Make Strategy Execution a Core Competency Balanced Scorecard Center of Excellence Overview

Balanced Scorecard Collaborative, Inc. • 55 Old Bedford Road • Lincoln, MA 01773 • Tel: 781.259.3737 • Fax: 781.259.3389 • bscol.com

Make Strategy Execution a Core Competency

Balanced Scorecard Center of Excellence Overview

For further information please contact:

Mario A. BognannoVice [email protected]

2©2003 Balanced Scorecard Collaborative, Inc. • bscol.comBSCol – 01497 COE Document – 02/18/03

Table of Contents

• The Strategy Challenge

• Principles of the Balanced Scorecard and Strategy-Focused Organization

• Critical Success Factors in Becoming a Strategy-Focused Organization

• The BSC Center of Excellence


StrategicStrategic

SuccessSuccess

At RiskDoomed FromDoomed From

The StartThe Start

Missed

Opportunity

Str

ateg

y F

orm

ula

tio

n

Flawed Sound

Strategic success requires going beyond successful strategy formulation to successful strategy execution

Source: 1Execution: The Discipline of Getting Things Done, by Larry Bossidy, 2002.

Strategy Execution

1

Strategy Development or Strategy Execution? Organizations Need Both

Fla

we

dS

ound


There are generally accepted tools to manage finances, customers, processes, and people. But what about strategy?

The Balanced Scorecard is the vehicle that fills the Strategy Management Gap

Financial Management Tools

EVA

Balance Sheets

Income Statements

Shareholder Value Analysis

Customer Management Tools

Customer Satisfaction Measurement

Customer Relationship Management

Segmentation Analysis

One-to-One Marketing

Process Management Tools

Six Sigma

Supply Chain Integration

Cycle Time Reduction

TQM

People Management Tools

Core Competencies

Knowledge Management

Pay for Performance

HRIS

Strategy Management Tools

?

Strategy Execution Challenges


The Balanced Scorecard - A Framework To Describe and Measure Strategy

Source: Kaplan and Norton, Strategy-Focused Organization, 2001.

The Balanced Scorecard provides a framework and mechanism to integrate strategy formulation and strategy execution

Internal Process Perspective

Financial Perspective

Learning & Growth Perspective

Customer Perspective

Return on Investment

Price Quality Time Function Image Relationship

Value Proposition

Sources of Growth Sources of Productivity

+ +

“Build the Brand”

“Make the Sale”

“Deliver the Product”

“Service Exceptionally”

Revenue Strategy

Productivity Strategy

1. The economic model of key levers driving financial performance

2. The identification of targeted customer segments and their value proposition

3. The process-focused view of the business using the value chain

4. The intangible assets necessary to drive performance

Staff Competencies

Technology Infrastructure

Climate for Action

A Balanced Scorecard tells the “story of the strategy”


Strategy-Focused Organization Profiles:Breakthrough Results

Public Sector

SMDC Health System

• Profitability up $23m• Customer Satisfaction

City of Charlotte

• Customer Satisfaction = 70%

• Public Official Award

Duke Children’s Hospital

• Customer Satisfaction #1• Cost/Case 33%

Defense Logistics Agency

• $130MM in Savings in FY2002• Processed $2.2B more requisitions

for its customers

Private Sector

Hilton Hotels

• From last to first in industry• ROI 6% --> 16%

• Customer Loyalty 5%• EDITDA margins 3% above

average

UPS

• Revenues 9%• Net Income 33%

Wendy’s International

• Mkt. Cap $2.5 --> $4b• Stock Price up 75%

Mobil

BREAKTHROUGH RESULTS

Shareholder Value

Profitable Growth

Cost Reduction

Organizational Alignment

Customer Satisfaction


50% of organizations who claim to be using Balanced Scorecards are doing it “wrong”1

A Word of Caution…

NOT Using BSC

Using It RIGHT

Using ItWRONG

Source: 1BSCol Survey Data, Pepperdine/SUNY Albany Study.


Only 5% of the work force understand the strategy

60% of organizations do not link budgets to strategy

Only 25% of managers have incentives linked to strategy

85% of executive teams spend less than one hour/ month discussing strategy

9 of 10 companies fail to execute

strategy

The People Barrier

The Vision Barrier

The Management Barrier

The Resource Barrier

Why Do Organizations Fail To Execute Strategy?


The “Strategy Focused Organization” Is Used To Execute Strategy for Breakthrough Results

STRATEGY-FOCUSED

ORGANIZATION

MOBILIZE

GOVERNALIGN

MOTIVATE

TRANSLATE

Mobilize Change through Executive Leadership

Govern to Make Strategy A Continual Process

Motivate to make Strategy Everyone’s Job

Align the Organization to the Strategy

Translate the Strategy into Operational Terms


Build the Internal Capability to Execute Strategy:The Center of Excellence (COE)

Together these people, processes, and tools form the group responsible for strategy execution in your organization: Your Center of Excellence

Successful Strategy Execution Requires

A skilled team of professionalsPeople

Integrated strategy management processesProcesses

Tools, technologies, and supportTools


You Need to Select and Train the People in Your Center of Excellence

A Center of Excellence will help your organization make strategy a core competency.

A Center of Excellence Requires:

A COE requires people who can influence the execution team and the strategy

The RightPeople

A COE team member must understand the BSC and SFO concepts and methodologies

The RightSkills

A COE team must be able to facilitate, reach, and manage change

The Right Competencies


COE’s Need To Establish and Maintain Processes for Strategy Execution in Your Organization

Successful Strategy Execution Requires:

A process to mobilize the organization to changeMobilize

A process to describe and communicate strategyTranslate

A process to align the organization around the strategyAlign

A process to ensure personal objectives and incentives are supporting the strategyMotivate

An integrated reporting and decision making processGovern


Leveraged Tools and Approaches Help Rapidly and Effectively Build the Capability to Execute Strategy

COE’s set of tools and approaches ensure knowledge transfer and repeatable, scalable processes

Successful Strategy Execution Requires:

Proven, Repeatable Approaches• BSC Design• Communication• BSC Cascade• Reporting

Leveraged Technology• Online Design• Measure Library• Industry Templates

• Online Training• Online Learning

Center

14©2002 Balanced Scorecard Collaborative, Inc. • bscol.comBSCol - 01436 - 11/21/02

A Center of Excellence Is Built In Three Phases

Source: Kaplan and Norton, Strategy-Focused Organization

Phase I:

Launch

• Builds understanding of the strategic challenges

• Develops commitment by providing a Plan of action

Phase II:

Build

• Develops the internal capabilities to execute strategy through:

•Education

•Facilitation

•Knowledge Transfer

Phase III:

Sustain

• Enhances internal strategic capabilities through continuous learning and involvement


Evaluate the Current Status Relative to BSCol Best Practices

Phase 1: Launch with Assessment & Design

SFO Development PlanStrategic Readiness

Mobilization

Translate

Alignment

Empower

Governance

Status ActionSFO Competency

Sense ofUrgency

Bes

tP

ract

ice

Case forChange

Vision&

Strategy

AlignExecutive

Team

New Wayof

Managing

Account-ability

ChangeAgents

60

70

80

90 Self Assessment

Best Practice Total

BSCol Score

Define a Program to Build and Sustain a Strategy-Focused

Organization

I. Mobilize1. Assessment2. Plan3. Workshop

II. Build1. Executive

Education2. Pilot Program

(Coaching)3. BSCol Leverage

Toolkit Training

III. Sustain1. Benefits Tracking2. Coaching & Check

Point Reviews 3. Executive Updates4. Change Agent

Roundtables

Task Time


The Program Design Will Detail the Knowledge Transfer Requirements

That are Needed

People/Process and Tools are selected to meet the requirements

of the Client

Phase 2: Build by Executing the Program

Executive Education

BSC Awareness

Building Strategy-Focused Organizations

Coaching and Advisory Support

Expert Facilitation

Pilot Program Development and Deployment

Corporate/Pilot BSC

Cascading Process

Implementation Planning

BSCol Leveraged Toolkit

Online Learning

Communities

Executive Awareness

E-Library

Development & Transfer of Core Competencies

Leveraged Trainer Training





Toolkit Training



Roundtables

Task Time


Phase 3: Sustain the Program by Creating Irreversible Momentum

“A New Way of Managing” “Irreversible Momentum”

Processes Are Put Into Place That Create “Irreversible Momentum”

Benefits TrackingContinuous focus on defining,

documenting, and harvesting the benefits created by the BSC program

Coaching and Check-Point ReviewsPeriodic check-point reviews of progress

against SFO development plan

Executive Updates Periodic executive education sessions

on topics of importance to maintaining momentum

Change Agent RoundtableA community of BSC program managers

from different organizations sharing issues of common interest

The Program Design Will Detail the Key Processes and “Habits” to Create

Change





Toolkit Training



Roundtables

Task Time


Center of Excellence Critical Success Factors

Leadership Commitment

Commitment From The Leader And The Majority Of The Leadership

Team

Integrated Program Coordination

Expert Internal Advocates/Consultants

Expert Resources

A Designated Position Responsible For The Program – Advocacy,

Monitoring And Facilitation

A Group Of Trained Internal Facilitators Who Can Consult And

Support Internal Clients

Affinity Groups/Community – Learning Technology – Program

Management Technology


For Further Information

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use, enhancement, and integrity of the

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management process”

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Make Strategy Execution a Core Competency Balanced Scorecard Center of Excellence Overview