Strategy Execution Champions 2011 PDF

Strategy Execution Champions
The Palladium Balanced Scorecard

Hall of Fame Report 2011
The Palladium Balanced Scorecard Hall of Fame for Executing Strategy

Class of 2010
Abu Dhabi Government/General
Secretariat of the Executive Council
Dimension Data Asia Pacific

(formerly Datacraft Asia)
AKSA Acrylic Chemical
Federal Bureau of Investigation
Barcelona City Council
First Philec Solar Corporation
Boys & Girls Clubs of Puerto Rico
Folkhlsan
Christchurch City Council (New Zealand)
Health Insurance Review & Assessment

Service (South Korea)
Cisco Systems/Customer Value Chain

Management
Culligan Argentina
Product #12693
Hindustan Petroleum Corporation Ltd.

The Hospital for Sick Children
(Toronto)
MAPFRE Brazil
Merck & Co.
Minor Food Group
City of San Fernando
(Pampanga, Philippines)
Sociedad Hipotecaria Federal
TNT Express Services UK & Ireland
Strategy Execution Champions:

The Palladium Balanced Scorecard Hall of Fame Report 2011
We invite you to explore our family of Balanced Scorecard publications and tools.
Balanced Scorecard Hall of Fame Reports
BSC Hall of Fame Profiles
Editorial Advisers
Robert S. Kaplan, Baker Foundation Professor, Harvard Business School
David P. Norton, Director and Founder, Palladium Group, Inc.
Each year, we publish a Hall of Fame Report profiling the
BSC Hall of Fame Profiles provide an in-depth look at the
organizations named to the Palladium BSC Hall of Fame for
practices, processes, and decision making of 15 select BSC
Executing Strategy in the previous calendar year. The first
Hall of Fame winners. Each profile includes a 3,000- to
Publishers
Robert L. Howie Jr., Managing Director, Palladium Group, Inc.
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such annual Hall of Fame Report was published in 2004.
4,000-word narrative, along with Key Results, Takeaways,
The eight Reports published thus far highlight 129 of the
and an SFO Spotlight section that summarizes the orga-
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Fame since its inception.
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In this eighth annual Balanced Scorecard Hall of Fame Report,
we pay tribute to the 20 organizations that were inducted into
the Palladium Balanced Scorecard Hall of Fame for Executing
Strategy in 2010. This diverse group represents a broad spectrum
of industries from the public and private sectors throughout
the world. All are exemplars of strategy management discipline,
through their application of the Kaplan-Norton approach to
strategy execution as embodied in the Palladium Execution
Premium Process (XPP). The remarkable execution premiums
these winners have achieved attest to the power of disciplined
strategy management when it is successfully linked to operations.
INTRODUCTION
Results First: Creating Value along the Performance Continuum. . . . . . 2
PROFILES
Abu Dhabi Government/General Secretariat of the
Executive Council. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
AKSA Acrylic Chemical . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Barcelona City Council. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Boys & Girls Clubs of Puerto Rico. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Christchurch City Council (New Zealand). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Cisco Systems/Customer Value Chain Management. . . . . . . . . . . . . . . . . . 19
Culligan Argentina. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Dimension Data Asia Pacific (formerly Datacraft Asia) . . . . . . . . . . . . . . . 23
Federal Bureau of Investigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
First Philec Solar Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Folkhlsan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Health Insurance Review & Assessment Service (South Korea). . . . . . . 31
Hindustan Petroleum Corporation Ltd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
The Hospital for Sick Children (Toronto). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
MAPFRE Brazil. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Merck & Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Minor Food Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
City of San Fernando (Pampanga, Philippines) . . . . . . . . . . . . . . . . . . . . . . . 43
Sociedad Hipotecaria Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
TNT Express Services UK & Ireland. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Palladium Balanced Scorecard Hall of Fame Report 2011
Results First: Creating

Value along the
Performance Continuum
By Robert L. Howie Jr., Chief
Marketing Officer, Palladium Group,
Inc., and Director, Palladium
Balanced Scorecard Hall of Fame
for Executing Strategy
If you cant measure it, you cant manage it.
Strategy is important, but its the execution that counts.
Whether the two thought leaders can claim full credit for these
axioms, its safe to say that the universal currency of these statements is in large measure a triumph of the revolution Robert
Kaplan and David Norton began nearly 20 years ago with the
Balanced Scorecard. The effectiveness of the Kaplan-Norton
approach to executing strategy has become well known around
the world. The report that you hold in your handsthe eighth
such report since the Balanced Scorecard Hall of Fame program
was launched in 2000provides ample evidence that the
approach can be learned and mastered by any organization
having the desire to do so and the right capabilities in place.
Organizations clarify their strategy using a strategy map;
translate it into action with the Balanced Scorecard; align the
organization through shared objectives and performance
incentives; link strategy to operations through plans, processes,
and resources; monitor and learn through dashboards and key
performance indicators (KPIs); and test and adapt the strategy to
ensure the desired outcomes.
This is the proven six-stage Kaplan-Norton approach that highperforming organizations, including the 20 newest members of
the Hall of Fame profiled here, embrace to achieve sustainable
breakthrough performance results.
This approach, based on systems dynamics, is also what Michael
Beer, professor emeritus at Harvard Business School, calls the
technical system of strategy managementwhat you and I
might call the left-brained, disciplined, engineering approach to
strategic performance management. Over the past decade,
a vast body of knowledge has developed around the KaplanNorton system, anchored by the strategy map, the Balanced
Scorecard, and other tools, from strategic job families and
the Office of Strategy Management to Strategic Expenditures
(StratEx). Five best-selling business books, 10 Harvard Business
Review articles, more than 350 articles in Balanced Scorecard
Report: The Strategy Execution Source, and scores of cases
presented in countless classes, conferences, and seminars have
documented the practices and experiences of organizations

throughout the globe, along with the performance successes
they have achieved and sustained.
The evidence is overwhelming: the Kaplan-Norton system
delivers on its promise of helping organizations of any type,
in any industrypublic or private, regardless of governance
modelsuccessfully execute their strategies.
Change Everyone Can Believe In

Yet there is another side to this success story that we must
not overlook, and it has to do with the right-brained, individual,
behavioral approach to strategic performance management.
Organizations dont execute strategy; people do. Each individual
must embrace the organizations strategy and effect the changes
in his or her behavior that are required for success. But people
dont embrace change spontaneously. They need to be persuaded. Its up to leaders to make the case for change and win
employees hearts and minds.
For many years, speaking at Palladiums public conferences,
Robert Kaplan often observed, Leadership is necessary but
insufficient. He was referring to the need for a system that
helps articulate, communicate, measure, and manage strategy
and its execution.
More recently, Kaplans thinking has evolved to the point
where he now claims, Leadership is necessaryand sufficient.
With the right kind of leadership, the restthe process part
is entirely feasible. We can teach process and system
implementation and executionbut we cant teach leadership.
Leadership is the sine qua non of successful strategy execution; it creates the conditions by which organizationsand the
people within themwill change and perform according to
the new imperatives.
Strategy is how an organization intends to create value for its
stakeholders consistent with its mission. Strategy execution is
the process of creating that value. Employeesthose who do
the work that leads to value creationneed to know about the
strategy and understand how they contribute to it. But understanding it isnt enough; they must also believe in it if they are to
fully engage in executing it.
Creating a high-performance culturethe kind of culture that
inspires individuals to want to perform, that causes them to
believe deeply in the organizations mission and in their contribution to that missionis a fundamental and essential task of
leadership. Individuals personal mastery of the competencies
required to perform is also essential, but leadership comes first.
Leaders make the case. They galvanize; they inspire.
As you review the profiles of the 2010 Hall of Fame winners, you
will find that these organizations leaders made the case for
The Palladium Execution

Premium Process (XPP), based
on the Kaplan-Norton approach
to executing strategy, is
composed of six stages. In stages
5 and 6, organizations analyze
results, test strategic assumptions, and adapt accordingly. By
using the XPP approach, Hall of
Fame winners have successfully
executed their strategies.
change in part by expressing dissatisfaction with the status quo,

even in organizations that were performing well. These leaders
made the case for change to inspire individuals to achieve even
higher levels of performance. Regardless of the performance
starting point, in almost every case leaders had to first overcome
organizational and individual inertia, either mere reluctance or
outright resistance, to change behaviors.
John Kotter, one of the worlds foremost experts on leadership
and change (and professor emeritus at Harvard Business School),
identified eight steps for leading change successfully: (1) establish a sense of urgency; (2) form a powerful guiding coalition;
(3) create a vision for change and the strategy for achieving it;
(4) communicate the vision and strategy; (5) empower others to
act on the vision and strategy; (6) produce early wins; (7) sustain
the change effort; and (8) embed change into the culture.1 For
those in charge of strategy execution, recognizing these steps
is important because managing strategy is, after all, managing
change. Its about moving an organization and its people to a
place they want to go but have never before been. The leaders of
the Hall of Fame winners in this report understand this fundamental truth, and engage employees, through both the right and
left sides of the brain, to ensure that their change program has
staying power.
The starting point for change is culturethe way we do things

around here. When Richard Clark became CEO of Merck & Co.
(a 2010 Hall of Fame winner) he famously said, We first must fix
the culture. If we dont, culture will eat strategy for lunch every
time. He was referring to the not invented here mind-set then
prevalent at Merck. It was a mind-set that Clark was determined
to change. (On pages 3940, you can read about how his effort
turned out.)
Building organizational capability and the competencies to support change are, of course, critical to sustainable execution. These
actions include establishing an Office of Strategy Management
to coordinate the cross-functional business processes required
to execute strategy, and ensuring that decision makers, whatever
their organizational level, have access to enterprise performance
management systems that contain the data they need, when they
need it, to make better, more informed decisions.
Show Me the Money

In the introduction to the 2010 Hall of Fame Report, I cited documented evidence that the Kaplan-Norton approach to executing
strategy works, evidence so compelling that it bears repeating
here. A 2008 study by independent academics Aaron Crabtree
(of the University of NebraskaLincoln) and Gerald DeBusk
1 K
otter is author of the best-selling book Leading Change (Harvard Business Press, 1995) and a popular version of the book, Our Iceberg Is Melting (St. Martins Press,
2006). Robert Kaplan mapped Kotters eight principles to the six stages of the Kaplan-Norton system in Leading Change with the Strategy Execution System,
Balanced Scorecard Report: The Strategy Execution Source, NovemberDecember 2010 (Reprint #B1011A).
(University of TennesseeChattanooga) analyzed the share-price

performance of more than 160 public companies (BSC users and
nonusers)matched by industry, organization size, and other
criteriaover the BSC users three-year post-BSC adoption period.
BSC users outperformed nonusers across three measures of
performancemarket value of equity, book-to-market ratio, and
net assetsby an average of 28%. In their article in Advances in
Accounting, Crabtree and DeBusk concluded:
Many firms have adopted the Balanced Scorecard (BSC) as a
way to execute strategy and measure performance. ...[F]irms
that adopt the BSC significantly outperform those that do
not adopt the BSC over a three-year period beginning with
the year of adoption. ...These results provide strong evidence
that the BSC is an effective strategic management tool that
leads to improved shareholder returns.2
The Crabtree and DeBusk findings show that companies using
the Kaplan-Norton approach to executing strategy achieve
growth in shareholder value that is three times as great as those
years. Moreover, the percentage of organizations using the BSC

and analytics together for three or more years and achieving
breakthrough results was four times the percentage of organizations achieving breakthrough results and using only one of the
two tools. Its no surprise that most of the Hall of Fame organizations in this report fall into the former group; theyve linked
strategy management and business intelligence to scale and
sustain their successful execution.
The Results Continuum

Its not uncommon for Hall of Fame companies to achieve
revenue growth of, say, 225%, or profitability growth of 150%, or
increases in shareholder value (measured by whatever yardstick
you choose) on the order of 200%. They do so by doing many of
the right things right, typically for two or more years. It takes
time and resources to close the gap between an organizations
current performance and its desired future performance. Creating extraordinary value for stakeholders with results that can be
measured in the hundreds of millionsif not billionsof dollars
takes time, resources, and effort.
According to Arun Balakrishnan, former chairman and managing director of Hindustan Petroleum, a 2010
Hall of Fame winner, The Kaplan-Norton approach helped us early on to clarify our strategic objectives,
align ourselves with them, and communicate and implement change.
companies that do not. This differential constitutes what we
call an execution premium, creating extraordinary value for
stakeholders.
A 2009 survey of members of the Palladium Execution Premium
Community (XPC), an online community of strategy management
professionals, provided powerful evidence of the added impact
of the BSC when used in combination with enterprise performance management technologies such as business intelligence
and decision analytics. Survey participants were asked about
their use (and length of use) of the BSC, as well as their use of
such technologies. It turns out that the use of decision analytics
alone (without the BSC) does little to improve an organizations
chances of strategic success; fewer than 20% reported achieving
breakthrough results.
A separate study by Palladium, published in Business Network
Transformation: Strategies to Reconfigure Your Business
Relationships for Competitive Advantage, demonstrates how
powerful the outcome is when analytics are combined with the
BSC.3 The odds of success rise dramatically: to a 57% chance of
breakthrough results (when BSC usage is less than three years)
and to 77% when the BSC has been in use for more than three
Breakthrough performance: the term can convey instantaneity,

something accomplished in a single blow, the overnight
sensation. That is rarely the case. Moreover, the performance
results achieved by the Hall of Fame winners described in this
report takes place along a continuumthe Kaplan-Norton
strategy execution continuumand not just at the end of two
or three years.
In our experience in working with organizations over many
years, different types of results are realized in different time
periods, some in the earliest stages of a strategy transformation.
In fact, through extensive research, we have identified three
categories of benefits and approximate time frames in which
these benefits begin to accrue. The most basic benefits, such
as getting aligned, are organizational. Next come operational
benefits. Finally, organizations achieve strategic benefitsthe
breakthrough, pan-BSC-perspective, across-the-board results
that are the accumulation and the culmination of the aggregate
performance improvements and results.
The key organizational result derived from the Kaplan-Norton
approach to strategy execution is alignment. Much has been
written about the essential need for and power of alignment,
2 A
. Crabtree and G. DeBusk, The Effects of Adopting the Balanced Scorecard on Shareholder Returns, Advances in Accounting, incorporating Advances in
International Accounting 24 (2008): 815. See also BSC Adoption Boosts Shareholder Returns: Findings from a Recent Study by DeBusk and Crabtree, in Balanced
Scorecard Report, MayJune 2010 (Reprint #B1005C).
3 J. Word, ed., Business Network Transformation: Strategies to Reconfigure Your Business Relationships for Competitive Advantage (Wiley & Sons, 2009).
Palladium Balanced Scorecard Hall of Fame for

Executing Strategy 20002010
whose benefits include enhanced teamwork and sharper focus.

Getting your top 10 leaders on the same page is a precondition
for getting the next 500 or the next 10,000 on the same page.
This is usually accomplished in a matter of weeks, not months; if
the experience of Hall of Fame organizations is a guide, getting
the top 10 aligned can be accomplished in as little as 30 days.
According to Arun Balakrishnan, former chairman and managing
director of Hindustan Petroleum, a 2010 Hall of Fame winner,
The Kaplan-Norton approach helped us early on to clarify our
strategic objectives, align ourselves with them, and communicate and implement change.
safety. These improvements are measurable results that have

direct and indirect benefits. Reducing product cycle times, for
example, saves money and resourcesa direct result. It also
yields indirect (and perhaps more important) results, such as
accelerated sales and receivables collection.
Consider this small sampling of operational results achieved by
2010 Hall of Fame winners. AKSA Acrylic Chemical cut raw materials wastage from 103 tons to 72 tons (indirect result: reducing its
environmental footprint). Ciscos Customer Value Chain Management division helped raise the percentage of products achieving Six Sigma quality by almost 23% (indirect result: greater
Strategy execution is a team sport. The roles of the chief operating officer, chief financial officer, chief
strategy officer, chief information officer, and chief human resources officeralong with the other
C-suite and business-unit chiefs that make up the senior leadership teamare critical to effective
strategy execution.
Long before Duluth, Minnesotabased Essentia Health achieved
a compound annual growth rate of 127% while improving
operating margins by a factor of 3, Essentia saw results. In fact,
Essentiaa $1.6 billion healthcare system (formerly SMDC
Health System, a 2002 Hall of Fame winner)realized results
almost immediately after adopting the Kaplan-Norton approach
more than a decade ago. Getting ourselves aligned first was a
turning point for the executive team, says CEO Peter Person,
M.D. The agenda of our monthly leadership meeting shifted
from day-to-day operations to strategic-issue decision making.
And at the Toronto-based Hospital for Sick Children (another
2010 winner), the common cause of alignment, as clarified in
the hospitals BSC and in from-to diagrams illustrating current
status to desired state, created a near-immediate culture shift
from silos to solidarity. Within two quarters, MRI wait times fell,
and medication reconciliation (analyzing the interactions of
all of a patients medications) went from being performed on
33% of patients admitted to nearly 70% of them.
Although its not easy to measure the quantitative value of
organizational results, many Hall of Fame organizations have
managed to do so. The ability of Nemours, the Wilmington,
Delawarebased pediatric healthcare institution and 2007 Hall
of Fame winner, to communicate its strategy to a bond rating
agency convinced the agency to award the hospital a AAA rating.
This organizational competency saved Nemours what might
have amounted to millions of dollars in borrowing costs (a financial result) as the organization prepared to undertake a major
capital expansion.
Even before achieving dramatic breakthroughs in revenue and
profits, strategy-focused organizations achieve operational
results. For example, their leading KPIs show improvements in
such areas as cycle time reduction, employee retention, and
reliability and an enhanced reputation in the marketplace). The

percentage of employees at Culligan Argentina with access to
online strategic reporting rose from 0% to 23% (indirect result:
faster, better decision making by more people, including customer-facing personnel). The City of San Fernando in the Philippines
slashed the time needed to process a new business permit from
two weeks to 25 minutes (indirect result: fostering business and
economic development).
Timing Is Everything
Nor are results limited to the organizational and the operational.
Several years ago, in assessing the strategic initiatives portfolio
of a bank client, we were able to document in less than a month
that 30% of its initiatives had little or no measurable strategic
impact. At the same time, key elements of the banks strategy
lacked initiatives that could close the performance gap. By pulling the plug on the 30% of initiatives lacking strategic impact,
the bank saved millions. Launching new initiatives that did in
fact support the banks strategic objectives added some cost,
but the bank still realized a net savings of many millions of
dollarsmoney it was then able to reinvest elsewhere. Equally
important, management was assured that every strategic
objective was now supported by one or more corresponding
initiatives. This causal link, fundamental to the Kaplan-Norton
approach, translates into significant tangible benefits.
The causal links between strategy map perspectivesalso
fundamental to the Kaplan-Norton approachprovide us with
an even clearer way to understand the sequence and timing of
results. In the foundational learning and growth perspective
(known at the FBI, another 2010 Hall of Fame winner, as the
three Ts: talent, teamwork, and technology), many Hall of Fame
members measure employees awareness and understanding
of the strategy and employee engagement. Generally speaking,
employee understanding and awareness of the strategy

prerequisites to successful executioncan be achieved in 60
to 90 days, depending on the organizations size, complexity, and
other factors. (Effective communicationcarried out seven
times in seven waysnever ends.)
In the internal process perspectivethe heart of all operations,
where the work gets doneresults can be achieved in three to
six months, again depending on factors unique to the organization. In the customer perspective, whose outcomes are causally
based on the objectives of the underlying learning and growth
and internal process perspectives, results at Hall of Fame organizations were typically achieved in four to nine months. In the
financial perspective (locus of the ultimate results for corporations) or the mission perspective (locus of the ultimate results
for mission-based organizations), breakthrough performance
results will take longer to manifest themselves. For many Hall
of Fame organizations, it takes anywhere from 18 to 30 months
to achieve such breakthrough results as doubling shareholder
value (or, for nonprofits, doubling donor contributions).
The 20 organizations profiled in this years Hall of Fame Report

were named to the Hall of Fame in 2010 based on the strength
of their strategy management systemsall of which are based
on the Kaplan-Norton approachand their performance results
through 2009.
Its worth noting that although weve been citing CEOs throughout these examples, strategy execution is a team sport. The roles
of the chief operating officer, chief financial officer, chief strategy
officer, chief information officer, and chief human resources
officeralong with the other C-suite and business-unit chiefs
that make up the senior leadership teamare critical to effective
strategy execution. Each of these individuals brings a unique
perspective, insight, experience, and influence to bear in executing the strategy. Each ones personal engagement, commitment
to change, and effectiveness in aligning his or her own unit or
area to the strategy are essential ingredients to success.
Eliminating or reducing spending on nonstrategic initiatives:

30 to 60 days. Potential savings: millions of dollars
Educating and engaging employees in the strategy:
60 to 90 days
Initial process improvements and new projects to fill performance gaps yielding measurable results: three to six months
Results achieved in customer objectives, based on learning
and growth and internal process actions: four to nine months
If an organization is not getting organizational, operational,

or other measurable results earlyin weeks or months, not
quartersits unlikely it will ever achieve breakthrough strategic performance. Early resultsthose that are organizational
and operationalare gateway results. They lay the foundation
for breakthrough results, and are, in effect, bellwethers of
eventual breakthrough performance.
Profiling the Class of 2010
Martin Madeus, chairman and CEO of 2009 Hall of Fame winner

Millipore Corporation, said, Our strategy maps and BSCs ensure
that our people understand our strategy and their individual
and team contributions to it. As a result, were on track to double
shareholder value within five years. It took only four years for
Millipore to increase revenues 82% and see its stock price rise
41%. Billions of dollars in value were created.
So lets recap this results timetable. Although best case, these

scenarios are typical of Hall of Fame winners, as the profiles in
this report show.
Breakthrough results, such as doubling shareholder value:

18 to 30 months
Eight winners hail from the Americas (Argentina, Brazil, Canada,

Mexico, and the United States); five from Europe and the Middle
East (Finland, Spain, Turkey, the United Arab Emirates, and the
UK/Ireland); and seven from the Asia-Pacific region (India, New
Zealand, the Philippines, Singapore, South Korea, and Thailand).
They represent a similarly diverse range of industries and sectors, and run the gamut in size, from organizations with fewer
than 200 employees to those with workforces in the tens of thousands. And their challenges were, in the least, many; at most,
downright daunting.
Seven winners are government organizationsthe Abu Dhabi
Government/General Secretariat of the Executive Council,
the city councils of Barcelona and Christchurch (New Zealand);
the City of San Fernando (Pampanga, the Philippines); the U.S.
Federal Bureau of Investigation; South Koreas Health Insurance
Review & Assessment Service; and Mexicos Sociedad Hipotecaria Federal. As public sector entities, they must demonstrate,
whether to a legislature, a ministry, or the general public, that
they provide value for taxpayers and citizens and serve the
common good. Typically, they serve multiple types of customers,
which adds complexity to their strategy maps and strategy
management process; at times, this means reconciling constituents conflicting needs (e.g., building new infrastructure while
reining in taxes). Many faced the classic government challenge
of doing more with less, a challenge heightened by the recessionary environment and economic uncertainties of the past
few years. All have had to cut through siloed structures and
the bureaucratic mind-set to instill teamwork and foster crossfunctional behavior and actions, while sharpening competencies
to private-sector levels.
Manufacturers such as AKSA Acrylic Chemical, Cisco Systems/
Customer Value Chain Management, and First Philec Solar Corporation must constantly balance two imperatives: innovation
and operational efficiency. And they must do so in a business
Strategy execution is indeed a journey. But that doesnt mean organizations cannot experience results
along the way. Organizations neednt delay gratification; in fact, by pursuing and expecting preliminary
results, they lay the groundwork for an execution premium down the road. Strategy execution is a
continuum; results are cumulative and reinforce each other.
environment in which competitors can come seemingly out of
nowhere to overtake even the most established market leader
with breathtaking speed.
Social services organizations Folkhlsan (the Finnish health
and wellness group) and the Boys & Girls Clubs of Puerto Rico
grappled with growth and the need for clear, well-communicated
strategies and new systems and processes to support them
all while maintaining the financial discipline that is often overlooked, though no less important, in nonprofits.
On top of a national economic crisis and a flood of new competitors, Culligan Argentina faced an overwhelming lack of management systems and customer service standards that threatened
its fiscal survival. Dimension Data Asia Pacific, already familiar
with the ruthlessness of IT markets, needed a mechanism for
evolving from a product to a solutions focusand one that
would help it transcend the cultural and process differences
among its 13 geographies. Hindustan Petroleum Corporation
faced market liberalization with a workforce unprepared for
the rigors of private competition. The Hospital for Sick Children
needed an organizing framework to prioritize, communicate,
and pursue its ambitious goals in care, research, and education.
In addition to unifying two separate entities, MAPFRE Brazil had
to find a way to build growth in a new marketthe substantial
lower-income segment of the Brazilian population that had
never before bought insurance. Shifting costs, expiring patents,
and skyrocketing innovation costs prompted Merck & Co. to
create a rigorous strategy management infrastructure. A raft of
strategic risks convinced executives at Minor Food Group that
a strategy makeoveralong with a disciplined management
systemwas imperative. And intensifying competition, flat customer satisfaction, and a looming recession convinced leaders
at TNT Express Services UK & Ireland that they needed a clearly
articulated strategy, strategy management structures (such as
an Office of Strategy Management), and prioritized initiatives to
remain viable.
Through the profiles of these 20 organizations, youll learn more
about the challenges they faced, their decisions and actions, and
the execution premiums they realized. Their successes are all the
more impressive considering they were achieved during a time
of recession and economic uncertainty.
A System That Works

If the profiles in this report affirm anything, it is that successful
strategy execution is possible for any organization. Its no accident, however, that 70% to 90% of organizations fail at executing
strategy.4 Certain key ingredients must be in place: leadership,
a commitment to change, a clear and universally understood
strategy, and a disciplined management process to execute the
strategy. What successful execution does not require is waiting
years for results to show. Results should begin to appear
early on, and their arrival fuels the desire for morein turn,
accelerating further results that stoke pride of achievement
and an ever-increasing commitment by all.
Business in the twenty-first century moves fast. And the
accelerated pace raises performance expectations. If your
organizations performance is measured quarterly, can you even
afford to wait two years to see results? Certainly, achieving the
ultimate resultbreakthrough strategic performancetakes a
commitment in people, resources, and time. Strategy execution
is indeed a journey. But that doesnt mean organizations cannot
experience results along the way. Organizations neednt delay
gratification; in fact, by pursuing and expecting preliminary
results, they lay the groundwork for an execution premium down
the road. Strategy execution is a continuum; results are cumulative and reinforce each other.
Early results are themselves leading indicators of the execution
premiumthat extraordinary, organization-wide value that the
Hall of Fame winners profiled in these pages have achieved. This
newest class of Hall of Fame winners demonstrates that theyve
achieved benefits all along the continuum, from first results
those immediate or near-term operational and organizational
gainsto the aggregate breakthroughs. We encourage you to
study the remarkable journeys of these 20 organizations and the
results they achieved along each milestone of the strategy
continuumresults that propelled them forward in their pursuit
of breakthrough performance. These lessons are as rich and
varied as they are adaptable to any organization with the will to
inspire and lead transformational change.
4 A
n early 1980s survey of management consultants noted that fewer than 10% of well-formulated strategies were successfully implemented (reported in Corporate Strategists Under Fire, by Walter Kiechel, Fortune, December 27, 1982). By 1999, the statistics had hardly improved; in Why CEOs Fail (Fortune, June 21, 1999),
Ram Charan and Geoffrey Colvin observed that 70% of companies failed at strategy execution.
Abu Dhabi Government/

General Secretariat of the
Executive Council
In 2006, the booming, cosmopolitan capital of the United Arab
Emirates forged an ambitious new
strategyonly to struggle with
operationalizing it. Two years
later, Abu Dhabis Executive Council embarked on
a comprehensive and disciplined path to strategy
execution. At its heart: the councils Performance
Management Framework, which fosters alignment
vertically, horizontally, and thematically.
These champions identify specific whole-ofgovernment outcomes for which they are
responsible and also develop outcome definition
cardsmini-scorecards with key measures
that help the ADGSEC quickly see whether outcomes are being achieved.
In recent decades, Abu Dhabi has transformed itself from a

small, localized economy into a booming, $187 billion economy
fueled by oil and global finance. The largest of the seven United
Arab Emirates and the federations capital, it now accounts for
more than 50% of the UAEs total GDP. A constitutional monarchy with a population of about 1 million, Abu Dhabi is run by an
18-member executive council headed by Crown Prince Sheikh
Mohammed bin Zayed Al Nahyan.
In 2006, the Executive Council set its sights on becoming a
world-class government. It introduced a comprehensive strategy
encompassing and coordinating the activities of its 34 government organizations, or entities, from healthcare and utilities to
environmental management. But the obstacles to implementing
the strategy were formidable. Each agency employed hundreds
of people and had its own budget, constituents, and systems.
Employees were wary of what they saw as yet another attempt
at strategic planning. And managers lacked the expertise
to align people throughout the sprawling organization and
translate strategy into action. Without a comprehensive policy
agenda, the new strategy floundered.
A Vision, a Plan, a Performance Management Framework

Then, in 2008, the Executive Council took a new tack, articulating a vision focused on creating a more globally competitive
economy and becoming a leading government. It also crafted a
17-point policy agenda with such goals as A caring society that
provides equal opportunities, Readily accessible world-class
information and communication technologies (ICT) infrastructure, and World-class government administration and
services. This long-term planit has a two-decade horizon
involved devising a program of short- and medium-term actions
and initiatives. The Executive Council turned to the Balanced
Scorecard to make it all happen.
The Abu Dhabi General Secretariat of the Executive Council

(ADGSEC), an administrative body reporting to the Executive
Council, was tasked with creating an operational framework for
the governments long-term vision. Using the BSC methodology,
the ADGSEC took a disciplined, rigorous approach to translating
the strategy into strategy maps and scorecards and cascading
them to each entity. For example, it created what it called a
whole of government (WoG) strategic five-year plan and strategy map, which encompassed the policy agendas 17 goals. After
several revisions, the ADGSEC produced individual entity (i.e.,
agency or departmental) maps to link and align objectives
and initiatives to the WoG plan. Perhaps more important, it
created its Performance Management Framework encompassing
the vision and policy agenda, with goals, outcomes, priorities,
and initiatives, along with corporate- and entity-level strategy
maps, and a five-year strategic plan for each entity.
To reinforce alignment between departments and functions,

the ADGSEC organized strategy maps drawing on four strategic
themes: Social Sustainability, Environmental Sustainability,
Knowledge-based Economy, and Human Capital, along with
two enablersInfrastructure and Government Excellence. To
further strengthen this alignment, the ADGSEC created strategy
maps for each strategic theme. It also appointed champion entities in agencies or departments, such as utilities and finance,
that provide services to external or internal customers. These
champions identify specific WoG outcomes for which they
are responsible and also develop outcome definition cards
mini-scorecards with key measures that help the ADGSEC
quickly see whether outcomes are being achieved.
The OSM and Initiative Management

The Government Performance Management Division (GPMD),
which reports to the ADGSEC, serves as the ADGSECs Office of
Strategy Management (OSM), with a mission of enabling and
driving the delivery of policy, strategy, and initiatives execution
to create public value. Twelve staff members drive or coordinate most elements of key strategy management processes,
from strategy development to strategy review.
Perhaps the OSMs most impressive role is managing initiativesa formidable task, given the number of entities and
initiatives (some 1,700 thus far). The office ensures that the
initiatives support the strategy and pinpoints areas of overlap
and gaps; it then oversees and monitors their progress. The OSM
also prioritizes initiatives by assigning each one a score and
plotting results according to such criteria as strategic relevance
and available resources. Additional analysis examines such
considerations as the relationship between feasibility and ease
of implementation.
The GPMD also ensures that initiatives are linked to specific
budget categoriesoperating expenditures (OpEx), capital
expenditures (CapEx), and strategic expenditures (StratEx)and
takes steps to detect any misallocation of resources. As part
of the yearly budgeting process, the GPMD and Department of
Finance calculate the total budget allocated to each strategic
goal and identify relevant initiatives, as well as the entities
driving those initiatives.
Initiatives often affect multiple outcomes or themes. Those
aimed at developing human capital through education might
also, for instance, affect social sustainability, because that
theme encompasses education and healthcare quality. To
ensure fund allocations are balanced, each initiative is analyzed
to determine its impact on the WoG outcomes and entity-level
priorities, as well as on service delivery.
Awareness and Accountability

To help overcome the natural tendency toward bigger bureaucracy and a siloed culture, the Executive Council has actively
sought to increase transparency and accountability. For example,
initiative owners are identified in strategic plans. Performance
contractsessentially service-level agreementsbetween
the Executive Council and each entity stipulate mutually
agreed-upon key performance indicators and selected key
strategic initiatives. More recently, to further reinforce a
culture of accountability, entities have begun using internal
performance agreements between their top management and
internal departments or sections.
Even before the BSC was cascaded throughout the government,
the GPMD had launched its strategy communication program
by engaging the key management and strategy teams from all
entities. Workshops (for senior management and delivery teams
alike) are also conducted at each stage of strategy management
and execution. More than 15 have been held over the past three
years on topics ranging from vertical and horizontal alignment
to bolster collaboration among entities, to capacity building to
help entities effectively execute their strategies.
After only three years, the Abu Dhabi government has realized
impressive results. From 2007 to 2009, the percent of Emirati
women in the workforce increased from 20% to 27%. Automation of services grew from less than 30% to 53%. Customer
satisfaction (i.e., citizens, residents, businesses) rose from 52%
10
to 69%. Also during this period, GDP value increased by 35%,

and import value as a percentage of GDP increased by 84%
results more indirect, but no less relevant, to the governments
broader goals.
Coordination among entities, once nonexistent, is today the
norm. And the internal culture has been transformed into one
focused on strategy and execution. We have been successful
in setting and maintaining a single language and approach to
execution and performance across the entire government,
says His Excellency Mohammad Ahmad Al Bowardi, secretarygeneral of the Executive Council. The structured framework of
the Kaplan-Norton approach has established the basis for crossgovernment alignment, transparency, and accountability. And
with the steadfast focus on both WoG outcomes and specific
service-delivery targets, Abu Dhabi has maintained an enviable
pace of growth, despite the global downturn.
Execution Premium
(All results from 20072009 unless otherwise indicated)
Employment rose from less than 43% to 50.2%, supporting the objective on the human capital strategy map to
Strive for full employment.
GDP value increased by 22% in 2008, reflecting achievement against the objective to build rapid, sustainable
GDP growth.
Percentage of initiatives executed on time increased
from less than 65% to 74%.
The United Arab Emirates ranking on the ICT Networked
Readiness Index rose from 29 (of 130-plus nations) in
20072008 to 23 in 20092010. The index, published by
the World Economic Forum in cooperation with
INSEAD, is the leading global ranking of the impact of
information communication technology on nations
development and competitiveness.
Future Focus
Further increasing the horizontal alignment among
entities to bolster their collaboration in delivering
results.
Linking individual objectives to overall strategy.
Increasing the use of performance management by top
leadership as a key tool in decision making.
Improving efforts by the GPMD to facilitate the exchange of best practices among entities.

Volatile oil prices and new competitors
flooding its markets prompted this
Turkish manufacturer to shift strategic
focus from operational excellence to
product innovation. A rigorous management system
that emphasizes leadership and human capital
fueled the new strategyand dramatic growth.
The carpets on your floors, the upholstered sofa in your living
room, your favorite knitwear, those cozy socksthese and other
items you rely on every day may well have had their origin at
AKSA Acrylic Chemical.
Based in Istanbul, the 42-year-old company is the worlds largest
producer of acrylic fiber used in textile manufacturing. AKSA,
one of four firms within parent company AKKKs Chemistry
group, accounts for 45% of AKKK revenues. (AKKKs other
groups include Energy, Textile, and Real Estate.) Its revenues in
2010 were approximately $850 million. Its global market share
stood at 13.2%; its Turkish share, at 70%. AKSA serves customers
in more than 50 countries on five continents. Listed on the
Istanbul Stock Exchange, the company employs 900 people,
most of them factory workers.
Pulling off the new strategy required major changes. For

instance, AKSA would need to start competing on value, not
cost; sharpen its market and customer focus; step up growth in
global markets; and simplify its organizational structure. The
company adopted the Balanced Scorecard to execute these
changes. In 2006, a team consisting of AKSAs general manager,
eight directors, 14 managers, and members of the strategic
planning office created its first strategy map (whose key
themes center on innovation) and scorecard (characterized by
SMART targetsspecific, measurable, achievable, related, and
time-bound). The following year, the map and scorecard were
cascaded to the business units (Acrylic Fiber, Outdoor & Special
Fiber, Carbon Fiber, and Energy) and support units (including
human resources [HR], Finance, New Business Development,
and Purchasing and Maintenance). Reflecting the new strategy,
the company also created a scorecard specifically for its R&D
and Innovation function.
Uncommon Discipline and Rigor

AKSA has demonstrated uncommon discipline and rigor in
managing its new strategy. First of all, the company uses wellestablished strategy-formulation methods, including Michael
Porters Five Forces model as well as SWOT (strengths, weaknesses, opportunities, and threats) and PESTEL (political, economic, social, technological, environmental, and legal) analyses.
It also has a five-year rolling strategic plan that incorporates
budget management with strategy management.
From Operational Excellence to Product Innovation

AKSA had long focused its strategic efforts on operational
excellence, steadily applying process improvement techniques
including TQM, Six Sigma, and the European Foundation for
Quality Model (EFQM). But in the 1990s, executives realized that
the companys fortunes were tied too closely to oil prices. The
price of acrylonitrile, the raw material accounting for most of
the costs of AKSAs acrylic fiber product, rises and falls with
oil prices, which are notoriously volatile. That makes AKSA
vulnerable to oil industry trends and acrylonitrile producers
decisions.
In addition, in 2008 the company established a Co-Creation

Center through which it collaborates with customers and sister
companies in AKKK to develop product concepts. The center
raises customer awareness of AKSAs products and ensures
that products meet customers expectations regarding matters
such as quality standards and compliance with environmental
requirements. Through weekly teleconferences with key customers, product development directors involve clients early in the
R&D process.
Prioritizing Leadership and Human Capital
But AKSA faced additional challenges. Owing to global warming,

customers in the apparel industry wanted thinner knitwear
made with alternative materials such as cotton. During the
1990s, use of AKSAs acrylic fiber shrank in developed countries
while increasing in emerging markets. Acrylic fiber made by
Chinese competitors had begun flooding AKSAs markets,
following the elimination of quotas in 2005 by the World Trade
Organization.
AKSA views leadership and human capital as critical means for

executing its new strategy. (Indeed, human capital makes up 25%
of AKSAs Intellectual Capital Model, which also includes process capital, customer capital, and relationship capital.) The HR
function is considered a true strategic partner and has its own
strategy map. And the company has defined three leadership
levelsstrategic, managerial, and operationaleach of which
has individual performance linked to strategic objectives.
To reduce AKSAs vulnerability to such forces, executives decided

in 2005 to radically shift the companys strategy to R&D-driven
innovation and product leadership. The goal: accelerate development of special products such as carbon fiber and polymers, a
practice that would enable the company to make more efficient
use of its existing infrastructure while also increasing the
percentage of value-added products in its offerings portfolio.
Leaders are assigned to sponsor strategic initiatives, which

have included increasing installed capacity, researching alternative energy production methods, reducing environmental
waste, and developing new chemical formulas, to name only
a few examples. Performance is evaluated through the lens
of contribution to the strategy, including tracking return on
11
investments in initiatives through a web-accessible project

database, as well as distinguishing between breakthrough
and incremental improvements. (AKSA makes this distinction
because of different expectations for results.) Incremental
improvements are typically operational and result from
employee suggestions, whereas breakthrough improvements
involve developing new processes and products and arise from
innovation and formal process improvement methodologies.
Assessments include 360-degree feedback as well as benchmarking against other industries (in such areas as strategy management and leadership development).
Leaders also play a key role in motivating and aligning employees through a multichannel communication effort designed
to regularly convey AKSAs strategic priorities, mission, values,
targets, and strategic performance to teams. Communications
are tailored to different managerial and employee audiences
and include daily internal TV programs and access to scorecards
through information kiosks; monthly department meetings
and celebrations of successes; quarterly performance reports
and strategy reviews; and an annual publication of corporate
objectives.
Communications are tailored to different managerial and employee audiences and include daily
internal TV programs and access to scorecards
through information kiosks; monthly department
meetings and celebrations of successes; quarterly
performance reports and strategy reviews; and an
annual publication of corporate objectives.
The company backs its leadership approach with identification
of strategic job families, investing most heavily in development
(through training) or acquisition (through recruiting) of competencies directly affecting innovation. These competencies
include gathering information, creativity, conceptual thinking,
self-confidence, and team training. AKSA has also taken steps
to craft a culture of innovation; for instance, it provides awards
as well as individual and team incentives for inventions and
patents.
Says board member and general manager Mustafa Yilmaz,
One of the most important steps in strategic management is
to ensure the deployment of strategy through the organization and to secure its spreading and ownership throughout all
management layers. AKSAs results strongly suggest that the
company has mastered this step. In three yearsand amid a
global economic downturn that forced some competitors out of
businessAKSA saw dramatic improvements in sales, profits,
returns on investment and equity, market share, customer satisfaction, and employee loyalty.
12
Execution Premium
(All results from 20052008)
Sales increased from $531 million to $685 million; net

profit, from $10.2 million to $57 million; and EBITDA,
from $47.5 million to $63.6 million.
Global market share expanded from 8.25% to 12.5%.
The customer loyalty index ranking went from 87.5 to
90.5 (on a scale of 100).
Incentives from R&D projects (offered by the Turkish
government) increased from 1 unit to 4 units.
Raw materials wastage dropped from 103 tons to
72 tons.
Employee turnover decreased 50%, and the number of
training sessions soared from 216 to 770.
Future Focus
Aligning the BSC with the companys new strategic business unit structure to increase management efficiency.
Upgrading reporting through improvements in information technology platforms.
Using AKSAs experience to expand the use of the BSC to
its sister companies within AKKK.
In 2008, city manager Andreu Puig Sabanes (newly arrived from

the private sector), along with five sector heads, defined seven
projects that would constitute Barcelona 2.0. The projects
included establishing a management by objectives (MBO)
program. To support it, the team decided to adopt the Balanced
Scorecard. (The remaining six projects focused on improving relationships with citizens, establishing e-administration
systems, developing human resources and IT plans, clarifying
service-level agreements between the sectors and districts, and
designating district technicians to assess citizens needs and
to serve as the eyes of the City Council in each district.)
Spains second-largest city

adopted the BSC to translate
its Municipal Action Plan into strategic objectives,
measures, targets, and initiativesas well as craft
a culture of high performance and accountability.
Results? Key performance criteriaincluding
tourism, business activity, and customer service
all improved.
With Barcelonas rich history, architectural beauty, and economic might, its no wonder the city has excited imaginations
around the world. Spains second-largest city (after Madrid) and
the capital of Catalonia (one of 17 autonomous communities
in Spain), Barcelona is home to 1.6 million people10.7% of
Spains population.
A hub of economic and cultural activity, the city boasts more
than 7 million visitors and 1,800 conferences and conventions
annually. Some 51 million tons of goods are imported and
exported every year through Barcelonas 2,000-year-old port.
In 1992, Barcelona hosted the Summer Olympics, which were
deemed a smashing success.
Orchestrating this citys many moving parts is no small feat. But
the Barcelona City Council has risen to the challenge. Managing
a workforce of 13,000 and a budget of 2.7 billion, the council
consists of 21 elected members (a mayor, five deputy mayors,
and 15 councilors) plus an administration team headed by the
city manager. The administration teams job is to ensure that
the promises made to Barcelonas citizens by their elected officials are fulfilled throughout the citys 10 geographic districts
and 10 sectors (including social services, environment, finance,
education and culture, and security).
Barcelona 2.0
The Barcelona City Council is no stranger to municipal selfreinvention. It launched a major transformation effort in
preparation for the 1992 Olympics that helped win Barcelona
international recognition as a best-in-class city.
The team believed that the BSC would help the City Council
translate the incumbent governments political strategy for the
20082011 termpromises made to constituents and expressed
in the Municipal Action Plan (MAP)into objectives, measures,
targets, and initiatives to fulfill those promises. The BSC would
further help the council tie its budgeting process to the city
governments political strategy. In addition, the scorecard
methodology could help the council address other frustrations. These included lack of communication and collaboration
among the districts and sectors, technological backwardness,
and a workforce not only exhausted by chronic conflict (in
part due to a lack of career planning) and overwork but also
highly resistant to change. Puig determined to replace the
councils culture of complacency and inefficiency with one of
performance, accountability, transparency, and alignment to an
agreed-upon strategy.
By June 2008, the council had developed its own strategy map
reflecting the priorities laid out in the MAP. The map had four
perspectivesValue, Citizens, Services, and Resourcesand six
strategic themes: Coexistence and Proximity [to citizens], Social
Inclusion, Sustainability and Commitment to the Environment,
Competitive with the Global Economy, Capital Status [citizens
economic well-being], and Successful Government. That same
month, the map was cascaded to the sectors and districts as
well as to shared services (functional) units. Twenty-four scorecards were developed from December 2008 through April 2010.
Infusing Discipline into the Budgeting Process
In 2008, the newly elected council launched another transformation programBarcelona 2.0to address the challenges of
a rapidly changing world. These include citizens demand for
ever-more-convenient and higher-quality e-services, unprecedented demographic diversity and mobility stemming from
the European Unions open-borders policy, recognition of the
need for environmental and social responsibility, and the global
economic recession (which has threatened Barcelonas allimportant tourist trade).
In designing its BSC program, the council excelled at linking its

budgeting process to the strategic initiatives supporting the
MAP. Pre-BSC, district and sector leaders had simply referred to
the previous years budget to create the current one. But the
BSC demanded a new approachbudget by programs [initiatives]to determine budgets and show how leaders would
support execution of specific initiatives. Through this approach,
managers examine how well results from current strategic initiatives match the targets defined in their scorecards. If results fall
short of a target, managers consider whether different activities would improve results, whether existing activities need to
13
be executed more effectively, or whether the target was too

ambitious. Based on this assessment, managers determine the
funding required to make those changes.
Managers must also answer questions about how effectively
they are using funds. For instance, to enhance citizen satisfaction, Barcelona funded initiatives such as improving street
cleanliness, increasing in-house visits by social services, and
reducing traffic accidents. If satisfaction with any initiative
declined, the manager responsible for that initiative faced
questions such as, Are you spending all of the funds allocated
for this initiative? If customer satisfaction met or exceeded
targeted performance and the manager had not used all the
allocated funds, unused funds might be channeled into lowerperforming initiatives.
Thanks to such changes, Barcelonas senior managerswho
previously demonstrated lukewarm interest in (if not outright
hostility toward) the BSCnow take a keen interest in improving their performance. If results on a particular strategic objective prove disappointing, district and sector leaders demand
detailed performance data as well as assistance in analyzing
potential causes.
Combating Complacency and Resistance

Barcelonas municipal employees were understandably
complacent in the face of the citys challenges and resistant to
proposed new management approaches: most had a guarantee
of lifetime employment, and they had seen new ideas come
and go every four years when a new government was voted
into office.
To combat the complacency and resistance, the council
launched an extensive change program that began with strong
leadership from the top. The city manager himself, along with
the councils Office of Strategy Management (established in
2008), used the MAP to define corporate-level strategic objectives and metrics. Then more than 700 employeesmostly
district and sector leaders and their direct reports as well as
technical personnelreceived training on the BSC framework
(including how it related to the MAP) and the technology
solution the city had adopted for performance monitoring
and reporting. Finally, all employees were given ownership of
particular objectives and metrics, so everyone had a stake in
the framework.
Thanks to this effort, managers and employees have begun
demonstrating a new excitement about Barcelonas strategy
management approach. One manager who had strenuously
protested the introduction of the new approach even remarked,
Now I see that this is for realand it works.
14
She was right; it does work. Barcelona has seen improvements

across key performance criteria such as tourism, business
activity, and customer service. Says Puig, Implementing a
robust, comprehensive performance management system to
support our new management framework sharpens our
strategic focus. We are the pioneers of strategic management of
government in Spain, starting with making Barcelona a better
city. And 500 multinational managers agree: in the 2008 annual
European Cities Monitor Report, Barcelona was named the
Best European City in Quality of Life and ranked within the top
10 for establishing a business.
Execution Premium
City Halls total public debt decreased 20%.

The number of new businesses registered increased
by 55%.
Revenues rose 21%.
The number of in-house visits by social services
increased 42%.
Traffic accidents decreased 10%.
The proportion of services delivered online to citizens
grew 34%.
The number of citizens using municipal facilities
increased 16%.
The number of municipal job opportunities covered
internally increased 150%.
More than 700 municipal employees have been trained
in strategy management.
Future Focus
Instituting a driver model for each unit to better link
the citys strategy management process to operations
managementby identifying operational processes
and activities that support performance on strategic
objectives and metrics and establishing dashboards to
monitor them.
Extending the BSC model and its supporting technology to public institutions within the councils control,
such as the Institut Municipal dInformtica (Technical
Institute) and Barcelona Serveis Mobilitat (Mobility
Services).
Boys & Girls Clubs of

Puerto Rico
Following its own financial
crisis, this nonprofit serving
Puerto Rican youths got serious
about goals and performance.
The key to its success: a relentless focus on employee awareness, alignment, and development.
Established four decades ago, the Boys & Girls Clubs of Puerto
Rico (BGCPR, an affiliate of the Boys & Girls Clubs of America) is
a nonprofit organization aimed at helping young people reach
their full potential as productive, caring, responsible citizens.
With a budget of $6.2 million and eight facilities throughout
Puerto Rico, it provides services and programs to promote
healthy youth development, ranging from career development
to recreational pursuits. More than 200 full- and part-time
employees serve about 7,500 youths. The organization is run by
a board of directors, with day-to-day management handled by a
CEO and an executive team.
Back in 2004, however, BGCPRs situation was dramatically different. BGCPR underwent a financial crisis, and was unable to make
payroll for six months. When the organization emerged from the
crisis, executives decided never again to put BGCPRs services
and employees at risk. Once BGCPR was back on its feet, in 2005,
CEO Jos Campos and EVP Eduardo Carrera decided it was time
to expand the number of facilities and services. But myriad obstacles stood in the organizations way, including a lack of public
awareness, limited resources, a paucity of donors, and the inability to measure the impact of its services. And with no mechanism
in place for retaining key employees, retention had fallen to
55%a human capital cost the organization could no longer
afford. To address the many obstacles and boost organizational
effectiveness, Campos turned to the Balanced Scorecard.
An Urgent Need for Employee Alignment
pants, Clubs and Administration, Personnel and Organizational

Culture, and Finances. Clubs and Administration, for example,
focused on becoming the programmatic and organizational
leader of the third [nonprofits] sector, with such objectives
as Excelling in process quality. Objectives under Finances
included increasing not only the amount but also the sources of
income, as well as establishing a reserve fund.
The effort represented a significant cultural change. Initially,
commitment among many corporate as well as club leaders
was lukewarm. Many were skeptical of the BSC process and
balked at the prospect of being measured for the first time. To
foster staff alignment, Carrera strove from the beginning to
involve employees in strategy development. At the annual strategy review meeting, for instance, a team of employee representatives evaluates performance results and provides feedback to
management on ways to improve processes and generate new
tactics and operational plans to fix red flag items. In addition,
the Office of Strategy Management (OSM) conducts interviews
and surveys in the business and support units to get a full
picture of strategy execution. BGCPR has also put considerable resources into a multifaceted communications plan that
includes simulation games (such as interactive quizzes and role
playing), town meetings, and videos. A handbook provides detailed information on everything from strategy maps to objectives (including definitions). So comprehensive and professional
is the document that the board of directors also uses it when
approaching donors.
To foster staff alignment, Carrera strove from

the beginning to involve employees in strategy
development. At the annual strategy review meeting,
for instance, a team of employee representatives
evaluates performance results and provides
feedback to management on ways to improve
processes and generate new tactics and operational
plans to fix red flag items.
The first step: creating a more efficient organizational structure

and ensuring that the right people were in the right positions.
Campos and his executive leadership team added departments
(including human resources) and administrative personnel.
Campos also instituted a job rotation system to build competencies for some employees and ensure that others, already
endowed with knowledge, skills, and abilities, could pursue
new goals. A year later, the executive leadership team began
the planning process.
But the BSC is more than just a tool for performance measurement and employee alignment. BGCPRs board, in fact, actively
uses the Balanced Scorecard and has its own strategy map to
align itself with BGCPRs strategy. Every trimester, the board
convenes for an organizational briefing, and, once a year,
members hold a retreat to evaluate the boards as well as the
organizations performance.
The team articulated an ambitious vision: becoming the leading nonprofit in Puerto Rico, offering high-quality programs,
and being the best investment choice for donors. It created a
strategy map organized around four areas: Donors and Partici-
The BSC plays a vital role in employees professional development at BGCPR. At the beginning of every fiscal year, employees meet with their supervisors to discuss personal action
plans and how their activities relate to organizational and
Investing in Employees
15
department goals. Throughout the year, supervisors monitor

progress and suggest areas for improvement. During formal
performance reviews, employees and their supervisors create
a development plan based on strategic goals. Employees who
achieve the targets they set with their supervisors receive a
performance bonus.
The system has been a hit. Employee satisfaction surveys reveal
that BGCPR staff regards professional development as the most
valuable organizational asset. The system has also heightened
employee engagement and employees appreciation of the fact
that financial growth enables BGCPR to support more programs. This appreciation has prompted employees to conceive
of several ingenious initiatives. For example, at the 2009 annual
meeting, an employee with technology expertise proposed
starting a new business that would offer technological,
educational, and career services to corporations, government
agencies, and the public. Shortly thereafter, another project
emerged: Club Pizza, which allowed the organization to train
youths in sales skills while also generating extra revenue.
Big on Best Practices

To keep everyone on the same pageand to advance operational excellenceBGCPR encourages best practice sharing.
Soon after introducing the BSC, for example, the executive team
discovered that some clubs were considerably more successful
than others in implementing the new system. To share information and standardize best practices, it formed committees
composed of directors and employees who performed the same
tasks in different SBUs. The team also established a best practice
sharing meeting for all employees called Quarterly Encounter.
Best practice sharing is also an important part of strategy
review meetings, from weekly department heads meetings to
the monthly meetings of the director of operations and each
SBU, to the quarterly review meetings.
Through its performance management software, BGCPR
identifies trends and patterns in performance results, and
makes constant adjustments. For example, if the number of
participants in any given week is lower than usual, the appropriate SBU can evaluate whether theres also been a drop
in other, relevant indicators, such as participant satisfaction,
and take corrective steps.
Exceeding Expectations, Despite the Economy

Armed with the ability to measure resultsand provide evidence of its success to potential donorsBGCPR has won over
new contributors. Between 2005 and 2010, revenues more than
tripled, from $1.9 million to $6.2 million, and the organization
went from a loss of more than $50,000 to more than $85,000
in profits. It also established a reserve fund thats now worth
nearly half a million dollars. These financial gains occurred
during the economic recession. Moreover, during a time when
16
Puerto Ricos unemployment rate hit 15%, BGCPR grew from 60

to more than 200 employees.
Through a disciplined, creative approach to best practice sharing, BGCPR has made important progress toward its operational
excellence goals. Satisfaction among youths served soared, employee strategic readiness rose significantly, and key employee
retention increased markedly.
Collectively, these successes have contributed to BGCPRs
effectiveness in its core mission. During a time of economic
crisis, the organization has been able to provide safety from the
storm for thousands of disadvantaged youthsfar more than it
could ever have hoped to help only a few years earlier.
Execution Premium
BGCPR expanded its facilities from four to eight, and the

number of participants served increased from 2,500 to
more than 7,500.
Average daily attendance by participants (measured
against building capacity) went from 68% to 102%; the
number of participants who came to clubs three or more
times a week rose from 9% to 40%.
Participant satisfaction rose by nearly a factor of 6, from
9% to 53%.
Revenues from repeat donors jumped from $1.9
million to $4.5 million, and revenues from new donors
rose $1.7 million.
Technology project completion (e.g., centralizing
networks, security measures, the website) went from
zero to 73%.
Employee strategic readiness (as measured by surveys
and quizzes) rose from 60% to 94%; key employee retention increased from 82% to 90%.
Future Focus
Mentoring other nonprofits in Puerto Rico on the use of
the Balanced Scorecard.
Implementing such process improvement methods as
Six Sigma, Lean Six Sigma, and the Baldrige Performance
Excellence program.
Encouraging more local autonomy in refining BSCs and
managing the BSC process.
Christchurch City Council
private sector (such as central-city childcare). Council leaders

looked to the BSC to help them set these prioritiesand, longer
term, to enable them to accomplish more with less.
Since its induction into the Hall of Fame in 2010, Christchurch

suffered two major earthquakes: the first on September 4, 2010,
and the second on February 22, 2011, just after this overview
was finalized. The citys world changed in a matter of seconds.
Loss of life and damage to infrastructuresmall relative to the
quakes magnitude, thanks to the citys stringent building codes
and decades of careful planningwere still significant. Recovery
will be long. Clearly, the city has had to turn away from the longrange strategic ambitions described here to heal and rebuild.
But, as the councils OSM head, Peter Ryan, notes, its planning
and execution system will serve it well in this challenge.
The Strategic Spine of the Organization
The pressure to do more with

less presented big challenges
to the Christchurch City
Council, which serves New Zealands second-mostpopulous city. With the BSC as its central management tool, the council has achieved organizational
alignment, from the corporate to individual employee performance levels, and has linked operations
to strategywith exceptional results.
Because of its outstanding natural beauty, the City of Christchurch (pop. 380,000) is known around the world as the Garden
City. Located on the east coast of New Zealands south island
and covering an area of 590 square miles, it is the nations oldest city and second most populous after Auckland.
Christchurch City Council (CCC), the citys management arm,
provides residents and businesses everything from road building and maintenance to a water supply, from city planning and
subsidized housing to economic development. And it must do
so responsively, cost-effectively, and sustainably. The council has an annual budget of more than NZ$560 million ($433
million), total assets of about NZ$5.6 billion ($4.3 billion), and
approximately 2,200 employees.
From 2007 to 2009, the CCC created BSCs for every level of
operation, from senior management to teams. For example, the
Regulatory Services departmental BSC (which rolls up to the
executive management BSC) cascades to its units (e.g., Inspections and Enforcement) and finally to individual operational
teams (e.g., animal control). Each BSC contains the mandated
vital few strategic objectives for the four BSC perspectives
(customer, finance, process, and people). These strategic objectiveswhich the CCC calls its strategic spineare affirmed
each year by the executive team. Cross-functional initiatives
support strategic objectives. The Enterprise Project Management System (EPMS), for example, provides project management and tracking software and processes for the 1,000-plus
infrastructure projects (e.g., roads, wastewater, parks) that
the CCC delivers each year. Accountability for EPMS is shared
across the planning, IT, finance, and project delivery arms of
the CCC. Each task within an initiative has a designated owner,
and performance is tracked on the owners individual employee
performance plan.
A three-person Office of Strategy Management (OSM), established in 2006, coordinates the scorecard program throughout
the councils business units. In addition to overseeing the
integration of corporate strategy with business unit strategy,
the OSM helps link individual performance plans to strategy.
The OSM also advises the CEO on strategy management matters
and facilitates monthly scorecard reviews by key department
heads and the CFO.
For a municipal authority, value is about more

than adhering to budget; it is also about delivering
quality services. Recognizing that dual requirement,
in 2007, the CCC introduced its Bang for the Buck
process.
Doing More with Less

In 2007 the council introduced the Balanced Scorecard (which it
calls Plan on a Page) as its central framework for coordinating
strategy and operations. But additional reasons prompted the
decision. Christchurchs population was growing rapidly, and in
2006, Banks Peninsula District Council, a large rural authority,
was absorbed into Christchurch Citys jurisdiction. This instantly expanded the CCCs service responsibilitiesand tripled
its size. Amid general inflation (in food and fuel prices as well as
interest rates), labor and raw material costs escalated dramatically. But the public and business groups clamored against tax
increases. The CCC was thus forced to prioritize its delivery
of services, eliminating some already available locally in the
In 2007, the CCC developed its own automated performance

management system, which it dubbed Horizon. The system
houses all BSCs and their component objectives, metrics, and
targets, as well as initiatives and tasks, tracking them at all
performance levels, from corporate to individual. The system
aligns operational key performance indicators (KPIs) and targets
with their strategic measures, and also tracks operational
tasks. The validity of strategy-operational causal linkages is
thoroughly tested during development and execution. Horizon
is accessible to everyone in the council, although access to
certain sensitive data is controlled.
17
Individual Performance Plans

Horizon automatically provides the objectives, metrics, and
targets for the CCCs individual employee performance plans.
In 2008, the performance plan template was reconfigured to
match the four BSC perspectives. The vital few enterprise
scorecard objectives appear as the foundation of each plan to
ensure that everyone, including frontline operational employees, can clearly see the councils strategic priorities. In developing an employees plan, the supervisor and employee examine
what the employee does to contribute to these objectives,
and then translate the priorities into operational terms. This
contribution includes any indirect role the employee may play
in supporting the strategic objectives of other areas of the organization. For example, for an employee in the building approval
area, the contribution would include the ways in which that
individual supports a public works project.
Through the individual performance plans, scores for BSC
achievement form the basis of compensation (base salary or any
additional bonus). On one axis of a performance graph, the
employee is rated at the individual level for her success against
her BSC targets and initiatives, and on the other axis, is rated on
the behaviors she engaged in to achieve that performance. In
this way, the plan not only orients employees toward delivering
their part of the strategy but also focuses them on how they
achieve their goals.
Bang for the Buck

The CCC recognizes that although performance on a BSC objective might earn a green rating, that does not necessarily signal
good performance. A finance objective, for example, might be
green, but underlying that result might be a customer-service
delivery failure. For a municipal authority, value is about more
than adhering to budget; it is also about delivering quality
services. Recognizing that dual requirement, in 2007 the CCC
introduced its Bang for the Buck process. Every managers
budget is linked to delivering specific customer targets, and
financial and customer performance are reported together on
a single graph. Bang for the Buck enables managers to manage
according to their budget without hurting customer performanceor vice versa. It thus forces alignment to the strategy.
Its commitment to strategic alignment has enabled the CCC to
achieve remarkable successes during the global financial crisis
and ensuing recession, events that have put other municipalities and governments in dire fiscal straits. Indeed, the CCCs
service-level achievementsperformance on communityfocused measures such as the speed of repairing road damage
and the quality of park maintenancerose from 65% in 2006
to a record 91% by mid-2010. During this same period of service
delivery improvement, rate increases slowed dramaticallya
trend that budget calculations indicate is not merely short term,
but rather is sustainable for another decade. Thanks to Plan on

a Page, the CCC is now the fiscally strongest municipal government in New Zealand; it was the only metropolitan authority
to maintain a Standard & Poors AA+ credit rating from 2008 to
2010, during the global economic crisis.
Says Peter Ryan, the head of the councils OSM, The BSC has enabled Christchurch City Council to realize ambitions that a few
years ago seemed impossible. Service delivery to the community is at record highs, while cost increases have been slashed.
We not only survived the recession but emerged in a position of
financial strength.
Execution Premium
Since the program was implemented, overall cost

increases passed on to the taxpayer have been slashed
from 9% per annum to 4%.
Levels of achievement on service delivery (communityfocused performance targets) rose from 65% in 2006 to
91% in 2010a historical high.
Multiple customer satisfaction ratings rose: satisfaction
with curbside recycling rose from 69% to 95% from 2007
to 2010; satisfaction with regional (nonurban) parks
rose from 80% to 95% during that same period; and
satisfaction with regulatory approval procedures (such
as for building permits), a measure introduced in 2009,
was 96%.
Staff engagement, as measured by the Aon Hewitt
employee engagement survey, rose from 35% in 2006
to 54% in 2010 (with an additional 36% of staff ranked
nearly engagedimproving, if not quite there yet).
Future Focus
Focusing the CCCs Six Sigma program on underperfor
ming Balanced Scorecard objectives.
Refining the midyear and annual strategy review
processes.
We wish Peter Ryan, his city management colleagues, and the people of Christchurch all the best in their recovery efforts.
18
Cisco Systems/Customer
Value Chain Management
any innovation and any business model, anywhere in the

world; and developing high-performance leadership, talent,
and culture. Strategic objectives include Growing customer
loyalty and Delivering high-quality products (in the Voice
of the Customer perspective), Enabling shared capabilities
throughout the organization (the Employee/Capabilities Development perspective), Accelerating product innovation and
Monitoring compliance (Operational Excellence), and Driving
ongoing cost savings while accurately predicting and achieving
financial commitments (Financial Productivity).
Part of Ciscos operations group,

the CVCM unit was created to
support global supply chain
integration and transform innovations into
market-leading products. By rationalizing strategic
initiatives, building a robust OSM, and leveraging
advanced analytics, the division has advanced
quality excellence and boosted customer loyalty.
For computer users everywherebusinesses large and small,
households, individualsCisco plays a vital role in enabling
people to connect, communicate, and collaborate through technology. Founded in 1984, Cisco offers networking equipment,
including routers, switches, and wireless systems; collaboration
services such as WebEx; and data-center and virtualization services. Headquartered in San Jose, Calif., the company recorded
$40 billion in net sales for 2010an 11% increase over 2009.
In October 2008, Ciscos Customer Value Chain Management
(CVCM) division was created to support the companys continued efforts to expand and globally integrate its supply
chainand, in turn, to foster worldwide growth. Today, CVCM
is charged with transforming Cisco innovations into marketleading products and services, and delivering an unrivaled
customer experience. Part of Ciscos Operations group, CVCM
performs activities that extend beyond traditional supply chain
management to include product design, demand management
and planning, sourcing, order management, manufacturing,
and delivery, as well as the monitoring and management of the
customers quality experience.
Unifying Myriad Players

CVCMs role is significant, in part because 95% of Ciscos production is outsourced and involves a complex web of players across
the globe. Nine functional teams working at 90-plus locations
in 32 countries manage collaboration with more than 1,000
suppliers worldwide; four contract manufacturers; five original
design manufacturing and original equipment manufacturing
partners; internal teams (engineering, sales, services); and customers. Some 50,000 purchased parts support 8,000 products and
800 product families. Cisco sells to its broad range of customers
through numerous channels. Most of its products are configured
to order. And the company is constantly integrating new acquisitions (more than 144 to date).
To fulfill its vision, CVCM defined a strategy that hinged on putting the customer first in everything it does; driving operational
excellence and world-class value chain performance; enabling
From its inception, CVCM has used the Balanced Scorecard to

foster a sense of unity among the three previously independent
functions from which it originated, as well as to promote a
customer-centered mind-set. Pre-CVCM, the companys functional areas had tracked their performance via a subset of metrics
focused on cost, quality, speed, delivery, and customer perception. When CVCM was created, its executives adopted the BSC to
develop a unified strategic plan whose objectives would support
the new entitys vision. They initiated cross-functional discussions and workshops to select metrics for CVCMs scorecard. The
metrics augmented older operational metrics with key performance indicators (KPIs) assessing customers satisfaction at
every key juncture, including purchase decision, order management, order receipt, installation, and service.
The strategic priority focused on quality excellence

resulted in the creation of Ciscos Quality Management Operating System (QMOS). This system of
business processes assembles the various subteam
scorecards and uses outputs to perform monthly
reviews of critical-to-quality processes and metrics.
Each year, strategic objectives are decomposed into initiatives
(strategic priorities), which are prioritized against the budget.
Once an initiative is prioritized, the initiative owner (priority
advocate, always a senior employee) prepares a project
proposal quantifying its impact on the organization in terms
of BSC metrics and identifying which customer experience the
initiative is intended to improve. All CVCMs functions review
the proposal to validate its alignment with specific strategic
objectives.
The strategic priority focused on quality excellence resulted
in the creation of Ciscos Quality Management Operating
System (QMOS). This system of business processes assembles
the various subteam scorecards and uses outputs to perform
monthly reviews of critical-to-quality processes and metrics.
This performance review also helps identify areas of future
investment for continuous improvement.
19
Setting the Stage for Strategy Execution

CVCMs Office of Strategy Management (OSM) (which reports
to the VP of Global Business Operations) consists of seven
full-time employees, supported by subject-matter experts
from the divisions Strategy and Planning, Information Data
and Strategy, Finance, Communications, and Advanced Value
Chain Solutions areas. In addition to performing traditional
BSC-related tasks, the OSM conducts external market scans and
competitive analysis.
CVCMs executive team not only formulates CVCM strategy but
also actively influences Ciscos overall strategy. Senior executives throughout Cisco lead cross-functional groups (called
Corporate Councils and Corporate Boards) in defining enterprise
strategy. All CVCM leaders are represented in these councils
and boards. The strategies resulting from council and board
decisions are then integrated into CVCMs strategic process, thus
ensuring alignment throughout the organization.
Leveraging Advanced Analytics

Executives developed a platform for automating performance
reporting, which pre-CVCM was performed manually. CVCMs advanced analytics capabilities have enabled it to explore higherlevel cause-and-effect linkages among its BSC metrics. Using a
dashboard and mathematical models, the organization conducts
what-if analyses of ways a change in one metric would affect
other metrics in the scorecard, vertically and horizontally.
Advanced analytic modeling has, for example, driven strategic
decisions about which operational investments to make to
improve customer satisfaction. Additionally, tactical what-if
decisions regarding inventory highlight the best strategies for
achieving supply-demand balance.
Fostering Strategic Awareness

In addition to using traditional communication channels
executive forums, companywide meetings, workshops, training
sessionsto foster employees strategic awareness, CVCM
leverages Ciscos skills in building and providing collaborative
platforms to foster such awareness. Tools such as wikis, blogs,
and social networking enable Cisco employees to provide realtime feedback on topics such as the firms strategic direction,
the alignment of functions, and performance measures. This
feedback has helped Cisco achieve new levels of speed and
flexibility in its strategic planning process. For example, the use
of Ciscos video technology heightened productivity and cost
savings in integrating recent acquisitions.
Encouraging Best Practice Sharing

CVCM views best practice sharing as pivotal in an organization
of its heft and reach. Structures created to encourage such
sharing include the QMOS forum, consisting of CVCM directors.
20
Forum discussions focus on how to improve customers

experience relating to quality (including ordering, technical
service, and product quality). The forum has its own scorecard,
a subset of CVCMs corporate scorecard. Additionally, several
boards and councils as well as other major areas of Cisco
continue to engage the CVCM OSM to drive best practices into
their business units.
Customer Loyalty and Agility

Its disciplined use of the BSC has enabled CVCM to score important quantitative as well as qualitative results. To illustrate, by
tracking customers satisfaction with transactions, quality,
and ordering, the company has been able to address shortfalls
swiftly. Consequently, customer loyalty has increased, which
in turn has improved revenues. Moreover, using the BSC has
positioned CVCM to respond quickly to changes in Ciscos strategy. Finally, CVCM has won a reputation for thought leadership
throughout Cisco. Corporate Council members are now planning
to drive similar strategic alignment in their operations. Says SVP
Angel Mendez, Our BSC approach is truly a strategic differentiator, ultimately impacting top- and bottom-line results.
Execution Premium
Overall customer satisfaction increased from 4.37

to 4.43, on a 1-to-5 scale. (The scale indexes such
customer-perception dimensions as hardware and
software performance, ease of doing business, and
overall perception of Cisco.)
The percent of perfect orders (those that were
delivered complete, on time, with flawless documentation, and in perfect condition) increased 3.2%.
The proportion of products achieving Six Sigma quality
rose 22.6%.
The span of control (the average number of direct
reports per manager; a proxy of organizational effectiveness and flexibility) increased from less than
5.06 to 6.07.
Future Focus
Propagating the BSC framework to other parts of Cisco
to promote horizontal and vertical alignment.
Strengthening strategic analytics capabilities to manage multiple global supply chains as Cisco expands into
new markets.
Culligan Argentina
The team also developed numerous initiatives, including

establishing a state-of-the-art call center, a phone account
representative position to personalize customer interactions,
and an enterprise resource planning platform to integrate and
streamline processes. But team members realized they needed
a disciplined approach to implement these initiatives. In 2003,
they adopted the Balanced Scorecard to prioritize initiatives,
allocate resources to them, and communicate the units strategic goals to its three main offices, which had long acted
autonomously: (1) the front office (sales and marketing); (2) the
middle office (bottling, sanitization, logistics, and distribution);
and (3) the back office (administration, finance, quality, and HR).
Leaders also hoped that the BSC would help the unit tackle
additional challengessuch as a lack of basic performance
management tools, inconsistent processes, and a lack of interoffice cooperation.
An economic crisis, a flood

of competitors, and the lack
of adequate management
systems put this watercooler services leader in a
tight spot. In two wavesone focused on customer
intimacy, the other on quality and process efficiencythe company cut costs, slashed customer
attrition, and raised productivity,.
The leader in Argentinas watercooler services market, Culligan
Argentina is a strategic business unit of U.S.-based Culligan
International, which provides water filtration products and
drinking water systems through business units in Canada,
Dubai, China, and throughout Europe.
A Rollout in Two Waves
Established in 1987 as a wholly owned subsidiary of private

equity firm Clayton Dubilier & Rice, Buenos Airesbased
Culligan Argentina employs only 180 people. Five managers
report to a general manager; the remaining staff consists
of salespeople, plant operators, service technicians, and
assistants. Everyone shoulders a heavy load; a typical account
representative has about 1,000 clients and handles an average
of 80 calls (transactions, requests, complaints) a day. In 2010,
the unit recorded revenues of $12 million and served a total of
approximately 20,000 customers.
Culligan Argentina rolled out its BSC program in two waves. The
first wave, from 2002 to 2006, saw creation of the enterpriselevel strategy map and scorecard and their cascade to the three
offices. Most of the 44 strategic objectives in the enterpriselevel map were in the internal process perspective, under three
strategic themes: Operational Excellence, Client Management
Capabilities, and Corporate Social Responsibility.
Results from the initial wave were impressive:

annual customer attrition fell from 71% to 22%,
the client base grew 36%, workforce productivity
rose 44%, and collections improved from 115 days
sales outstanding to 58. Costs decreased, and
resources were focused on customers needs
instead of pet projects.
A Tough and Crazy Business

Customer intimacy has long been Culligan Argentinas focus.
During boom times, salespeople lavished customers with premium service such as unscheduled 24-hour delivery if supplies
ran out. But around the year 2000, all that changed. A national
economic crisis, long in the making, produced violent street
protests and a run on the banks in 2001. Along with many other
businesses, Culligan Argentina suffered, with client attrition
reaching 70% annually. As the industry matured, profit margins tightened, and new competitors, enabled by low barriers
to entry, flooded the market. It became tougher than ever to
achieve customer intimacy in this high-volume, low-margin
businessyet employees at Culligan Argentina seemed unwilling to acknowledge the problem.
By 2002, Culligan Argentinas general manager, Santiago
Murtagh, along with the units finance and quality leaders,
decided to establish a formal strategy management practice for
the business. They started by defining a new missionBuild
a lifetime relationship with [the] client through our motivated
and committed talent, to maximize our shareholders value
and visionProvide the best service that [every] client can
get from any of their suppliers. Both would be supported by
integrity, teamwork, passion, and consistency.
The latter two themes signaled a desire to strengthen customer intimacy by moving from merely selling water coolers to
enhancing customers awareness about pressing water-related
issues. For example, the Client Management Capabilities theme
included objectives for developing a water treatment business
and validating water experts credentials. The Corporate Social
Responsibility theme included objectives for raising customers
awareness of environmental issues and educating them about
waters importance.
Results from this initial wave were impressive: annual customer
attrition fell from 71% to 22%, the client base grew 36%, workforce productivity rose 44%, and collections improved from 115
days sales outstanding to 58. Costs decreased, and resources
were focused on customers needs instead of pet projects.
21
Despite these gains, the unit still faced serious problems.

Customer complaints worsened. The company was at one point
using eight different databases. Processes were still carried
out manually, with no system in place, for example, for capturing customer account information through the value chain. It
wasnt unusual for competing fiefdoms to spend days unearthing old emails in attempts to show colleagues what a customer
had been promised.
In addition, Culligan Argentina has established a formal process

for funneling operational feedback to senior leaders for use
in strategy-related decisions. For instance, the general manager and area managers participate in the operational offices
monthly meetings, where managers explain whats being done
to achieve strategic objectives on each offices contribution
panel, address strategic performance shortfalls, and compare
resource allocations to the budget.
Culligan Argentinas second wave of BSC implementation

(20072010) focused on clarifying business rules and adopting
more best practicesincluding activity-based costing, advanced budgeting techniques, and Great Place to Work Institute
assessments to help improve workforce morale. It also began
measuring and rewarding performance through objective criteria and new monthly bonuses. To demonstrate its commitment
to quality standards, Culligan Argentina achieved certifications
in practices related to quality (ISO 9001), food safety (HACCP),
and labor safety (OHSAS 18,001).
Despite meager resources, Culligan Argentina has achieved

remarkable strategic performance. Even customers are impressed: some of them, having heard about the units strategy
execution practice in the local media, have contacted Culligan
Argentina to learn more. The key to the units success is its
power to mobilize its employees behind its strategy. In fact,
says General Manager Murtagh, [Today], most of our employees would not be able to differentiate our strategy execution
practices from their business-as-usual activities.
This wave delivered more incremental results, including reductions in water-quality complaints, employee injury rates, and
service complaints, as well as improvements in logistics and
distribution efficiencies. Collections improvements gained in
the first wave held steady even during the global recession. And
the unit tightened its grip on the considerable risks inherent in
its business because of Argentinas complex regulatory environment. Independent truck owners to which it outsourced delivery
represented a labor headache, so the company helped them organize professionally into three companies. This move reduced
contingent labor liabilities from 120% to only 20% of sales.
Keeping the Message Fresh

Recognizing the need to keep the message fresh, Culligan
Argentina adapted its strategic communication campaigns as
its BSC program evolved. Initial campaigns focused on the units
strategy and how the BSC worked, using such creative tools
as a strategy board game. Then, as employees demonstrated
a command of the BSC framework, Culligan Argentina shifted
its communication focus to its new performance management
structure. For instance, today each manager has a contribution
panel, a unit-level strategy map that explains how his or her office contributes to the units overall strategy, derives measures
from critical success factors (CSFs), and tracks actual versus
targeted performance. Loop billboards posted throughout the
facility show how a string of CSFs affect a particular strategic
objective. Office and human resources managers also hold
one-on-one meetings to review employees questions about
new personal incentives and to address underperformance on
specific measures.
22
Execution Premium
EBITDA rose from $5,000 to $788,000.

Attrition of large accounts declined from 38% to 17%.
The number of hours needed to solve a customers
problem decreased from 139 to 68.
The performance of approximately 25% of the
workforce (management, supervisors, and the like) is
measured against the strategy.
The share of employees with access to online strategic
reporting went from zero to 23%.
The percentage of processes that are automated
increased from 56% to 84%.
Future Focus
Enhancing data analysis through the use of statistical tools (such as Monte Carlo simulations) to validate
cause-and-effect relationships.
Launching a customer co-creation initiative to test
value creation assumptions in the corporate strategy
map.
Developing a strategic expenditure (StratEx) budget to
improve funding of strategic initiatives.
with the parent company. In March, executives convene at regional strategy retreats to address four questions: Where are we
now? Where do we want to go? How will we get there? How will
we drive and measure results? They review past performance as
well as market and competitor trends, set priorities three years
out, and outline eight to 10 core initiatives. Each country team
aligns its initiatives to the strategy, selecting those most appropriate to its market and internal capabilities. Each countrys
budget includes separate strategic expenditure (StratEx) funds
to support these initiatives.
For many technology companies, the

bursting of the tech bubble in 2000
spelled doom. For others, it brought the
opportunity to rethink and restructure
their strategies and operations. Dimension Data
Asia Pacific turned this opportunity into a strategic
transformation that has delivered breakthrough
results, even amid the recent economic downturn.
Making Initiatives Stick
Singapore-based Dimension Data Asia Pacific (formerly Datacraft

Asia; herein, DDAP) is a wholly owned subsidiary of Dimension
Data, a $4.7 billion global provider of information technology
(IT) solutions and services. DDAP employs 2,500 people at 55
locations in 13 Asia-Pacific countries. Its 2010 revenues were $735
million, and it has core strategic partnerships with 11 vendors,
including Cisco, Microsoft, EMC, NetApp, VMware, and F5.
At the time a product reseller, DDAP took significant losses
in 2001 and 2002 during the tech downturn. Company leaders
recognized not only that DDAPs products and services were
rapidly becoming commoditized but also that emerging models
would alter the business. They undertook a major change
program to reposition the company as a solutions provider.
Executives adopted what they called a 3M (management,
model, and metrics) strategy, standardizing the business model
and management metrics across multiple countries. The 3M approach returned the company to profitability but did not alter
DDAPs fundamentally product-centered model. Then in 2004
and 2005, DDAP implemented its 3S (solutions, services, and
standard operating environment) strategy. Beyond operational
excellence, it now needed to develop compelling solutions
to meet clients strategic goals, enhance client intimacy, and
engage clients over the longer term. The new strategy entailed
standardizing divergent processes, boosting innovation, and increasing collaboration with partners. But differences in culture,
processes, and levels of sophistication among managers made
it difficult to implement across the companys 13 countries of
operation.
Senior executives meet monthly to assess strategy

execution and track the progress of projects and
strategic initiatives. The review process is structured around three questionsWhat? So what?
Now what?a process participants consider the
most powerful element of the strategy review.
So in 2006 the firm launched its BSC, strategy map, and Office
of Strategy Management (OSM), cascading the BSC and map the
following year. The strategy map was organized around four
themes: Accelerate Solutions and Services Innovation, Maximize
Client Value, Drive Quality and Productivity, and Foster a
Performance-oriented Culture.
Where Do We Want to Go? How Will We Get There?

DDAP developed a rigorous, multistage annual strategy planning and review process. Every February, country and regional
leaders meet to review global strategy and ensure alignment
An executive steering committee, formed in 2010, ensures that

initiatives are executed as planned and that proposed projects
align closely with enterprise strategy. For example, monthly BSC
and quarterly steering committee reviews helped drive execution of a critical FY10 initiativeBuild scale across DDAPs six
lines of businesswhich required a substantial investment
in new personnel. Some country teams, however, attempted to
delay hiring to improve their short-term profitability. Thanks to
the transparency and focus of DDAPs review processes, more
than 180 new StratEx-funded employees were hired. The company strengthened its data center and virtualization, cloud, and
Microsoft practices, effectively positioning itself against much
larger competitors.
The first round of budgeting focuses on aligning each countrys

strategy with corporate strategy and ensuring operating plan
linkage. In later rounds, financial projections are finalized based
on each countrys strategy and operating planeach of which
includes a solution plan, marketing strategy, targeted efficiency
improvements, and functional area (e.g., IT, human resources,
finance) plans.
DDAPs senior executives meet monthly to assess strategy
execution and track the progress of projects and strategic initiatives. The review process is structured around three questions:
What? So what? Now what?a process participants consider
the most powerful element of the strategy review. The results
of this review are distributed to each country, where executives
ensure that these outputs are front and center in their own
strategy reviews. And every quarter, CEO Bill Padfield uses the
BSC to report enterprise performance to the board of directors
and to parent Dimension Datas global leadership team.
23
To test strategic hypotheses, the company builds impact

diagrams that show causal links between strategic objectives
and their leading indicators. For example, when a key countrys
bookings and profitability were lower than expected, the result
was traced to its inability to grow business with existing clients,
a financial perspective objective (and leading indicator). BSC
analysis revealed five contributing causes, and remedial plans
were implemented.
Finally, BSC targets are set quarterly to reflect changes in the
market and in internal skills, processes, and priorities. Feeding
into this process are country teams proposals for targets based
on their priorities and circumstances. A detailed manual guides
the teams in setting their targets.
The Balanced Scorecard is an extraordinarily powerful tool

that is central to everything we do, says CEO Padfield. Beyond
strategic alignmentof employees to strategy, budget to
strategy, company to partners and clientsDDAP is now able to
identify risks early on, when theyre most amenable to mitigation. In an industry that reserves its greatest rewards for the
nimble, DDAP can revise its BSC targets quarterly in response to
industry and internal changes; it credits flawless execution of
its services strategy with a 20% jump in 2009 profits despite a
16% drop in revenues. The next downturn? The Next Big Thing?
DDAP is ready.
Execution Premium
Aligning People to the Strategy: Color Your Strategy Map

To align individuals to the strategy, DDAPs executive team
assigns key performance indicators (KPIs) or management by
objectives (MBOs) to all employees. These indicators, linked
to the BSC, define each persons expected behaviors. For most
employees, 20% to 30% of total compensation is linked to these
metrics. DDAP considers the MBO/KPI system the biggest contributor to its entrepreneurial, execution-oriented culture.
The company also puts considerable resources into communicating strategic priorities through its intranet, posters and
leaflets, a quarterly BSC newsletter, and messages in employee
paychecks. After orientation, new hires are given a blank strategy map and asked to arrange the strategic objectives and draw
the connecting links. Further, the BSC and strategy map frame
the agenda of the annual sales kickoff, attended by 500 clientfacing employees. And country general managers send key messages via employee IP desk phones.
Revenues rose 11% (compound annual growth rate);

profitability grew almost 20%; profits as a percentage of
revenue increased from 5.4% to 7.2%.
Services as a share of revenue rose from 32% (2008) to
more than 38% (2010).
Productivity (in gross margin per employee) increased
7% year on year.
The proportion of late projects declined from more than
15% (when tracking began) to 3% in 2010.
Client satisfaction jumped from 8.17 (on a scale of 10)
to 9.24.
Multiyear contracts increased from 30% to more than
40% of all contracts.
Employee satisfaction scores increased from 66 to 75.
Deepening Partner and Client Relationships

To help create more compelling solutions and services, demonstrate business and technical expertise, and drive quality and
productivity, DDAP seeks to deepen its alliance relationships.
To gain top-three market share with partners, for example,
the company works with them to define a joint strategy supported by partner scorecards. DDAP also tracks partner plan
execution (a lead indicator) and partner market share (a lag
indicator) to evaluate and drive joint engagement effectiveness. Similarly, it tracks the performance of key clients by
segment. Metrics include the value of bookings and the number
of account plans, account plan reviews, and executive sponsor reviews. DDAP has also developed scorecards for selected
strategic clients.
24
Future Focus
Developing regional scorecards for large, complex
markets, such as India and China.
Expanding joint partner scorecards to include Global
Solution partners.
Increasing the number of joint scorecards with
strategic clients.
Federal Bureau of
Investigation
leadership recognized it needed a clear vision and strategy to

more effectively execute its new mission. In January 2006, CTDs
leaders adopted the Balanced Scorecard and defined a set of
strategic shifts that the FBI would need to make to uphold its
mission: a shift in focus from prosecution-driven investigations
to intelligence-driven collection and action; a shift in modus
operandi from crisis- and case-driven (reactive) to enterprisedriven (proactive); a shift in scope from domestic to global; and
a shift in relationships from those with a traditional inward
focus to those that were interdependent and collaborative with
other intelligence agencies.
With new counterterrorism responsibilities after 9/11, the FBI defined

strategic shifts and aligned divisions
and offices, executing them with
the BSC. Thanks to communication
campaigns and a new approach to tracking
performance, key strategic initiatives delivered
as promised.
In the spring of 2006, CTD built a strategy map and scorecard,

and by that summer, Mueller ordered deployment of the BSC
organization-wide. Over the next three months, the executive
development team (Mueller, his deputy and associate deputy
directors, the five branch heads, and officers from the Resource
Planning Office and CTD) developed strategic shifts, strategy
maps, objectives, measures, and initiatives for the entire
organization.
The Federal Bureau of Investigation (FBI) has come a long way

since its inception in 1908. The United States first national
investigative service began with 10 special agents reporting
to the Department of Justices (DOJs) chief examiner. Today, it
employs about 35,400 people: roughly 13,800 special agents,
3,100 intelligence analysts, and 18,500 other professionals,
including language specialists, scientists, and information
technology (IT) experts.1
New strategic shifts included adding national security to the

FBIs responsibilities, replacing siloed operations with integrated
teams, updating IT systems, moving from a tactical to a strategic
mind-set, and replacing old rules about information sharing
(Restrict, and share what you must) with new ones (Share, and
restrict what you must). In addition to supporting these shifts,
the BSC would help the FBI address several longstanding cultural
and structural challenges. For example, the field offices had
historically operated independently of one another, and headquarters program managers level of involvement in managing
field programs (such as violent crime and counterintelligence)
varied. Moreover, in the past, the organization had experienced
false starts with new enterprisewide management and strategy
approaches. Managers and executives were too consumed with
tactical details to devote enough time to strategy formulation
and execution.
The FBIs priorities include protecting the United States from

terrorist attacks, foreign intelligence activities, and high-tech
crimes; combating public corruption along with major whitecollar and violent crime; countering transnational and national
criminal enterprises; protecting civil rights; and supporting law
enforcement and intelligence community partners at the local,
state, federal, and international levels.
The organization (which still reports to the DOJ) carries out this
mission through five branches: National Security; Criminal, Cyber, Response, and Services; Science and Technology; Information and Technology; and Human Resources. Headquartered in
Washington, D.C., the FBI also has 56 field offices in major cities
throughout the nation, approximately 375 resident agencies in
smaller U.S. cities and towns, and more than 60 offices in U.S.
embassies worldwide. In 2010, the bureaus budget totaled approximately $8 billion.
9/11: A Wake-Up Call

The September 11, 2001, terrorist attacks on the U.S. revealed a
major disconnect among the nations intelligence and investigative operations, as well as within the FBI itself. Director
Robert Mueller, sworn in only seven days before the attacks, set
a new strategic focus for the organization that emphasized the
importance of preventing terrorist attacks.
The FBIs Counterterrorism Division (CTD), which was merged
into the newly created National Security branch after 9/11,
would play a major role in supporting the organizations new
direction. Until late 2005, CTD found itself in constant firefighting mode, trying to head off the next major attack. Then CTDs
New strategic shifts included adding national

security to the FBIs responsibilities, replacing
siloed operations with integrated teams, updating
IT systems, moving from a tactical to a strategic
mind-set, and replacing old rules about information
sharing with new ones.
By September 2006, the FBI had an enterprise-level BSC, which
was introduced to each special agent in charge (the executive
heading a field office). The FBI dubbed its BSC program the
Strategy Management System (SMS). Key among its scorecards
strategic themes is the internal process theme Operational
Excellence: Deter, Detect, and Disrupt National Security and
Criminal Threats.
25
An Expanding OSM
In 2007, the FBI established its Strategy Management Office
(SMO), which reports to the head of the bureaus Resource Planning Office. Originally staffed with four full-time employees,
the SMO today has 10 people who handle the offices expanded
responsibilities. These include educating new hires on the SMS,
providing quarterly reporting documentation, and coordinating
performance to such oversight entities as the DOJ, the Office of
the Director of National Intelligence, and the Office of Management and Budget. As of 2010, the office has led 27 branches and
divisions in developing their first strategy maps and scorecards.
Strategic Communication Campaigns

To help align its once-autonomous divisions and offices, the FBI
uses numerous channelsincluding an intranet, webcasts, orientation programs, leadership training, executive and divisional
quarterly meetings, and videoconferences between field office
leaders and senior executivesto communicate its strategic
priorities and SMS throughout its vast workforce. The SMO produced a video about the SMS that it shows to all new employees
as well as an SMS communication and training package that it
distributes to each field office.
In 2007, the FBI created an employee communications unit
within its Office of Public Affairs to drive enterprisewide strategic communications. The unit works with the SMO to develop
communication campaigns for strategic initiatives and to drive
messaging down through the executive, frontline managerial,
and rank-and-file levels in each field office and headquarters
division.
A Compass for Tracking Strategic Performance

To generate the performance insights needed to further ensure
that the SMS sticks, the FBI tracks strategic performance
through Compass, its executive management information platform. Compass provides decision makers with a single source of
information and a standardized reporting format. The system
links executives at headquarters and in field offices to the latest
operational and institutional information, providing nearly
real-time data on performance, personnel utilization, and case
management. The bureau also recently launched a strategy management toolan application within Compass that will update
all data related to SMS measures, initiatives, and objectives.
Signs of Success
Although the bureau cant reveal classified or sensitive information about its operations, several achievements that it can
reveal speak to the value that the SMS has provided in helping
the FBI fulfill its complex mandate.
For example, through its focus on the strategic objective Information dissemination and integration, the FBI has stepped
up production of intelligence information reports and is now
measuring their quality and timeliness. A strategic initiative on
surveillance has significantly increased surveillance capacity
in only two years. The bureau has also updated IT systems and
reengineered hiring processes to recruit employees with hardto-find skills and expertise as well as to increase the speed and
efficiency with which people are processed for security clearance and hiring.
Says Mueller, SMS has been incredibly useful to the FBIs senior
executive team in terms of setting the course for the bureau ...
and the objectives we must meet to get there. SMS provides the
means to focus on long-term goals while balancing the need to
address crime and terrorism, every day.
Execution Premium
Operational efficiencies and effectiveness have

increased significantly, through the alignment of
performance criteria with SMS objectives.
Information sharing internally among units and
externally with other intelligence and law enforcement
partners has increased.
Surveillance and IT capacity have improved.
Resource allocation for strategic initiatives has
improved.
Hiring and employee career development have
improved.
Future Focus
Continuing to integrate the SMS with individual
employee performance evaluations, particularly for
senior executives, as well as with the internal
inspection and budget processes.
Continuing to translate the organizational strategy to
operational strategies in the field.
Increasing the use of SMS measures in external
performance reporting.
Implementing future releases and versions of the
recently released strategy management tool.
1 P
ersonnel numbers are as of January 2011. In addition, the FBI uses some 175 personnel from other agencies and 4,500 task force officers (personnel employed by
partner organizations who work at least part-time on joint investigative efforts with FBI personnel).
26
First Philec Solar

Corporation
This producer of silicon wafers used
in solar cell technology is one of the
few known start-ups to adopt the
Balanced Scorecard from the getgo. Doing so helped it far exceed its business plan
goals and shareholder expectations.
In the past decade, the global embrace of renewable energy
has, along with an explosion in silicon wafer production for solar cells and modules, created a booming solar energy market.
In 2007, First Philec Solar Corporation (FPSC) was bornan 80-20
joint venture between First Philippine Electric Corporation1 and
SunPower Philippines Manufacturing (SPML), the sole manufacturing facility of San Jose, Calif.based SunPower. (SunPower
is one of the worlds largest solar energy companies and the
recognized leader in high-efficiency solar cell technology.)
Based in Batangas, the Philippines, FPSC produces micro-thin
silicon wafers that are used primarily as substrates for solar
cells. Strategically located next door to SPML (initially its sole
customer), FPSC was positioned to compete with SPMLs existing suppliers in China and Japan. Launched in May 2008, the firm
represented the Philippines entry into the global solar energy
arena. In 2010, the 1,100-employee company earned $100 million
in revenues. FPSCs operational excellence strategy entails
producing best-quality silicon wafers on time and at the lowest
cost to the customer. The company aims to become the global
partner of choice for integrated wafer solutions.
Big Pressures on a Little Start-up

As a start-up, FPSC faced daunting challenges. Its parent companies devised a 10-year business plan with draconian cost, quality, and delivery targets. With only five months to go before its
first scheduled delivery, the company had to construct its plant,
test equipment and manufacturing processes, and hire and
train 400-plus employees in a country with little solar manufacturing expertise. In addition, the company had to beat existing
production costs, improve on efficiency and yield percentages
(against SPMLs metrics) and produce 18 million wafers by the
end of its first year. Moreover, management sought to set new
production and performance standards.
In March 2008, FPSC adopted the BSC, beginning with a corporate strategy map and scorecard that emphasized production,
process excellence, and workforce development. (In September
2009, the company cascaded the BSC throughout all departments, and currently has 11 departmental strategy maps.)
FPSC delivered its first product one month ahead of schedule

and exceeded its 2008 commitment by 2.2 million wafers. By
year-end 2008, it exceeded its revenue target by 16% and reduced
projected start-up losses (net income after taxes, or NIAT) by
$1 million. Its manufacturing innovations won it most of SPMLs
total wafer requirement, and within four months of start-up, it
surpassed its competitorsbecoming, in SPMLs words, its best
outsourced wafer provider. The parent company invited FPSC to
participate in a new joint venture in Malaysia.
Adopting a Disciplined Strategy Management Process

To smooth out first-year difficulties, leaders held team-building
sessions and simplified goals and measures. FPSC began implementing an enterprise resource planning (ERP) system along
with a manufacturing execution system to replace its manual
data collection.
By 2009, FPSC faced big challenges as it ramped up operations.
The global economy had tanked and, with materials constituting
almost 70% of total costs, drastic cost reductions and process
improvements were needed to achieve profitable growth. Management forged new strategic themes and objectives focused
on innovation and quality processes to reduce cost and improve
output, and implemented rigorous Lean Six Sigma and Statistical
Process Control programs. To align people and processes to the
strategy, senior executives implemented a highly disciplined,
seven-step Strategy Management Process (SMP). Facing a funding crunch, FPSC shifted temporarily to supplier financing.2
FPSCs Bright Idea program awards prizes (and

recognition in employees performance evaluations) for process improvement ideas and other
suggestions that support company objectives.
The SMP addresses long-term strategy development as well
as processes for responding quickly to underperformance or
changes in business needs by helping the company adjust
strategy and fast-track process improvements. Annual strategy
planning sessions integrate operational planning and budgeting, and senior leaders ensure that all strategic objectives in the
BSC are aligned with related initiatives. Departmental scorecards, activities, and resources are, in turn, updated in alignment with company goals. Additionally, strategic objectives
are translated through operational key performance measures
(those pertaining to yield, cost per wafer, utilization, downtime,
attendance, and so forth). A common operational dashboard
allows managers at all levels to review production data in real
time at daily and weekly staff meetings, as well as at monthly
and quarterly strategy meetings. Statistical techniques and
tools such as failure modes and effects analysis (FMEA), root
27
cause analysis, and fishbone diagrams support the BSC in arming decision makers with the information needed to assess and
test strategy and, where needed, make the case for change.
These tools helped FPSC in 2009 achieve two important strategic successes in quality and process improvement. First, to
reduce unit costs associated with the price fluctuations of
raw materials, the cost of air freighting raw materials, and an
increase in material use, FPSC purchased equipment to recycle
materials in-house. Doing so saved the company $3 million by
year-end. In addition, FPSC established 28% higher saw-cutting
times than the industry average within its first four months,
and increased saw utilization (by 22%) and capacity (by 30%),
saving about $4 million in 2009.
Managing and Motivating with Targets

From the outset, FPSC has vigorously promoted a target-setting
culture. Each BSC performance measure is broken down into
three target levels: target (the baseline, or budget number set
in the 10-year plan); goal; and BHAG (big hairy audacious, or
stretch, goal). These multilevel targets are communicated to
the entire workforce. Since June 2010, each employee has had a
personal scorecard whose targets are also linked to merit pay
increases. To promote a culture of strategy ownership, FPSC
awards teams bonuses for hitting or exceeding targets. FPSC
also uses rewards to incentivize best practice sharing: its Bright
Idea program awards prizes (and recognition in employees
performance evaluations) for process improvement ideas and
other suggestions that support company objectives.
Becoming a Major Industry Player

In its first three years, FPSC has defied start-up odds and exceeded customer expectations, results that executives attribute
to the enterprisewide strategic alignment fostered by its SMP
system and Office of Strategy Management, established in
February 2010. By fall 2010, FPSC was providing most of SPMLs
wafer requirement, and is steadily expanding its customer base.
With a growing global solar energy market and favorable U.S.
government tax incentives, FPSC has ambitious expansion
plans: to produce 240 million silicon wafers annually and $155
million in revenues by 2012. That would make FPSC one of the
largest solar wafer manufacturing firms in southeast Asia. Says
FPSC president Dan Lachica, The BSC played a major role in
providing a common language for strategy and an effective
process that our organization follows to ensure our journey to
excellence. In the few years that weve implemented the BSC,
weve already reaped the fruits from process improvements,
cost reduction, and employee engagement.
Execution Premium
In its first six months of operations, FPSC surpassed
stretch targets for revenue and NIAT.
During its first full year of operations, FPSC broke
even, far exceeding the $2 million loss expected in its
business plan.
The company achieved the most aggressive sawcutting time in the world28% faster than the industry
average.
Floor space utilization and materials efficiencies
have yielded a cumulative savings of $7 million within
three years.
Customer satisfaction improved by 16% from 2008
to 2009.
In year 1 of operations, FPSC achieved 100% timely
deployment of quality hires, and 98% of key positions
were filled for 2009.
Future Focus
Improving strategic awareness and understanding
of the BSC to bolster alignment.
Cascading the BSC throughout more departments
(such as marketing) and subcontracted services (such
as transportation).
Creating supplier and contractor BSCs in coordination with those partners to monitor their performance
against company goals.
Deepening the incentives for strategy execution
excellence by further integrating the BSC into the
performance management and rewards system.
Consolidating the Lot Tracking System, the HR Information System, and ERP systems data into a single BSC
database.
Implementing a separate strategic expenditures
(StratEx) category into the management reporting
system.
1 First Philippine Electric Corporation is part of the Lopez Group of Companies, a Philippine conglomerate with holdings chiefly in power and telecommunications.
2 Supplier financing involves arranging alternative payment terms or providing equipment and services in demo condition prior to actual purchase.
28
Folkhlsan
mandate for an open-tender system for purchasing healthcare

services.1 Now, Folkhlsan had to bid its services, competing
against private providers for the same municipal clients. Winning bids became all about price. Still, Folkhlsan remained
determined to deliver higher-quality services than its rivals and
to maintain close bonds with its customers. But selling services
for less money while maintaining service quality led to soaring
costs and dwindling operating margins.
Experiencing growing pains and new

competition, a Helsinki-based social
services organization used the BSC as
a road map and compass for driving strategic
change. Membership growth, revenues, employee
trust, and postmerger capabilities all improved.
Realizing the situation wasnt sustainable, executives decided to

change the way they managed the organization.
Headquartered in Helsinki, Folkhlsan strives to promote health

and quality of life for Swedish-speaking Finns, a small but flourishing ethnic minority concentrated along Finlands southern
and western coasts. Founded in 1921 by internal medicine
specialist Ossian Schaumanwho stressed the importance of
combining research with practical actionthe nonprofit has
four major divisions.
From EFQM to the BSC
The Folkhlsan Foundation, which has overall management

responsibility for the organization, is in charge of asset management, building projects, quality management and development
work, human resources, and information technology (IT). The
Folkhlsan Research Center, with some 200 researchers (experts
in their fields), focuses on genetics, preventive medicine, public
health, and health promotion. Folkhlsans Service Production
division offers outpatient clinics, daycare centers, rehabilitation
units, after-school nutrition and exercise programs, and eldercare facilities for a target clientele of a half-million people, under
the auspices of nonprofit companies that sell healthcare services
to local municipalities. Of the organizations 1,500 employees,
80% work in services. The Folkhlsan Association oversees public
outreach and Folkhlsans work promoting health with more
than 100 independent local associations. It is supported by the
Folkhlsan Foundation and other charitable organizations.
In 2009, Folkhlsan personnel, along with 17,000 volunteers,
provided services for 1,970 children in daycare centers, 3,000
children and teenagers in vacation programs, 462 seniors in
group homes and care units, and 455 teens in outpatient clinics,
among others, throughout Finland.
In 2003, Folkhlsan adopted the European Foundation for

Quality Management (EFQM) methodology as a framework for
clarifying its mission, values, and vision. The following year, the
organization adopted the Balanced Scorecard to augment its
EFQM work. Executives saw Folkhlsans BSC program, named
Map and Compass, not only as a means for driving strategic
change and continuous process improvement but also as a way
to enhance employees understanding of the strategy and secure
their buy-in to these new management approaches.
During 2005, a BSC team consisting of the four operating area
heads developed an enterprise-level strategy map and scorecard.
The first map had 18 strategic objectives (including Cooperation
among our three divisions, Improved risk management, and
Information as a strategic tool), most of them clustered in the
internal process perspectivereflecting Folkhlsans focus on
process improvement and operational excellence. The financial
perspective contained only one objective: Balanced finances.
In 2006 and 2007, the map and scorecard were cascaded throughout the divisions, with extensive involvement from their leaders.
Also in 2007, Folkhlsan automated its BSC reporting system.
Implementing a management system in a nonprofit is demanding; Folkhlsans BSC implementation, which took five years, also
required different implementation approaches for each of the
organizations operating areas.
Documenting to Advance Process Improvement
Over the past 10 years, Folkhlsan experienced strong growth,

chiefly in eldercare and sheltered housing, with revenues
ballooning by roughly 350%. With such growth came new
challenges. Cross-division communication and synergies were
weak. Initiatives werent linked to the annual budget. Roles and
responsibilities werent clearly defined, so goals and initiatives
were managed ineffectively. Organizational performance was
reviewed only once a year and focused only on operations. Many
employees were unaware of Folkhlsans priorities.
In 2007, the organization conducted a pilot study of Map and

Compasss effectiveness within Folkhlsan Botnia (Folkhlsans
service unit in Ostrobothnia), publishing its first Annual Personnel and Quality Report to document the studys findings. In
2008, this study was extended across the entire organization,
documenting the years strategic performance, initiatives, and
action plans for all of Folkhlsan. It serves as a powerful tool for
showing how each division supports enterprise-level goals, further strengthening alignment. In 2008, PricewaterhouseCoopers
granted Folkhlsan an award for the report, praising its transparency and clear language.
At the same time, Folkhlsans Service Production division faced

new competition resulting from the Finnish governments new
Folkhlsan has also used documentation to identify the processes critical for achieving its strategic objectives and ensur-
Growing Pains and New Competition
29
ing quality in the execution of those processes. Specifically, it

has developed a set of handbooksfor activities ranging from
senior care, daycare, and child protection to research and cost
controlthat provides detailed instructions for performing
these processes. According to Folkhlsan Foundation CEO Stefan
Mutanen, these handbooks represent a capital investment in
process improvement.
Excelling at Strategic Alignment

In implementing its Map and Compass program, Folkhlsan
has demonstrated excellence in strategic alignment, an impressive outcome given one of the organizations major alignment
challenges: the vastly different mandates of its three main
operating divisions. Involving division heads in map and BSC
development helped align them to the enterprise strategy.
Folkhlsans divisions have also developed a set of rigorous
workshops on the strategy review and operational planning
processes to enhance managers and employees understanding
of the organizations strategy and their parts in executing it.
Communication programsincluding emails from the CEO,
regularly published staff newsletters and magazines, and
current versions of strategy maps posted in meeting rooms and
officesreinforce the message.
New Discipline, Impressive Results

Folkhlsans Map and Compass system has infused the organization with a discipline thats already generating results. For
example, the organization no longer tolerates financial losses
in any division or department; it demands remedial action with
deadlines from entities suffering losses.
In addition to yielding improvements in key areas such as
membership growth, revenues, customer service, employee
trust, process efficiency, and published research, Map and
Compass has more recently enabled Folkhlsan to navigate
difficult transitions. For instance, to prepare for a late-2009
merger between Folkhlsan Botnia and Norrvalla Folkhlsan
(two regional companies with similar business volumes), the
organization appointed a new board of directors, CEO, and
management team for the future entity in early 2009. Executives
used the enterprise-level map and scorecard to define a strategy
for the new entity and to establish team and individual
objectives aligned with that strategy.
Outside experts from Folkhlsans ISO 9000 certification inspection team acknowledge several strengths related to the merger,
including the application of shared action plans, long-term
planning for changes, and a comprehensive management
system. Other third parties have recognized Folkhlsans
accomplishments as well. For instance, Finlands National
Institute for Health and Welfare named a Folkhlsan senior
rehabilitation facility one of the 20 best in the nation. The
1 An effort to make the nations healthcare system more efficient and fairer to all.
30
organizations antibullying videos received a gold medal at an

international film festival in New York. And several Folkhlsan
researchers have won awards for quality and citations of
their work.
CEO Mutanen puts the organizations achievements in simple,
clear terms: Folkhlsans strategic work has ensured that our
growth has not been achieved at the expense of quality. Our management system has paid attention to whats really important.
Execution Premium
Folkhlsan Association membership increased by 10%.

Revenues increased by 10%.
Folkhlsans 2009 image analysis survey (of profes
sionals and Finlands Swedish population) indicated
Folkhlsan has a strong brand linked to positive values
in all groups surveyed.
Great-place-to-work rankings show significant improvement across criteria, especially in the dimensions of
fairness, pride, and employee development, as tracked
in four biannual surveys between 2004 and 2010.
Customer feedback targets were exceeded in all criteria.
The number of research articles published by
Folkhlsan experts rose 45%.
Folkhlsans units were recognized by the Finnish
National Institute for Health and Welfare as best care
provider (2006); for excellence in nutrition (2007); for
excellence in rehabilitative care (2008); and for excellence in nutrition, the use of psychiatric medicines, and
rehabilitative care (2009).
Future Focus
Enhancing the monitoring of strategic initiatives.
Developing an internal audit process to monitor the
effectiveness of process improvement efforts.
Using Map and Compass to report strategic
performance to the board of directors.
Improving links between rewards and employees
performance; strategic objectives and risk management; and objectives and the organizations
environmental policy.
Health Insurance Review &

Assessment Service
(South Korea)
cial objectives in the process perspective of its strategy map. By

2006, the departments that formerly handled strategic planning,
budget management, and performance management were
consolidated into the Planning and Coordination department,
effectively HIRAs Office of Strategy Management (OSM).
Growing workloads,
a medically needier
population, and new
technologies were overwhelming the agency
charged with monitoring quality and cost for South
Koreas public healthcare system. A new management system, strong leadership, and mechanisms
that raised accountability took the agency to new
levels of performanceearning it a reputation as a
model government agency.
Overcoming Initial Obstacles
In 2000, 11 years after South Korea transitioned from a private to

a national health insurance system, the government integrated
numerous health insurance societies into a single insurer known
as the National Health Insurance Program. Simultaneously, the
government launched the Health Insurance Review & Assessment (HIRA) Service, an affiliate of the Korean Ministry of Health
and Welfare. Its mission: to improve healthcare for the countrys
45 million citizens by ensuring the appropriate level of quality
and costs. Working with healthcare institutions, HIRA reviews
medical fees on patient claims and assesses the costs and performance of the public healthcare system.
But by 2004, when HIRA placed last in the nations first customer
satisfaction survey of public organizations, HIRAs leaders
knew that change was in order. The agencys challenges were
mountingin particular, an aging population that required
higher service levels, and a ballooning employee workload
exacerbated by medical advances, including new technologies.
HIRA desperately needed its own assessment to transform the
$200 million annual budget, 1,700-employee agency and elevate
its standing in the eyes of Koreans.
The first step was to improve service quality and customer
satisfaction. HIRA executives knew this required focusing on
business processessuch as accelerating medical refunds
(which averaged 74 days) and working with healthcare providers to improve treatment practices (which would, for example,
reduce prescription rates for antibiotics and injections). To
implement the needed changesand accomplish HIRAs overall
goalsleaders chose the Balanced Scorecard.
With strong backing from HIRA executives, a team was established in late 2004 to launch the BSC. Enterprise- and divisionlevel strategy maps centered on the strategic themes Service
Quality Improvement and Customer Orientation. Because
processes were critical to these themes, HIRA embedded finan-
HIRAs leaders recognized that imparting a performance focus to

beleaguered government workers would take more than a new
management system. In addition, because HIRAs mission and
goals were set by the government, the agency lacked autonomy
in its strategy execution and, in turn, had little control over
determining the time frames needed to achieve certain goals.
Furthermore, many employees did not understand the notion of
a strategy execution tool, instead seeing the BSC as an appraisal
tool. So strong was their initial resistance that some employees threatened to take the performance measurement issue
to their labor union. In response, HIRAs president, in a speech
that became famous internally, accepted full responsibility for
the organizations failings, offering an apology to employees.
Change is a must for our survival, he declared.
This speech proved instrumental in gaining employee buy-in to
the strategy. The president issued a steady stream of communications, through monthly assemblies, monthly strategy meetings, weekly directors meetings, and status meetings on key
change initiativesan effort that transformed employees into
active players in HIRAs new performance-focused culture.
Recognizing that being focused on performance and strategy
begins at the top, HIRAs president believed that senior leaders
and management could advance this mind-set through their
own behavior and accountability. Every year, HIRA revises its
organizational mission, vision, and strategic goals through a
management goal-setting workshop involving the president,
executive directors, directors, and external experts. Critical
strategic initiatives are identified, and key performance indicators (KPIs) associated with them are included in a performance
contract between the president and the Korean minister of
health and welfare. This contract in turn shapes the performance contracts the president signs with his executive
directors. This process is repeated at each level, in contracts
between executive directors and directors, and between
directors and general managers.
Models and Methodologies

In 2008, to drive performance management at the individual
level and align employee goals with organizational goals,
leaders introduced the management by objective (MBO)
methodology. With MBO augmenting the BSC system, HIRA
manages strategy execution and performance at multiple levels,
a capability that has helped it overcome its lack of control
over its strategy execution.
31
That same year, to ensure that operations and strategy were

solidly linked, HIRA launched its 3-Biz Model for integrating
business, budget, and the BSC. This model allocates the budget
according to the priority of each strategic goal and initiative.
It also enables HIRA to incorporate performance into planning
and budgeting, thus linking budget planning for the current year
with that of the following year.
The rigor of HIRAs target-setting process is matched by the rigor
HIRA applies to analyzing the linkages between strategic measures and operational KPIs. For quantitative indices as well as
qualitative measures tracked semiannually or annually, HIRA creates proxy indices, allowing performance to be monitored and
managed on a quarterly basis. In addition, future improvement
plans for any underperforming indices are evaluated. The agency
today has visibility as far out as eight quartersa critical ability,
given its mandate to balance healthcare costs and services.
Division; and the Best Human Resource Development (HRD)

award (2009), conferred by the South Korea HRD Congress, an HR
consultancy that also publishes a leading Korean trade magazine.
Today, HIRAs employees see how the processes they engage
in contribute to the development and continuous improvement of the nations health insurance system. HIRAs four-year
cultural transformation has made the agency the benchmark
against which many other Korean public organizations measure
themselves.
Execution Premium
Customer satisfaction (as measured in the 2009 Customer Satisfaction Survey for Public Organizations) rose
44.4% between 2004 and 2009, from 57.7 to 83.3.
HIRAs key risk indicator system gives executives early warning signssuch as the number of reviews closed in any given
quarter exceeding the legal deadline. Leaders can thus determine
whether the risk of delay in the review process has increased
and respond appropriately.
The agency saved $666.7 million in treatment costs by

linking its review and assessment systems. For example,
in 2008, HIRA reduced the rate of antibiotics prescribed
by 12.5% and the rate of overprescription by 24.5%,
compared with the previous year.
Best practice sharing has fueled innovation at HIRA, including the development of a comprehensive medical information
system. Today, HIRA has more than 180 communities of practice
(CoPs), with nearly 4,600 members (many people participate in
multiple CoPs). The CoP for the Healthcare Fee Review department, for example, consists of virtual review rooms categorized
according to the different areas of review (e.g., rehabilitation,
neurosurgery). In addition, HIRAs OSM offers coaching and consulting services to underperforming divisions by leveraging the
best practices of high-performing divisions.
The number of cases of federally prohibited drugs

prescribed fell from 118,741 to 66 cases.
A Model of Efficiency and Productivity
Review accuracy improved (as reflected in an appeal

rate of 0.82%).
The rate of medical fee reviews completed within 15
days (the legal deadline) increased from 89.3% to 99.4%.
The average number of reviews completed per reviewer
increased nearly 153% in that period.
The governments Public Organizations Evaluation
recognized HIRA for having the highest level of labor
productivity of any South Korean public organization
for four consecutive years (20052008).
Among the most dramatic illustrations of the BSCs effectiveness at HIRA has been the agencys One-Stop Service for Refunds
program, which reduced the processing time for medical fee
refunds from an average of 74 days to 32 days. Newfound efficiencies have led to significant cost reductions; in 2009 alone,
the agency cut $220 million in medical expenses by preventing
inaccurate or excessive prescriptions at healthcare institutions
that participated in HIRAs on-site reviews.
Future Focus
Since becoming HIRAs president in March 2010, Yoon-Koo Kang

has continued to champion the use of the BSC. He also actively
participated in the formulation of HIRAs redefined organizational vision, Proper Review, Proper Assessment: Together for
Public Health.
Upgrading the employee performance measurement

and assessment system to enhance employee
acceptance.
HIRAs impressive results have earned the agency numerous

awards, including the South Korean governments Best Productivity Award (2008), Knowledge Management Innovation Award
(2009), and Global Standard Service Award in Management
32
Establishing an integrated management system that

automatically connects with other information
technology systems (such as the organizations HR
and knowledge management systems).
Increasing the weight of performance in the HR

appraisal and the link between compensation and
performance to improve employee motivation and
advance the performance-focused culture.
Hindustan Petroleum
Corporation Ltd.
environment of trust, pride, and camaraderieall while achieving the highest possible growth rate and ROI.
Management then built the corporate strategy map and scorecard. Objectives included Improve strategic thinking capabilities (learning and growth perspective), Ensure inter-SBU coordination (internal process), Increase profitability of dealers
(customer), Increase focus on premium products (financial),
and Conscientious corporate citizen (corporate).
A Mumbai-based oil and gas giant

focused on customer satisfaction to
become competitive in a transformed
industry. With the BSC as the tool
for executing its new customer intimacy strategy, Hindustan Petroleum has achieved
dramatic gains in workforce alignment, revenue,
dealer supply times, and other critical metrics.
Building a Shared Vision
Boasting $25 billion in annual sales and an 11,000-strong workforce, Hindustan Petroleum Corporation Ltd. (HPCL) is a Fortune
500 giant. The Mumbai-headquartered company was created in
1974 and owns and operates two major oil refineries as well as
the largest lubricants refinery in India. Its other business units
include Aviation, Bulk Fuel, Liquefied Petroleum Gas (LPG), Lubricants, Retail (60% of the companys business), Trade (including
oil and petroleum-product imports and exports), Exploration
and Production, and Joint Venture Companies.1
HPCL has 13 regional marketing offices, 130 terminals and depots, more than 8,500 gas stations, 43 LPG plants, and 2,250 LPG
dealerships. Three large cross-country pipelines carry petroleum
products to the companys major supply points.
Sharpening Focus on the Customer

Like all Indian oil companies, HPCL is a mega public sector
unit51% government owned and subject to price and wage
constraints. Until the late 1990s, it operated in a predictable environment and faced little private sector or global competition.
In the state-regulated oil industry, the government even planned
industry growth.
But the next decade brought liberalized trade. The opening of
the Indian markets to multinationals and private enterprise
created newfound competition. Although HPCL enjoyed solid
financial performance, its executives recognized that customer
satisfaction had to be the primary goal if HPCL hoped to remain
competitive in its radically reshaped industry. And a motivated,
sharper workforce would be key to achieving that goal.
In February 2003, top executives, along with functional-area
and SBU heads, began intensive deliberations to craft their own
individual visions of the organizationsand their personal
success as it related to customer satisfaction. From these, they
articulated a corporate-level vision: to delight customers
[through] superior understanding and fulfill their stated and
latent needs with innovative products and services. The vision
also included being more agile than the competition, being a
learning and innovative organization, and creating an
Executives knew that the new organizational vision couldnt be

achieved through management edict alone. To buy in to HPCLs
desired future, employees had to help define it. This would be
a challenge, given the civil-service mind-set that had characterized the companys workforce for so long. The answer: building
a shared vision.2 Thenhuman resources director (and future
chairman) Arun Balakrishnan recommended adopting the Balanced Scorecard to execute the customer intimacy strategy that
would be crucial to realizing HPCLs vision.
Through a series of workshops held in 2003, managers and
employees (including unionized labor) from HPCLs SBUs, shared
services units, and teams articulated their own vision for their
units in alignment with the organizational vision. Using such
leading techniques as SWOT (strengths, weaknesses, opportunities, and threats) analysis and Michael Porters Five Forces
approach, the units then crafted strategies for realizing their
vision and, with the help of internal coaches, depicted them on
corresponding strategy maps and scorecardsa total of 200
BSCs for the operating units and functional areas, and 500 for
team leaders. In addition, the company asked each employee to
identify his or her career (and even personal) aspirations as they
related to the companys future.
Executives knew that the new organizational vision

couldnt be achieved through management edict
alone. To buy in to HPCLs desired future, employees
had to help define it. This would be a challenge,
given the civil-service mind-set that had characterized the companys workforce for so long. The
answer: building a shared vision.
Securing Commitment to Strategy Execution
HPCL launched a plethora of initiatives to secure the commitment to strategy execution. For example, it created a performance measurement system for each corporate officer, sending
the message that the highest levels of leadership were just as
accountable for strategy execution as the lowest-level employees. Officers incentives are based on not only how they perform
against their scorecard targets but also how their SBU performs.
33
The company also identified strategic job families and provided

training and developmental experiences (including mandatory
job rotations for managers) on the competencies essential for
each job family. It provides continuous training on BSC methodology as well, delivering about 70 workshops to more than 600
officers in 2009 alone.
Careful crafting of service-level agreements (SLAs) between
shared service functions and SBUs further reinforced commitment. To draw up the SLAs, managers answered two questions:
(1) What help does our unit or function need to provide to make
this SBUs strategy successful? and (2) How do we offer goods
and services to be superior to an external supplier providing
similar services?
The company also encourages best practice sharing by enabling
managers and employees to share success stories through
multiple communication channels: the chairmans blog and
regular executive and business council meetings, webcasts,
corporate emails, fliers, in-house magazines, and large-scale
town-hall meetings. The company has also put in place online
work systems such as HR tools and internal channels of
communication to improve transparency, individual employee
performance, and efficiency in communications.
Scoring Impressive Successes

HPCLs dedication to strategy execution has delivered impressive results in the five years since the company adopted the BSC.
Revenue more than doubled, the companys retail network grew
almost 30%, and dealer supply time (the time between receipt
of a purchase order and shipment) shrank from 24 hours to just
two hours for high-volume category A dealers. Refinery project
delays decreased from as long as 24 months to on-time performance, and new-employee attrition fell by more than 40%.
Equally remarkable, when major government-owned Indian
companies went on strike during January 2009 to protest a delay
in pay increases, HPCL officers declined to join them. The company worked around the clock during the three days of the strike
to serve customers, staving off what could have turned into a
complete shutdown of Indias transportation infrastructure.
Grateful customers praised HPCL for helping them continue to
operate during the strikegiving the company a powerful edge
over rivals in instilling customer trust and faith.
A dizzying array of awards, domestic and global, further testifies
to the companys success. For example, HPCL became the only
Indian aviation fuel company to win the Golden Peacock award
for environmental management. And in 2008, it won the NDTV
Profit Business Leadership Award, given to companies that have
fueled the Indian economy and nurtured excellence. It has

won national training and marketing awards, and over several
years was named best employer in India by Hewitt Associates.
Notes Balakrishnan, who retired in August 2010, The Balanced
Scorecard has become the method for communicating and
implementing change as we become a more customer-focused
learning organization. His successor, Shri S. Roy Choudhury,
former director of marketing and BSC program headand
a fervent believer in the impact of learning and growth and
internal process perspective objectives on customer and financial outcomeshas oriented the organization toward holistic
measurement systems.
Execution Premium
Revenue jumped from approximately $14.4 billion

(Rs 652.2 billion) to approximately $25 billion.
The number of retail stations increased from 6,667 to
8,539a jump of almost 30%.
Turnover of new hires decreased from 11% to 6%.
Project delays fell from as long as 24 months to on time.
New pipeline throughput in 2010 was 11.95 million
metric tons (MMT), compared with 6.14 MMT in 200304;
and the length of HPCLs own pipeline (i.e., excluding
joint venture pipelines) grew from some 730 kilometers
to 2,130 kilometers.
Future Focus
Integrating BSC reporting software with the companys
existing enterprise resource planning platform.
Continuing to train newly hired managers in the BSC
methodology.
Holding vision-building workshops.
Revisiting strategy maps at least quarterly to ensure
alignment of objectives and initiatives.
Reviewing and refreshing individual Balanced
Scorecards to conform to strategy map and BSC
changes.
1 H
PCL currently has nine joint ventures and two subsidiaries in such businesses as manufacturing and marketing specialized bitumen emulsion, underground LPG
storage, and distributing and marketing environmentally friendly fuels.
2 S
hared Vision is one of the five disciplines of a learning organization defined by Peter Senge in his book The Fifth Discipline. The remaining disciplines are Team
Learning, Personal Mastery, Mental Models, and Systems Thinking.
34
The Hospital for Sick

Children
A history of excellence made
change a challenge to this
Toronto-based, internationally renowned childrens
hospital. But the growing emphasis on measuring clinical performance, along with changes in
leadership and industry developments, prompted
a strategy makeover. Driven by its OSM, SickKidss
transformation has yielded unprecedented levels
of alignmentand stunning results.
Located in Toronto, The Hospital for Sick Children offers secondary and tertiary specialized healthcare for local patients as
well as complex, advanced care for patients from Ontario and
throughout the world. For the year ended March 31, 2010, the
hospital, known as SickKids, had revenues of $682.3 million, most
of it provided by Ontarios Ministry of Health and Long-Term
Care (MOHLTC) and the Toronto Central Local Health Integration
Network. The remaining revenue came from patient care from
outside Ontario, research grants, SickKids foundation grants,
and commercial services revenue.
Almost immediately, executives observed an internal culture

shift as personnel began to see how they contributed to strategy execution. The BSC was the mechanism that united all areas
of the hospital in the common goal of executing the strategy.
Planning efforts became aligned from top to bottom, and crossunit collaboration became the norm.
SickKidss strategy is multipronged: to be a world-class leader in

quality and service excellence in clinical care, research, education, and administration; to improve staff skills and engagement;
to foster a culture of innovation; to maintain a commitment to
fiscal responsibility; to update facilities and equipment; and to
share best practices in providing accessible, comprehensive, and
sustainable child health systems.
Data gathering in the healthcare industry has become a widespread imperative in Canada (as elsewhere, due to the growth
of public insurance), with a focus on measuring clinical performance, financial performance, and patient satisfaction. In the
mid-1990s, a handful of Ontario hospitals implemented dashboards, report cards, and scorecards.
For these and other reasonsleadership changes, new directions taken by the Ontario MOHLTC, and developments in
healthcarein April 2005 SickKids began developing what it
calls strategic directions to identify challenges, opportunities,
and priorities. To measure and manage the strategy, executives
in 2007 adopted the Balanced Scorecard (which had already
But SickKids faced challenges in implementing the new plan.

Galvanizing physician and staff unity would be crucial to achieving these objectives. However, the clinical care areasalong
with corporate support services, education, and research
typically operated as silos. Another difficulty was, ironically,
SickKidss 100-year history of excellence; people were already
following numerous operational imperatives and were naturally
resistant to change. And educating the organizations 8,000 staff
in the useand valueof a new reporting tool was a challenge.
Executives adopted a number of strategiesfor example, using
from-to diagramsto demonstrate the case for change.
Fast Results
SickKids has a three-part mission: care, research, and education.

The SickKids Research Institute is Canadas largest hospitalbased research entity. Through SickKidss Learning Institute, the
organization educates more than 2,300 academic trainees each
year and presents learning and orientation programs to more
than 6,000 staff.
The Measurement Imperative
been adopted by the Ontario MOHLTC). Later that year, SickKids

created its first strategy map, defining five strategic objectives:
Leading nationally and internationally; Enhancing system
capabilities; Achieving operational excellence; Establishing
areas of focus; and Strengthening integration of care, research,
and education.
Hard benefits followed within two quarters. Most notable was

medication reconciliation, the process of identifying all medications and supplements a patient is taking and analyzing them
for possible interactions and their impact on the given condition. Pre-BSC, medication reconciliation was performed for only
33% of patients admitted. Within two months, the procedure
approached its target of 70%, and remains near 80% currently.
Wait times for MRIs were also reduced almost immediately.
The OSM as Prime Mover

In October 2006, SickKids established an Office of Strategy
Management (OSM). Among other things, the OSM developed
portfolio action planning, an annual process of revising the
strategy and cascading it to its portfolios (business and
support units) and even to individuals. Senior executives work
from OSM-crafted templates to create the plans. Portfolio action
planning ensures that the strategic initiatives developed by
the units (e.g., Research Institute, Clinical Programs and Services,
SickKids International, Corporate Services, Information Management and Technology) are aligned with corporate strategy.
SickKids plans to add operational dashboards to the scorecard
template, thereby giving leaders insight into operations effect
on achieving strategic objectives.
The plans are also applied to frontline employees personal
performance objectives, which in turn are linked to those of
other units, the organizations five-year plan, and the strategy
itselffurther highlighting employees connection to strategy
35
and strategic reviews. Take, for example, hand hygiene. After

frontline staff received intensive training on the connection
between hand hygiene and reduced infection rates, shortened
patient stays, and increased patient satisfaction, they began ensuring that they as well as their colleagues washed their hands
at all required points. As a result, compliance rates shot up more
than 30% in three years.1
SickKidss OSM has also built a key capability in enterprise
project management. Launched in 2009, iProject (a standard
project management methodology) consists of tools (including a project road map), templates, and a software application.
iProject promotes efficiency, supports improved and consistent
reporting, enables intervention when needed, and tracks
resource allocation. The OSM also produces an annual report
that describes initiatives that have been undertaken and explains how and why they align to the hospitals strategy.
The OSM devotes much energy to communicating the strategy
message, beginning with the hospitals trademarked vision
(Healthier Children. A Better World) and the brand name
SickKids. The OSM presents text and multimedia messages on
its intranet (called KidWeb) and website, along with posters,
booklets, a company and departmental newsletters, and hospital-wide forums. In 2010, the OSM created a 36-page document,
Avenues to Excellence: 20102015, which outlines SickKidss
strategic directions and strategic objectives and describes its
strategy planning process.
Target-Setting Expertise
Because SickKids is a mission-driven organization, nonfinancial
performance is the ultimate measure of success in its BSC.
Known for its expertise in developing nonfinancial metrics,
SickKids is regularly consulted about target setting; hospital
officials chair provincial and national benchmarking initiatives.
Moreover, the hospital is often asked to consult on quality
topics such as patient safety, access to care, and family-centered
care, and OSM personnel speak at industry meetings about
implementing an OSM.
Having a well-articulated strategy not only benefits the hospital
internally but also helps attract top international recruits, who
cite it as a key reason for their interest in joining the organization. Using the BSC framework to define, operationalize, monitor,
and report its strategy, SickKids is on healthcares leading edge,
an achievement that CEO Mary Jo Haddad attributes to its focus
on the measurement, monitoring, and management enabled
by the scorecard. Closely linking abstract concepts such as
quality and safety with concrete actions enables SickKids to
pursue its vision of ushering in a better world by improving the
health of children.
Execution Premium
Medication reconciliation rose from 33% of admitted

patients to 78.3%.
Hand hygiene compliance increased from 53.1% to 77%.
MRI wait times fell from 11.7 weeks to 7.7 weeks.
Inpatient overall satisfaction, already high, rose to
99.1%; pain management satisfaction jumped from 39%
to 77.7%; and inpatient bed wait times from the emergency department dropped from 9.6 hours to 6.1 hours.
Health and safety compliance (a metric combining
implementing safety recommendations with safety
reporting incidents and mask-fit testing compliance)
rose from 69% to 84.5%.
Core blood count test turnaround time decreased from
60 minutes to 20 minutes.
Voluntary attrition of paid staff fell from 7.2% to 3.5%.
International revenue as a percentage of nongovernmental and nonresearch revenue increased from 2.1%
to 10.1%.
Future Focus
Cascading the scorecard into all business and support
service units, and then more deeply into their subunits,
as appropriate.
Integrating operational dashboards into the BSC
framework.
Building the internal capacity to align and integrate the
scorecard with Six Sigma, Lean, and other performance
and continuous improvement initiatives.
Enhancing automation and use of the SickKids decision
support reporting tool on the hospital intranet. The tool
will include all scorecards for the organization as well
as each areas dashboard of operational indicators.
Enhancing public performance reporting on the public
website to include relevant aspects of the SickKids
scorecard for patients and families, government stakeholders, and prospective staff.
1 Infection rates are complicated (with many risk factors), and changes in rates cannot easily be attributed to any single prevention strategy. Increasing
compliance rates is also about the process and about enhancing a culture of safety/improvement, and hand hygiene compliance contributes to the overall
culture of safety at SickKids.
36
MAPFRE Brazil
Already adept at operational
efficiencies, this major Latin
American insurer was bent on innovating products
and services. Creative strategy education programs
and a rigorous approach to target setting helped
MAPFRE Brazil win new customers and realize
breakthrough financial performance.
Founded in 1933 by a group of Spanish farmers to protect their
investments, MAPFRE is one of the worlds largest insurance
companies.1 Outside Spain, its largest operation is MAPFRE
Brazil, with 15 million customers, some $2.9 billion in issued
premiums, $301.8 million in revenue, and 2,750 employees.
MAPFRE Brazilwhich now represents around 69% of the
companys total profits in Latin America and more than 15%
worldwidewas formed in 1992 from an acquisition. Originally
two separate entities (insurance and pensions), the company in
2003 became a single organization to facilitate growth. Senior
executives realized that the new unit required a new way of
managing as well as a common management language. So that
year, they developed a Balanced Scorecard and strategy map
to define the companys strategic fundamentals, create a new
culture, and align its initiatives among its four business units:
Auto, General Insurance, Life Insurance and Pensions, and Credit
and Warranties.
horizon) and a long-term (five-year horizon) version to help

clarify the corporations role and rationalize the effect of operational decisions on corporate strategy.
Cultivating a Strategic Conscience

Cognizant that human capital is critical for its success, MAPFRE
Brazil launched its strategic conscience programan ongoing
effort to raise employees strategic awareness. The program
strives to ensure that every employee understands the strategy
and how his or her actions contribute to it. Through such tools
as the Algorithm, the program also helps reinforce desired
behaviors. The Algorithm, a series of numbers updated yearly,
represents key company targets; it appears on all business
cards, as well as on strategy maps, signage, the intranet, and
even T-shirts, and is referenced in all presentations and memorized by all employees. In 2010 the Algorithm was

3.2 + 1.8 + 35 + 95 + 3.75 = 486
(Or, R$3.2 billion of nonlife insurance premiums issued; R$1.8

billion of life insurance premiums issued; an employee satisfaction ranking of 35;2 a combined ratio3 of 95; external and internal
customer satisfaction index average of 3.75 ; and profit of
R$486 million.)
To further educate employees on the performance methodology and strategic priorities, the company presents numerous
courses. Advanced Strategic Planning, intended to reach 2,000
employees in eight months, was taken by 115 people in the first
three days it was offered.
Over the past 10 years, the company has fostered operational efficiency through Six Sigma, saving an estimated $29 million. But
the real challenge to growth was demographic: many Brazilians
lived near the poverty line and did not traditionally buy insurance. Thus, the dominant strategy of the retooled MAPFRE Brazil
was innovating products and services, a strategy it has pursued
by offering as many insurance products as possible in as many
ways as possible, with each product customized for the channel.
Thanks to top executives early support, within a year of its BSC
rollout, MAPFRE Brazil had developed a BSC and strategy map,
cascaded them to the business and support units, launched
a performance management system, and aligned strategy to
compensation.
MAPFRE Brazil developed three strategic themesProcess
Excellence (Lean management, Six Sigma, internal control, and
technology); Customer Focus (distribution, services and clubs,
and branding); and People (high performance, recognition, and
working environment). The company does not manage themes
cross-functionally, although the move from a product-structured
to a customer-focused organizational structure, currently under
consideration, might prompt such an approach. Today, MAPFRE
Brazil uses two types of strategy maps: a short-term (one-year
Bulls-Eye on Targets
Every year, as part of its strategy refresh process, MAPFRE Brazil
looks at long-term (three- to five-year) goals (defined for all key
performance indicators [KPIs] in all perspectives) and focuses
on the current years activities toward each goal, broken down
by deadlines. For example, the target for the combined ratio is
divided among 12 products, each with its own accountability
and target, and is further deconstructed into specific components for each of the business units. Stretch targets emphasize
continuous improvement.
Each business unit assesses its challenges and develops its
financial and nonfinancial targets in a workshop attended by all
business and support units. Following the workshops, managers
discuss and revise these targets, with final approval by senior
executives. Each business unit then updates its strategy map,
targets, and KPIs, and creates action plans. Next, the Office of
Strategy Management (OSM) conducts workshops with executives and business unit (BU) leaders to validate the revised
strategy framework (map, KPIs, targets, and initiatives). Each BU
discusses its revised targets and commits to a specific level of
performance. Then the units cascade the objectives and targets,
both short- and long-term, to individuals.
37
In 2005, MAPFRE Brazil integrated employee performance

management with this strategic planning process. Each of
the objectives is numbered sequentially as it is cascaded and
translated into action plans through the ranks. For example,
the combined ratio targetsay, objective 4 on the strategy
mapmight become objective 4.2 (Analyze 24-hour call center
to avoid bottlenecks and waste) for the call center director, and
action plan 4.2.4 (Reach 90% attendance) for the call center
manager. It would then become action plan 4.2.4.123 (Report
attendance weekly) for the relevant supervisor, and action plan
4.2.4.3 (Attendance of 90%) for the junior call center attendant.
(Fourth-level numbers arent hierarchical, but simply represent
activities.)
see company performance) and execution discipline have been

critical to its performanceand help explain how MAPFRE Brazil
has enjoyed a steady increase in market share, even as a swarm
of global insurers has entered the Brazilian market.
Supervisors are encouraged to review and manage employee

performance at least once each quarter; employees receive a
performance grade annually that affects their bonus, personal
development plan, and promotions. For line employees, approximately 40% of the bonus is based on worldwide company
performance, and 60% on individual performance; for senior
executives, 60% is based on global, and 40% on unit, performance. Personal development plans typically include a list of
readings, attendance at group training sessions, and completion
of courses (such as leadership development, sales techniques,
and evaluating people) both on-site and at public institutions.
The number of brokers working with MAPFRE grew from

4,625 to 11,284.
Innovating Its Way to Growth

Today, MAPFRE Brazil reaches 15 million customers via 122
branches, and another 7 million customers through 12,000 alternative channels, including the Internet, kiosks, telephone, banks,
supermarkets, small stores, car dealerships, and more. And
supporting its innovative multichannel, multiproduct strategy
is another innovation in customer service: a consumer advocate,
who serves as an ombudsman in resolving customer complaints.
This savvy move helps establish trust among customers and
support growth, particularly in the newer lower-income segment,
which has less experience with insurers.
As of January 2011, MAPFRE Brazil formalized an agreement
with Banco do Brasil, the largest financial institution in the
country, to merge insurance operations.4 The bank will augment
MAPFRE Brazils strengths with a strong national presence and
an extensive customer base. As with all mergers, the challenge
will be to consolidate throughout the new entity the strategic
mission, vision, and values; update strategy maps and scorecards;
and launch a new communications planchallenges rendered
manageable by the clear management model already in place.
The companys focus on transparency (allowing all employees to
Execution Premium
(All results from 20032009 unless otherwise specified)
Revenue rose more than 400%, from $617 million to

$2.5 billion.
EBIT jumped almost tenfold, from $21.5 million to
$208 million. EBIT per employee jumped from $10,300
to $51,400.
Customer satisfaction (in auto insurance) improved

from 81% (in 2008) to 86% (2009), and in residential
insurance, from 82% to 87% during that period.
The combined ratio dropped more than 10%, from
107.8% to 97.5%.
Productivity per employee more than doubled, from
$460,000 to $925,000 worth of revenue.
The companys ranking in the Best Companies to Work
for in Brazil survey conducted by the Great Place to
Work Institute climbed to 19 in 2010. Prior to 2007, the
company did not make it into the top 100.
Future Focus
Related to postmerger integration:
1. Updating the corporate short-term and long-term
strategy maps and corresponding Balanced
Scorecards.
2. Launching a new strategy communication plan
for new merged employees, with strong emphasis
on training and development on the management
model and dynamics.
Developing a new technology solution to enhance
graphics and various capabilities.
Improving initiative management capability to view
strategic initiatives as a single portfolio.
1 In Spanish, MAPFRE stands for Mutualidad de la Agrupacin de Propietarios de Fincas Rusticas en Espaa.
2 Ranking is from the Best Companies to Work for in Brazil survey, provided by the Great Place to Work Institute.
3 An insurance industry measure of profitability, a ratio of the sum of incurred losses and expenses divided by earned premium. The lower the number, the better.
4 At press time, approval was pending from SUSEP, the insurance regulatory body in Brazil.
38
Merck & Co.
In 2005, Merck defined a new strategy to leverage these

strengths. Dubbed Plan to Win, the strategy delineated six key
themes addressing customer value, innovation, differentiated
prescriptions, effective and efficient commercialization, a lean
and flexible business model, and a high-performance culture.
Successful execution of the strategy would require major
change across the company, such as enhancing efficiencies in
the manufacturing network. Merck would also need to unify
previously independent support functions and shared business
services under centralized structures. These structural changes
would improve service, create new efficiencies, promote timelier
decision making, and produce a clear line of accountability.
Facing daunting challenges

(including important patent
expiries), a pharmaceutical giant defined a new
strategy and forged a new strategy management
infrastructure to leverage its strengths. Executed
through the BSC, the new strategy has boosted
sales, stock price, and clinical cycle timesand
facilitated postmerger integration.
Merck & Co.the second-largest pharmaceutical firm in the
worldhas a long and proud history. Its parent company,
E. Merck, was founded in Germany in 1668 and first opened its
doors in the United States in 1891. In November 2009, Merck
merged with Schering-Plough to create a stronger, more diverse,
and more global company. Headquartered in Whitehouse
Station, New Jersey, the 94,000-person, $46 billion company1
operates in more than 140 countries, offering everything from
vaccines and prescription drugs to over-the-counter allergy
medications. In addition, Merck strives to increase access to
healthcare through efforts such as a rotavirus infant vaccination program with the Nicaraguan Ministry of Health and
HIV/AIDs care partnerships in Africa. Mercks strategy has long
centered on innovation through product leadershipwith the
goal of providing lasting consumer satisfaction.
A Confluence of Challenges
The pharmaceutical industry has always faced unique challenges. But in 2005, a number of challenges converged to create
a particularly daunting business environment. Throughout
the world, governments and managed-care companies were
making drug reimbursement more difficult, thus shifting costs
to consumers, who are typically more price sensitive. Patents
protecting an entire generation of successful products were
set to expire. Innovation was becoming costlier and riskier. And
a series of high-profile product withdrawals had heightened
regulatory scrutiny.
Merck wasnt immune to these pressures. The firm had experienced its share of late-stage product failures and, looking ahead
to 2010, expected to lose around $10 billion in revenues due to
patent expiries on key products. Industry analysts ranked Merck
near the bottom of leading health care companies2 in expectations for near-term revenue and earnings-per-share growth.
A Plan to Win
Yet Merck had numerous strengths it could build on to regain its
leadership position, among them a global workforce, a range of
innovative offerings sold worldwide, and an unrelenting commitment to investing in R&D.
Building a Strategy Execution Infrastructure

Merck moved quickly to create an infrastructure that would
support the execution of its new strategy, including the
alignment of its diverse, far-flung workforce. In late 2005, the
company introduced a transitional corporate strategy map and
scorecard. By February 2006, a Strategy Realization Office (SRO)
was formally established to translate the strategy into objectives, measures, and initiatives. Today, the 20-person-plus SRO
reports directly to the CEO; its three areas of focus are formulating strategy, allocating resources for initiatives, and managing
scorecard reporting and strategy reviews.
Merck later augmented its SRO with a network of program realization offices (PROs) located within key functions (R&D, sales
and marketing, manufacturing) and geographies. Mirroring the
SRO, the PROs were charged with addressing strategic risk at
the local level and fostering best practice sharing and alignment
across strategic-initiative teams.
Merck believes that how it achieves targets is just

as important as what it achieves. For instance,
when evaluating performance, the Compensation
and Benefits Committee of the board of directors
considers how well executives complied with
regulations governing sales and marketing, health
and safety, ethics, and environmental impact.
Since 2006, Merck has completed divisional and support function
scorecards, and refined methodologies and processes to fix
such problems as too many measures and inconsistent alignment. The corporate strategy map has also evolved over the
years; the themes and objectives within the four perspectives
have been refined to reflect changes in the business. In 2006, for
example, the focus of the Internal Business Driver perspective
was to Build the most efficient and effective business model. In
2010, however, almost half of the corporate maps 13 objectives
related to internal processesreflecting the strategic priority of
the merger with Schering-Plough. And the 2010 themes reflected
39
the key objectives in the Internal Business Drivers perspectives:

Sustain momentum, Become one company, and Position for
acceleration and breakthrough phases.
Linking Targets and Incentives

Over the past four years, Merck has worked to fortify the link
between the BSC and incentives. Targets are aligned with the
companys annual profit plan. Achieving targeted performance
for all measures would yield an individual a BSC score of 100
points. Target slopes were established for the measures,
allowing scorecards to achieve a maximum (stretch) score of
200 points and a minimum (threshold) score of 50. A score of
less than 50 earns no payout.
others as needed, was designed to enhance postmerger coordination and ensure clarity of strategic priorities, with its members
serving as change agents for major strategic initiatives. With
the existing SRO structure in place, this new group enabled
Merck to more readily align its postmerger activities around key
objectives. It smoothed the integration process, and that helped
Merck maintain momentum in its ongoing operations and
enabled managers to resume business as usual more quickly.
Chief Strategy Officer Mervyn Turner sums up Mercks experience with the BSC in straightforward language: [The strategy
map and scorecard] are critical to our alignment as a company,
ensuring that everything we do, at every level, is focused on the
successful execution of Mercks strategy.
The SRO reviews targets to ensure that theyre ambitious but

achievable without encouraging excessive risky behavior (such
as taking shortcuts to reach a target). Merck believes that how
it achieves targets is just as important as what it achieves. For
instance, when evaluating performance, the Compensation and
Benefits Committee of the board of directors considers how
well executives complied with regulations governing sales and
marketing, health and safety, ethics, and environmental impact
while striving to achieve targets.
Connecting Operational and Strategic Performance

To regularly analyze the link between key operational performance indicators and strategic measures, Merck supplements
data in its scorecard reporting system with strategic and
operational dashboards that provide additional insights for
decision making. Divisional and functional PROs are in charge
of managing and analyzing their operational information,
reviewing it every month with their leadership teams and with
their executive committee member. The SRO also analyzes the
information with the executive committee before each quarterly
strategy review. Finally, several major divisions and support
functions use the scorecard to conduct their own operational
reviews.
Signs of Robust Health

Mercks rigorous approach to strategy management has
produced signs of robust health in sales and other financial
measures, brand power, internal efficiencies, talent retention,
and other areas. Perhaps most impressive are improvements in
R&Dspecifically, reduced clinical development cycle times.
The research cycle time from candidate selection to regulatory
approval improved 7% since 2005.
Mercks well-oiled strategy execution infrastructure made a huge
difference during the companys 2009 merger with ScheringPlough. Its Strategy Execution Network was created to augment
the existing SRO structure. The network, comprising merger
integration leaders, division and function PRO leaders, and
1 As of December 31, 2010.

2 According to EvaluatePharma, a pharmaceutical and biotechnology analysis service.
40
Execution Premium
From 2005 to 2010, worldwide sales increased from

$22 billion to $46 billion; Mercks stock price rose from
$28.05 to $36.04 per share; and earnings per share (nonGAAP EPS) increased, from $2.53 to $3.42.
Mercks overall reputation score among the U.S. general
public increased by 5.2 points, as measured by Harris
Interactives Reputation Quotient (RQ).
Procurement through electronic reverse auction expanded from 0.1% to 12%.
Clinical cycle times improved 7%.
Employees customer focus result in 2009 was 4.75 times
as high as in 2006, as measured by a culture survey administered by Denison Consulting. (Results represent a
percentile score relative to Denisons database of some
1,000 global benchmark companies.)
Retention of high-performing and high-potential employees increased by 3.6%.
Future Focus
Enhancing strategy reviews with information from the
companys enterprise risk management group.
Enhancing strategy reviews with dashboards, allowing
deeper analysis of key initiatives.
Continuing to review best practices to improve strategy
alignment and execution throughout the world.
Minor Food Group

Shaken by a regional financial
crisis and a military coup, a
Thailand-based quick-service and fast casual-dining
restaurant company moved to mitigate risk by expanding its geographical footprint to drive growth.
The BSC helped drive the new strategy from the
topand boosted financial performance, brand
strength, process efficiencies, and workforce morale.
If you live in or travel throughout Asia, you might frequent one
or more of the thousand quick-service or fast casual-dining restaurants owned by Thailand-based Minor Food Group (MFG). The
company owns, operates, and franchises 10 brands: Burger King,
Dairy Queen, NewYorkNewYork, Shokudo, Sizzler, Swensens,
Thai Express Concept, The Coffee Club, The Pizza Company, and
Xinwang. Employing more than 11,000 people in Thailand, MFG
is owned by Minor International and has restaurants in 13 countries, mostly in Asia. In 2010, its restaurants served 86.5 million
customers, generated sales of $302.9 million, and posted a net
profit of $18.6 million.
Launched in 1980 by Chairman Bill Heinecke, MFG originally
consisted of one pizza restaurant. With an influx of Western
tourists into Asia, Heinecke foresaw growing demand and began
acquiring popular franchised brandsPizza Hut, Dairy Queen,
and Burger King, among others.
Driving Strategy Management from the Top

In 2007, MFGs executive team implemented the Balanced
Scorecard to support the companys strategic makeover. The
corporate strategy map and scorecard were developed in August
that year and were cascaded to the brands and support units in
September.
The lions share of the corporate maps strategic objectives (10
of a total of 22) resided in the internal process perspective, organized by strategic themes that included Operational Excellence,
Human Capital Development, Organizational Capital Development, and Partnership Management. Strategic initiatives vary
across the brands and strategic themes. For example, initiatives launched by The Pizza Company to support the theme of
Operational Excellence have included creating a chef academy
and dough master program as well as establishing a preventive
equipment maintenance program.
MFGs executive team actively leads strategy formulation
and execution. For example, the head of the Office of Strategy
Management (OSM) reports directly to the CEO. And a strategy
committee led by the CEO and COO facilitates workshops to
communicate strategies to vice presidents, general managers,
and directors so that these leaders can formulate unit strategies and execution plans. Twice a year, the COO presents MFGs
strategy on talent management and succession planning to the
board, a reflection of the companys emphasis on human capital
development as a pillar of its organizational strategy.
Reshaping Strategy to Minimize Key Risks

MFGs business boomed, along with Thailands economy overall,
until 1997when a series of misfortunes made it clear that the
company needed to strengthen its risk management efforts.
That year, the Thai baht collapsed following the governments
decision to float the baht, cutting its peg to the U.S. dollar. The
decision came after exhaustive efforts to support the baht in
the face of a severe financial overextension driven in part by
real estate overspeculation and increasing foreign debt. As the
financial crisis quickly spread throughout Asia, the weakened
baht affected MFGs liquidity, hampering its ability to pay off its
foreign liabilities.
Linking Performance Management to Strategy
Another major setback came in 2000, when MFG lost the Pizza
Hut franchise after a drawn-out court battle over a franchising rights contract. The companys market capitalization was
decimated, and MFG was taken off the Thailand Stock Exchange.
Six years later, the Thai government fell in a military coup, which
spawned political instability and loss of consumer and tourist
confidence in Thailand, resulting in significant sales losses.
Shaken by these blows, as well as by intensifying competition
in Thailands quick-service restaurant industry, MFGs executive
team realized that the company needed a strategic makeover to

mitigate risk. MFG wanted to maintain its long-time emphasis
on operational excellencewhich, in the quick-service restaurant business, hinges on three key metrics: quality, service, and
cleanliness (QSC). But executives believed that the best way to
inoculate the company against risk was to aggressively expand
its geographical footprint to fuel growth in Asiaespecially in
China and Indiaas well as in other markets, such as Eastern
Europe and Africa. This expansion would come through strategic
acquisition of restaurant brands and proliferation of companyowned and franchise outlets.
MFG excels at linking its performance management practices to

its strategy management framework. For instance, department
heads performance is reviewed monthly, not just at the end of
every year. Those who achieve monthly performance targets
receive an incentive, a practice that fosters year-round consistency in performance.
MFG also aligns personal development plans with strategy. For
example, to improve performance in key areas of responsibility
such as revenue, QSC, and change leadership, a managers supervisor might help him or her craft a plan that includes coaching
41
or enrollment in leadership training sessions. Employees set

their own personal scorecard targets, which are reviewed and
approved by their supervisors. The scorecards are sent to human
resources and the OSM. Managers and directors present their
individual milestones in brand meetings and quarterly reviews
so that progress can be monitored.
MFG excels at linking its performance management

practices to its strategy management framework.
For instance, department heads performance is
reviewed monthly, not just at the end of every year.
Executives and managers are also evaluated as possible successors for key roles at the manager, director, VP, and C-suite levels.
Candidates can be designated as move (potential to advance
in the next year), grow (potential to advance in more than one
year), build (continue developing skills in current role), must
improve (limited potential), or to be replaced (unacceptable
performance).
Connecting Strategy to Operations

MFG maintains a steady flow of information between strategy
and operations review meetings. At monthly executive committee meetings, executives review progress on MFGs strategy
execution. At three-day quarterly strategy and operational
reviews, each brands general manager reports performance on
the brands strategic initiatives. General managers then communicate information from the quarterly strategy reviews to the
operational staff at their brands weekly and monthly meetings.
To ensure that strategic initiatives receive adequate funding,
MFG established a separate strategic expenditures (StratEx) category in its budget. It uses driver-based budgeting with rolling
forecastingidentifying root causes underlying performance
shortfalls and using those findings to define needed strategic
initiatives.
MFGs disciplined approach to strategy management has netted
it impressive results, including improvements in financial performance, brand strength, process efficiencies, and workforce
morale. Employees at all levels now know what the companys
strategic priorities are and how they can help fulfill them.
Because top performers are rewarded, the work environment is
perceived as fair. And people throughout the organization now
have a deeper understanding of how MFG operates.
42
MFG has also been able to weather instability and risk. In 2008,
for example, political upheaval in Thailand led to closure of
the nations airportsthreatening to shut down the tourism
industry and significantly affecting Thai consumer confidence.
MFG not only survived the crisis by adjusting and realigning its
strategies, but it also scored a profit increase of 72% in 2009. That
year, it also made gains in sales growth and market share, while
its biggest competitor saw sales and market share decrease.
As OSM director Charles Clinton puts it, The BSC has contributed to our phenomenal success and has truly made a difference
to Minor Food Group from the strategy execution perspective.
Execution Premium
Sales increased 123%; profits, 72%; and number of

outlets, 65%.
Growth plans delivered as expected, including the
opening of outlets in regions outside Asia, such as New
Zealand and Jordan.
Total customers served rose 29%, and the brand
perception index improved for The Pizza Company (5%),
Swensens (6%), and Sizzler (7%).
Franchise satisfaction scores improved 22%; QSC, 4%.
Employee satisfaction rose 5%.
Talent retention improved 21%, and the number of
successors identified for executive and manager roles
rose from one to three candidates.
Future Focus
Using the BSC to facilitate knowledge sharing across
brands and franchise networks.
Extending the BSC to Thai Express Concept and The
Coffee Club and to sister companies within Minor
International, such as Minor Hotel Group.
Automating BSC reporting.
Defining a Bold Vision and Mission

Despite its impressive network of schools, financial institutions,
and businesses, along with a highly literate citizenry, San
Fernando faced challenges typical of Philippine LGUs. These
included internal corruption, low tax-collection rates, complacency among staff, and an emphasis on short-term problem
solving instead of long-term planning. Mayor Oscar Rodriguez
believed that the PGS would enable San Fernando to combat
these problems while capitalizing on its strengthsto make the
city a full-blown regional center that would uplift the quality
of life for Fernandinos.
To support the Philippines new

vision, San Fernando built a strategy
map and scorecard andby executive
orderan Office of Strategy
Management. Its methodical approach to strategy
execution helped the city advance its topmost
goals, including a reduced reliance on national
government revenue allotments, a decrease in
poverty, and rapid new business growth.
In late 2005, Rodriguezalong with executives from the citys

multisectoral governance council, planning department, and
chamber of commerce, and a technical team from ISAdefined
a three-stage vision for the city: (1) become the gateway to the
northern Philippines, the regional center of Central Luzon, and
the champion of good urban governance by 2015; (2) become
a global gateway by 2020; and (3) become a habitat of human
excellence by 2030. The team also articulated the citys mission,
which advances social inclusion, transparency, and accountability in governance, as well as Fernandinos ability to enjoy the
fruits of their labor and live in harmony with their environment.
Located in the center of Pampanga province (on Luzon, the

Philippines northernmost island), San Fernando is the provincial capital. The city (pop. 282,000; 68 square kilometers in size)
consists of 35 villages, called barangays. Despite its modest
proportions, San Fernando is playing a major role in realizing
the Philippines dreams. Its one of eight cities that in 2005
agreed to join a nationwide governance initiative by adopting
a version of the Balanced Scorecard methodology called the
Public Governance System (PGS) developed by the Institute for
Solidarity in Asia (ISA).
A Road Map to the Future
The ISA promotes good governance throughout the public and

private sectors in East Asia. In the Philippines, it works with
industry leaders, institutions, and public officials to combat the
effects of corruption, apathy, and inertia. ISA members see their
duty as promoting their countrys welfareincluding helping
the Philippines become a modern, democratic society.
Philippines 2030
In 2006, the ISA created Philippines 2030, a road map that laid
out a vision and strategic priorities for the nation. Priorities
included enhancing Filipinos personal dignity, strengthening
their solidarity, and encouraging their participation in local decision making. The road map identified four key drivers of change:
government, business, education, and family. Institutions from
these sectors that have joined the effort receive guidance from
the ISA, which defined four steps along this pathway:
(1) Initiation: Crafting a vision and strategy road map; establishing measurable targets for BSC perspectives.
By the end of 2005, Rodriguez and his team had built a strategy
map topped by three strategic themesResponsible Citizenship, Effective Government, and Sustainable Development. The
maps five perspectives included such objectives as Improved
socioeconomic condition and Sense of pride in being a
Fernandino (in the uppermost Social Impact perspective);
Dynamic and competitive local economy and Quality infrastructure (in Strategic Agenda); Participatory government,
which involves fostering public-private activities and projects
(in Strategic Partnerships); Highly competent and committed
public servants (in Organization); and Increase and optimize
LGU income (in Finance, at the base).
During 2006 and 2007, the citys strategy map and scorecard
were cascaded to its 22 departments and offices, resulting in a
total of 791 scorecards.
Fulfilling the PGSs Promise
(2) Compliance: Defining clear stakeholder deliverables and

accountabilities captured in scorecards.
(3) Proficiency: Using the scorecard to track strategic performance; establishing an Office of Strategy Management (OSM).
(4) Institutionalization: Achieving breakthrough results in strategic performance; linking individual performance to the strategy;
promoting governance among neighboring communities.
To ensure that its new PGS delivers as promised, San Fernando

establishedby executive orderan OSM in April 2007. Three
full-time employees are responsible for scorecard management,
organizational alignment, and initiative management, and four
part-timers manage strategic planning, budgeting, communication strategy, information technology, best practice sharing,
workforce alignment, project evaluation, and social services.
In 2009, San Fernando became the first local government unit

(LGU) in the Philippines to achieve institutionalization.
43
The city also strives to strengthen strategic awareness, using

multiple communication channelssuch as a quarterly news
letter, weekly one-hour television and radio programs, and a
dedicated websiteto communicate strategic performance
throughout the city governments workforce and to Fernandinos.
In addition, the LGU ensures that strategic initiatives get the
funding they need to succeed. For example, the annual investment plan prepared by all departments is based on scorecard
measures and targets. The yearly budget allocates strategic
expenditures (StratEx) to the initiatives seen as having the highest potential impact on the citys scorecard. In 2010, almost 73%
of the current capital outlay budget was dedicated to StratEx.
This approach has paid off: the citys Adopt a Tuberculosis
Patient program (launched in 2006), which provides TB patients
and their families with treatment, education assistance, and
employment help, was lauded by the World Health Organization for its recognition of the complex dynamics behind TB. And
flood-mitigation initiatives have reduced the percentage of
flooded communities in San Fernando from 40% to just 10%.
To secure city workers commitment to the new way of governing, San Fernando found a way to tie incentives to strategic
performanceno easy task for a government organization.
Through PRAISE (Program on Awards and Incentives for Service
Excellence), employees who demonstrate outstanding performance on their individual scorecards and make major contributions to objectives on the citys scorecard are nominated to
receive monetary awards and recognition.
In February 2010, San Fernando began piloting integration of
the BSC with the Performance Measurement SystemOfficer
Performance Evaluation System (PMS-OPES), the official employee evaluation tool prescribed by the Philippine government
through the Civil Service Commission. The goal: to show that
government officials are measuring their own performance and
walking the talk of PGS.
Moving in a Single Direction

Rodriguez, who in July 2010 was elected president of the League
of Cities of the Philippines, maintains that the PGS ensures
that we are all moving in a single direction. This unity of
purpose and movement has delivered striking measurable
results, including a reduced reliance on revenue allotments from
the national government, new efficiencies in service delivery,
increased investment in San Fernando businesses, greater
access to education for citizens, and a reduction in the number
of families living in poverty.
On the qualitative-results front, performance and governance

have become the new battle cry for city employees. Moreover,
silos between the citys executive branch (the mayor) and
legislative branch (the city council) are breaking downas
evidenced by the creation of the Legislative-Executive Development Advisory Coordinating Council, which uses BSC reporting
to identify performance gaps and address them through policy.
Finally, the city has graduated from the traditional budgeting
process, which emphasized funding of departments pet
projects, to one that synchronizes budgeting and planning.
Now, the budgeting process is driven by strategic initiatives
identified during strategy reviews.
So serious is San Fernando about sustaining its success that
leaders took the unusual step of passing City Ordinance No.
2007-012, which calls for the city to maintain the BSC methodology even through election cycles. This well may be a first.
Execution Premium
Unemployment dropped from 17.6% to 8%.

The number of Fernandinos receiving social services
increased from 255 to 3,464 from 2005 to 2009.
The percentage of Fernandino families living in poverty
decreased from 10.3% to 3%, according to Gallup
Internationals 2010 Asia Research Organization Survey.
The number of new businesses with more than
PhP5 million in capital more than quadrupled, from
21 to 84.
The time needed to process business permits shrank
from two weeks to 25 minutes.
The share of new hires with civil service eligibility
skyrocketed, from 10% to 65%.
Local revenue rose 75%, reducing San Fernandos reliance on allocations from the national government.
Future Focus
Establishing a Center for Leadership, Excellence, and
Responsible Citizenship to disseminate information
about the PGS to nearby towns through seminars and
programs.
Exploring the feasibility of extending the PGS to San
Fernandos barangays.
Automating BSC reporting.
44
Sociedad Hipotecaria
Federal
economically active workers (employees and independent wage

earners) account for 65% of Mexicos unmet housing demand.
Mexicos federal home mortgage

bank was given an ambitious
mandate that included creating
a national mortgage securities market. How did
this new agency orchestrate its complex strategy
and accomplish so much so quickly?
Up until the early part of this century, if you were not on social
security or employed by the government, your options for getting a home mortgage in Mexico were slim. The countrys historically low savings rates had created a limited retail mortgage
market that basically served the affluent. All that changed in
2002, when Mexicos Congress passed legislation establishing
the Sociedad Hipotecaria Federal (SHF).
As the governments sole mortgage development bank, SHF is
responsible for developing Mexicos primary and secondary
housing markets. It creates loan products for lending intermediaries (such as banks and credit unions), subsidized and bridge
loans for developers, insurance for lenders, and several other
products, such as microloans for low-income borrowers. A 400employee government institution, SHF reported an income of
$814 million and equity of $1.5 billion in 2010.
In addition to developing products, SHF provides funding and

guarantees to other institutions and coordinates public sector
housing initiatives. It supports the Mortgage SOFOLES and
SOFOMES1 marketsso-called non-bank banks that play an important role as intermediaries to fund housing production and
mortgages for the nonaffiliated sector. In 2008 SHF spearheaded
the creation of the Sustainable Integral Urban Development
program (its Spanish acronym: DUIS), a government-sponsored
program aimed at developing 17 environmentally sustainable,
self-contained communities throughout Mexico. DUIS serves
mixed-income residents, generally commuters for whom affordable housing in metropolitan areas has been in short supply. SHF
developed the certification and governance protocols for DUIS.
Creating the Strategy Blueprint

In 2003 CEO Guillermo Babatz understood that meeting the
organizations ambitious goals would require introducing management disciplines usually associated with the private sector
specifically, a clear methodology for developing and executing
strategy. SHF chose the Balanced Scorecard to help define SHFs
mission and vision, plan strategy, and manage its execution.
In 2004, an Institutional Strategy Office (ISO) was established,
consisting of a Strategy Management Office and a Project Management Office that oversees initiatives. (A Product Development Office, also part of the ISO, was established in 2008.) The
ISO reports directly to the CEO.
SHFs other primary mission is developing a mortgage securities

market in Mexico. Doing so helps build the capital to support a
growing home loan market while enabling the agency to offer
lower interest rate mortgage products. As a market maker,
the agency supports the mortgage-backed securities market,
granting guarantees, insurance, and other credit enhancements
to both private and government issuanceswhich from 2003
through 2010 grew to around 175,000 million pesos, or $14.6 billion. SHFs other roles include shaping a regulatory framework
for the market, promoting investment in mortgage securities,
and, more recently, providing market liquidity during periods of
market stress.
Building the strategy map was a challenge for SHFs leaders,

considering the agencys multipronged mission and multiple
constituencies. The first strategy map, which incorporated input
from the entire organization, had a dizzying number of objectives. It took about seven years and 320 sessions to streamline
the map to its current form; by 2010, it had undergone six revisions. Cascading to the units began in 2008.
Entirely self-funded, SHF has seven functional units: three

business units, three support units, and an internal control
unit. The business units include a building and housing market
development office, which promotes new products and seeks
intermediaries and agency partnerships; a credit, guarantees,
and insurance office (its operations arm); and a financial office.
Its support units include an administration, strategy, and risk office; a systems and operations office; and a legal/fiduciary office.
In 2009, SHF established a mortgage insurance company.
Filling the Market Gap

First and foremost, SHF is focused on serving the nonaffiliated
population those not receiving social security and therefore
not eligible for existing government mortgage programs. These
In SHFs early years, the BSC framework served primarily to help

articulate and plan strategy and provide a structured approach
to execution. Over time, and as the strategy map has evolved,
its strategic objectives have evolved to reflect continuously
improving performance and a changing market.
Bolstering Buy-In ... and the Strategy-Operations Link

Winning employees wholehearted commitment to the strategy
wasnt easy, in part because SHFs compensation structure didnt
permit performance-related incentives. Strong leadership was
crucial. Babatz led every strategy review meeting and, in 2005,
launched annual achievements and challenges sessions for all
employees, in which he discussed the previous years achievements and the challenges management anticipated in the coming year. Every employee is also required to take two BSC-related
courses: one that underscores employees contributions to
strategy and one on project management methodologies.
45
In 2007, Javier Gavito Mohar succeeded Babatz as CEO. The BSC

system, already firmly in place, helped smooth the transition,
which included a four-month period when SHF was without a
chief executive. By 2010, Gavito had decided to divide the map
vertically into six themes: Internal and External Operational
Efficiencies; Housing Market Infrastructure; Asset-Backed
Financial Instruments; Housing Production; Housing Backlog;
and Sustainable Integral Urban Development. Themes would
better organize and clarify goals and would sharpen the focus
on the strategy by defining linkagescausal, temporal, and
operationalthereby helping to reinforce the importance of
executing operational (shorter-term) goals, which support the
achievement of strategic (longer-term) market goals.
To further align goals and incentives with strategy, SHF launched
the Human Capital Management project in 2010. The initiative
helps employees become more skilled in designing concrete (and
more meaningful) objectives and measures.
Success in Building a Housing Market

Since 2002, SHF has helped more than 1.1 million families (4.1%
of the population) buy a house, with almost 300,000 loans made
available through 2010. It has supported the issuance of approximately $6.9 billion in private mortgage-backed securities and
about $7.7 billion in public issuancea total of $14.6 billion.2 SHF
has also granted more than 194,000 microloans.
Over the past two years, SHF introduced two products for lowincome borrowers: a green mortgage (to buy homes with builtin technologies that reduce water and energy consumption)
and an auto (i.e., do it yourself) construction loan primarily for
rural families to build prefabricated houses. Also, SHF oversaw
the first four projects in the DUIS program, which will ultimately
construct 250,500 houses.
Beyond helping it implement strategy, SHFs leaders believe that
the BSC helped the agencyand the Mexican housing market
weather the global financial crisis. Four years ago, leaders began
lobbying Congress to change the law to allow SHF to make
bridge loans once again.3 Such an action was designed to help
inject liquidity into the Mexican housing market and avert the
credit crunch they saw developing in the global markets. The
move was approved, ultimately allowing SHF to soften the
impact of the crisis in the country. This, along with the agencys
well-articulated strategy and disciplined execution, yielded
enviable results during the recession: SHFs roster of financial
intermediaries grew to 31 by year-end 2010; its capitalization
index remained above 12% throughout the crisis, and from 2007
to 2009in midrecessiontotal assets grew from $5.4 billion to
$7.85 billion.
Execution Premium
SHF-facilitated home loans rose from 54,229 in 2003
to a cumulative 296,624 through 2010. More than
1.1 million families joined the ranks of homeowners.
By 2010, SHF had granted a cumulative 194,066
microloans.
From 2009 through 2010 (its first two years of operation),
SHFs mortgage insurance company provided 18,589
new policies through 12 financial intermediaries.
SHFs share in the total portfolio of Mexican development banks rose from nearly 3.5% in 2002 to almost
14.9% in 2009.
The value of SHFs credit reserves in both 2008 and
2009 exceeded $500 million, nearly twice its reserves
during any year in the period 2002 to 2007. At the end
of 2009, SHFs capitalization index reached 12.85%,
well above the 8% minimum required by law.
The number of operational incidents related to
information technology dropped from 121 to 58 in
that time period.
Future Focus
Cascading the BSC deeper into the operational levels
of SHF, ultimately down to the level of the individual
employee.
Developing a complete measurement system for all
employees, along with an individual employee incentive
system (goals set forth in the Human Capital Management project).
Developing dashboards to automate key performance
indicator input and retrieval in the agencys second
(and latest) scorecard software system, installed in 2008.
Appointing a strategy leader in all seven functional
units. The strategy leader serves as a liaison to the OSM,
helping coordinate strategy advancement.
1 M
ortgage SOFOLES (Sociedades Financieras de Objeto Limitado), single-credit issuers, and Mortgage SOFOMES (Sociedades Financieras de Objeto Multiple),
multiple-credit issuers, suffered liquidity problems during the financial crisis due to their commercial paper issuance. In 2010, through various action plans
(equity, mergers, restructurings, or acquisitions), these entities were strengthened and/or reformed, with the support and oversight of SHF.
2 Based on an exchange rate of 12 pesos/$1 U.S., the average rate from 2007 to the present.
3 I n 2004 and 2005, SHF made bridge loans, but as a development bank, such lending was removed from the agencys charter. When the crisis erupted, SHF decided
to modify its strategy and grant new bridge loans, but such a change required Congresss approval.
46
TNT Express Services

UK & Ireland
OSM to ensure that all projects align with strategic objectives

and to give the executive team visibility into strategic initiatives
across the business.
Market forces and a down

economy forced TNT Express UK
& Ireland to take a second look at
its strategic moves. Working with
the strategy map, theme teams, and cutting-edge
practices, the parcel delivery giant has learned how
to make its reach exceed its grasp.
In its first 10 years of existencefrom 1978 to 1988TNT Express
Services became the first parcel delivery service in the United
Kingdom to provide guaranteed next-day delivery, achieving
rapid growth as well as setting the standard for speed and efficiency in the industry. TNT Express is a unit of Amsterdam-based
TNT N.V., a $10 billion provider of on-demand transport, storage,
and delivery of parcels and freight in 200 countries.
As the UK and Ireland business unit, TNT Express employs
10,500 people and operates 4,500 vehicles and a dedicated
network of 48 aircraft in Europe. In most of its markets, TNT
Express is the number 1 providerand one of parent TNT N.V.s
most profitable units.
But in 2006, the company faced a critical juncture. Consolidation
and exits shrank the parcel delivery market in the UK and
Ireland from 24 companies to 14. Competition intensified, leading
to pressure on rates and margins. Customer satisfaction was
flat, and the companys services were undifferentiated in the
marketplacetwo factors that did not bode well for sustainability. Internally, because of its vast infrastructure, TNT Express
needed to squeeze maximum efficiency from its fixed-cost
assets, and sharpen employees skillsall amid a looming worldwide recession.
Galvanizing Strategy Through the OSM

In 2007, the company developed a Balanced Scorecard and
strategy map around the strategy Deliver a superior customer
experience. But TNT struggled with how to operationalize it.
Formulated during a period of high growth, the strategy was
hard to adapt to a changing market.
So within months of developing its strategy map, TNT Express
created an Office of Strategy Management (OSM). The OSM defines and designs the strategy management process, helping to
formulate, communicate, adapt, and review the strategy; align
the organization; plan, fund, and oversee strategic initiatives;
and adapt quality programs to strategic objectives. Reporting to
the COO, the office has a staff of seven full-time employees. In
2009, the company established its UK Program Office within the
From the start, TNTs OSM has helped operationalize the strategy in two important ways: by engaging executives who were
initially skeptical of the new strategy management process, and
by appointing and managing theme groups (theme teams).
Three Themes and the Big 8

To address TNT Expresss three strategic themesOperational
Excellence, Customer Relationship Management, and Innovationthe OSM developed what the company calls its Big 8 initiatives. To advance Operational Excellence, the Big 8 initiatives call
for developing a continuous improvement framework (#1) and
implementing common systems (#2). Under Customer Relationship Management, the company works to define a customer
value proposition (#3) and deliver what it calls the Customer
Promisea set of 10 pledges to the customer, developed
through extensive research and aimed at meeting customers
desires and preferences (#4). Under Innovation, TNT is pursuing a
carbon reduction program (#5); developing e-solutions (web-based
applications that make it easy for customers to interact with the
company and that properly link back-office functional processes
to provide customers a positive, consistent experience) (#6); and
launching an innovation framework to support new product
and service development (#7). Underlying and overlapping all
three themes is the employee value proposition (#8), tied to the
People perspective of the strategy map. Its goal is to provide
first class human resources services to maximize employees
effectiveness and ability to deliver a superior customer experience along with sustained growth.
To align risk mitigation with strategic objectives

and develop risk management activities around
program implementationTNT Express has awarded the risk management function to its OSM. For
example, a new risk registerused to quantify,
compare, and analyze risksprovides valuable
information to guide the firm in avoiding higher-risk
activities based on pursuing the wrong strategy.
Communication and Collaboration
Through snappy, sophisticated materials, TNT Express educates
and informs employees about strategy and operations seven
times in seven ways. A colorful Youre on the Map brochure
explains in simple language where the company is heading, how
it plans to get there, and how employees can contribute to company goals. A leaflet titled LeanA Smarter Way of Working
47
explains this money-saving way of operationalizing continuous

improvement and shows where Lean fits in the strategy map.
Teamtalk, a company newsletter, often features strategy
updates, instructional items, and tips on how employees can
help advance the strategy.
An intranet, maintained by the OSM, features text, charts, and
graphs to help workers understand their role in company strategy. A collaboration portal, launched in 2010 by the OSM, offers
collaboration and work options on a single page. Users can read
blog entries; access TNT Express communities, their personal
calendars, and links to bookmarked pages; and work on files,
among other things. These tools support the Innovation theme
in providing a forum for companywide interaction and for
sharing knowledge and new ideas.
Early Efficiency Gains

In the first three years of implementing its strategy, TNT Express
focused chiefly on its Operational Excellence theme, deploying
several programs within its continuous improvement initiative. Lean methodology, adopted to make work processes more
efficient, more productive, and safer, yielded impressive results
within only two years: the Lean Hubs and Depots program yielded productivity gains of more than 12%, helped cut unit costs
by more than 11% (delivering almost 2 million in savings), and
reduced workplace accidents by more than 11%. And, says Kevin
Hosell, a supervisor at the Cannock (England) depot, Lean has
significantly boosted morale, as our loading bay operators and
drivers see positive change resulting from their ideas becoming
best practice.
Overall, efficiency initiatives have reduced operational costs
by 100 million. The company is now turning its attention to the
Customer Relationship Management theme and its Customer
Promise initiative. In 2010, TNT Express rolled out measures to
determine its effectiveness in delivering the customer promise.
This initiative will also be incorporated into the annual appraisal
process.
Sure We Can
By achieving its asset utilization and efficiency goals, TNT
Express has reduced overhead significantly while outperforming
its main competitors in return on sales. The company has made
significant strides in the primary goals of its Customer Relationship Management themeto grow revenue and outperform the
marketwith performance in revenues per parcel 28% better
than competitors average.
For us now the strategy map has become part of the way that
we work, says Stuart Stobie, divisional managing director. It
tells us what we need to do, and how we need to do it and by
when. We have truly instilled the strategy into our work. Thanks
to its strategy management system, TNT Express has thrived,
experiencing both growth and improved customer satisfactionliving up to its motto, Sure We Canin a downturn that
has stymied less adept, but often far better known, competitors.
Execution Premium
From 2006 to 2008, market share increased by 3.2%, to
26.23%.
Customer loyalty rose by 3.8% between 2007 and 2009.
(This score is based on a survey asking customers how
strongly they would recommend the company.)
Return on sales hit 5.8% in 2009, compared with 3.88%
for the next highest-performing competitor.
Revenue per parcel in 2009 was 5.60 versus the market
average of 4.37.
Customers use of the technology interface grew by
16.1% to reach 83.2%.
Employee turnover fell 16.7% from 2007 to 2009.
On-time delivery, already high, increased from 2007 to
2009: by more than 4.3% for international deliveries,
and 1.5% for domestic deliveries.
On the Leading Edge of Strategic Risk Management

To align risk mitigation with strategic objectivesand develop
risk management activities around program implementation
TNT Express has awarded the risk management function to its
OSM. This breakthrough practice has resulted in such innovations as the use of a risk framework for high-value contract
adherence within the Business Solutions division. A new risk
registerused to quantify, compare, and analyze risks
provides valuable information to guide the firm in avoiding
higher-risk activities based on pursuing the wrong strategy.
Future Focus
Continuing to improve alignment across support
functions and business areas.
Refreshing strategy map objectives to reflect new
challenges.
Relaunching the employee suggestion program to
better align it to areas of strategic focus.
Implementing the innovation framework.
48
Strategy Execution Champions:

The Palladium Balanced Scorecard Hall of Fame Report 2011
We invite you to explore our family of Balanced Scorecard publications and tools.
Balanced Scorecard Hall of Fame Reports
BSC Hall of Fame Profiles
Editorial Advisers
Robert S. Kaplan, Baker Foundation Professor, Harvard Business School
David P. Norton, Director and Founder, Palladium Group, Inc.
Each year, we publish a Hall of Fame Report profiling the
BSC Hall of Fame Profiles provide an in-depth look at the
organizations named to the Palladium BSC Hall of Fame for
practices, processes, and decision making of 15 select BSC
Executing Strategy in the previous calendar year. The first
Hall of Fame winners. Each profile includes a 3,000- to
Publishers
Robert L. Howie Jr., Managing Director, Palladium Group, Inc.
Joshua Macht, Group Publisher, Harvard Business Review Group
such annual Hall of Fame Report was published in 2004.
4,000-word narrative, along with Key Results, Takeaways,
The eight Reports published thus far highlight 129 of the
and an SFO Spotlight section that summarizes the orga-
153 organizations inducted into the Palladium BSC Hall of
nizations SFO best practices. Most profiles also include a
Executive Editor
Randall H. Russell, Vice President/Research Director, Palladium Group, Inc.
Fame since its inception.
strategy map.
Balanced Scorecard Report: The Strategy Execution Source
Strategy-Focused Organization Execution Toolkits
Editor
Janice Koch, Palladium Group, Inc.
The bimonthly Balanced Scorecard Report: The Strategy
Developed by Balanced Scorecard creators Drs. Robert
Execution Source (BSR) is the definitive source of articles
Kaplan and David Norton, each Strategy-Focused Organiza-
on strategy execution and linking strategy to operations.
tion Execution Toolkit contains a rich set of multimedia
Published jointly by Harvard Business Publishing and
materials to help organizations design their road map to
Palladium Group, Inc., BSR features the latest thinking by
executing strategy: videos, best practice definitions, expert
Balanced Scorecard creators Robert S. Kaplan and David P.
advice, tips, techniques from seminal BSR articles, expert
Norton, along with articles highlighting BSC best practices,
briefings, BSC Hall of Fame Profiles, and examples and
challenges, and champions. It also features the latest
templates. Sixteen toolkits offer essential instruction on
thinking of strategy experts from within and outside the
the Balanced Scorecard and Execution Premium method-
Balanced Scorecard community. The comprehensive BSR
ologies. For more information, and to preview toolkits,
Index 19992010, organized by SFO Principle, case studies,
visit store.executivestrategymanager.com.
Senior Contributing Writer

Lauren Keller Johnson
Contributing Writers
Linda Chow
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topics, Hall of Fame organizations, and other useful headPalladium Group, Inc. is the global leader in helping organizations solve their most
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Available titles include:
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The Palladium Balanced Scorecard Hall of Fame for Executing Strategy

Class of 2010
Abu Dhabi Government/General
Secretariat of the Executive Council

(formerly Datacraft Asia)
Federal Bureau of Investigation
First Philec Solar Corporation
Boys & Girls Clubs of Puerto Rico
Folkhlsan
Christchurch City Council (New Zealand)
Health Insurance Review & Assessment

Service (South Korea)
Cisco Systems/Customer Value Chain

Management
Culligan Argentina
Product #12693
Hindustan Petroleum Corporation Ltd.

The Hospital for Sick Children
(Toronto)
MAPFRE Brazil
Merck & Co.
Minor Food Group
(Pampanga, Philippines)
Sociedad Hipotecaria Federal
TNT Express Services UK & Ireland

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The Palladium Balanced Scorecard Hall of Fame for Executing Strategy

Dimension Data Asia Pacific

AKSA Acrylic Chemical

Federal Bureau of Investigation

Barcelona City Council

First Philec Solar Corporation

Boys & Girls Clubs of Puerto Rico

Christchurch City Council (New Zealand)

Health Insurance Review & Assessment

Cisco Systems/Customer Value Chain

Hindustan Petroleum Corporation Ltd.

Strategy Execution Champions:

BSC Hall of Fame Profiles

Each year, we publish a Hall of Fame Report profiling the

BSC Hall of Fame Profiles provide an in-depth look at the

organizations named to the Palladium BSC Hall of Fame for

practices, processes, and decision making of 15 select BSC

Executing Strategy in the previous calendar year. The first

Hall of Fame winners. Each profile includes a 3,000- to

such annual Hall of Fame Report was published in 2004.

4,000-word narrative, along with Key Results, Takeaways,

The eight Reports published thus far highlight 129 of the

and an SFO Spotlight section that summarizes the orga-

153 organizations inducted into the Palladium BSC Hall of

nizations SFO best practices. Most profiles also include a

Fame since its inception.

Balanced Scorecard Report: The Strategy Execution Source

Strategy-Focused Organization Execution Toolkits

The bimonthly Balanced Scorecard Report: The Strategy

Developed by Balanced Scorecard creators Drs. Robert

Execution Source (BSR) is the definitive source of articles

Kaplan and David Norton, each Strategy-Focused Organiza-

on strategy execution and linking strategy to operations.

tion Execution Toolkit contains a rich set of multimedia

Published jointly by Harvard Business Publishing and

materials to help organizations design their road map to

Palladium Group, Inc., BSR features the latest thinking by

executing strategy: videos, best practice definitions, expert

Balanced Scorecard creators Robert S. Kaplan and David P.

advice, tips, techniques from seminal BSR articles, expert

Norton, along with articles highlighting BSC best practices,

briefings, BSC Hall of Fame Profiles, and examples and

challenges, and champions. It also features the latest

templates. Sixteen toolkits offer essential instruction on

thinking of strategy experts from within and outside the

the Balanced Scorecard and Execution Premium method-

Balanced Scorecard community. The comprehensive BSR

ologies. For more information, and to preview toolkits,

Index 19992010, organized by SFO Principle, case studies,

Senior Contributing Writer

ings, is available free at www.strategyexecutions.com or

Harvard Business Publishing is a not-for-profit, wholly owned subsidiary of

BSC Basics: Getting It Right

Govern to Make Strategy Execution a Core Competency

Copyright 2011 by Harvard Business School Publishing Corporation and Palladium

Planning for Results: Linking Planning and Budgeting

Palladium Balanced Scorecard Hall of Fame for Executing Strategy is a registered

Setting Measures and Targets That Drive Performance

Cover photo by Westward Eye, LLC.

Managing Strategic Initiatives

Eliminating or reducing spending on nonstrategic initiatives:

Breakthrough results, such as doubling shareholder value:

Sales increased from $531 million to $685 million; net