Balanced Scorecard

Airline & FMCG -Implementation

Anand Subramaniam

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To navigate a plane, looking at
the fuel indicator is too limited
other factors impact the
success of a flight; a cockpit
requires a balanced measuring
system !!

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 Implementation Highlights
Challenges around Strategy Execution

What is Balance Scorecard (BSC) and why firms

implement it?

My Clients (FMCG & Airlines) :

Challenges,
Goals,
Benefits Seeked,
Critical Success Factors (CSF),
Strategy Map
Example themes, CSF, measures & targets,
implementation roadmap including time frames,
Project Organisation Chart
Lessons Learnt 3
 Is this happening at your firm ?

STRATEGY

60% of organizations
dont link strategy & update the test the 85% of management
budgets strategy hypotheses teams spend less than
Strategic Learning Loop one hour per month on
strategy issues

BALANCED
SCORECARD

BUDGET

78% of organisations lock

budgets to an annual cycle funding Management Control Loop reporting
92% of organisations do
20% of organisations take not report on lead
more than 16 weeks to PERFORMANCE indicators
prepare a budget
Input Initiatives & Output
Programs
(Resources) (Results)

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 Strategy Execution Challenges
We have a Our employees Our strategic, We do not know if
strategy, we just dont have a clear operational, and our strategy is
cant explain it that understanding of financial plans are working until it is too
easily. what the strategy is not aligned. late.
and their role in it.
We spend too Our data is of poor
Our leadership much time and quality and we have
team does not effort creating disparate systems to
agree on our key We are a collection plans instead of report on
priorities. of silos that do not getting value from performance.
collaborate. the planning
process
Im not sure our We dont have the
We are trying to Recognition and right measures.
do 100 things, rewards are not resources are
allocated against There are too many
rather than do 15 based on driving the of them and were not
critical things change we need. priorities and our
best opportunities. sure which ones to
well. use

Unclear Vision Lack of Organisation Disjointed Planning 5

Inability to Test and
and Strategy Alignment and Processes Adapt Performance
Vision to Outcomes Conceptual Overview
MISSION
Why we exist
VALUES
Whats important to us
VISION
What we want to be
STRATEGY
Our game plan
BALANCED SCORECARD
Translate, Focus and Align
STRATEGIC INITIATIVES
What are the priorities
TOTAL QUALITY MANAGEMENT
What we must improve
EMPOWERMENT / PERSONAL OBJECTIVES
What I need to do

STRATEGIC OUTCOMES

Satisfied Delighted Efficient & Effective Motivated & Prepared

SHAREHOLDERS CUSTOMERS PROCESSES WORKFORCE 6
What is a Balance Scorecard (BSC)?
The Premise
Measurement Communicates Values, Priorities & Direction

The Conclusion

Measurement Must Be Linked To Strategy

Strategy
Balanced
Scorecard

Measurement To Communicate, Not To Control

 BSC Perspectives
Perspective Key Concept Key Questions

Through the eyes of our

Customer/ customers and stakeholders, how
Satisfaction will they judge our products and
Stakeholder
services?
For businesses, how do we create
value for owners?
Financial Financial
Stewardship Performance

How can we improve internal

Internal processes to improve quality,
Efficiency timeliness, economics, and
Process
functionality?
How can we continually get
Organisational Knowledge and smarter, innovate, and improve?
Capacity Innovation
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BSC

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 Why firms implement BSC?
To align corporate strategy with daily operations
To make informed business decisions via defined
reporting and analysis, to corporate best practices
To comply with regulations by disclosing corporate
information timely
To achieve the vision by building rigor
To help with innovation / new product development
To adapt to changing technologies and markets
To attract and retain talented people
A management system or a check-up for the
business 10
My Clients BSC Implementation

Lessons Learnt

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 Challenges before BSC
Measures not aligned or changed with strategy and does not
reflect critical success factors.
Short-term focus rather than taking a long-term and the focus
was on what is currently being done, not what should be done
Failure to measure the impact on the overall organisation
Much quantitative information could not be reduced to
monetary amounts and some could not be quantified
Some information provided feedback but no guidance
Measures poorly designed and / or collected (eg. customer
satisfaction, employee morale)
Goals were arbitrarily determined, beyond the ability of the
system
Measures produced were irrelevant, redundant, questionable,
confusing (not defined) and some were manipulated
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 Goals seeked
To improve management effectiveness by having a shared
and actionable view of the strategy
To provide a generic framework to translate strategy into
operational terms
To create a systems approach or an integrated Strategic
Management Process
To provide a clear line of sight to the vision and strategy of
the company, providing feedback and guidance
To provide a tool for communicating the strategy and the
processes and systems required for strategy implementation
To draw a cause and effect roadmap to stakeholder value
shareholder, customer, and employee.
To provide a balance between current performance and long-
term competitive abilities (financial & non-financial measures)
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 Benefits achieved
Improved management effectiveness by having a
shared and actionable view of the strategy
Ensured strategic outcomes for a given set of
resources
Enabled employees to work in a coordinated,
collaborative fashion towards organisational goals
Provided timely information for informed decision-
making on resource allocation
Provided guidance on future operations & decisions
BSC was utilised as an change agent, to translate
the strategy into action, providing feedback and
learning
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Lessons Learnt / Success Criteria
Story of the firms strategy in actionable terms.
Executive Involvement - strategic decision makers
validated and owned the strategy and related
measures
Cause and Effect Relationships - every objective
selected was analysed for cause and effect linkages
and to the strategy
Balance between outcome and leading measures -
there was a balance and facilitated anticipatory
management
Financial Linkage - every objective was ultimately
linked to the financial results
Linkage of Initiatives and Measures - each initiative
was analysed for variance, between baseline and
target.
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 Strategy Map designed
Improve Shareholder Value
Financial Perspective: Productivity Strategy Shareholder Value Revenue Growth Strategy
ROCE
drivers of shareholder
Improve Cost Increase Asset Enhance Create Value from
value Structure Utilisation Customer Value New Products &
Services
Cost per Unit Asset Turnover Customer New Revenue
Profitability Sources
Market and Account Share Customer Acquisition Customer Retention Customer Satisfaction
Customer Perspective: Product Leader
Customer Solutions
differentiating value
proposition Customer Value Proposition Low Total Cost
Product/Service Attributes Relationship Image

Price Quality Time Function Service Relations Brand

Internal Perspective: Customer

Operations Theme Innovation Theme Regulatory and
Management Society Theme
how value is created Theme (Processes that
(Processes that (Processes that
and sustained Produce and (Processes that
Create New Products Improve the
& Services) Environment and
Deliver Products & Enhance Customer
Services) Value) Communities)

Learning & Growth

Human, Information, and Organisational Capital
Perspective:
Strategic Strategic Climate for
role for intangible assets Competencies Technologies Action 16
people, systems,
climate and culture
 Example - Internal / Operations Themes
Objective Objective Statement Measure Initiatives

Certification Rates of all Charter attrition work

course. group.
% deploying BCT receiving
Ensure health services assets of all three
Enhance Training deployment training across TBD
components are trained and modular and
& Development all modules.
cutting edge to support full spectrum
operation and joint force requirements. Adherence to the (re)
Incorporate audit
verification, (re) validation, and
Internal Perspective

guidance.
(re) accreditation process.

Enhance accessibility of our products and % of products available via

Improve Access to Market products and
services to our customers through online and traditional
Products and Services service.
innovative, cutting edge delivery. methods (hard copy, CDs)

Increase Organisational Survey employees

Institutionalise processes that increase our % increase in updated policies
Efficiency and concerning alignment and
efficiency and get rid of those that dont. and procedures from baseline.
Standardisation duplication of efforts.

Posture our organisation to optimise joint Comprehensive and

Improve Joint Adherence to Schedule
integration integrated program
Integration
management plan.

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 Example - Critical Success Factors
Success Factor Imp. Cap. Supporting Actions

Business-wide 10 3 Customer Focus Groups

clarity on customer needs & 0800 complaint line
concerns System of Listening Posts

Effective internal 10 7 Team Listening structure

communications Intranet Web-sites for all projects
48 hour responses to all project queries

Involvement and 8 2 Management workshop on I&P ideas

Participation (I&P) at all Pilot participative event
levels Staff design of business forums

Demonstrable support for 9 6 Regular business forums

new culture / ethos Team charters at all levels
Open access to performance data

Process 7 9 Formal ownership guidelines

Ownership Infrastructure Regular process owners forums
Central process design repository

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Imp. - Importance 1- Minor Relevance 10 - Critical
Cap. - Current Capability 1 - Major Weakness 10 - Best Practice
 Measures & Targets - Example
Strategic Goals Measures Targets Initiatives

What do we have to do to get How do we know if we are

Customer

What will we measure our

there? achieving our goals? progress against?

What activities are we doing to reach our targets?

Financial
Vision & Mission

Process

Employee

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 BSC - Airways
Strategy Map Balanced Scorecard Action Plan
Theme: Operating Efficiency Objective Measurement Target Initiative Budget
Financial
Profits & Profitability Market Value 30% CAGR
RONA
Grow revenues Seat Revenue 20% CAGR
Grow Fewer
Revenues Planes
Fewer planes Plane Lease Cost 5% CAGR
Customer
Attract & Retain Flight is on-time FAA On-Time Arrival #1
More Customers Rating
Lowest prices Customer Ranking #1 Customer Loyalty $XXX
# Repeat Customers 70% Program
On-time Lowest
Attract and retain # Customers Increase
Service Prices
more customers 12% annual

Internal Fast ground On Ground Time 30 Minutes On Ground Cycle $XXX

Fast Ground
turnaround Time
Turnaround
On-Time Departure 90% Optimisation $XXX
Quality
Management
Learning Ground crew aligned % Ground Crew 100% ESOP $XXX
Ground Crew with strategy Stockholders
Alignment
Strategic Awareness 100% Ground Crew $XXX
Training
Develop the Strategic Job Yr 1 - 0%
necessary skills Readiness Yr 3 - 90% Crew Scheduling $XXX
Yr 5 - 100% System Rollout
Strategic Systems Strategic Job Develop the support
Crew Scheduling Ramp Agent system Info System 100% CRM System $XXX
Availability
Total Budget 20
$XXXX

Communicate Measure Execute

 Implementation Roadmap
Week 1 2 4 6 8 10 12 14 16 18
Step 1

Step 3 Step 4 Step 5 Step 6

Define and Clarify
Mission & Vision
Develop Strategic Goals

Step 2
Draft Strategic Define Measures Identify Initiatives Get Buy-in!
Map with linkages Set Targets Allocate Resources Plan & Implement
& themes
Develop Baseline

Identify Unit Objectives/ Critical

Success Factors / Architecture
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Ongoing Management
 Implementation - Steps 1 ~ 3
Week 2 4 6 8 10 12 14 16 18
Step 3
Step 1 Step 5
Draft a
Develop a Strategy Map Select Strategic
Business Case With Linkages Initiatives
And Themes

Step 2
Step 4 Step 6
Build
Strategic Determine Measures Plan and
Architecture and Targets implementation

Work/Inputs Outputs:

Strategy Refine and Agreed upon

Documents Agree upon Review and rework draft stretch targets
stretch refine themes Discuss next
linkages steps
Draft themes & targets Finalised themes
linkages based
on Strategic Strategy map
Destination
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 Implementation - Step 4
Week 2 4 6 8 10 12 14 16 18
Step 3
Step 1 Step 5
Draft a
Develop a Strategy Map Select Strategic
Business Case With Linkages Initiatives
And Themes

Step 2
Step 4 Step 6
Build
Strategic Determine Measures Plan and
Architecture and Targets implementation

Work/Inputs Outputs:

Refined 90%
strategy complete
linkages
Existing Refine and Review Begin Plan for
measures Design new Complete
validate draft targets measures
assigned to measures measures
linkages measures discussion development
objectives
Measures
Draft development
measures 23place
plan in
developed
 Implementation - Step 5 & 6
Week 2 4 6 8 10 12 14 16 18
Step 3
Step 1 Step 5
Draft a
Develop a Strategy Map Select Strategic
Business Case With Linkages Initiatives
And Themes

Step 2
Step 4 Step 6
Build
Strategic Determine Measures Plan and
Architecture and Targets implementation

Work/Inputs: Outputs:

Refined linkages Review Locked in on

Align/ objectives and linkages
and measures and Review Brainstorm
rationalise
validate existing new
Inventory of linkages
initiatives Measures defined
initiatives initiatives
to themes
existing and
initiatives measures Initiatives defined

Proposed new Plan for initiatives

initiatives review established 24

implementation
 Project Organisation
Overall project ownership
Executive
Vendor
Sponsor/ Consultations/workshops
Engagement
Steering as needed
Manager
Committee
(part-time)

3 days/week
Vendor 8 Half-day
Client Executive workshops
Project
Project Leadership
Leader
(full-time)
Leader Team One 90-minute
briefing/
interview

Consultations/
2-4 staff workshops
Client
as needed
Vendor Core
Project Team 3- 5 days/week
Team
Staff Briefings with others
1-2 knowledgeable as needed
Consultants of business
(full-time) strategies and
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organisation
 Lessons Learnt
Measures must relate to the strategy and interrelated
Must understand how the perspectives influence each other
Organisation-wide view replaces local focus

Determine the critical success factors

Identify long-term and short-term business objectives and prioritise them
based on business goals
What must be achieved to survive, or what will cause the company to fail
if it is not achieved?
Determine success factors for each of the four perspectives
Limit the number to items that are critical, not just interesting
Must understand the linkages between the activities and the goals

Develop metrics to evaluate performance

Provide feedback and also indicate risk / opportunity areas
Metrics may be financial, non-financial, trends, surrogates, internally or
externally gathered
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Should include leading and lagging measures, not too much or little
 Lessons Learnt (Contd.)
Requires teamwork and collaboration
Different perspectives and expertise are required
No one individual has a complete view of the organisation
Greater participation produces greater buy-in
Employees have a sense of ownership in the resulting scorecard
More likely to use the scorecard to guide their decisions

Identify owners and assign responsibilities

Initiative must start with Senior Management
Who understand the overall strategy and have authority to make
strategic decisions
Their Commitment level will determine success or failure
The project may fail if senior management does not show continued interest
and support in the design process
The scorecard will be ignored if management does not promote its use for
performance evaluation and guidance 27
 Lessons Learnt (Contd.)
Requires teamwork and collaboration
Different perspectives and expertise are required

Link to databases and IT system

Modify information system if necessary to collect and report the metrics
What data is available / not available?
The scorecard should determine what data is collected and the data available
should not determine the scorecard
Determine reporting procedures
Who gets the information? How is it reported? How often is it reported?

Communicate to employees regularly - tactics,

objectives, assumptions, timetables
What is being measured
Why it is being measured
What is expected of the employees 28

How to use the information

 Lessons Learnt (Contd.)
Develop scorecards for lower levels
For staff to understand what they must do to support the level above

Interview senior managers

Input on strategic objectives, critical success factors, possible measures

Periodic reviews and re-align

Has company strategy changed?
Are the critical success factors still valid?
Are the activities still valid?
Are the metrics still valid?
Analyse results

Pitfall to avoid
Senior management committed and there is consensus 29

Staff buy in and regular communication between staff and management

 ROI & BSC
It may not be obvious to YOU or
YOUR managers, how to increase
sales, decrease costs, and
decrease investments in a way
that is consistent with the
companys strategy.
A well constructed balanced
scorecard can provide YOU with a
road map that indicates how YOUR
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company intends to increase ROI.

 Take Away
BSC not only supports management decisions, but also
identifies possibilities for change and motivates people

Reports on the performance against the corporate goals

Supports management decisions & establishes priorities

regarding human and other resources

Identifies ways to improve performance

Identifies the need for adjusting processes and the flaws in

supporting systems and infrastructure

Identifies the need for change in the organisational culture

Motivates people in their work by giving signals about what is

important to the organisation 31
 Good Luck
http://www.linkedin.com/in/anandsubramaniam

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