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Balanced scorecard master by norton condensed
1. Executing Strategy for
Breakthrough Results
Based on Presentation by David P. Norton
President
Balanced Scorecard Collaborative/Palladium
The Balanced Scorecard:
2. 2
Most organizations don’t know how to execute strategy.
“Less than 10% of
strategies effectively
formulated are
effectively executed.”
– Fortune Magazine
3. Why do organizations fail to execute strategy?
#1. You can’t manage
something that you
can’t describe!
There is no generally
accepted way to describe
a business strategy
4. Why do organizations fail to execute strategy?
#1. You Can’t Manage
Something That You
Can’t Describe!
There is no generally
accepted way to describe
a business strategy
#2. They Don’t Manage
Strategy
• 95% of the typical work force
doesn’t understand the strategy
• 60% of organizations do not link
strategies with budgets
• 70% do not link management
incentives to strategy
• 85% of executive teams spend
less than one hour per month
discussing strategy
6. How did they do it?
#1. They translated their strategies to
operational terms
#2. They put strategy at the center of
their management process
They created
strategy-focused
organizations
STRATEGY
Management
Process
Motivate
STRATEGY
Balanced
Scorecard
Strategy Maps
7. TOPIC #1: How To Describe Your Business Strategy
Financial Strategy Business Strategy
8. Strategy is how an organization intends to create value for its
stakeholders.
"If we succeed, how will we
look to our shareholders?”
The Strategy
Private Sector Organizations
Financial Perspective
"To achieve our vision, how
must we look to our
customers?”
Customer Perspective
"To satisfy our customers, at
which processes must we
excel?”
Internal Perspective
"To achieve our vision, how
must our organization learn
and improve
Learning & Growth
Introducing
Strategy Maps
A simple model of the
value creation process
9. Sample Strategy Map: Consumer BankInternalProcess
…which is all about great products and personal service…
Customer
…enduring value-added relationships…
Financial
―Our success comes from…
C3 - “Appreciate me, and
get things done easily,
quickly, and right.”
C1 - “Understand me and
give me the right
information and advice.”
C4 - “Be involved
in my communities.”
C2 - “Give me
convenient access to
the right products.”
F1 - Achieve sustainable double-
digit net income growth
F2 - Maximize
traditional revenue
sources
F4 - Manage financial
resources for maximum
risk-adjusted return
F3 - Grow non-
traditional
revenue sources
Learningand
Growth
…delivered by a motivated & prepared work force.‖
L4 - “We have the
information and tools we
need to do our jobs.”
L1 - “We develop,
recognize, retain, and
hire great people.”
L3 - “We understand the
strategy and know what
we need to do.”
L2 - “I‟m developing
the skills I need to
succeed.”
Innovation Customer Partnerships Operational Excellence
Provide premium service to
delight and retain valuable
customers
Maximize efficiency and quality
of business processes
Focus on the critical few
activities
Consistently deliver the full
value proposition
Migrate customers to the right
channel
Identify and recognize high-
potential relationships
Segment markets and target
prospects
Communicate the full value
proposition
Broaden offering through
internal & external partnerships
Develop attractive new products
& services
10. The Balanced Scorecard for Consumer Bank
Perspective
Financial Perspective
F1 Increase earnings per share
F2 Add and retain high value customers
F3 Increase revenue per customer
F4 Reduce cost per customer
Strategic Objectives Strategic Measures
Customer Perspective
Customer Management
Internal
Perspective
Human Capital
Learning&Growth
Perspective
Product Innovation
Operations Management
Information Capital
Organization Capital
• Net income (vs. plan)
• Revenue mix (by target segment)
• Revenue per customer
• Cost per customer
C1 Become a trusted financial advisor
C2 Provide superior service
• Customer satisfaction (survey)
• Share of wallet
• Target customer retention
I1 Understand customer segments
I2 Shift to appropriate channel
I3 Cross-sell the product line
• Share of segment
• Channel mix change
• Cross-sell ratio
I4 Develop new products • Revenue from new products (%)
I5 Minimize problems
I6 Provide rapid response
• Service error rate
• Request fulfillment time
L1 Insure readiness of strategic jobs • Strategic job readiness
L2 Insure availability of strategic info • Information portfolio readiness
L3 Create a customer-focused culture
L4 Build cadre of leaders
L5 Align the organization
L6 Best practice sharing
• Customer survey
• 360° Survey (leadership model)
• Strategic awareness survey
• Personal goals aligned to BSC (%)
• KMS utilization/currency
Responsible Citizen I7 Build diversity reflecting community • Diversity mix versus community
Targets
+$100M
30%(A) 70%(B)
$300
$75
90%
50%
90%
30%
40%
2.5
50%
0.%
< 24hrs
1.0
100%
100%
100%
70%
90%
100%
100%
Consumer
Bank
11. Strategy describes how an organization intends to create value for its
shareholders.
Strategy maps are simple models of the value creation process.
"If we succeed, how will we
look to our shareholders?”
The Shareholder
Private Sector Organizations
The Mission Stakeholder
Government & Non-Profit Organizations
Financial Perspective
"To achieve our vision, how
must we look to our
customers?”
Customer Perspective
"To satisfy our customers, at
which processes must we
excel?”
Internal Perspective
"To achieve our vision, how
must our organization learn
and improve
Learning & Growth
“To satisfy our customers, financial
donors and mission, what business
processes must we excel at?”
Internal Perspective
“To achieve our vision, how must our
people learn, communicate, and work
together?”
Learning & Growth
"If we succeed, how will we
look to our taxpayers
(or donors)?”
"To achieve our vision, how
must we look to our
customers?”
Customer PerspectiveFiduciary Perspective
12. Architecture for an Association Strategy Map
The Mission Stakeholder
Associations: Member-Based Organizations
“To satisfy our members, financial
donors and mission, what business
processes must we excel at?”
Internal Perspective
“To achieve our vision, how must our
people learn, communicate, and work
together?”
Learning & Growth
"If we succeed, how will we
look to our donors?”
"To achieve our vision,
how must we look to our
members?”
Member PerspectiveFiduciary Perspective
13. ADA Strategy Map
ADA’s Mission, Vision, Goal and Values
Mission: To prevent and cure diabetes and to improve the lives of all
people affected by diabetes
Vision: To make an every day difference in the lives of people affected
by diabetes
Goal: By 2007 we will continue to be the leading diabetes organization
and will support our programs of research by increasing our income to
$300MM while improving net margin
Values: Integrity, Passion for making a difference, inclusion, leadership,
ownership, trust
14. Strategy Map: American Diabetes Association
Board of Directors StakeholderInformation SeekersConstituent
High Impact Individuals
Community Volunteer
Leadership
High Risk Individuals
People Affected by Diabetes
Professional Section
Donors
Corporate Community
The Strategy Map design begins with a clear definition of:
• The Stakeholders (like “shareholders”)
• The Constituents (like “customers”)
15. Strategy Map: American Diabetes Association
Board of Directors
Progress Toward
Prevention/Cure
Stakeholder
Improve
Quality of
Life
Information SeekersConstituent
High Impact Individuals
Community Volunteer
Leadership
High Risk Individuals
People Affected by Diabetes
Professional Section
Donors
Corporate Community
Improve
Quality of
Care
• Analysis of constituent needs leads to clear, concise definitions
of the constituent objectives that we will attempt to satisfy
(like a “customer value proposition”)
16. Strategy Map: American Diabetes Association
Board of Directors
Progress Toward
Prevention/Cure
Stakeholder
Improve
Quality of
Life
Improve
Quality of
Care
Information Seekers
Financial
Increase
Net Margin
Constituent
High Impact Individuals
Community Volunteer
Leadership
High Risk Individuals
People Affected by Diabetes
Professional Section
Donors
Corporate Community
Grow
Revenues
Operate
Efficiently
• The Financial strategy for an association plays a “support role”,
unlike the private sector where it is the ultimate measure of
effectiveness
• Nonetheless, the financial strategy is structurally similar and no
less intense
17. Strategy Map: American Diabetes Association
Financial
Board of Directors
Standardized ExecutionConstituent Relationship Management
Identify
Resource
Gaps
Adopt ADA
Best Practices
Develop, Deliver &
Evaluate Products &
Services
Progress Toward
Prevention/Cure
Understand & Prioritize
Segments, Needs &
Strategies
Stakeholder
Establish Donor
Focused Fund
Raising
Influence
Policy
Makers
Improve
Quality of
Life
Improve
Quality of
Care
Information Seekers
Increase
Net Margin
Grow
Revenues
Operate
Efficiently
Constituent
High Impact Individuals
Community Volunteer
Leadership
High Risk Individuals
People Affected by Diabetes
Professional Section
Donors
Corporate Community
Work Process
Improve End
to End
Processes
• Identify the “critical few” internal processes that create the
desired impact on constituent and financial outcomes
18. Financial
Board of Directors
Standardized ExecutionConstituent Relationship Management
Identify
Resource
Gaps
Adopt ADA
Best Practices
Develop, Deliver &
Evaluate Products &
Services
Progress Toward
Prevention/Cure
Understand & Prioritize
Segments, Needs &
Strategies
Stakeholder
Establish Donor
Focused Fund
Raising
Influence
Policy
Makers
Improve
Quality of
Life
Improve
Quality of
Care
Information Seekers
Increase
Net Margin
Grow
Revenues
Operate
Efficiently
Constituent
High Impact Individuals
Community Volunteer
Leadership
High Risk Individuals
People Affected by Diabetes
Professional Section
Donors
Corporate Community
Work Process
Improve End
to End
Processes
Strategy Map: American Diabetes Association
Enablers
Train the
Workforce
Identify & Recruit
Qualified Talent
Integrate X-
Functionally
Integrate
Data
Align with
Priorities
Keep the
Best People
Achieve
Appropriate
Fund Balance
19. Topic #2 – How did they create Strategy Focused Organizations
#1. They translated their strategies to
operational terms
#2. They put strategy at the center of
their management process
They created
strategy-focused
organizations
STRATEGY
Management
Process
Motivate
STRATEGY
Balanced
Scorecard
Strategy Maps
20. There is a consistent set of ―best practices‖ applied by successful
BSC users.
1.1 Top leadership committed
1.2 Case for change clearly articulated
1.3 Leadership team engaged
1.4 Vision and strategy clarified
1.5 New way of managing understood
1.6 Program manager identified
5. GOVERN TO MAKE STRATEGY A
CONTINUAL PROCESS
3.1 Corporate role defined
3.2 Corporate – SBUs aligned
3.3 SBU – Support units aligned
3.4 SBU – External Partners aligned
3.5 Board of directors aligned
5.1 BSC reporting system established
5.2 Strategy review meetings conducted
5.3 Planning, budgeting, and strategy integrated
5.4 HR and IT planning linked to strategy
5.5 Process management linked to strategy
5.6 Knowledge sharing linked to strategy
5.7 Strategy Management Office
established
2.1 Strategy map developed
2.2 Balanced Scorecard created
2.3 Targets established
2.4 Initiatives rationalized
2.5 Accountability assigned
4.1 Strategy awareness created
4.2 Personal goals aligned
4.3 Personal incentives aligned
4.4 Competency development aligned
4. MOTIVATE TO MAKE
STRATEGY EVERYONE’S JOB
STRATEGY-
FOCUSED
ORGANIZATION
BEST
PRACTICES
2. TRANSLATE STRATEGY TO
OPERATIONAL TERMS
1. MOBILIZE CHANGE THROUGH
EXECUTIVE LEADERSHIP
21. Principles of the Strategy-Focused Organization
Mobilize Change through Executive Leadership
1
A successful Balanced
Scorecard program starts with a
recognition that it is not a
metrics project…
IT’S A CHANGE PROCESS
Best Practices
1.1 Top leadership committed
1.2 Case for change clearly articulated
1.3 Leadership team engaged
1.4 Vision and strategy clarified
1.5 New way of managing understood
1.6 Program manager identified
Principle 1:
Mobilize Change through
Executive Leadership
The executive team is
responsible for overseeing the
formation and execution of
strategy.
Formulate &
Communicate
The Strategy
Oversee
Execution of
The Strategy
Executive Team
CIO
SMO
CFO
CEO
MKTG
OPS
R&D
HRO
Held together by
a shared view of
the strategy
22. Best Practices
2.1 Strategy map developed
2.2 Balanced Scorecard created
2.3 Targets established
2.4 Initiatives rationalized
2.5 Accountability assigned
Principle 2:
Translate the Strategy to
Operational Terms
Principles of the Strategy-Focused Organization
Translate the Strategy to Operational Terms
2
You can’t manage
something that you
can’t describe!
The Objective:
Link management process to strategy
The Problem:
How do you describe a strategy?.
23. The Balanced Scorecard provides a framework to link long term strategic
objectives to short term targets, initiatives and accountability.
Objectives Milestones
• Provide
technology
& resources
• % new
technology
used by staff
• Learning
assessment
project
InternalLearningCustomer
Accountable
• HR
Committee
• $ xxxx
Resource Alloc.Targets InitiativesMeasuresVisionMission
• Provide
personalized
care
• Customer
satisfaction
survey rating
• „04 xx%
• „05 xx%
• „06 xx%
• Survey drafted
by 6/04
• Deadline
met
• Mkg.
Team
• $ xxxx
Toprovidetop-notchhealthcaretoour
community
Bethecommunityhospitalofchoice
Longer Term (3-5 year) View Shorter Term (Annual) View
Strategy
―Leadership‖
Tactics
―Management‖
• Service level
spot check
rating
• Electronic
notes project
• Dept. Chairs• Complete by
2004
• All patients
logged in
• $ xxxx• Keep patients
informed
• „04 xx%
• „05 xx%
• „06 xx%
Financial • Grow high-
margin
service
• % revenue
from high-
margin
services
• „04 xx%
• „05 xx%
• „06 xx%
• Develop
organization-
wide survey
• „04 xx%
• „05 xx%
• „06 xx%
Strategy and Map
L4
P1
P2
F1
F2
C1
24. Principles of the Strategy-Focused Organization
Align the Organization to the Strategy
3
Best Practices
3.1 Corporate role defined
3.2 Corporate & SBUs aligned
3.3 SBU & Support units aligned
3.4 SBU & External partners aligned
3.5 Board of Directors aligned
Principle 3:
Align the Organization to the
Strategy
BSC provides a framework
for describing strategy and
managing its execution
(“Strategy Focused
Organizations”)
BSC provides a
framework for aligning
the governance
process and promoting
greater transparency
Employees
Shareholders
Board
CEO
Corporate
Group
Division
SBU SBUSBUSBUSBU
25. Top-Down “Bridging
Process” To Share
the Strategy & Align
the Workforce
Bottom-Up Process
to Internalize &
Execute the
Strategy
CORP
SBU
The Strategy Focused Workforce
Principles of the Strategy-Focused Organization:
Make Strategy Everyone’s Job
4
Best Practices
4.1 Create strategic awareness
4.2 Align personal goals
4.3 Align personal incentives
4.4 Align competency development
Principle 4:
Making Strategy Everyone’s
Job
HR processes are essential for moving
strategy from the top to the bottom
26. Principles of the Strategy-Focused Organization
Govern to Make Strategy a Continual Process
5
Best Practices
5.1 BSC reporting system established
5.2 Strategy review meetings conducted
5.3 Planning, budgeting and strategy integrated
5.4 HR and IT planning linked to strategy
5.5 Process management linked to strategy
5.6 Knowledge sharing linked to strategy
5.7 Strategy Management Office established
Principle 5:
Govern to Make Strategy a Continual
Process
Continuous
Improvement
Integrated
Planning
Review &
Learning
Reporting &
Analysis
Organizational
Alignment
Human Capital
Alignment
Strategy
Leadership
27. Strategy Management—An Integrated Closed Loop Process
Human Capital
Planning
Q1 Q2 Q3 Q4
STRATEGY
MANAGEMENT
PROCESS
Enterprise
Strategy
Planning
Business Unit
Strategy
Planning
Financial
Planning
Management
Control &
Learning
Strategy Reviews
Initiative Management
Knowledge Sharing
Q1 Q2
Next Year
Strategy Update
Strategy Update
• Clarify Vision
• Update Strategy
Financial Resource Alignment
• Budgets
• Initiatives
Strategy Map / Scorecard
Design & Update
Organization Alignment
• Corporate role updated
• Corporate-SBU aligned
• SBU support unit aligned
• Board of Directors aligned
Human Resource Alignment
• Personal goals
• Incentives
• Personal development
This Year
Strategy Communication
28. There is a consistent set of ―best practices‖ applied by successful
BSC users.
1.1 Top leadership committed
1.2 Case for change clearly articulated
1.3 Leadership team engaged
1.4 Vision and strategy clarified
1.5 New way of managing understood
1.6 Program manager identified
5. GOVERN TO MAKE STRATEGY A
CONTINUAL PROCESS
3.1 Corporate role defined
3.2 Corporate – SBUs aligned
3.3 SBU – Support units aligned
3.4 SBU – External Partners aligned
3.5 Board of directors aligned
5.1 BSC reporting system established
5.2 Strategy review meetings conducted
5.3 Planning, budgeting, and strategy integrated
5.4 HR and IT planning linked to strategy
5.5 Process management linked to strategy
5.6 Knowledge sharing linked to strategy
5.7 Strategy Management Office
established
2.1 Strategy map developed
2.2 Balanced Scorecard created
2.3 Targets established
2.4 Initiatives rationalized
2.5 Accountability assigned
4.1 Strategy awareness created
4.2 Personal goals aligned
4.3 Personal incentives aligned
4.4 Competency development aligned
4. MOTIVATE TO MAKE
STRATEGY EVERYONE’S JOB
STRATEGY-
FOCUSED
ORGANIZATION
BEST
PRACTICES
2. TRANSLATE STRATEGY TO
OPERATIONAL TERMS
1. MOBILIZE CHANGE THROUGH
EXECUTIVE LEADERSHIP
29. What is your organization’s strategic readiness?
SFO Strategic Readiness Assessment
2. TRANSLATE STRATEGY
TO OPERATIONAL TERMS
3. ALIGN THE
ORGANIZATION
TO THE STRATEGY
1. MOBILIZE CHANGE THROUGH
EXECUTIVE LEADERSHIP
5. GOVERN TO MAKE
STRATEGY A
CONTINUAL PROCESS
4. MOTIVATE TO MAKE
STRATEGY EVERYONE’S
JOB
2.2 – Balanced Scorecard Created 3
2.1- Strategy Map Developed 2
2.3 – Targets Established 3
2.4 – Initiatives Rationalized 2
2.5 – Accountability Assigned 2
4.1 – Strategic Awareness Created 2
4.2 – Personal Goals Aligned 3
4.3 – Personal Incentives Aligned 2
4.4 – Competency Development Aligned 3
3.1 – Corporate Role Defined 2
3.2 – Corporate-SBUs Aligned 2
3.3 – SBU-Support Units Aligned 2
3.4 – SBU-External Partner Aligned 1
3.5 – Board of Directors Aligned 1
5.1 – BSC Reporting System 2
5.2 – Strategic Review Meetings 2
5.3 – Budgets and Strategy Integrated 2
5.4 – HR/IT Linked to Strategy 2
5.5 – Process Mgt. Linked to Strategy 2
5.6 – Knowledge Sharing Linked 2
5.7 – Strategy Management Office 2
1.2 – Case for Change Clear 3
1.1 – Top Leadership Committed 2
1.3 – Leadership Team Engaged 3
1.4 – Vision & Strategy Clarified 2
1.5 – New Way of Managing 2
1.6 – Program Manager Identified 2
STRATEGY-
FOCUSED
ORGANIZATION
2.4 2.3
1.6 2.0
2.5
Key: Level of Excellence
5 - We are “best practice’ at this
4 – We are good at this
3 – We are okay at this
2 – We are not good at this
1 – We are awful at this
30. Just as with other management disciplines, you must build the
capability to execute strategy as a permanent, enduring competency
of your organization.
“A New Way of Managing”
Enterprise
Strategy
Management
Financial
Management
Human Resource
Management
Marketing /
Communications
Technology
Management
Strategic
Planning
Organizational
Unit A
Organizational
Unit B
Organizational
Unit C
Organizational
Unit D