Board level ScorecardBoard level Scorecard

Objectives

Measures amp Targets

Initiatives

Objectives

Measures amp Targets

Initiatives

Overall VisionOverall Vision

Subordinate ScorecardSubordinate Scorecard

Objectives

Measures amp Targets

Initiatives

Objectives

Measures amp Targets

Initiatives

Local VisionLocal Vision

How

TeamIndividual ScorecardTeamIndividual Scorecard

Objectives

Measures amp Targets

Initiatives

TeamIndividual Vision

TeamIndividual Vision

Strategic direction

Strategic direction

Strategy implementation

Strategy implementation

(V11) November 2001 Introducing the Balanced ScorecardPage 23

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 24

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deploymentldquoAchieving strategic goals requires activityrdquo

(V11) November 2001 Introducing the Balanced ScorecardPage 25

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Strategic alignment amp goal setting

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development Ac

tiviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

VisionVision

StrategyStrategy

Out

com

esAc

tiviti

es

(V11) November 2001 Introducing the Balanced ScorecardPage 26

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Align existing management control tools with strategy

SVA amp EVASVA amp EVAB

udge

tsB

udge

ts

BEMBEMBalanced Scorecard

ABCABC HR ToolsHR Tools

(V11) November 2001 Introducing the Balanced ScorecardPage 27

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Support two-way communication of strategyhellip

Fuzzy objectivesFuzzy objectives

Unjustified trust in informal

Unjustified trust in informal

feedback systems

feedback systemsEntren

ched m

easure

ment

Entren

ched m

easure

ment

system

s

system

s

BSC

(V11) November 2001 Introducing the Balanced ScorecardPage 28

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Everybody crafts amp monitors strategy all the timehellip

Comm

unica

tion Com

munication

Board levelScorecard

process

OperationalScorecard

process

Support function Scorecard

process

Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets

Take action

Create amend

strategic vision

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Balanced Scorecard

Developrevise measures amp

targets

Communication

(V11) November 2001 Introducing the Balanced ScorecardPage 29

2GCActive

Managementcopy 2GC Limited 2001

Success criteria

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 30

2GCActive

Managementcopy 2GC Limited 2001

Key success factorsCultural building blocks of Scorecard success

bullInclusive design process building on consensus seeking amp involvement

bullParticipative management style focused on learning open discussion and creative thinking

bullSponsorship and commitment from entire management team -top management in particular

bullldquoEmbeddingrdquo of management processes to use refresh and renew the Balanced Scorecard over time

(V11) November 2001 Introducing the Balanced ScorecardPage 31

2GCActive

Managementcopy 2GC Limited 2001

Introducing the Balanced ScorecardTo find out morehellip

bullVisit 2GCrsquos Web Sitendash We focus specifically on strategic

control and performance measurement issues and have a wide range of working papers FAQs and presentations to download on these topics

ndash The site also has a recommended reading list that covers relevant topics and the ldquoWeblinksrdquo database of relevant Internet sites

bullContact 2GCndash Let us know if you have a question

you canrsquot answer wersquoll do what we can to helphellip

bull info2gccouk

(V11) November 2001 Introducing the Balanced ScorecardPage 20

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard Development Development within the organisation

Country 1 Country 2

Regional Cluster(Line Management)

Country 3

Dept 1

Team

Dept 2

Country 4

Regional ClusterLine Management

Shared Service(eg Supply Chain)

Group SupportLegal Finance HR IS

Main Board

The optimal role-out

sequence is ldquoTop Downrdquo

(V11) November 2001 Introducing the Balanced ScorecardPage 21

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard DevelopmentDevelopment within the organisation

Country 1 Country 2

Regional Cluster(Line Management)

Country 3

Dept 1

Team

Dept 2

Country 4

Regional ClusterLine Management

Shared Service(eg Supply Chain)

Group SupportLegal Finance HR IS

Main Board

Corporate Balanced Scorecard

Co-ordinatingBalanced Scorecard

Support Function Balanced Scorecard

Operating Unit Balanced Scorecard

Departmental Balanced ScorecardTeam Level

Balanced Scorecard

(V11) November 2001 Introducing the Balanced ScorecardPage 22

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard DevelopmentldquoContractualrdquo agreement between management teams

What

How

What

Board level ScorecardBoard level Scorecard

Objectives

Measures amp Targets

Initiatives

Objectives

Measures amp Targets

Initiatives

Overall VisionOverall Vision

Subordinate ScorecardSubordinate Scorecard

Objectives

Measures amp Targets

Initiatives

Objectives

Measures amp Targets

Initiatives

Local VisionLocal Vision

How

TeamIndividual ScorecardTeamIndividual Scorecard

Objectives

Measures amp Targets

Initiatives

TeamIndividual Vision

TeamIndividual Vision

Strategic direction

Strategic direction

Strategy implementation

Strategy implementation

(V11) November 2001 Introducing the Balanced ScorecardPage 23

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 24

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deploymentldquoAchieving strategic goals requires activityrdquo

(V11) November 2001 Introducing the Balanced ScorecardPage 25

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Strategic alignment amp goal setting

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development Ac

tiviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

VisionVision

StrategyStrategy

Out

com

esAc

tiviti

es

(V11) November 2001 Introducing the Balanced ScorecardPage 26

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Align existing management control tools with strategy

SVA amp EVASVA amp EVAB

udge

tsB

udge

ts

BEMBEMBalanced Scorecard

ABCABC HR ToolsHR Tools

(V11) November 2001 Introducing the Balanced ScorecardPage 27

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Support two-way communication of strategyhellip

Fuzzy objectivesFuzzy objectives

Unjustified trust in informal

Unjustified trust in informal

feedback systems

feedback systemsEntren

ched m

easure

ment

Entren

ched m

easure

ment

system

s

system

s

BSC

(V11) November 2001 Introducing the Balanced ScorecardPage 28

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Everybody crafts amp monitors strategy all the timehellip

Comm

unica

tion Com

munication

Board levelScorecard

process

OperationalScorecard

process

Support function Scorecard

process

Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets

Take action

Create amend

strategic vision

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Balanced Scorecard

Developrevise measures amp

targets

Communication

(V11) November 2001 Introducing the Balanced ScorecardPage 29

2GCActive

Managementcopy 2GC Limited 2001

Success criteria

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 30

2GCActive

Managementcopy 2GC Limited 2001

Key success factorsCultural building blocks of Scorecard success

bullInclusive design process building on consensus seeking amp involvement

bullParticipative management style focused on learning open discussion and creative thinking

bullSponsorship and commitment from entire management team -top management in particular

bullldquoEmbeddingrdquo of management processes to use refresh and renew the Balanced Scorecard over time

(V11) November 2001 Introducing the Balanced ScorecardPage 31

2GCActive

Managementcopy 2GC Limited 2001

Introducing the Balanced ScorecardTo find out morehellip

bullVisit 2GCrsquos Web Sitendash We focus specifically on strategic

control and performance measurement issues and have a wide range of working papers FAQs and presentations to download on these topics

ndash The site also has a recommended reading list that covers relevant topics and the ldquoWeblinksrdquo database of relevant Internet sites

bullContact 2GCndash Let us know if you have a question

you canrsquot answer wersquoll do what we can to helphellip

bull info2gccouk

(V11) November 2001 Introducing the Balanced ScorecardPage 21

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard DevelopmentDevelopment within the organisation

Country 1 Country 2

Regional Cluster(Line Management)

Country 3

Dept 1

Team

Dept 2

Country 4

Regional ClusterLine Management

Shared Service(eg Supply Chain)

Group SupportLegal Finance HR IS

Main Board

Corporate Balanced Scorecard

Co-ordinatingBalanced Scorecard

Support Function Balanced Scorecard

Operating Unit Balanced Scorecard

Departmental Balanced ScorecardTeam Level

Balanced Scorecard

(V11) November 2001 Introducing the Balanced ScorecardPage 22

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard DevelopmentldquoContractualrdquo agreement between management teams

What

How

What

Board level ScorecardBoard level Scorecard

Objectives

Measures amp Targets

Initiatives

Objectives

Measures amp Targets

Initiatives

Overall VisionOverall Vision

Subordinate ScorecardSubordinate Scorecard

Objectives

Measures amp Targets

Initiatives

Objectives

Measures amp Targets

Initiatives

Local VisionLocal Vision

How

TeamIndividual ScorecardTeamIndividual Scorecard

Objectives

Measures amp Targets

Initiatives

TeamIndividual Vision

TeamIndividual Vision

Strategic direction

Strategic direction

Strategy implementation

Strategy implementation

(V11) November 2001 Introducing the Balanced ScorecardPage 23

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 24

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deploymentldquoAchieving strategic goals requires activityrdquo

(V11) November 2001 Introducing the Balanced ScorecardPage 25

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Strategic alignment amp goal setting

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development Ac

tiviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

VisionVision

StrategyStrategy

Out

com

esAc

tiviti

es

(V11) November 2001 Introducing the Balanced ScorecardPage 26

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Align existing management control tools with strategy

SVA amp EVASVA amp EVAB

udge

tsB

udge

ts

BEMBEMBalanced Scorecard

ABCABC HR ToolsHR Tools

(V11) November 2001 Introducing the Balanced ScorecardPage 27

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Support two-way communication of strategyhellip

Fuzzy objectivesFuzzy objectives

Unjustified trust in informal

Unjustified trust in informal

feedback systems

feedback systemsEntren

ched m

easure

ment

Entren

ched m

easure

ment

system

s

system

s

BSC

(V11) November 2001 Introducing the Balanced ScorecardPage 28

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Everybody crafts amp monitors strategy all the timehellip

Comm

unica

tion Com

munication

Board levelScorecard

process

OperationalScorecard

process

Support function Scorecard

process

Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets

Take action

Create amend

strategic vision

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Balanced Scorecard

Developrevise measures amp

targets

Communication

(V11) November 2001 Introducing the Balanced ScorecardPage 29

2GCActive

Managementcopy 2GC Limited 2001

Success criteria

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 30

2GCActive

Managementcopy 2GC Limited 2001

Key success factorsCultural building blocks of Scorecard success

bullInclusive design process building on consensus seeking amp involvement

bullParticipative management style focused on learning open discussion and creative thinking

bullSponsorship and commitment from entire management team -top management in particular

bullldquoEmbeddingrdquo of management processes to use refresh and renew the Balanced Scorecard over time

(V11) November 2001 Introducing the Balanced ScorecardPage 31

2GCActive

Managementcopy 2GC Limited 2001

Introducing the Balanced ScorecardTo find out morehellip

bullVisit 2GCrsquos Web Sitendash We focus specifically on strategic

control and performance measurement issues and have a wide range of working papers FAQs and presentations to download on these topics

ndash The site also has a recommended reading list that covers relevant topics and the ldquoWeblinksrdquo database of relevant Internet sites

bullContact 2GCndash Let us know if you have a question

you canrsquot answer wersquoll do what we can to helphellip

bull info2gccouk

(V11) November 2001 Introducing the Balanced ScorecardPage 22

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard DevelopmentldquoContractualrdquo agreement between management teams

What

How

What

Board level ScorecardBoard level Scorecard

Objectives

Measures amp Targets

Initiatives

Objectives

Measures amp Targets

Initiatives

Overall VisionOverall Vision

Subordinate ScorecardSubordinate Scorecard

Objectives

Measures amp Targets

Initiatives

Objectives

Measures amp Targets

Initiatives

Local VisionLocal Vision

How

TeamIndividual ScorecardTeamIndividual Scorecard

Objectives

Measures amp Targets

Initiatives

TeamIndividual Vision

TeamIndividual Vision

Strategic direction

Strategic direction

Strategy implementation

Strategy implementation

(V11) November 2001 Introducing the Balanced ScorecardPage 23

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 24

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deploymentldquoAchieving strategic goals requires activityrdquo

(V11) November 2001 Introducing the Balanced ScorecardPage 25

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Strategic alignment amp goal setting

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development Ac

tiviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

VisionVision

StrategyStrategy

Out

com

esAc

tiviti

es

(V11) November 2001 Introducing the Balanced ScorecardPage 26

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Align existing management control tools with strategy

SVA amp EVASVA amp EVAB

udge

tsB

udge

ts

BEMBEMBalanced Scorecard

ABCABC HR ToolsHR Tools

(V11) November 2001 Introducing the Balanced ScorecardPage 27

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Support two-way communication of strategyhellip

Fuzzy objectivesFuzzy objectives

Unjustified trust in informal

Unjustified trust in informal

feedback systems

feedback systemsEntren

ched m

easure

ment

Entren

ched m

easure

ment

system

s

system

s

BSC

(V11) November 2001 Introducing the Balanced ScorecardPage 28

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Everybody crafts amp monitors strategy all the timehellip

Comm

unica

tion Com

munication

Board levelScorecard

process

OperationalScorecard

process

Support function Scorecard

process

Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets

Take action

Create amend

strategic vision

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Balanced Scorecard

Developrevise measures amp

targets

Communication

(V11) November 2001 Introducing the Balanced ScorecardPage 29

2GCActive

Managementcopy 2GC Limited 2001

Success criteria

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 30

2GCActive

Managementcopy 2GC Limited 2001

Key success factorsCultural building blocks of Scorecard success

bullInclusive design process building on consensus seeking amp involvement

bullParticipative management style focused on learning open discussion and creative thinking

bullSponsorship and commitment from entire management team -top management in particular

bullldquoEmbeddingrdquo of management processes to use refresh and renew the Balanced Scorecard over time

(V11) November 2001 Introducing the Balanced ScorecardPage 31

2GCActive

Managementcopy 2GC Limited 2001

Introducing the Balanced ScorecardTo find out morehellip

bullVisit 2GCrsquos Web Sitendash We focus specifically on strategic

control and performance measurement issues and have a wide range of working papers FAQs and presentations to download on these topics

ndash The site also has a recommended reading list that covers relevant topics and the ldquoWeblinksrdquo database of relevant Internet sites

bullContact 2GCndash Let us know if you have a question

you canrsquot answer wersquoll do what we can to helphellip

bull info2gccouk

(V11) November 2001 Introducing the Balanced ScorecardPage 23

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 24

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deploymentldquoAchieving strategic goals requires activityrdquo

(V11) November 2001 Introducing the Balanced ScorecardPage 25

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Strategic alignment amp goal setting

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development Ac

tiviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

VisionVision

StrategyStrategy

Out

com

esAc

tiviti

es

(V11) November 2001 Introducing the Balanced ScorecardPage 26

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Align existing management control tools with strategy

SVA amp EVASVA amp EVAB

udge

tsB

udge

ts

BEMBEMBalanced Scorecard

ABCABC HR ToolsHR Tools

(V11) November 2001 Introducing the Balanced ScorecardPage 27

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Support two-way communication of strategyhellip

Fuzzy objectivesFuzzy objectives

Unjustified trust in informal

Unjustified trust in informal

feedback systems

feedback systemsEntren

ched m

easure

ment

Entren

ched m

easure

ment

system

s

system

s

BSC

(V11) November 2001 Introducing the Balanced ScorecardPage 28

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Everybody crafts amp monitors strategy all the timehellip

Comm

unica

tion Com

munication

Board levelScorecard

process

OperationalScorecard

process

Support function Scorecard

process

Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets

Take action

Create amend

strategic vision

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Balanced Scorecard

Developrevise measures amp

targets

Communication

(V11) November 2001 Introducing the Balanced ScorecardPage 29

2GCActive

Managementcopy 2GC Limited 2001

Success criteria

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 30

2GCActive

Managementcopy 2GC Limited 2001

Key success factorsCultural building blocks of Scorecard success

bullInclusive design process building on consensus seeking amp involvement

bullParticipative management style focused on learning open discussion and creative thinking

bullSponsorship and commitment from entire management team -top management in particular

bullldquoEmbeddingrdquo of management processes to use refresh and renew the Balanced Scorecard over time

(V11) November 2001 Introducing the Balanced ScorecardPage 31

2GCActive

Managementcopy 2GC Limited 2001

Introducing the Balanced ScorecardTo find out morehellip

bullVisit 2GCrsquos Web Sitendash We focus specifically on strategic

control and performance measurement issues and have a wide range of working papers FAQs and presentations to download on these topics

ndash The site also has a recommended reading list that covers relevant topics and the ldquoWeblinksrdquo database of relevant Internet sites

bullContact 2GCndash Let us know if you have a question

you canrsquot answer wersquoll do what we can to helphellip

bull info2gccouk

(V11) November 2001 Introducing the Balanced ScorecardPage 24

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deploymentldquoAchieving strategic goals requires activityrdquo

(V11) November 2001 Introducing the Balanced ScorecardPage 25

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Strategic alignment amp goal setting

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development Ac

tiviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

VisionVision

StrategyStrategy

Out

com

esAc

tiviti

es

(V11) November 2001 Introducing the Balanced ScorecardPage 26

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Align existing management control tools with strategy

SVA amp EVASVA amp EVAB

udge

tsB

udge

ts

BEMBEMBalanced Scorecard

ABCABC HR ToolsHR Tools

(V11) November 2001 Introducing the Balanced ScorecardPage 27

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Support two-way communication of strategyhellip

Fuzzy objectivesFuzzy objectives

Unjustified trust in informal

Unjustified trust in informal

feedback systems

feedback systemsEntren

ched m

easure

ment

Entren

ched m

easure

ment

system

s

system

s

BSC

(V11) November 2001 Introducing the Balanced ScorecardPage 28

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Everybody crafts amp monitors strategy all the timehellip

Comm

unica

tion Com

munication

Board levelScorecard

process

OperationalScorecard

process

Support function Scorecard

process

Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets

Take action

Create amend

strategic vision

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Balanced Scorecard

Developrevise measures amp

targets

Communication

(V11) November 2001 Introducing the Balanced ScorecardPage 29

2GCActive

Managementcopy 2GC Limited 2001

Success criteria

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 30

2GCActive

Managementcopy 2GC Limited 2001

Key success factorsCultural building blocks of Scorecard success

bullInclusive design process building on consensus seeking amp involvement

bullParticipative management style focused on learning open discussion and creative thinking

bullSponsorship and commitment from entire management team -top management in particular

bullldquoEmbeddingrdquo of management processes to use refresh and renew the Balanced Scorecard over time

(V11) November 2001 Introducing the Balanced ScorecardPage 31

2GCActive

Managementcopy 2GC Limited 2001

Introducing the Balanced ScorecardTo find out morehellip

bullVisit 2GCrsquos Web Sitendash We focus specifically on strategic

control and performance measurement issues and have a wide range of working papers FAQs and presentations to download on these topics

ndash The site also has a recommended reading list that covers relevant topics and the ldquoWeblinksrdquo database of relevant Internet sites

bullContact 2GCndash Let us know if you have a question

you canrsquot answer wersquoll do what we can to helphellip

bull info2gccouk

(V11) November 2001 Introducing the Balanced ScorecardPage 25

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Strategic alignment amp goal setting

Customer PerspectivePerceptions of price service quality

Customer PerspectivePerceptions of price service quality O

utco

mes

Internal PerspectiveCycle time productivity processes

Internal PerspectiveCycle time productivity processes

Learning amp Growth PerspectiveKnowledge product development

Learning amp Growth PerspectiveKnowledge product development Ac

tiviti

es

Financial PerspectiveProfitability growth valueFinancial PerspectiveProfitability growth value

VisionVision

StrategyStrategy

Out

com

esAc

tiviti

es

(V11) November 2001 Introducing the Balanced ScorecardPage 26

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Align existing management control tools with strategy

SVA amp EVASVA amp EVAB

udge

tsB

udge

ts

BEMBEMBalanced Scorecard

ABCABC HR ToolsHR Tools

(V11) November 2001 Introducing the Balanced ScorecardPage 27

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Support two-way communication of strategyhellip

Fuzzy objectivesFuzzy objectives

Unjustified trust in informal

Unjustified trust in informal

feedback systems

feedback systemsEntren

ched m

easure

ment

Entren

ched m

easure

ment

system

s

system

s

BSC

(V11) November 2001 Introducing the Balanced ScorecardPage 28

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Everybody crafts amp monitors strategy all the timehellip

Comm

unica

tion Com

munication

Board levelScorecard

process

OperationalScorecard

process

Support function Scorecard

process

Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets

Take action

Create amend

strategic vision

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Balanced Scorecard

Developrevise measures amp

targets

Communication

(V11) November 2001 Introducing the Balanced ScorecardPage 29

2GCActive

Managementcopy 2GC Limited 2001

Success criteria

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 30

2GCActive

Managementcopy 2GC Limited 2001

Key success factorsCultural building blocks of Scorecard success

bullInclusive design process building on consensus seeking amp involvement

bullParticipative management style focused on learning open discussion and creative thinking

bullSponsorship and commitment from entire management team -top management in particular

bullldquoEmbeddingrdquo of management processes to use refresh and renew the Balanced Scorecard over time

(V11) November 2001 Introducing the Balanced ScorecardPage 31

2GCActive

Managementcopy 2GC Limited 2001

Introducing the Balanced ScorecardTo find out morehellip

bullVisit 2GCrsquos Web Sitendash We focus specifically on strategic

control and performance measurement issues and have a wide range of working papers FAQs and presentations to download on these topics

ndash The site also has a recommended reading list that covers relevant topics and the ldquoWeblinksrdquo database of relevant Internet sites

bullContact 2GCndash Let us know if you have a question

you canrsquot answer wersquoll do what we can to helphellip

bull info2gccouk

(V11) November 2001 Introducing the Balanced ScorecardPage 26

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Align existing management control tools with strategy

SVA amp EVASVA amp EVAB

udge

tsB

udge

ts

BEMBEMBalanced Scorecard

ABCABC HR ToolsHR Tools

(V11) November 2001 Introducing the Balanced ScorecardPage 27

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Support two-way communication of strategyhellip

Fuzzy objectivesFuzzy objectives

Unjustified trust in informal

Unjustified trust in informal

feedback systems

feedback systemsEntren

ched m

easure

ment

Entren

ched m

easure

ment

system

s

system

s

BSC

(V11) November 2001 Introducing the Balanced ScorecardPage 28

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Everybody crafts amp monitors strategy all the timehellip

Comm

unica

tion Com

munication

Board levelScorecard

process

OperationalScorecard

process

Support function Scorecard

process

Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets

Take action

Create amend

strategic vision

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Balanced Scorecard

Developrevise measures amp

targets

Communication

(V11) November 2001 Introducing the Balanced ScorecardPage 29

2GCActive

Managementcopy 2GC Limited 2001

Success criteria

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 30

2GCActive

Managementcopy 2GC Limited 2001

Key success factorsCultural building blocks of Scorecard success

bullInclusive design process building on consensus seeking amp involvement

bullParticipative management style focused on learning open discussion and creative thinking

bullSponsorship and commitment from entire management team -top management in particular

bullldquoEmbeddingrdquo of management processes to use refresh and renew the Balanced Scorecard over time

(V11) November 2001 Introducing the Balanced ScorecardPage 31

2GCActive

Managementcopy 2GC Limited 2001

Introducing the Balanced ScorecardTo find out morehellip

bullVisit 2GCrsquos Web Sitendash We focus specifically on strategic

control and performance measurement issues and have a wide range of working papers FAQs and presentations to download on these topics

ndash The site also has a recommended reading list that covers relevant topics and the ldquoWeblinksrdquo database of relevant Internet sites

bullContact 2GCndash Let us know if you have a question

you canrsquot answer wersquoll do what we can to helphellip

bull info2gccouk

(V11) November 2001 Introducing the Balanced ScorecardPage 27

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Support two-way communication of strategyhellip

Fuzzy objectivesFuzzy objectives

Unjustified trust in informal

Unjustified trust in informal

feedback systems

feedback systemsEntren

ched m

easure

ment

Entren

ched m

easure

ment

system

s

system

s

BSC

(V11) November 2001 Introducing the Balanced ScorecardPage 28

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Everybody crafts amp monitors strategy all the timehellip

Comm

unica

tion Com

munication

Board levelScorecard

process

OperationalScorecard

process

Support function Scorecard

process

Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets

Take action

Create amend

strategic vision

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Balanced Scorecard

Developrevise measures amp

targets

Communication

(V11) November 2001 Introducing the Balanced ScorecardPage 29

2GCActive

Managementcopy 2GC Limited 2001

Success criteria

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 30

2GCActive

Managementcopy 2GC Limited 2001

Key success factorsCultural building blocks of Scorecard success

bullInclusive design process building on consensus seeking amp involvement

bullParticipative management style focused on learning open discussion and creative thinking

bullSponsorship and commitment from entire management team -top management in particular

bullldquoEmbeddingrdquo of management processes to use refresh and renew the Balanced Scorecard over time

(V11) November 2001 Introducing the Balanced ScorecardPage 31

2GCActive

Managementcopy 2GC Limited 2001

Introducing the Balanced ScorecardTo find out morehellip

bullVisit 2GCrsquos Web Sitendash We focus specifically on strategic

control and performance measurement issues and have a wide range of working papers FAQs and presentations to download on these topics

ndash The site also has a recommended reading list that covers relevant topics and the ldquoWeblinksrdquo database of relevant Internet sites

bullContact 2GCndash Let us know if you have a question

you canrsquot answer wersquoll do what we can to helphellip

bull info2gccouk

(V11) November 2001 Introducing the Balanced ScorecardPage 28

2GCActive

Managementcopy 2GC Limited 2001

Balanced Scorecard deployment Everybody crafts amp monitors strategy all the timehellip

Comm

unica

tion Com

munication

Board levelScorecard

process

OperationalScorecard

process

Support function Scorecard

process

Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets Take action

Vision

ObjectivesReview ObjectivesReview

Balanced Scorecard

Measures amp targets

Take action

Create amend

strategic vision

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Createchange linked

strategic objectives

Review results and cause amp

effect assumptions

Balanced Scorecard

Developrevise measures amp

targets

Communication

(V11) November 2001 Introducing the Balanced ScorecardPage 29

2GCActive

Managementcopy 2GC Limited 2001

Success criteria

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 30

2GCActive

Managementcopy 2GC Limited 2001

Key success factorsCultural building blocks of Scorecard success

bullInclusive design process building on consensus seeking amp involvement

bullParticipative management style focused on learning open discussion and creative thinking

bullSponsorship and commitment from entire management team -top management in particular

bullldquoEmbeddingrdquo of management processes to use refresh and renew the Balanced Scorecard over time

(V11) November 2001 Introducing the Balanced ScorecardPage 31

2GCActive

Managementcopy 2GC Limited 2001

Introducing the Balanced ScorecardTo find out morehellip

bullVisit 2GCrsquos Web Sitendash We focus specifically on strategic

control and performance measurement issues and have a wide range of working papers FAQs and presentations to download on these topics

ndash The site also has a recommended reading list that covers relevant topics and the ldquoWeblinksrdquo database of relevant Internet sites

bullContact 2GCndash Let us know if you have a question

you canrsquot answer wersquoll do what we can to helphellip

bull info2gccouk

(V11) November 2001 Introducing the Balanced ScorecardPage 29

2GCActive

Managementcopy 2GC Limited 2001

Success criteria

General General management management issuesissues

What is What is Balanced Balanced ScorecardScorecard

Balanced Balanced Scorecard Scorecard designdesign

Balanced Balanced Scorecard Scorecard developmentdevelopment

Balanced Balanced Scorecard Scorecard deploymentdeployment

Success Success criteriacriteria

(V11) November 2001 Introducing the Balanced ScorecardPage 30

2GCActive

Managementcopy 2GC Limited 2001

Key success factorsCultural building blocks of Scorecard success

bullInclusive design process building on consensus seeking amp involvement

bullParticipative management style focused on learning open discussion and creative thinking

bullSponsorship and commitment from entire management team -top management in particular

bullldquoEmbeddingrdquo of management processes to use refresh and renew the Balanced Scorecard over time

(V11) November 2001 Introducing the Balanced ScorecardPage 31

2GCActive

Managementcopy 2GC Limited 2001

Introducing the Balanced ScorecardTo find out morehellip

bullVisit 2GCrsquos Web Sitendash We focus specifically on strategic

control and performance measurement issues and have a wide range of working papers FAQs and presentations to download on these topics

ndash The site also has a recommended reading list that covers relevant topics and the ldquoWeblinksrdquo database of relevant Internet sites

bullContact 2GCndash Let us know if you have a question

you canrsquot answer wersquoll do what we can to helphellip

bull info2gccouk

(V11) November 2001 Introducing the Balanced ScorecardPage 30

2GCActive

Managementcopy 2GC Limited 2001

Key success factorsCultural building blocks of Scorecard success

bullInclusive design process building on consensus seeking amp involvement

bullParticipative management style focused on learning open discussion and creative thinking

bullSponsorship and commitment from entire management team -top management in particular

bullldquoEmbeddingrdquo of management processes to use refresh and renew the Balanced Scorecard over time

(V11) November 2001 Introducing the Balanced ScorecardPage 31

2GCActive

Managementcopy 2GC Limited 2001

Introducing the Balanced ScorecardTo find out morehellip

bullVisit 2GCrsquos Web Sitendash We focus specifically on strategic

control and performance measurement issues and have a wide range of working papers FAQs and presentations to download on these topics

ndash The site also has a recommended reading list that covers relevant topics and the ldquoWeblinksrdquo database of relevant Internet sites

bullContact 2GCndash Let us know if you have a question

you canrsquot answer wersquoll do what we can to helphellip

bull info2gccouk

(V11) November 2001 Introducing the Balanced ScorecardPage 31

2GCActive

Managementcopy 2GC Limited 2001

Introducing the Balanced ScorecardTo find out morehellip

bullVisit 2GCrsquos Web Sitendash We focus specifically on strategic

control and performance measurement issues and have a wide range of working papers FAQs and presentations to download on these topics

ndash The site also has a recommended reading list that covers relevant topics and the ldquoWeblinksrdquo database of relevant Internet sites

bullContact 2GCndash Let us know if you have a question

you canrsquot answer wersquoll do what we can to helphellip

bull info2gccouk