The Balanced Scorecard Drives Rapid Strategy Implementation STRATEGY SCORECARD 1 Translate the Strategy Into Operational Terms 2 5 Align the Organization to the Strategy Make Strategy a Continual Process • Executive Team Alignment • Strategy Map • Balanced Scorecards • Corporate Role • Business Unit Synergies • Support Unit Synergies • Governance Process • Strategic Management • Analytics & Information Systems 4 3 Make Strategy Everyone’s Job Prioritize initiatives and Align Resources • Strategic initiatives are clearly identified • Investments are rationalized by the strategy • Link Budgets and Strategy • Strategic Awareness • Personal Scorecard • Balanced Paychecks / Link to Compensation

The Balanced Scorecard Provides a Framework to Translate the Vision and Strategy Into Operational Terms The Vision • Measurement is the language that gives clarity to vague concepts. • Measurement is used to communicate, not to control. • Building the scorecard develops consensus and teamwork throughout the organization. Financial Perspective "If we succeed, how will we look to our shareholders?” Profit- ability Growth Share- holder Value Customer Perspective "To achieve my vision, how must we look to my customers?” Cycle Time Quality Service Price/Cost Internal Perspective "To satisfy my customers, what business processes must we excel at?” Cycle Time Quality Productivity Organization Learning " To achieve our vision, how must our organization learn and improve?” Market Innovation Continuous Learning Intellectual Assets

We Use the Balanced Scorecard to Clarify Strategy and Translate it into Focused, Actionable Objectives Financial Perspective Return on Investment Revenue Strategy Productivity Strategy Sources of Growth Sources of Productivity Customer Perspective The Balanced Scorecard Is Based on an Understanding of the Cause and Effect Relationships on Which the Strategy Is Based Value Proposition Quality Function Image Relation Price Time Internal Process Perspective Pathways to Performance “Build the Brand” “Make the Sale” “Deliver the Product” “Service Exceptionally” Learning & Growth Perspective Staff Awareness Goal Alignment Staff Competencies Technology Infrastructure + + +

The Balanced Scorecard Is Used to Tell the Story of Your Strategy The Revenue Growth Strategy The Productivity Strategy “Improve stability by broadening the sources of revenue from current customers” “Improve operating efficiency by shifting customers to more cost-effective channels of distribution” Improve Returns Financial Perspective Improve Operating Efficiency Broaden Revenue Mix Example Metro Bank Vision Increase Customer Confidence in Our Financial Advice Increase Customer Satisfaction Through Superior Execution Customer Perspective “To be the best broad-based financial institution, a leader in our chosen markets” Internal Perspective Understand Customer Segments Develop New Products Cross-Sell the Product Line Shift to Appropriate Channel Provide Rapid Response Minimize Problems Increase Employee Productivity Learning Perspective Develop Strategic Skills Align Personal Goals Access to Strategic Information

This Begins With Developing the Key Strategic Themes or Pathways – These Form the Strategy Stairway Case Example: Odessa Computers Long-Term Strategic 5. Redesigning Our Customers’ Business Pathways 4. Solution Delivery 3. Sales Excellence 2. Service Excellence 1. Leverage Resources Near-Term Tactical

For Each Pathway, We Develop a Cause and Effect Model Across the Four Perspectives of the Balanced Scorecard Case Example: Odessa Computers 5. Customer Partnering 4. Solution Delivery 3. Sales Excellence 2. Service Excellence 1. Leverage Resources 1. Financial 2. Customer 3. Internal 4. Learning/ Growth

Build a Cause and Effect Model for Each Pathway: An Example Odessa Computers Pathway 3: Sales Excellence Financial Shift Revenue Mix to Higher Margin Products/Services to Improve Margins Solve High Value Business Problems Customer Qualify Opportunities Process Discover & Analyze Customer Needs Deploy Business Unit Offerings Put Right Sales Team Together Learning / Growth Increase Consultative Selling Skills

A Strategy Map of Odessa Computers: The Sum of the Pathways PROFITABLE GROWTH Customer Partnering Leverage Resources Service Excellence Sales Excellence Solution Delivery Leverage People and Financial Assets to Achieve Organizational Productivity Grow Revenue Through Customer Retention Shift Revenue Mix to Higher Margin Products/Services to Improve Margins Grow Revenue Through Customer Extension/Expansion Redefine Customers Businesses Financial Customer Solve High Value Business Problems Create Customer Competitive Advantage Easy to Do Business With My Partner for Creating High Value Solutions Improve Customer Awareness Qualify Opportunities New Product Development/Service Opportunities Internal Perform Effective Delivery and Installation Create Centers of Solution Expertise Manage Inventory and Receivable Effectively Provide World-Class Ongoing Support Supply Knowledge Infrastructure (System and Tools) Discover & Analyze Customer Needs Partners/ Alliances Create Customer Driven Marketing Insights Simplify Processes and Enhance Systems Effective Project Management Deploy Business Unit Offerings Localize Business Unit Offerings Capture Product/Customer/Industry Knowledge Learning & Innovation Create Success-Oriented Culture Shift Resources to High Potential Revenue Generating Roles Deploy Services Resources to Improve Productivity Put Right Sales Team Together Dynamic Deployment of Cross- Functional Resources Just-in-Time Resource Deployment Manage Resources Share Best Practices Increase Leadership Skills Foster Sales/Marketing Alignment New Product Development Insights/Raw Creativity Increase Consultative Selling Skills Build Skills Clarify and Communicate Roles & Responsibilities Attract, Retain, and Motivate Associates

From Strategy Map to Implementation: Targets and the Business Case Measures ACCELERATE PROFITABLE GROWTH • We will contribute X% increase in GM – and $XXX in bottom line growth by 1998 Shift Revenue Mix to Higher Margin Products/Services F • Gross Margin % • 1995 impact of $XX • 1996 impact of $XX • 1997 impact of $XX • 1998 impact of $XX Solve High Value Business Problems C Improve Customer Awareness] • CSM Relationship Survey - Overall Solutions Provided to you by Odessa • % Opportunities Through Bid Review Where PS Risk Assessment Performed Qualify Opportunities I Discover and Analyze Customer Needs • Total HV offering $ in the Funnel (Next 12 Months) Deploy Business Unit Offerings • Opportunities by Key Marketing Programs - $/# • % Associates in Customer-Facing HV Positions L&G Put Right Sales Team Together Manage Resources • Associates Certified within Key Job Families • Leadership Index IncreaseConsultative Selling Skills Build/Enhance Set of Skills/ Competencies Clear Roles & Accountabilities • Number of Associates with Objectives on File • Sales and Pre-Sales Open Position Days • Associate Turnover • Associate Satisfaction Survey - overall question Attract, Retain, and Motivate Outstanding Associates

From Strategy Map to Implementation: The Alignment of Initiatives and Resources Strategic Pathway Existing Initiatives Initiatives Description Sponsor Shift Revenue Mix to Higher Margin Products/Services to Improve Margins • Integrate media products into our computer and self-service offerings • Paper supplies Integration • Manufacturing -Jim S. Financial • (Outside Study):Localize Americas programs on a regional basis (e.g., The Sales Process, Marketing Programs for Canada, Latin America and US Area). • Price Realization-II • Corporate Marketing - Alice L. Solve High Value Business Problems Customer • Lead with Service Bundles • Global Sales - Connie C. • Increasing PS and CS service content and enable all 550 salespeople to sell services. Qualify Opportunities Internal • High Availability Transaction Processing • Developing horizontal offerings across industries. • Corporate Marketing - Bruce G. Discover and Analyze Customer Needs • Global Realization Process (GRP) • Define and deploy the GRP in the Americas Region • Distribution - Eric S. Deploy Business Unit Offerings Learning • Sustain/Execute The Sales Process(TSP) • Lg Bus. Sales - Barbara R. Put Right Sales Team Together Increase Consultative Selling Skills • Expand to Professional Services and other sales industries. • Certification Program • HR - Allen V. Clarify and Communicate Roles & Responsibilities • Building consultative selling skills within our sales and services organizations. • Consultative Selling • Training - Bryan D. Attract, Retain, and Motivate Associates

Aligning the Managing Process and Balanced Scorecard Architecture Balanced Scorecard Architecture Managing Process StrategicPathways • Clear roles and responsibilities in managing initiatives Context For Targets and Measures • Executive Meetings Supporting Initiatives and Implementation Plan • Balanced Scorecard provides a key communication tool to the entire organization

The Implementation of a Balanced Scorecard Management Process is a Leadership Challenge • The number one key success factor for BSC implementation is the support and follow through of leaders in the organization • The BSC implementation process (the design and cascading) typically raises difficult issues for the Leadership team • The translation of the strategy into operational terms forces a number of important strategic issues to be clarified and reconciled with short term business challenges • Aligning resources with strategic initiatives raises issues of priorities – and forces decisions around what a leadership team will not do • The ongoing use of a BSC-based Management Process also raises key leadership challenges • BSC use drives greater accountability and transparency of decision making for the leadership team and the organization • The BSC provides feedback that requires more team based problem solving rather then traditional command and control approaches BSC implementation requires the conscious management of change by the leadership team

Leadership Teams Are More Comfortable with Process and Less Comfortable with the “Soft-side”of Change Approach Key Activity Individual Leader’s Challenge Analytical side/ Process drivenapproach • Designing the BSC • Using the BSC to manage the business / function What role do I play in doing this? • Conscious leadership of change • “Felt leadership” in the organization How will I model the type of leadership required to make this change work? Emotional side of change - what we do & how we behave

The Team Must Take the Organization With Them How do we engage the “top leaders” in the organization? How do we build ownership and buy-in from the broader organization? • A campaign of influence (power does not work) • Events/process (leadership forums, action learning teams etc.) • Leading by example • Communication, communication, communication • Early engagement in the process • Value and use this early feedback • Walk the talk and stay the course Having the Best Strategy Won’t Matter if You Don’t Have Motivated People to Execute It

Using the BSC to Drive Strategy Implementation Is Both an Art and a Science… and It Requires Transformational Leadership • Developing a BSC-based Management Process is very much a transformational leadership issue • You are fundamentally changing how the leadership team operates • …and how you engage the rest of the organization in tracking strategy implementation and adjusting that plan based on real-time feedback • It requires both the analytical process of BSC design and implementation as well as the “soft-side” of leading change by behaving differently as leaders • Transformational leadership must be designed for and executed as a critical element of the overall BSC and transformation effort “…one of the greatest benefits of the BSC implementation has been how it has changed the quality and effectiveness of the top team’s conversations. It has challenged us all to be better leaders.” Craig Naylor, Executive VP, DuPont

Straw Model of Leadership Development Process Context is the Business Strategy Defined by the Scorecard Set Improvement Objectives Measure Leadership ( Baseline) Create & Implement Development Plans Agree on a Leadership Model The Business Re-measure & Set New Objectives Define the Leadership Population

Process Steps for Transformational Leadership Development 5. Embed process within the Managing Process 1. Baseline Assessment against TLP model 2. Deliver Individual Feedback 3. Organizational Development Planning 4. Group Development sessions • Conduct half day leadership model and 360-degree process training session • Participants select up to 8 people each to give them feedback • Distribute 360-degree assessment instruments • Collect instruments and process feedback reports • Conduct half day group training sessions followed by: • Individual one hour coaching sessions • Creation of individual development plans by participants • Implement first round of high impact Group Development sessions linked to individual skill application in the workplace • Embed this process within the new Managing Process by developing scorecard Leadership Development metrics and targets from baseline data • Analyze individual developmental needs across the organization • Determine common needs • Design appropriate group level intervention to meet common needs

The Transformational Leadership Process (TLP) Encompasses Ten Scales of Leadership Process Detail

The TLP Encompasses Ten Scales (cont.) Process Detail

360-Degree Feedback Concept Process Detail 360 means you will get feedback on Leadership Behaviors from all sides MANAGER SELF PEERS Good feedback is the key to beginning the Personal Development Process REPORTS

Overview Of the Process One on One Data Analysis & Development Planning with each Individual One on One Coaching One Day Leadership Team Workshop Team Development Sessions Team Based Approaches

With Individuals- Our Process in More Detail One On One Coaching Individual Data Analysis & Development Planning • Each coach will schedule and conduct monthly one on one coaching sessions with each leader. • These sessions may be face to face or by telephone. • We utilize a coaching model called GROW which asks people to focus on; • - their Goals, • - the current Reality, • - Options for improvement, • - and a commitment to what they Will actually do differently and by When. • The coach will… • Gather and review all available data about the person being coached including 360-degree feedback and survey data • Interview 4-5 selected direct reports • Conduct a half-day one on one session with the leader to review the data and agree on developmental goals

With Teams – Our Approach in More Detail Leader Team Development Sessions One Day Leadership Team Workshop • To help accelerate development, every two months the coach will facilitate a half-day group session with the leader being coached and their direct reports to accomplish the following: • Share team member individual development plans and actions regarding selected breakthrough business goals • Work on group support and development processes • Coach the leader on how to develop both the individuals who report to them and to develop the workplace culture in their organizations (how they work together) • The coaches will design and facilitate a one-day leadership team meeting with the top level leadership team to build consensus around the following: • Group/Team goals (where are the real breakthrough opportunities) • Individual development plan sharing • Mutual developmental support • Plan to share successes and best practices in personal and employee development

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