1

Dr.L.Prakash Sai

#1 REASON WHY LEADERS FAIL?

70% of strategic failures are due to poor

execution of leadership.....

It’s rarely for lack of smarts or vision.

Source: Charan, R. and Colvin, G. “Why CEOs Fail”, Fortune, June 21, 1999.

2

“Today the difference between a company and its

competitor is the ability to execute.

If your competitors are executing better than you

are, they’re beating you in the here and now, and the

financial markets won’t wait to see if your elaborate

strategy plays out.

So leaders who can’t execute don’t get free runs….

Execution is the great unaddressed issue in the

business world today.”

Execution Drives Results

Know your people and your business

Insist on realism

Set clear goals and priorities

Follow through

Reward the doers

Expand people’s capabilities

Know yourself

The

Leader’s

Seven

Essential

Behaviors

“Leaders get the behaviors they exhibit and tolerate.” - Larry Bossidy and Ram Charan - Execution

3

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 Challenge

4

Why Do Organizations Struggle So Hard With Strategy?

1 in 10 organizations

execute their strategies

successfully

72% of CEOs believe that

executing their chosen

strategy is more difficult

than developing a good

strategy

Fortune Magazine, 1998

Malcolm Baldrige CEO Survey, 2002

Strategy Development or Strategy Execution? Organizations Need Both

Strategic

Success

At Risk Doomed From

The Start

Missed

Opportunity

Str

ate

gy F

orm

ula

tio

n

Flawed Sound

Fla

wed

Sound

Strategic success requires going beyond successful strategy

formulation to successful strategy execution

Strategy Execution

5

MISSION Why We Exist

VALUES What’s Important To Us

VISION What We Want To Be

STRATEGY MAP Translate The Strategy

BALANCED SCORECARD Measure and Focus

TARGETS & INITIATIVES What We Need To Do

PERSONAL OBJECTIVES What I Need To Do

STRATEGIC OUTCOMES

Satisfied

Shareholders

Delighted

Customers

Efficient & Effective

Processes

Motivated &

Prepared Workforce

STRATEGY Our Game Plan

THE FRAMEWORK

6

What is the Balanced Scorecard

(BSC)?

The balanced scorecard is a management system (not only a

measurement system) that enables organizations to clarify their vision

and strategy and translate them into action.

It provides feedback around both the internal business processes and

external outcomes in order to continuously improve strategic

performance and results.

When fully deployed, the balanced scorecard transforms strategic

planning from an academic exercise into the nerve center of an

enterprise.

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FINANCIAL PERSPECTIVE

"TO SATISFY OUR SHAREHOLDERS,

WHAT FINANCIAL OBJECTIVES MUST

WE ACCOMPLISH?”

"TO SATISFY OUR CUSTOMERS, AND

SHAREHOLDERS, IN WHICH INTERNAL

BUSINESS PROCESSES MUST WE

EXCEL?”

INTERNAL PERSPECTIVE

"TO ACHIEVE OUR FINANCIAL

OBJECTIVES, WHAT CUSTOMER

NEEDS MUST WE SERVE?”

CUSTOMER PERSPECTIVE

Balanced Scorecard – Strategic Alignment

Measurement gives

clarity to vague concepts

Strategy can be described

as a series of cause effect linkages

LEARNING PERSPECTIVE

"TO ACHIEVE OUR GOALS, HOW

MUST OUR ORGANIZATION

LEARN AND INNOVATE?”

8

LAG MEASURES (Outcome)

Purpose

Focus on the performance results at

the end of a time period or activity

Examples

“year-end-budget expense”

“client satisfaction”

“cases per caseworker”

Strengths

Usually objective and easily captured

Issues

Outcome measures reflect success of

past, not current, activities and

decisions

LEAD MEASURES (Driver)

Purpose

Measure intermediate processes and

activities

Examples

“hours spent with clients”

“$ spent on automation”.

Strengths

More predictive in nature

Allows organisations to adjust

behaviors for performance

Issues

Based on hypotheses of strategic

“cause and effect”

Often difficult to collect supporting data

Strategic Measures

Balanced Scorecard – The Idea

Financial Perspective

GOALS MEASURES

Customer Perspective

GOALS MEASURES

Learning & Growth Perspective

GOALS MEASURES

Internal

Process Perspective GOALS MEASURES

The Balanced Scorecard Links Performance

Measures

How Do We Look to

Shareholders?

How Do

Customers See

Us?

Can We Continue to

Improve and Create

Value?

What Must We

Excel At?

Harvard Business Review January-February 1992

Accounts

Receivable

Operating

Expense

Return on

Capital Employed

Customer

Satisfaction

Rework

Employees’

Suggestions Employees’

Morale (+)

(+)

Financial

Customer

Internal

Business

Process

Learning

and

Growth

Harvard Business Review January-February 1996

How One Company Linked Measures

from the Four Perspectives

(-)

(-)

(+)

(+)

(-)

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Learning & Growth

Business Processes

Customer

Financial

“Strategy is a set of hypotheses” Cause & Effect Relationships

ROCE

Customer Loyalty

On Time Delivery

Process Quality Process Cycle Time

Employee Skills

Strategic Theme:

Operating Efficiency

Profitability Financial

Learning

More customers

Ground crew alignment

Lowest prices

Fewer planes

Flight Is on time

Customer

Internal

Fast ground turnaround

What will drive operating efficiency?”

• More customers on fewer planes

How will we do that?

• Attract targeted customer segments who

value price and on time arrivals

What must the internal focus be?

• Fast turnaround

Will our people do that?

• Educate and compensate ground crew

regarding how they contribute to the firm’s

success

• Employee stockholder program

The BSC Should Tell the Story of the Strategy

10

Objectives

• Fast ground

turnaround

Statement of

what

strategy

must

achieve and

what’s

critical to its

success

Target

• 30 Minutes

• 90%

The level of

performance

or rate of

improvement

needed

Strategic Theme:

Operating Efficiency

Profitability Financial

Learning

More customers

Ground crew alignment

Lowest prices

Fewer planes

Customer

Internal

Fast ground turnaround

Diagram of the cause and effect

relationships between strategic

objectives (Strategy Map)

Flight Is on time

• Cycle time

optimization

Key action

programs

required to

achieve

objectives

Initiative Measurement

• On Ground Time

• On-Time

Departure

How success

in achieving

the strategy

will be

measured and

tracked

Some Common Vocabulary

Human capital

Identify the strategic job families

Develop the competency profile

Assess the human capital readiness

Formulate a plan for improving the human capital

Information capital

Transaction processing applications: This involves the

day to day, repetitive tasks.

Analytic applications: This involves statistical analysis

used to understand and improve

Transformation applications: This involves change in the

nature of business

Organization capital

Culture: This describes the perception across the

company of its goals, mission, and policies.

Leadership and accountability

Alignment: Linking rewards to performance

Teamwork: A system of global knowledge management

Le

arn

ing

& G

row

th

Pe

rsp

ec

tive

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Strategy Map (TATA Steel)

CoC: Code of Conduct (TATA)

CVM: Customer Value Mgmt.

RVM: Revenue Value Mgmt.

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Top-Down “Bridging

Process” To Share

the Strategy & Align

the Workforce

Bottom-Up Process

to Internalize &

Execute the Strategy

CORP

SBU

The Strategy Focused Workforce

Strategic Education

& Communication

Personal Scorecards

Personal Development

Incentives & Rewards

Principles of the Strategy Focused Organization: MAKE STRATEGY EVERYONE’S JOB

The Challenge: Moving Strategy from the Top to the Bottom

13

BSC-Based Performance Management

Top Ten Balanced Scorecard Implementation Issues

Premature links to management processes

Lack of cascading

Terminology

No new measures

Consistent management practices

Timing

No objectives for the Balanced Scorecard program

No Strategy

Lack of Balanced Scorecard education and training

No executive sponsorship

14

STRATEGY

Formulate

Navigate Communicate

Execute

Summary: The Balanced Scorecard Provides a Framework to Manage Organizations That Execute Their Strategies Rapidly and

Reliably

Reengineer

Processes

Comprehensive

Communication to

Create Awareness

Rationalize & Align

the Organization

Translate the Strategy

Align Goals &

Incentives

Align

Resources &

Initiatives

Create

Knowledge

Networks

Strategic

Feedback

Encourages

Learning

Executive Teams

Manage Strategic

Themes

Testing

Hypotheses,

Adapting &

Learning

“The Strategy Focused Organization” Principles of a

Strategy Focused Organization

1. Translate the Strategy to

Operational Terms

2. Link & Align the

Organization Around It’s

Strategy

3. Make Strategy Everyone’s

Job

4. Make Strategy a Continuous

Process

5. Executive Team Leadership

to Mobilize Strategic

Change

‘90 ‘92 ‘94 ‘96 ‘98 ‘00 ‘02 ‘04 ‘06

The Balanced Scorecard has gone through three distinct cycles of evolution.

HBS

Books

HBR

Articles

A Measurement

System

(The Balanced

Scorecard)

A Performance

Management System

(Strategy-Focused

Organizations)

A Core Competency

(Strategy Execution)