Why Good Strategies Fail: Creating Sustainable Performance in Turbulent Times

1. Why Good Strategies Fail:Creating Sustainable Performance in Turbulent Times William A. Schiemann, Ph.D. ASP – Metro New York Chapter April 2009

2. Agenda • The Context of Sustainability • What’s the Value Proposition? • Role of Measurement • Social and Human Capital • Barriers to Success • Key Actions—Now!

3. Context • Sustainability and the Bottom Line: • Planet • Societal • Organizations • Triple Bottom Line • Financial • Environmental • Social

4. How Might Sustainability Be Important to Your Organization? Intentionally left blank

5. Qualities of Most Sustainable Companies • Holistic integration • Broad stakeholder engagement • Metrics • Systems alignment • Strategic centrality • Senior management support • Deeply embedded values Wirtenberg, et. al. 2007 based on Alcoa, Band of America, BASF, Coca Cola, Eastman Kodak, Intel, Novartis, Royal Philips, Unilever

6. Agenda • The Context of Sustainability • What’s the Value Proposition? • Role of Measurement • Social and Human Capital • Barriers to Success • Key Actions—Now!

7. Six Perspectives (Schiemann & Lingle) • Financial • Market • Operational • People • Supplier • Environmental • Community • Environment • Regulatory Adaptability

8. Value Map Environmental Product/ Service Value Creation Shareholder Equity People Customer Equity Suppliers

9. Agenda • The Context of Sustainability • What’s the Value Proposition? • Role of Measurement • Social and Human Capital • Barriers to Success • Key Actions—Now!

10. What is the Role of Measurement (e.g, Balanced Scorecards)? • Clarity of the goals • Targets (current, stretch) • Managing change (current vs. goal) • Accountability (visibility) • Focus on manageable • Resource focus • Evaluation of strategy execution • Guiding and testing strategic alignment

11. Agenda • The Context of Sustainability • What’s the Value Proposition? • Role of Measurement • Social and Human Capital • Barriers to Success • Key Actions—Now!

12. Social Factors to Consider • Labor practices (health & safety, training, diversity, employee well being) • Human Rights (discrimination, security, child labor) • Society (community, corruption, fair competition) • Product Responsibility (e.g, consumer health, privacy)

13. People Equity is Key Driver of Shareholder Equity Shareholder Equity Customer Equity Productivity • People Equity • Alignment • Capabilities • Engagement Initiatives

14. Connection to Human Capital Environment Community Shareholder Equity Regulatory Customer Equity Safety Productivity • People Equity • Alignment • Capabilities • Engagement Initiatives

15. People Equity Alignment • Are we going in the same direction? Capabilities • Do we have what we need to succeed? Engagement • Are we committed?

16. Industry Leaders

17. TODAY TOMORROW Strategy Strategy Work Work Processes Processes Structure CHANGE Structure PROCESS Systems Systems Capabilities Capabilities Culture Culture Creating Alignment

18. Alignment: Community Goal • Values statement (J&J Credo) • Success defined (image) • Scorecard (hours given) • Operating plan • Community outreach • Communications • Who? What? When? Where? How? • Tracking progress (pulse) • Validate linkage to goals

19. Capabilities: Community Image • Attracting talent -- Employer brand: • Reputation: values, benefits, growth, communications, innovation • Google “Do no evil!” • Safety – DuPont –It’s a lifestyle and value at all levels • Attitudes, skills are learned • Improve community • Image conveyed through employee behaviors and communications

20. Engagement & Sustainability at Sun • Flexibility an important value today; linked to Attraction, Engagement and Retention • More than 50% work at home; commuting 98% of employees carbon footprint • Saved $1700 annually on gas/vehicles • Home office equip less energy • Flex created 2.5 weeks of new time

21. People Equity Scorecard A - Alignment C - Capabilities E - Engagement Red = Trouble Yellow = OK Green = Strength

22. Turbulent Times • Sustainability is a long term agenda and value proposition • Implications during: • Weak economic period? • Strong economic period?

23. Agenda • The Context of Sustainability • What’s the Value Proposition? • Role of Measurement • Social and Human Capital • Barriers to Success • Key Actions—Now!

24. Critical Barriers to Overcome • Creating a broad inclusive and transparent process • Selling sr. management on longer horizon • The “right” measurement process • Accountability • Picking the critical few • Scenario planning & modeling • Benchmarking • Evaluation

25. Potential Actions for the Strategic Planner • Education regarding sustainability, triple, CSR and value equation • Deepen the strategic review process: • Environmental scan (broad and long term) • Conduct more risk analysis (cradle to grave thinking) • Use broader frameworks (like 6 dimensions) • Build more holistic strategic measures that encompass sustainability goals

26. Potential Actions for the Strategic Planner • Stronger modeling • Scenario testing of alternative futures (using broader assumptions) • Modeling of competitor, government, & other stakeholder actions • Create process and context to guide holistic solutions (across structural silos) • Test for resolve (visible communications, accountability, milestones, resources) • Ensure that sustainable plans are linked with HC systems, capabilities, & culture

27. About Metrus • Metrus Group is an industry leader in strategic performance measurement, assessment, and organizational change. For nearly twenty years we have partnered with the most successful – and challenging – organizations in the world to help them achieve superior, sustainable business results through the development of their People Equity and the creation of a high performance, measurement-managed culture. • Our Services Include: • Human Capital ROI Assessment & Solutions • Strategy Mapping • Balanced Scorecard Design and Assessment • Development of Quantifiable Performance Metrics • Return on Training Investment • Employee and Customer Survey Research • Leadership Assessment and Development • Corporate Governance, Alignment, and Accountability Audits • Measurement-Driven Organizational Change • Functional (e.g. HR, IT, Security, Sales) Strategies, Measures and Execution www.metrus.com info@metrus.com 953 Route 202, Somerville, NJ 08876 908-231-1900

28. Thank You! Dr. William Schiemann Metrus Group wschiemann@metrus.com 908-231-1900