Who to compete Where to compete and How to compete

Time and efforts sharing

Running the business

Changing the business

Front Line

Apex Team

The Management Challenge 9 0f 10 companies fail to execute strategy

Vision Barrier: Only 5% of the workforce understands the strategy People Barrier: Only 25% of managers have incentives linked to strategy Management Barrier: 85% of executive teams spend < 1 hour per month discussing strategy Resources Barrier: 60% of organizations dont link budgets to strategy

Why Balance Scorecard?

The Balance Scorecard is a management system (not only a measurement system) that enables organizations to clarify their vision, mission and strategy and translates them into Action. It

provides a generic framework to translate strategy into operational terms. It also provides a clear

line of sight to the vision and strategy of the company

Why Balance Scorecard?

Creates a systems approach to form an Integrated Strategic Management Process Provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results

Why Balance Scorecard?

Draws a cause and effect roadmap to

stakeholder value - shareholder, customer and employee When fully deployed, the balanced scorecard transforms strategic planning from an academic exercise into the nerve center of an enterprise.

Why Balance Scorecard?

What gets measured gets done

Why Balance Scorecard?

This is the power and the risk of

performance measurement. If you establish a measure, and faithfully attend to it, communicating widely your expectations and results, your organization will being to align to it

Premise behind BSC is that measurement motivates behavior

The Premise Measurement communicates Values, Priorities and Direction The Conclusion Measurement Must Be Linked to Strategy

Strategy

Balanced Scorecard

Measurement To Communicate, Not to Control

Making BSC a Strategic Tool Operating Strategy

Organizations need to language for communicating strategy as well as processes and systems that help them to implement strategy and gain feedback about how well the strategy is working. The BSC Process helps strategy to become everyones everyday job

Using a Mix of Performance Measures

The traditional focus of performance measures had been on quantitative financial measures. What are some quantitative non-financial measures? Cycle Time Yield Schedule Adherence Market Share Customer Retention

Making BSC a Strategic Tool Why use the BSC Approach?

Two Words

Focus

Alignment

What is BSC ?
The balanced scorecard consists of three things:

Strategic Management System

Balanced Scorecard

Communication Tool Measurement System

What is BSC ?
A carefully selected set of quantifiable measures derived from strategies, goals & objectives that represent a tool for leaders to use in communicating strategic direction to the organization and for motivating change. These same measures form a basis for managers to plan, budget, structure the organization and control results Financial Customer

Strategy & Vision

Financial

Learning & Growth

What is BSC ? 5 steps module

Translate the strategy to operational terms
Formulate Communicate Execute Navigate

What is BSC ? 5 steps module

Align the organization to create synergy
Corporate role Business unit synergies Shared service synergies

What is BSC ? 5 steps module

Make strategy everyones every days job
Strategic awareness Personal scorecard Balanced pay cheques

What is BSC ? 5 steps module

Make strategy a continuous process
Strategy learning Analytical information system Link budget & strategy

What is BSC ? 5 steps module

Mobilize change through leadership
Management system Governance process Mobilization itself

Alignment & Integration

Aligned

Integrated

Balance Scorecard Cause-Effect Hypothesis

4. Increased customer satisfaction will lead to better financial results 3. Improved work processes will lead to increased customer satisfaction 2. Skilled, empowered employees will improve the ways they work 1. Knowledge & skills of employees is foundation for all innovation and improvements Financial

Customer

Internal Process

Learning & Growth

The Four Perspective

Financial Perspective
To satisfy our shareholders, what financial objectives must we accomplish?

Customer Perspective
To achieve our financial objectives, what customer needs must we serve?

Internal Perspective To satisfy our customers, and shareholders, in which internal business processes must we excel?

Growth & learning l Perspective Knowledge & skills of employees is foundation for all innovation and improvements

Important Concepts in Balanced Scorecard

Strategic Mapping Multiple Perspectives Balance Feedback of measurements Cascading Scorecards Cause-Effect Framework

Cascading Scorecards
While it is possible to develop a single set of performance measures for the whole organization

The likelihood is that there will be a cascade of cards that closely reflect the formal organization reporting chain

From Strategy to Budget

Strategy Map Metrics Targets Strategic Initiatives

Customer approval rating Each Strategy Initiative plan contains: *Sponsor *Schedule *Resources *Budget

Cycle time reduction

% strategic skills available

Strategy Map:Diag of cause- And-effect relationships betnStrategic objectives

BSC Terminology
Statement of what strategy must achieve and whats critical to its success How success in The level of achieving the performance strategy will be or rate of measured and improvement tracked needed

Strategic Theme:Operating Efficiency

Financial

Profitability

Key action programs reqd to achieve objectives

Fewer Plane

More Customers

Customer

Flight is on time

Lowest Prices

Objectives
Internal Fast good turnaround

Measurement
*On ground time * On Time departure
*

Target
30 minutes * 90%

Initiatives
* Cycle time optimization

Fast ground Turnaround

Learning Ground crew alignment

Balances in the BSC

Lagging Indicators Short term objective Diagnostic Measurements Desired outcome Cost & Risk Hard objective measures Los risk / low benefit Leading Indicators Long term objective Strategic Measurements Performance driver Benefit & Value Soft subjective measures High risk / high benefit

BSC is based on an understanding of the basic Blocks of the Strategy

Financial Perspective
ROI Revenue Strategy Productivity strategy

1) The economic model of key levers driving financial performance

Sources of growth

Sources of Productivity

Customer Perspective
Price Qlty Time Functn Image R.Ship

2) The value proposition of target customers 3) The value chain of core business processes 4) The critical enablers of performance improvement, change and learning

Internal Process Perspective

Build the Brand Make the Sale Deliver Product Service Exceptionally

Learning & Growth Perspective

Staff Competencies + Tech Infrastructure + Climate for Action

Corporate Balance Score Card Example

B Customer Perspective
Strategic Objectives P erfo rmance M easures Review Freq Repo rti ng by Unit Target 2004-05 A ctual A ug 04 Cumulative Upto A ug 03-04 04-05 Indicato r

C1

Fo cus o f pro fitable segments & custo mers - XYZ - ABC - P QR

M arket Share o f XYZ, A B C and pro fitable segments fo r P QR (Do mestic)

M o nthly M o nthly M o nthly

RS RS RS RS

% % % Lacs

60 50 16.5 229

66.5 50 15.4 183

63.5 49.8 15 206

New 41 New New

G G Y R

Line P ro fits in M o nthly these segments C2 Enhance reach

C3

Incremental M o nthly RR M T 1500 p.a. 16 121 New vo lume so ld in new markets Create differntial Custo mer Satisfactio n Index (CSI_ No fo r "Value fo r M o ney" Value Do mestic Expo rts A nn A nn RS RS Index Index 78 75 69 70 69 70 72

R R

Corporate Balance Score Card - Example

C Business Perspective
Strategic Objectives P erfo rmance M easures A dherence to custo mer co ntact plan Do mestic Expo rts B2 B uild M arketing capabilities A dherence to implementatio n plan o f mkg & sales pro cess (Reno ir) % o f vo lume (to nnage) so ld with differentiated pro dt/o fferings per mo nth Co mpliance to relo catio n plan A dditio nal capacities create incl co nversio n and alliances Reductio n in co st o f quality Net wo rking capital turns Emplo yee co st as % o f value addn Six Sigma pro jects % o f identified critical issues reso lved Review Freq M thly Repo rti ng by RS Unit Target 2004-05 100 A ctual A ug 04 72 Cumulative Upto A ug 03-04 04-05 89 New Indicato r B1 Enhance custo mer relatio nship % R

Custo mer repurchase intentio n CSI (Custo mer Satisfactio n Index) A nn A nn M thly RS RS RS Indx Indx % 80 80 100 77 79 100 77 79 100 86 97 New Y Y G

B3

P ro duct / Offerings develo pment

M thly

RS

20

25

1.6

New

B4

A dd/relo cate capacities

M thly M thly

VKS RR

MT MT

100 10000

B5

Enhance Operatio nal excellence

M thly

VKS

Rs

3 L/ mth

4.71

7.52

4.3

M thly M thly

DG P RR

No %

4 25

4.53 Cum

4.5 27.23

4.05

R R

M thly

SSC

100

New

Recovery Plan
Performance Trend
99.50%

% First Compliance
120.00% 100.00% 66.06%

98.50%

98.37% 98.43% 98.04% 97.70% 96.96% 98.04% 97.89%

80.00% 60.00% 40.00% 20.00% 0.00%

Sep 00 Oct 00

97.50%

18.24%

8.67%

4.98%

2.02% FWSS

96.50%
Apr 00 May 00 Jun 00 Jul 00 Aug 00

Galv.

Ann

L.R.

Others

Improvement initiative in previous month * Process capability of Bekaert Galvanizing Furnace for Temp done * Team formed in galvanizing line to improve first compliance

Improvement action plan for this month Team to collect the data wrt Different reasons Collect data for process capability in Annealing Mid/long term improvements planned Team will Analyze & stratify resetting data under different categories Evolve solution to prevent retesting Implement the new process of testing thru line/dept heads Improve statistical stability of processes & correlate with prdt CpK. Thereby, improvement in first compliance

BSC Example
Strategic Theme:Operating Efficiency
Objectives
Profitability More

Measurement
Returns

Target
20% ROCE 20% increase 5% COS

Initiative

Financial

Profitability

Customers Fewer Planes

on Cap Seat Revenue Plan Lease Cost

Fewer Planes

More Customers

Flight

is on time Lowest prices

FAA on

Customer

time arrival rating Customer Ranking (Market Survey)

On

#1 1

Quality

management Customer loyalty program

Cycle

Flight is on time

Lowest Prices

Fast

ground turnaround

Ground Time On-Time departure % Ground crew trained Ground crew stockholders

30 Minutes 90%

time optimization program

Internal

Fast ground Turnaround

Ground

crew alignment
Learning Ground crew alignment

Yr

1 70% Yr 3 90% Yr 5 100%

ESOP Ground

crew

training

Common BSC Implementation Challenges

Mission, vision and strategies poorly defined or understood and not actionable. Strategies and goals not linked to performance drivers, outcome measures, individual goals, and incentives Budget and planning processes are not linked

Common BSC Implementation Challenges

Treating performance measures as an end rather than means

Performance targets sets too high or too low Feedback that is tactical, rather than strategic

Lack of meaningful employee involvement