As soon as he said- “Money isn’t Everything” - I knew we were in trouble

1. As soon as he said- “Money isn’t Everything” - I knew we were in trouble

2. It is important to focus on the means used to achieve the ends … …..not just on the ends themselves… To only focus on traditional financial accounting measures(such as ROI, ROE, EPS…) …..does not give mgt the whole picture….

3. Will Make $$$ - if sell product Performance needs to be judged thru mix of both financial & non-financial measures…. As - non-financialmeasures are drivers of financial outcomes Will sell product if consumer wants, knows about , can get, & LIKES product To achieve “above’ everyone must effectively do their job To effectively do job must know what to do

4. Organizations Often Have A Gap Between Strategy and Action Strategy Is a Step In a Continuum MISSION Why we exist VALUES What’s important to us VISION What we want to be STRATEGY Our game plan STRATEGIC OUTCOMES SatisfiedSHAREHOLDERS Delighted CUSTOMERS Efficient and EffectivePROCESSES Motivated & PreparedWORKFORCE

5. MISSION Why we exist VALUES What’s important to us VISION What we want to be STRATEGY Our game plan BALANCED SCORECARD Implementation & Focus STRATEGIC INITIATIVES What we need to do PERSONAL OBJECTIVES What I need to do STRATEGIC OUTCOMES SatisfiedSHAREHOLDERS Delighted CUSTOMERS Efficient and EffectivePROCESSES Motivated & PreparedWORKFORCE The Balanced Scorecard Is A Bridge To Close That Gap Strategy Is a Step In a Continuum

7. Strategic Thinking- the ten big ideas • 9 9. Metrics that matter • Balanced score card- a system that attempts to balance financial performance w/ consideration of customer's perspective, learning & growth perspective, & internal business process perspective

8. 2000 1992 1996 • Articles in Harvard Business Review: • “The Balanced Scorecard — Measures that Drive Performance” January - February 1992 • “Putting the Balanced Scorecard to Work” September - October 1993 • “Using the Balanced Scorecard asa Strategic Management System” January - February 1996 • Acceptance and Acclaim: • “The Balanced Scorecard” is translated into 18 languages • Selected by Harvard Business Review as one of the “most important management practices of the past 75 years.“ 1996 2000 Balanced Scorecard History Enterprise-wide Strategic Management Measurement and Reporting Alignment and Communication

9. Balanced Scorecard Hall of Fame Implemented Strategies and Achieved Breakthrough Results… Fast Mobil ATT Canada Saatchi & Saatchi • Last to first • Cash flow +$1.2b • ROI 6% --> 16% 3 years 3 years + $2b + $7b 2-5 years Cigna Brown & Root 2-5 years 3 years • #1 in growth & profitability + $3b City of Charlotte Duke Children’s 3 years 3 years • Customer Satisfaction = 70% • Public Official Award • Customer Satisfaction #1 • Cost/Case 33% Wells Fargo Southern Garden 3-5 years 3 years • # Customers 450% • Best Online Bank • Least Cost Producer 2 years UPS Chemical Bank Hilton Hotels 3 years 2 years • Revenues 9% • Net Income 33% • 99% Merged Target Asset Retention • Customer Satisfaction • Market Revenue Index

10. Today … ~ 70% of Fortune 1,000 companies utilize a Balanced Scorecard to help manage performance— because….. What is measuredgets noticed What is noticed gets acted on What is acted ongets improved

11. Perspectives Encompass all Respective Functional Domains

13. For Each Perspective: Financial… Objectives Measures Targets Initiatives Responsibility Budget 1. 2. 3. Customer… Business Processes…Learning & Growth Objectives Measures Targets Initiatives Responsibility Budget 1. 2. 3.

14. Objectives • Fast ground turnaround Basic Scorecard Terminology(Southwest Airlines Example) Strategy Map Measures How performance is measured against objectives InitiativesKey action programs required to achieve targets Targets The level of performance or rate of improvement needed Strategic Theme: Operating Efficiency Objectives: What the strategy is trying to achieve Profits and RONA Financial Grow Revenues Fewer planes Attract & Retain More Customers Customer On-time Service Lowest prices Measures Targets Initiatives Internal Fast ground turnaround • On Ground Time • On-Time Departure • 30 Minutes • 90% • Cycle time optimization Learning Ground crew alignment

15. A Complete Scorecard is a Program for Action Objectives Measures Targets Initiatives StrategicTheme: OperationsExcellence Strategic Theme:Operating Efficiency Profits and RONA Financial • 30% +/yr • 20% • 5% • Profitability • Grow Revenues • Fewer planes Grow Revenues Fewer planes Attract & Retain More Customers • # Customers • FAA On Time Arrival Rating • Market Survey • 12% growth • Ranked #1 • Ranked #1 • Customer loyalty program • Quality management • More Customers • Flight is on -time • Lowest prices Customer On-time Service Lowest prices Internal • On Ground Time • On-Time Departure • 30 Minutes • 90% • Cycle time optimization • Fast ground turnaround Fast ground turnaround • % Ground crew trained • % Ground crew stockholders • yr. 1 70%yr. 3 90%yr. 5 100% • Ground crew training • ESOP • Ground crew alignment Learning Ground crew alignment

16. The Complete Balanced Scorecard Strategy Map Improve Shareholder Value Financial Perspective: the drivers of shareholder value Shareholder Value ROCE Productivity Strategy Revenue Growth Strategy Create Value from New Products & Services Improve Cost Structure Increase Asset Utilization Enhance Customer Value • Customer Profitability • Cost per Unit • Asset Turnover • New Revenue Sources • Market and Account Share • Customer Satisfaction • Customer Acquisition • Customer Retention Customer Perspective: the differentiating value proposition Product Leader Customer Solutions Customer Value Proposition Low Total Cost Product/Service Attributes Relationship Image Price Quality Time Function Service Relations Brand Internal Perspective: how value is created and sustained (Processes that Produce and Deliver Products & Services) (Processes that Enhance Customer Value) Customer Management Theme Operations Theme Innovation Theme Regulatory and Society Theme (Processes that Create New Products and Services) (Processes that Improve the Environment and Communities) Learning & Growth Perspective: role for intangible assets – people, systems, climate and culture Human, Information, and Organizational Capital Strategic Competencies Strategic Technologies Climate for Action

17. Mobil NAM&R Strategy Map Increase ROE to 12% Financial Perspective ROCE Net Margin (vs. industry) Productivity Strategy Revenue Growth Strategy New Sources of Non-Gasoline Revenue Increase Customer Profitability Through Premium Brands Become Industry Cost Leader Maximize Use of Existing Assets • Non-Gasoline Revenue & Margin • Volume vs. Industry • Premium Ratio • Cash Expense (cpg) vs. Industry • Cash Flow Customer Perspective “Delight the Consumer” “Win-Win Dealer Relations” • Dealer Profit Growth • Dealer Satisfaction Basic Differentiators • Share of Targeted Segment • Mystery Shopper Score • Clean • Safe • Quality Product • Trusted Brand Speedy Purchase Friendly Helpful Employees Recognize Loyalty More Consumer Products Help Develop Business Skills “Achieve Operational Excellence” “Build the Franchise” “Increase Customer Value” “Be a Good Neighbor” Understand Consumer Segments Improve Hardware Performance Improve Inventory Management Create Non-Gasoline Products & Services Improve Environmental, Health and Safety Internal Perspective • Yield Gap • Unplanned Downtime • Inventory Levels • Run-Out Rate Best-In-Class Franchise Teams • New Product Acceptance Rate On-Spec On-Time Industry Cost Leader • Environment Incidents • Safety Incidents • Activity Cost vs. Competition • Dealer Quality Rating A Motivated and Prepared Workforce Climate for Action Competencies Technology Learning & Growth Perspective • Aligned • Personal Growth • Functional Excellence • Leadership Skills • Integrated View • Process Improvement • Personal BSC • Employee Feedback • Strategic Skill Coverage Ratio • Systems Milestones

18. Capstone's Balanced Scorecard

22. Additional – AFTER-the-FACT Tools for Managing & Assessing Your Performance: • Company Round Analysis • Analyst Report

23. Round Aanalysis -example

24. Simulation Scoring System