Make Strategy Execution a Core Competency Balanced Scorecard Center of Excellence Overview

1. Make Strategy Execution a Core CompetencyBalanced Scorecard Center of Excellence Overview For further information please contact: Mario A. Bognanno Vice President 781.402.1117 mbognanno@bscol.com

2. Table of Contents • The Strategy Challenge • Principles of the Balanced Scorecard and Strategy-Focused Organization • Critical Success Factors in Becoming a Strategy-Focused Organization • The BSC Center of Excellence

3. Strategy Development or Strategy Execution? Organizations Need Both Strategic success requires going beyond successful strategy formulation to successful strategy execution 1 Missed Opportunity Strategic Success Sound Strategy Formulation Doomed From The Start At Risk Flawed Flawed Sound Strategy Execution Source: 1Execution: The Discipline of Getting Things Done, by Larry Bossidy, 2002.

4. Strategy Execution Challenges There are generally accepted tools to manage finances, customers, processes, and people. But what about strategy? Financial Management Tools EVA Balance Sheets Income Statements Shareholder Value Analysis Process Management Tools Six Sigma Supply Chain Integration Cycle Time Reduction TQM Strategy Management Tools ? Customer Management Tools Customer Satisfaction Measurement Customer Relationship Management Segmentation Analysis One-to-One Marketing People Management Tools Core Competencies Knowledge Management Pay for Performance HRIS The Balanced Scorecard is the vehicle that fills the Strategy Management Gap

5. The Balanced Scorecard - A Framework To Describe and Measure Strategy The Balanced Scorecard provides a framework and mechanism to integrate strategy formulation and strategy execution 1. The economic model of key levers driving financial performance Financial Perspective Return on Investment Revenue Strategy Productivity Strategy Sources of Growth Sources of Productivity 2. The identification of targeted customer segments and their value proposition Customer Perspective Value Proposition Quality Function Image Relationship Price Time Internal Process Perspective 3. The process-focused view of the business using the value chain “Build the Brand” “Make the Sale” “Deliver the Product” “Service Exceptionally” 4. The intangible assets necessary to drive performance Learning & Growth Perspective Staff Competencies Technology Infrastructure Climate for Action + + A Balanced Scorecard tells the “story of the strategy” Source: Kaplan and Norton, Strategy-Focused Organization, 2001.

6. Shareholder Value Profitable Growth Customer Satisfaction Organizational Alignment Cost Reduction Strategy-Focused Organization Profiles:Breakthrough Results BREAKTHROUGH RESULTS Private Sector Public Sector Mobil SMDC Health System • From last to first in industry • ROI 6% --> 16% • Profitability up $23m • Customer Satisfaction City of Charlotte Wendy’s International • Mkt. Cap $2.5 --> $4b • Stock Price up 75% • Customer Satisfaction = 70% • Public Official Award UPS Duke Children’s Hospital • Revenues 9% • Net Income 33% • Customer Satisfaction #1 • Cost/Case 33% Defense Logistics Agency Hilton Hotels • Customer Loyalty 5% • EDITDA margins 3% above average • $130MM in Savings in FY2002 • Processed $2.2B more requisitions for its customers

7. A Word of Caution… 50% of organizations who claim to be using Balanced Scorecards are doing it “wrong”1 Using It WRONG NOT Using BSC Using It RIGHT Source: 1BSCol Survey Data, Pepperdine/SUNY Albany Study.

8. Why Do Organizations Fail To Execute Strategy? The Vision Barrier Only 5% of the work force understand the strategy The People Barrier The Management Barrier 9 of 10 companies fail to execute strategy Only 25% of managers have incentives linked to strategy 85% of executive teams spend less than one hour/ month discussing strategy 60% of organizations do not link budgets to strategy The Resource Barrier

9. The “Strategy Focused Organization” Is Used To Execute Strategy for Breakthrough Results MOBILIZE TRANSLATE Mobilize Change through Executive Leadership Translate the Strategy into Operational Terms STRATEGY-FOCUSED ORGANIZATION GOVERN ALIGN Govern to Make Strategy A Continual Process Align the Organization to the Strategy MOTIVATE Motivate to make Strategy Everyone’s Job

10. Build the Internal Capability to Execute Strategy:The Center of Excellence (COE) Successful Strategy Execution Requires People A skilled team of professionals Processes Integrated strategy management processes Tools Tools, technologies, and support Together these people, processes, and tools form the group responsible for strategy execution in your organization: Your Center of Excellence

11. You Need to Select and Train the People in Your Center of Excellence A Center of Excellence Requires: The RightPeople The RightSkills The Right Competencies A COE requires people who can influence the execution team and the strategy A COE team member must understand the BSC and SFO concepts and methodologies A COE team must be able to facilitate, reach, and manage change A Center of Excellence will help your organization make strategy a core competency.

12. COE’s Need To Establish and Maintain Processes for Strategy Execution in Your Organization Successful Strategy Execution Requires: Mobilize A process to mobilize the organization to change Translate A process to describe and communicate strategy Align A process to align the organization around the strategy Motivate A process to ensure personal objectives and incentives are supporting the strategy Govern An integrated reporting and decision making process

13. Leveraged Tools and Approaches Help Rapidly and Effectively Build the Capability to Execute Strategy Successful Strategy Execution Requires: • Proven, Repeatable Approaches • BSC Design • Communication • BSC Cascade • Reporting • Leveraged Technology • Online Design • Measure Library • Industry Templates • Online Training • Online LearningCenter COE’s set of tools and approaches ensure knowledge transfer and repeatable, scalable processes

14. A Center of Excellence Is Built In Three Phases Phase I: Launch Phase II: Build Phase III: Sustain • Builds understanding of the strategic challenges • Develops commitment by providing a Plan of action • Develops the internal capabilities to execute strategy through: • Education • Facilitation • Knowledge Transfer • Enhances internal strategic capabilities through continuous learning and involvement Source: Kaplan and Norton, Strategy-Focused Organization

15. 90 Self Assessment Best Practice Total BestPractice BSCol Score 80 70 60 Case forChange Account-ability ChangeAgents Sense ofUrgency Vision&Strategy AlignExecutiveTeam New WayofManaging Strategic Readiness SFO Development Plan SFO Competency Status Action Mobilization Translate Alignment Empower Governance Phase 1: Launch with Assessment & Design Evaluate the Current Status Relative to BSCol Best Practices Define a Program to Build and Sustain a Strategy-Focused Organization Task Time I. Mobilize Assessment Plan Workshop II. Build Executive Education Pilot Program (Coaching) BSCol Leverage Toolkit Training III. Sustain Benefits Tracking Coaching & Check Point Reviews Executive Updates Change Agent Roundtables

16. Phase 2: Build by Executing the Program The Program Design Will Detail the Knowledge Transfer Requirements That are Needed People/Process and Tools are selected to meet the requirements of the Client Executive Education BSC Awareness Building Strategy-Focused Organizations Coaching and Advisory Support Expert Facilitation Pilot Program Development and Deployment Corporate/Pilot BSC Cascading Process Implementation Planning BSCol Leveraged Toolkit Online Learning Communities Executive Awareness E-Library Development & Transfer of Core Competencies Leveraged Trainer Training Task Time I. Mobilize Assessment Plan Workshop II. Build Executive Education Pilot Program (Coaching) BSCol Leverage Toolkit Training III. Sustain Benefits Tracking Coaching & Check Point Reviews Executive Updates Change Agent Roundtables

17. Phase 3: Sustain the Program by Creating Irreversible Momentum The Program Design Will Detail the Key Processes and “Habits” to Create Change Processes Are Put Into Place That Create “Irreversible Momentum” Benefits Tracking Continuous focus on defining, documenting, and harvesting the benefits created by the BSC program Coaching and Check-Point Reviews Periodic check-point reviews of progress against SFO development plan Executive Updates Periodic executive education sessions on topics of importance to maintaining momentum Change Agent Roundtable A community of BSC program managers from different organizations sharing issues of common interest Task Time I. Mobilize Assessment Plan Workshop II. Build Executive Education Pilot Program (Coaching) BSCol Leverage Toolkit Training III. Sustain Benefits Tracking Coaching & Check Point Reviews Executive Updates Change Agent Roundtables “A New Way of Managing” “Irreversible Momentum”

18. Center of Excellence Critical Success Factors Commitment From The Leader And The Majority Of The Leadership Team Leadership Commitment A Designated Position Responsible For The Program – Advocacy, Monitoring And Facilitation Integrated Program Coordination A Group Of Trained Internal Facilitators Who Can Consult And Support Internal Clients Expert Internal Advocates/Consultants Affinity Groups/Community – Learning Technology – Program Management Technology Expert Resources

19. For Further Information Our Mission: “To facilitate the worldwide awareness, use, enhancement, and integrity of the Balanced Scorecard as a value-added management process” Join Balanced Scorecard Online™ at bscol.com Tel: (USA) 781.259.3737 Consulting Conferences Training Publications Consortia Certification Partnerships Online Services