Bsc workshop

©2002 ClaritasAsia Pte Ltd©2002 ClaritasAsia Pte Ltd..

Cascading the Balanced Scorecard at

Commercial Vehicle Business Unit,

Tata MotorsAn in-depth training and development

seminar

March 8 - 9th, 2004

CLARITASASIA‘FOCUS ON THE FUTURE’


Our agenda Module 0 Welcome

Module 1 The rationale for balanced scorecard

Module 2 Cascading the balanced scorecard

Module 3 Strategy mapping in detail

Module 4 Developing your cascaded strategy maps – workshop

exercises

Module 5 Developing performance measures – workshop exercises

Module 6 Resource allocation through initiatives

prioritisation

Module 7 Designing an ongoing management process

Module 8 Next steps


Module 0

Welcome


Welcome! This course is designed to introduce the complete balanced scorecard process and to provide a framework for reaping the benefits

from balanced scorecard within Tata Commercial Vehicles

The course is a hands-on working session designed to equip you to champion and lead subsequent activities on balanced

scorecard within Tata Commercial Vehicles

We will start with a review for the rationale behind balanced scorecard

We will identify best practice by reviewing external case studies, but most importantly by working with your scorecards that have

already been developed.

From concept to implementation!!!!


Getting to know each other

Your questions or concerns regarding this seminar or any balanced scorecard experiences to date?

Your role

Your current knowledge level


Module 1

The rationale for Balanced Scorecard


Interactive session 1

What are key issues facing today’s CEO?


Organisations are facing change at unprecedented speed

Capability to respond to the unforeseen!

GlobalisationGlobalisationCRMCRM

M&AM&A

Technology Technology innovationinnovation

AccountabilityAccountability

CostsCosts

AND


“Business Strategy is now the single most important issue … and will remain so for the next five years”

Business Week

More than ever, we need clarity on our organisational goals


“Less than 10% of strategies effectively formulated are effectively executed”

Fortune

And, we need to able to implement our strategies more effectively


If you don’t know where you are going, then……..

Strategic planning is the tool we use to establish our direction

Any road will do!!!!



What are problems with typical strategic planning?


Some of the ‘problems’ with strategic planning

Question

What did you do differently as a result of the last strategic planning process??

Once a yearOnce a yearLimited participationLimited participation

Form filling exerciseForm filling exercise

‘‘Secret’Secret’

Not linked to Not linked to budgetingbudgeting



What are problems with implementing strategy?


Some of the ‘problems’ with implementing strategy

Question

Do you have the time to think about the

strategy??

Managing to budgetManaging to budget

Not understandingNot understanding the strategythe strategy

Today’s crisisToday’s crisis

No ‘real’ informationNo ‘real’ information

Inadequate resourcesInadequate resources


What we must fix There must be a shared consensus on the strategy at the

executive level

We must communicate the strategy to the organisation

We must ‘translate’ the strategy into meaningful objectives which

all employees can identify with

Personal goals, targets and rewards should be clearly linked to

the strategy

Business processes should support achievement of the strategy

Management reporting should be designed around strategic goals

Management must lead by example


We need better processes in strategy formulation and in managing strategy implementation

A new culture of performance management based

on a single integrated business process


Many organisations have been successfully deploying an approach based around balanced

scorecard

Strategy Formulation

Strategy Refining

GlobalExternal Issues

LocalExternal Issues

BSC

Strategy“StressTest”

Costing

ETC.Strategic Initiatives

Performance Measures

Budgeting

New Technologies

HR

Knowledge Mgmt

ManagementReporting

ContinuousRe-forecasting

Strategy Loop


The history of a journey

Measurement System

Strategy Implementation

Total Strategy Management

Articles in Harvard Business Review: “The Balanced Scorecard —

Measures that Drive Performance” January - February 1992

“Putting the Balanced Scorecard to Work” September - October 1993

“Using the Balanced Scorecard as Strategic Management System” January - February 1996

1996 2000 2004

1992 1996 2000 2004


• Profitability• Growth • Shareholder Value

Organisation Vision

• Price• Service• Quality

• Market Innovation• Continuous Learning

• Intellectual Assets

• Strategy is ‘described’ using four ‘perspectives

• Cause and effect is a key element

• Measures are developed to monitor performance

“If we succeed, how will we look to our shareholders?”

“To achieve our vision, how must we look to our customers?”

“To satisfy our customers, what management processes must we excel at?”

“To achieve our vision, how must our organisation learn and improve?”

• Cycle Time• Productivity• Cost

Financial Perspective

Customer Perspective

Internal Perspective

Organization Learning

Traditional BSC modelBalanced Scorecard provides a framework to translate strategy into operational terms.


The terminology of balanced scorecard

Measures are important, BUT not the

whole picture!!!!!

PerspectivesPerspectivesThemesThemes

MeasuresMeasures

TargetsTargets

AccountabilityAccountability

InitiativesInitiatives

ObjectivesObjectives


Successful Balanced Scorecards start with a strategy map Example Mobil (US Marketing & Refining)

Growth Theme

Improve quality of revenue by understanding customer needs and differentiating ourselves accordingly.

Productivity Theme

Maximize utilization of existing assets and integrate the business to reduce total delivered cost.

Financial Perspectiv

e

Return on Capital

Increased from 6% to 16%

Competitive Position(profitability)

From last (1993)to first (95, 96, 97, 98)

Volume Growth

Exceeds industry by 2-2.5% annually

Reduce Cash Expenses

Down by 20%

Improve Cash Flow

From -$500 M/Yr to +$700 M/Yr

Customer Perspectiv

e

Internal Perspectiv

e

Customer SatisfactionContinuous improvement for 3

consecutive years

Speedpass ActiveIncreasing at rate of

1M per year

Dealer Quality Perfect OrdersContinuous

improvement for 4 consecutive years

Learning & Growth

Perspective

Quality Capacity Utilization Safety Lost work incidents

down from 150 to 30 per year

Environmental

Number of incidents reduced by 63%

Continuous improvement for 4 consecutive years

Annual value of lost yield reduced from

$175m to $50m

Product Innovation Customer Management

Operational Excellence Good Neighbor

Motivated & Prepared Workforce

Continuous improvement for 4 consecutive years

Strategic AwarenessAnnual employee survey shows awareness of

strategy increased from 20% to 80% Source:Source:The Balanced ScorecardThe Balanced ScorecardD. Norton & R. KaplanD. Norton & R. Kaplan


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

• Cycle time optimization

Key action programs

required to achieve

objectives

InitiativeMeasurement

• On Ground Time• On-Time

Departure

How success in achieving the strategy

will be measured and

tracked

Strategic Theme: Operating Efficiency

ProfitabilityFinancial

Learning

Morecustomers

Ground crew alignment

Lowest prices

Fewer planes

Customer

Internal

Fast ground turnaround

Strategy Map: Diagram of the cause-and-effect relationships between strategic objectives

Flight Is on time

Balanced Scorecard terminology


• % Ground crew trained

• % Ground crew stockholders

Objectives Measurement

• Market Value

• Seat Revenue

• Plane Lease Cost

• FAA On Time Arrival Rating

• Customer Ranking (Market Survey)

• On Ground Time• On-Time

Departure

Strategic Theme:Operating Efficiency

Initiative

• Cycle time optimization program

• ESOP

• Ground crew training

• Quality management

• Customer loyalty program

Target

• 30% CAGR

• 20% CAGR

• 5% CAGR

• #1

• #1

• 30 Minutes• 90%

• yr. 1 70%yr. 3 90%yr. 5 100%

ProfitabilityFinancial

Learning

MoreCustomers

Ground Crew Alignment

Lowest Prices

Fewer Planes

Customer

Internal

Fast Ground Turnaround

Flight Is on Time

• Profitability

• More Customers

• Fewer planes

• Flight is on -time

• Lowest prices

• Fast ground turnaround

• Ground crew alignment

Balanced Scorecard example


1

2

3 4

5

The Strategy Focused Organisation

Source:Source:The Strategy Focused OrganizationThe Strategy Focused OrganizationD. Norton & R. KaplanD. Norton & R. Kaplan


Summarising

The Balanced Scorecard gives us the framework to

describe our strategy (perspectives)

The Strategy Map is how we describe the detail of our

strategy

Themes help us focus on specific aspects


Some Goals of the Balanced Scorecard

Translate a strategy into operational terms

Ensure that the components of the strategy -- objectives, measures, and initiatives -- are aligned and linked

Communicate the strategy throughout the organisation

Form the basis of an effective and integrated strategic management process


The Balanced Scorecard is a tool and framework with a number of applications that can be tailored to the situation.

Scorecard Benefits for Your Organisation?

Clarify the vision

Gain consensus and ownership

Align the organisation

Integrate strategic planning

Drive resource allocation

Improve management effectiveness


Understanding how to measure performance

Measures and targets are the tools of strategy assessment

What should we measure & what constitutes a stretch target?

Revenue Growth Strategy Productivity Strategy

FinancialPerspective

CustomerPerspective

ImproveReturns

ImproveOperatingEfficiency

BroadenRevenue Mix

IncreaseCustomer

Confidence inOur Financial

Advice

IncreaseCustomer

SatisfactionThrough Superior

Execution

Cross-Sell theProduct Line

Shift toAppropriate

Channel

Provide RapidResponse

Develop NewProducts

MinimizeProblems

UnderstandCustomerSegments

Innovation Customer Management Operational Excellence

EmployeeSatisfaction

Revenue perEmployee

Strategic JobCoverage Ratio

Strategic InfoAvailability

Personal GoalsAlignment (%)

Increase EmployeeProductivity

Access toStrategic Info

Align PersonalGoals

DevelopStrategic Skills

F1 - Improve ReturnsF2 - Broaden Revenue Mix

F3 - Reduce Cost Structure

C1 - Increase CustomerSatisfaction With

Our Products & People

C2 - Increase Satisfaction “Afterthe Sale”

I1 - Understand Our CustomersI2 - Create Innovative Products

I3 - Cross-Sell Products

I4 - Shift Customers to Cost-Effective Channels

I5 - Minimize OperationalProblems

I6 - Responsive Service

L1 - Develop Strategic Skills

L2 - Provide Strategic Info

L3 - Align Personal Goals

Return on Investment Revenue Growth

Deposit Service Cost Change

Share of Segment

Customer Retention

New Product Revenue

Cross-Sell Ratio

Channel Mix Change

Service Error Rate

Request Fulfillment Time

Employee Satisfaction

Revenue per Employee

Strategic ObjectivesStrategic Measurements

(Lag Indicators) (Lead Indicators)

Revenue Mix

Depth of Relation

Satisfaction Survey

Product Development Cycle

Hours with Customers

Strategic Job Coverage Ratio

Strategic Info Availability Ratio

Personal Goals Alignment (%)

Le

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Fin

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lStrategy Map

Measures & targets


But having a plan is no good if you can’t allocate resources in support of it!!!

Are you clear where the ‘dollars’ are being spent?

What percentage of your budget is ‘spent’ even before the start of the financial year?

What funds are available for real ‘breakthrough’ activities?

Can you make an effective case for budget funds?

Is there a clear process to link strategy and budgeting?


Given a focus on driving change, how do we ensure effective resource prioritisation?

Initiative mapping

allocates effort

Objectives

Asset Productivity

Be the Lowest Cost Service Provider

New Revenue Sourcing

Timely response

Promised Delivery

Partnering

Integrate and Align Resources

New Service Development

Focused Technology Dvpmt

Perfect fulfillment

Performance Leadership

Strategic Comp. and Skills

Individual and Team Perf

Customer Sensitive Culture

Perspective

Financial

Customer

Internal

Learning and Innovation

Initiatives

Objectives

Asset Productivity



Timely response

Promised Delivery

Partnering




Perfect fulfillment





Perspective

Financial

Customer

Internal


InitiativesRevenue Growth Strategy Productivity Strategy


CustomerPerspective

ImproveReturns


BroadenRevenue Mix

IncreaseCustomer


Advice

IncreaseCustomer


Execution


Shift toAppropriate

Channel


Develop NewProducts

MinimizeProblems




Revenue perEmployee






Align PersonalGoals


Strategy Map


The final component involves risk assessment

Risk is assessed at each stage and risk action plans developed

Key Risk Factor: Customer

A-1 ….. 10% 7 3 4 84

A-2 .…. 15% 5 5 6 150

A-3 ….. 10% 3 3 6 54

A-4 ….. 10% 7 5 7 245

A-5 ….. 15% 7 5 7 245

A-5 ….. 10% 7 4 5 140

A-7 ….. 10% 6 7 8 336

A-8 ….. 10% 5 4 7 140

Weight Potential Impact

Likeli-hood

Control Effectiveness

Risk Score

Key Risk Factor: Customer

A-1 ….. 10% 7 3 4 84

A-2 .…. 15% 5 5 6 150

A-3 ….. 10% 3 3 6 54

A-4 ….. 10% 7 5 7 245

A-5 ….. 15% 7 5 7 245

A-5 ….. 10% 7 4 5 140

A-7 ….. 10% 6 7 8 336

A-8 ….. 10% 5 4 7 140

Weight Potential Impact

Likeli-hood

Control Effectiveness

Risk Score

Financial

Learning & Growth

Internal

Customer

Financial

Learning & Growth

Internal

Customer

Stra

tegi

c P

lann

ing

Pro

cess

es

Ris

k M

anag

emen

t P

roce

sses

Strategy Map Development

Measures & Targets

Identification

INIT

IAT

IVE

S

OBJECTIVES

Initiative Alignment

Risk Identification &Prioritization

Risk MitigatingStrategies and Action

Plans Developed

Key Performance Indicators Identified

Key Risk Indicators Identified

Ex

ce

lle

nc

e in

Cu

sto

me

r F

ocu

sed

Se

rvic

e d

eli

ve

ry

StrategicObjective

Description/Definition MeasuresChampion Due

Ex

ce

lle

nc

e in

Cu

sto

me

r F

ocu

sed

Se

rvic

e d

eli

ve

ry

StrategicObjective

Description/Definition MeasuresChampion Due

Strategic Alternatives Assessment

Strategy Refinement &

Agreement

Action Plan Development & Implementation

Strategy Formulation

Risk Scenario Analysis

• Risk Scenarios• Strategic Risks• Risk Tolerance

• Business Model• Environment• Options


In summary Strategic planning is THE most important

part of the total annual cycle The process needs careful planning to

maximise the value of the output Planning techniques like strategy

mapping can hugely add to the clarity and focus of the deliverables

Budgeting should be integrated around the plan

Effective performance measures must be put in place to track progress

Resources must be ‘freed up’ to achieve value creation

Risk issues must be factored in A redesigned ‘process of management’

will ensure effective ongoing decision making

Effective information feedback systems are key to making it all happen

Focus on the Future!


Module 2

Cascading the balanced scorecard


We have seen previously how the strategy map drives the measures,………

Measures and targets are the tools of strategy assessment

What should we measure & what constitutes a stretch target?



CustomerPerspective

ImproveReturns


BroadenRevenue Mix

IncreaseCustomer


Advice

IncreaseCustomer


Execution


Shift toAppropriate

Channel


Develop NewProducts

MinimizeProblems




Revenue perEmployee






Align PersonalGoals


F1 - Improve ReturnsF2 - Broaden Revenue Mix

F3 - Reduce Cost Structure

C1 - Increase CustomerSatisfaction With

Our Products & People

C2 - Increase Satisfaction “Afterthe Sale”

I1 - Understand Our CustomersI2 - Create Innovative Products

I3 - Cross-Sell Products

I4 - Shift Customers to Cost-Effective Channels

I5 - Minimize OperationalProblems

I6 - Responsive Service

L1 - Develop Strategic Skills

L2 - Provide Strategic Info

L3 - Align Personal Goals

Return on Investment Revenue Growth

Deposit Service Cost Change

Share of Segment

Customer Retention

New Product Revenue

Cross-Sell Ratio

Channel Mix Change

Service Error Rate

Request Fulfillment Time

Employee Satisfaction

Revenue per Employee

Strategic ObjectivesStrategic Measurements

(Lag Indicators) (Lead Indicators)

Revenue Mix

Depth of Relation

Satisfaction Survey

Product Development Cycle

Hours with Customers

Strategic Job Coverage Ratio

Strategic Info Availability Ratio

Personal Goals Alignment (%)

Le

arn

ing

Inte

rna

lC

us

tom

er

Fin

an

cia

lStrategy Map

Measures & targets


…..and helps to prioritise resources

Initiative mapping

allocates effort

Objectives

Asset Productivity



Timely response

Promised Delivery

Partnering




Perfect fulfillment





Perspective

Financial

Customer

Internal


Initiatives

Objectives

Asset Productivity



Timely response

Promised Delivery

Partnering




Perfect fulfillment





Perspective

Financial

Customer

Internal


InitiativesRevenue Growth Strategy Productivity Strategy


CustomerPerspective

ImproveReturns


BroadenRevenue Mix

IncreaseCustomer


Advice

IncreaseCustomer


Execution


Shift toAppropriate

Channel


Develop NewProducts

MinimizeProblems




Revenue perEmployee






Align PersonalGoals


Strategy Map


Strategies are executed through operational units. The strategies of the operational units must be integrated if organization purpose and synergies are to be achieved.

LINE BUSINESSES SUPPORT UNITS

CORPORATE

SBUA

SBUB

SBUC

SBUD

CORPORATE SCORECARD

Strategic Agenda Measures

EXTERNAL PARTNERS

• Customer Scorecards

• Distributor Scorecard

• Joint Venture Scorecard

• Vendor Scorecard

• New Venture Scorecard

• Outsourcer Scorecard

#1.

A Corporate Scorecard defines overall strategic

priorities.

#3.

Each Support Unit develops a plan and BSC for “best practice” sharing to create synergies across SBUs.

#2.

Each SBU develops a long-range plan and BSC consistent with corporate

strategic agenda.

#4.

Plans and BSC’s define relationships with external partners consistent with

SBU strategy.

1. Financial Growth

2. Delight the Consumer

3. Win-Win Relationships

4. Safe & Reliable

5. Competitive Supplier

6. Good Neighbor

7. Motivated & Prepared

8. Quality

xxx

xxx

xxx

xxx

xxx

xxx

xxx

xxx

xx xx xxxx

• Finance

• Marketing

• Distribution

• Procurement

• Purchasing

• Safety

• Human Resources

• Information Technology

There is usually more than one balanced scorecard in an organisation – we call this

process ‘cascading’


Why cascade?

The Tata Commercial Vehicles balanced scorecard

reflects the objectives, measures and targets at the

total Tata Commercial Vehicles management level

Individual business units need to link their goals and

objectives to the Tata Commercial Vehicles goals and

objectives

Support functions also need aligned objectives


Understanding the cascade process

There are a number of different approaches to cascading a balanced scorecard

Three sample approaches:

1) Shared Organisation Unit

Identical objectives (Parent) (Child)





2) Contributory Organisation Unit

Translated objectives (Parent) (Child)





3) Hybrid Organisation Unit

Identical, translated & unit specificobjectives (Parent) (Child)


Method 3 is likely to be more appropriate in a diverse organisation

It offers more flexibility

It provides for flight specific

goals to be defined

It allows for flights to develop

more targeted measures

It doesn’t stop you adopting

either of the other approaches

if that fits your needs


Module 3

Strategy mapping


The visual representation of our strategy

In their latest book, Norton and Kaplan look at experiences derived from what is the most important

part of all balanced scorecards

A way to define ‘discrete’ components of strategy

The basis for resource prioritisation

The guide to setting meaningful measures

2004


So what is a strategy map?

“ Strategy is a hypothesis…… The essence of implementing

strategy is to have hypotheses clearly understood in the

organisation, to align resources with the hypotheses, to test the

hypotheses continuously, and to adapt as required in real time.

We refer to these hypotheses as strategy maps”

Balanced Scorecard Report David Norton and Robert Kaplan


Customer Proposition

A strategy map is an X and Y axis diagram

Internal Processes

Learning & Growth

Financial

Th

eme

B

The X Axis consists of thegeneric four perspectivesof balanced scorecard

The Y Axis consists of strategic themes which are specific to eachorganisation



Experience shows two types of strategy mapType A

Internal Processes

Learning & Growth

Financial

Th

eme

B

Strategic themes run fromtop to bottom through all four perspectives


Type A : ‘Wells Fargo On-Line Financial Services’

Le

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“Add and Retain High Value and High Potential Value Customers”

“Increase Revenue Per Customer”

Maximize Profit

“Reduce Cost Per Customer”

Fin

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l

MigrateCustomers

Increase Efficiency

Develop Customer Self-

Help

Manage Alliance Costs

Streamline Manual

Processes

Automate Processes

Develop Customer Self-

Service

Grow Internal Revenues

Increase Fees and Balances

Grow Revenues from Non-Branded Sources

Identify and Develop Third

Party Relationships

Attract and Retain Key Players and Staff in General

Enhance Bench Strength and

Succession Planning

Increase Manager Competency and

Functional Technical Competency at All

Levels

Continue Development of organisation and

Culture

Deploy Scorecard and Embed

Develop and Implement Cost-Effective Marketing Plans, Sales Tools and Evaluation Techniques Including the Effective

Use of Data

Migrate Mass Consumers to

On-Line

Increase Customers’

Use of On-Line

Reduce Cost Per Customer for the

BankIncrease Revenue

Per Customer

Cross-Sell Branded Products

and Services

Cu

sto

me

r

Grow Revenue

Value Proposition

Basic Requirements Differentiators

• Time Savings• Security• Price• Reliability

• Multiple Channels• Service• Features/Ease of Use• Products

New

Manage Attrition

Develop and Implement

Cost Effective Marketing

programmes

Migrated

Continue Leadership in

Superior Product and Features Development

Add & Retain High Value and High Potential Value

Customers

Develop Superior Service

Capability

Maximize Reliability

EXAMPLE

Strategic themes run fromtop to bottom through all four perspectives



Experience shows two types of strategy mapType B

Internal Processes

Learning & Growth

Financial

Th

eme

B

Strategic themes are developed within internalperspective only


Increase ROCE to xx%


New Sources of Non-Gasoline Revenue

Increase Customer Profitability Through

Premium Brands

Become Industry Cost Leader

Maximize Use of Existing Assets

Create Non-Gasoline

Products & Services

“Build the Franchise” “Increase Customer Value” “Operational Excellence” “Good Neighbor”

Improve Environmental,

Health and Safety

Understand Consumer

Segments

Best-In-Class Franchise

Teams

Improve Hardware

Performance

Improve Inventory

Management

On-SpecOn-Time

Industry Cost Leader

A Motivated and Prepared Workforce

• Aligned• Personal Growth

Climate for Action

• Functional Excellence• Leadership Skills• Integrated View

Competencies

• Process Improvement• Y2K

Technology

Speedy Purchase

Friendly Helpful Employees

Type B : ‘Mobil US Marketing & Refining’


Customer Perspective

Internal Perspective

Learning & Growth Perspective

Help Develop Business

Skills

More Consumer Products

Recognize Loyalty

Differentiators

“Win-Win Dealer Relations”“Delight the customer”

Strategic themes are developed within internalperspective only


There’s no absolute rule, but experience over a number of years shows some

regularly recurring categories of themes.

Typically these are:

‘Build the franchise’ – relating to new business opportunities

‘Increase customer value’ – relating to how we build on customer relationship

‘Achieve operational excellence’ – relating to our internal cots and efficiency

management

‘Be a good corporate citizen’ – relating to our business and environmental

corporate practices

How do you develop the themes

Note how themes have a ‘doing’ thrust


Example:

Increase customer value may be described by differing

organisations as:

Expand into overseas markets

Develop new product lines

Grow through vertical integration

Or some combination of the above

Within any of these ‘theme types,’ the exact components vary by organisation and reflect the

specifics of the strategic approach

Note how constructing these themes has a significant impact on bringing clarity to our strategy

It tells us what we do- it also tells us what we don’t do


Some general rules for themes

Themes represent the ‘how’ in your strategy

Typically there will be between 3 and 5 key themes

Less than 3 themes indicates little ‘how’

Too many themes may mean a fragmented strategy

Themes should be ‘discrete’ and non-overlapping

Type B strategy maps are more common and easier to

construct

Themes are an ‘engineers’ way to view strategy



Now that we understand themes, lets look in more detail at the ‘X axis’

Internal Processes

Learning & Growth

Financial


The Financial Perspective-goals/typical areas for consideration

Goals of the Financial Perspective

• Create awareness of accountability to shareholders

• Determine the financial objectives upon which the company will be measured by shareholders and management

• Establish the “financial gap” that will clarify the magnitude of change required

• Build an economic model clarifying the critical drivers of growth and productivity

• Use the economic model to identify strategic issues

How Do We Close the Gap?

MaximizeReturn on assets

Profitable growth

byby

Define the Performance Gap

800

450

The Gap”$350 Million increase

(75% Increase)

‘99 ‘02

PBIT (Profit Before Interest and Tax)

Manage Operation costs


The Customer Perspective - goals/typical areas for consideration

• Focus the company on satisfying customer/market demands

• Articulate the objectives upon which the company will measure its success in satisfying market/customer demand

• Identify the drivers of loyalty, and

• Demonstrate how the company will differentiate itself in the eyes of customers.

Goals of the Customer Perspective

Value Proposition = (Product / Service Attributes) + Image + Relationship

Functionality Quality Price Time

Generic Model


The Internal Perspective- goals/typical areas for consideration

• Identify core business processes

• Customize the generic value chain to specifics of the business

• Identify elements that must be added or created to achieve the top-down financial and customer objectives

• Assess the operating characteristics of core processes

– Impact on time, cost, quality

– Opportunities for rationalization or integration

Goals of the Internal Perspective

Innovation Cycle

Operations Cycle

Post-Sale Service Cycle

“OperationalExcellence”

DevelopProducts/ Services

CreateServiceOffering

Sell the Products/ Services

ProvideCustomer Service

Optimiseation

Distribution& Execution

Generic Value Chain Model

“Customer Management”

“Innovation”

SatisfyCustomer

Needs

IdentifyCustomer

Needs


The Learning & Growth Perspective-goals/typical areas for consideration

• Create awareness of Learning and Growth’s fundamental role in driving long-term performance

• Identify the specific Learning & Growth requirements for each learning and growth objective

Goals of the Learning & Growth Perspective

organisation Learning

= ƒKnowledge & Technology

Assets

Climate for Action, ,

Sample Generic Learning & Growth Objectives:Employee

Competencies

Typical Learning & Growth Objectives

Employee Competencies Knowledge &Technology Assets

Climate forAction

• Increase Employee Satisfaction

• Retain key people

• Drive productivity

• Leverage Core competencies

• Leverage technologies

• Capture Best practices

• Seek and protect patents, copyrights

• Ensure Strategic Information is accessible

• Set accountability / empowerment

• Create line of sight between objectives and scorecard

• Encourage cross-functional teaming


Some general learnings

No two strategy maps look the same

Most strategy maps are the result of a number of

iterations during development

The process of building the map is as valuable as the

end product

Themes bring segmentation and focus


Financial

Learning & Growth

Internal

Customer

Organizational Competency

Organizational EfficiencyLeadership & Talent

Support Business Growth Performance Based Culture

Manage HR Cost Efficiency

Operating Efficiency Themes

Customer Objectives

Strategic Objectives

Organisational Enablers

Leadership/Competencies &

Skills

Retention of Leaders

Change & Performance Driven

Culture

Optimize Human Capital

Align HR Strategy with Business

StrategyRewards

Performance/Execution

Right People, Right Job, Right Time

Optimizing Service Delivery through

Streamlined Processes & Automation

Performance Driven

Internal Group/Division/Subsidiaries External Statutory Bodies/Vendors/Consultants Employees

Strategic Business Partner

Financial Destination

Strategy maps in support functions -Example of an HR scorecard


Some thoughts on support function strategy maps

The same ‘x axis’ applies

Themes often split between ‘effectiveness’ and

‘efficiency’

They can be quite hard to develop

There is a tendency to over elaborate

Don’t create them unnecessarily!!


Module 4

Developing your cascaded strategy maps

Workshop exercises


KEY CHALLENGES

1. Creation of world class products Performance Cost Time 2. Successful exploration of new Frontiers Markets Businesses Alliances, etc.

3. Continuous cost reduction

4. Organization to make it happen Competencies Performance ethic

5. Develop attitude for being World class

6. Develop passion for Customer Satisfaction

7. Create in customer, a blindfold trust in our Quality

The most important challenges being faced by CVBU are…


Be amongst the top 5 profitable CV manufacturers

globallyBe a dominant

player in domestic

market in all segments

Enhance product offerings

Excel in Corporate

governance social

responsibility

Fin

an

cia

lC

usto

mer

Bu

sin

ess P

rocess

Learn

ing

& G

row

thRevenue growth Productivity improvement

Enhance Value for Channel partners

OF1

OF2

OC4

OP4

OC2Increase

accessibility for customers

Identify and acquire Information

technologies in line with company

strategy

Align employees to company

strategy

OL1

A motivated, prepared and disciplined workforce

OL5

OC3

Excel in the

journey to excellence

(TBEM)

Culture and climate for action Strategic competencies

Corporate Citizenship

Channel PartnerEnd Consumer

OL6Map and source/ develop strategic

competencies

Enhance Employee satisfaction

OL3

Continuous Improvement

Be the lowest cost

manufacturer of CVs

globally

CV

BU

Str

ate

gy M

ap

2

00

3-0

4

Value proposition

OF5

Value creation

Create High performance

culture amongst

employees

OL4OL2

Enhance Customer satisfaction through safe, reliable and good

value products and services

OC1

STRATEGIC OBJECTIVES – Strategy Map Strategic

Objectives

Design and Development

(NPI)

Install Globally benchmarked processes in...

OP1 Manufacturing & Vendor

management

OP2 Sales & Marketing

OP3

Grow non-cyclical business revenue (Export + Defence + LOB4 + FBV

+ Plant sales )

Grow International Business

OF3OF4

Tata Commercial Vehicles strategy map


Lets get real – Lets start building a strategy map for your organisation

Take some time to look at the

components of financial

strategy

What are the main

opportunities for revenue

growth?

What is the plan for cost

and/or productivity savings?

What about asset utilisation?

Considering the above factors, review the financial perspective for your

business unit


Review your financial imperatives

What do your stakeholders require from you?

What constitutes financial success?

What is your revenue growth strategy (if any)?

What is your cost management strategy?

What is your asset management strategy?

Financial strategy is more than just staying within budget


Creating the model of strategy

The financial model

What is our overarching financial goal,

and how will we achieve it?

Sources of revenueSources of revenue Asset utilisationAsset utilisation Cost & productivityCost & productivitymanagementmanagement

Financial goalFinancial goal(NEV, ROCE Etc.)(NEV, ROCE Etc.)



The financial model (cont.)

Establishing the source of revenue growth?

Sources of revenueSources of revenue

New product

New customerOld customer

Old product

Increased customer

penetration (65%)

New customer

acquisition (35%)




Establishing the role of

asset management? A/cs receivable

Capex

Asset utilisationAsset utilisation

Stock

Cash

A/cs payable

Working

capital




Establishing the impact

of cost and productivity

Cost & productivityCost & productivitymanagementmanagement



Take some time to review

how you will segment

your customers

For each customer

group, what are the

customer value

propositions?

Considering the above factors, review the customer perspective for your

business unit



Take some time to review the

internal perspectives of the

various strategy maps that we

have seen in this workshop

Identify the major themes that

apply to your organisation.

Define some more detailed

strategic objectives within

each theme.

Considering the above factors, review the internal perspective for your

business unit



The critical internal processes

The themes are probably more than just operational excellence

Be a Good Citizen

Regulatory Processes

Provide Operational Excellence

Operational Processes

Increase Customer Value

Customer Management Process

Build the Franchise

Innovation Process


Identify key themes

Themes represent the ‘how’ in your

strategy

Typically there will be between 3 and 5

key themes

Themes are a way of breaking down the

strategy into discrete deliverables

Be prepared to iterate!!!

Themes create the way in which we think about the deliverables of the organisation


Build objectives within each theme

Expand coverage ofprofitable outlets

Improve call frequency

Increase availability of key packages

Ensure Product

Availability

Establishing cause and effect is a key element



Consider the components that

we previously looked at in

learning &growth

For each component identify

the critical areas in your

organisation that might inhibit

you from realising the

strategies already described

Set objectives to focus on

how to overcome these issues

Considering the above factors, review the learning & growth perspective

for your business unit



The learning & growth infrastructure

What are the people, infrastructure and culture issues?

Strategic Competencies

Strategic Technologies

Climate for Action[ ) ]()()( + +


Module 5

Developing Performance Measures

Workshop exercises


Interactive session

What makes a good measure?


The role of measures

To communicate purpose

To shape behaviour

To provide feedback on performance

Measuring the ‘wrong’ things can be more harmful than not measuring!!!


The need for leading and lagging measures

Our scorecard will be a balance of leading and lagging measures

Leading measures are the drivers of future performance

e.g. average time to requisition

They help us understand what we can managetoday

Lagging measures validour past performance

e.g. operational readiness

They help us understand if our strategy is working


Strategic Objective: Names the objective Measure: Names the measureMeasurement Intent: Describes the measure and the reasoning behind its selection as an indicator of progress against this strategic objective.

Measurement Definition/Formula: Provides a detailed formula for the calculation of a numerical value for the measure

Source For and Approach to Setting Targets: Identifies the report, document, system or individual from which the information will be obtained

Target Setting Responsibility: Person

Tracking / Reporting Responsibility:Person

Measure Availability: dateTarget: date

Frequency of Update: Identifies how often it is calculated

Units of Measure: Identifies the units in which the measure will be reported

Accountability for Meeting Target: Person

Notes/Assumptions: • Clarifies terms in the formula as necessary• Highlights key assumptions underlying the

formula

Measurement Information Is:___ Currently Available___ Available With Minor Changes

Data Elements and Sources: The data elements required to calculate this measure and the source systems, databases, documents, etc. of those data elements

2002Actual 2003 0047 2004

Lists numerical targets by year for the various component of the formula where relevant. For 2002 list targets by quarter and year.

1Q2Q3Q4QFull Year

Target

Next Steps:

We need to fully define measures before we can report on them


Be aware of the following issues

Setting too many measures

Measures lacking targets

Just looking at what we measure today

Inability to collect data


What about target setting?

Targets are key to monitoring

performance

Targets are set for the duration of the

strategic plan

Targets cannot be set in isolation

‘Sanity checking’ is necessary

Modeling is a good idea


Can everything be measured

‘Proxies’ can often be developed in hard to

measure areas

Don’t create meaningless measures

Be wary of just measuring activity

Absence of data doesn’t devaluate the need for it

– it just shows up gaps in our current information

management systems

Index measures can confuse if not used properly


Mandated measures

In addition to the centre and services level measures

which you develop, it may be the case that HSA will

require some additional measures to be recorded by all

organisational units.

These measures may be needed where:

A consolidated measure is needed at HSA level

Performance comparisons are required at HSA level

Have you decided on these?


Lets get real – Lets start building the measures

Consider the strategy map

that you have recently created

Review your existing

measures and see if they are

comprehensive

Will you add more measures?

Will you drop any measures?

Develop a revised framework of measures for your business unit


Module 6

Resource allocation through initiatives prioritisation


Defining initiatives Initiatives are ‘change’ agents

They will help us achieve our targeted performance

Every initiative should have an impact on achieving

one or more strategic objective

Not all objectives need initiatives

Initiatives are our link to resource planning and

budgeting

Initiatives are not ‘business as usual’

How many initiatives are How many initiatives are underway in your organisation? underway in your organisation?


Initiatives close a performance gap

Initiatives help close the gap between our current and desired performance

INITIATIVEImplement automated case management system and

train Every Rep in 99

Customer Satisfaction

Survey Rating

90% favorable overall

Measure

Target

Target Actual

90%

45%

$M

gap

Measures track our progress toward achieving and communicating the intent of the objective

MEASURE / TARGET

OBJECTIVEIncrease Customer

Satisfaction

Objectives articulate the components of our strategy


Initiative mapping is a valuable tool

Objectives

Asset Productivity



Timely response

Promised Delivery

Partnering




Perfect fulfillment





Perspective

Financial

Customer

Internal


Initiatives


Initiatives prioritisation processes can be developed

Fit

Bu

sin

es

s C

as

eT

ime

to

re

su

lt

Strategic Importance

Cost ($)

Lapse Time (Months)

Very Low Low Moderate High Very High

Very High> $1m

High$1m - 750k

Moderate750k - 500k

Low500k - 350k

Very Low< 350k

Very Long> 18

Long18 - 12

Moderate12 - 9

Short9 - 6

Very Short< 6

Scores

Weight

Criteria

0 25 50 75 100


Module 7

Designing an ongoing management process


Report design – the most neglected component of balanced scorecard

A new type of management report is required

Reporting should be presented in terms of ‘prioritised issues’

not tables of numbers

Use graphics to aid communication of messages.

Ensure commentary on performance issues is provided by

objective owners

Use initiative linkage to identify opportunities and problems


A framework for the report

Strategy Map

Prioritised by business impact within theme

Ranked by theme impact on total organisational result

Year end ‘credibility’ reporting‘windsock’

$

t

Budget

Likely outcome

Commentary

AsjsjsjjsjshfhfHfhfhfhdhdhhd

DhdhhdJdjjdjdjdjjdjdj

Related initiativesa) Jdkkdkdjdjdjdjdjjdjjdb) dhhdhdhhddhdhhdhd

Detailed analysis of related operational objectives within -theme


Year end forecasting options The ‘Windsock’

Copyright Copyright Metapraxis LtdMetapraxis Ltd


Innovative reporting techniques - 1




F6 – Increase fee based incomeComments

Objective SupportedMeasure Intent

Initiatives Supporting F6None identified.

4Q00

value

4Q00

target

Year to date fee based income15% >10% y

5%

8%

10%

15%

10% 10% 10% 10% 10%

1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01 1Q02

during quarter target

return index see also:

Performance Owner: Coordinator: Reporter:

Typical BSC report page


Be aware of the data issues

Not all data will be collected today

You can implement without all the data being

present

You must design ongoing data collection

procedures

Data reporting deadlines need to be established

A Balanced Scorecard Coordinator should be

appointed


Communication is a key success factor

Communication starts with the kick-off meeting

Communication is necessary throughout the three

stages

A formal communication plan should be developed


A communication planning template

WHOUser Groups

WHATMethod of

Communication

WHENFrequency of

Communication

WHOResponsibility for Communication

Materials required

InitialEducation

Ongoing Information

USER GRP EDUCATION ONGOING

WHEN WHAT WHO PURPOSE WHEN WHAT WHO


Module 8

Next Steps


Contact Nigel Penny at +65 9815 7830

For more information on the Balanced Scorecard...

Bsc workshop

Business

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