Aligning Business and Support Units to
Enterprise Strategy
Dr. Robert S. Kaplan
Baker Foundation Professor
Harvard Business School
Chairman, Professional Practice Committee
The Palladium Group/Balanced Scorecard Collaborative
May 15-17, 2007 Las Vegas, NV
Balanced Scorecard Collaborative/Palladium • 55 Old Bedford Road • Lincoln, MA 01773 • Tel: 781.259.3737 • Fax: 781.259.3389 • bscol.com
The Balanced Scorecard Model of Value Creation
Private Sector Organizations
Financial Perspective
"If we succeed, how will we
look to our shareholders?”
Customer Perspective
"To achieve our vision, how
must we look to our
customers?”
Process Perspective
"To satisfy our customers
and shareholders, at which
processes must we excel?”
Non Profit and Public Sector Organizations
Mission (Customer) Perspective
“How do we have a social impact
with our citizens/constituents?”
Support Perspective
“How do we attract resources
and authorization for our
mission?”
Process (Operational Capacity)
“To have a social impact and to
attract resources and support, at
which processes must we excel?”
Learning & Growth
Learning & Growth
“How do we align our
intangible assets to
improve critical
processes?”
“How do we align our intangible
assets to improve critical
processes?”
Financial
“How should we manage and
allocate our resources for
maximum social impact?”
©2007 Balanced Scorecard Collaborative and Robert S. Kaplan  2
Most organisations do not know how to execute strategy.
Less than 10% of strategies
effectively formulated are
effectively executed.
- Fortune Magazine
Only 15% of the 794
programs reviewed in
Fiscal 2005 were rated
effective.
- Barron’s
Between 1988 and 1998, only 13% of companies were able to deliver 5.5% annual real
earnings growth and deliver returns that covered their cost of capital.
- Chris Zook, Profit From the Core
Companies on average realize only 60% of the financial performance their strategies
promise... more than one-third of executives surveyed placed the figure at less than 50%.
- Harvard Business Review
©2007 Balanced Scorecard Collaborative and Robert S. Kaplan  3
According to a recently completed Monitor study, strategy execution is the
single most important issue to the executive suite.
"Using a 1-5 scale, please rate the level of interest / concern
you have in the following business issues at present.”
5
4
All Positions
n = 354
3.98
3.78
3.73
3.72
3.70
3.70
3.53
3.51
3.46
3.35
3.26
3.07
3
2.95
2
1
Executing the
strategy
Market
trends
Regulatory, compliance,
and risk management
Forecasting &
reporting effectiveness
Customer
service
IT capabilities
Growing the
top line
Product innovation
/ time to market
Product / service
fulfillment
ITO / BPO
HR
Investor
relations
SCM
Source: Monitor Analysis. Survey of 354 executives; 49% of respondents are C-level and 56% are from companies with revenue greater than $1 billion
©2007 Balanced Scorecard Collaborative and Robert S. Kaplan  4
Organizations with a formal strategy execution process in place are dramatically
outperforming organizations without formal processes.
Yes
No
(54%)
(46%)
….We have breakthrough results
12%
7%
…we are performing better than our peer group
58%
20%
70%
27%
…performing at the same level as our peer group.
18%
30%
…performing at a lower level than our peer group
9%
27%
…not performing at a sustainable level
3%
16%
30%
73%
Do you have a formal strategy
execution process in place?
Describe your organization’s current
performance.
Sub-Total
Sub-Total
Winners
Losers
Source: BSCol Research (Survey of 143 performance management professionals, drawn from BSCol On-Line Community, March 2006)
©2007 Balanced Scorecard Collaborative and Robert S. Kaplan  5
Balanced Scorecard Hall of Fame for Executing Strategy
By Industry 2000 – 2006
©2007 Balanced Scorecard Collaborative and Robert S. Kaplan  6
The typical benefits from successfully executing strategy are dramatic.
Hall of Fame Company Descriptions
Commercial Vehicle Business Unit
• Successful merger of 2 mega-banks
• Revenues from $1.8B to $9.8B
• Turned $100M loss to $100M profit
• Net business profit increased 117%
• Number one in market share (22%)
• 55% target market share
• Moody’s / S&P credit rating from A2 /BBB to A1/A
• Customer satisfaction awards (4years)
• 40% revenue growth
(2 years)
(2 years)
CGISS
S
M
• Wireless data revenue up 74%
M•
A•
T
U
R
I
T
Y
(4 years)
• Industry leading margins
• Return on assets from 16% to 137%
Fortune – Most admired innovator
• Customer loyalty up
• Market share = 2X nearest competitor
Forbes – One of 26 best managed
• Cost per room down
• World class call centers
(3 years)
Royal Canadian Mounted Police
• Industry leading stock growth
China Resources Microelectronics
(3 years)
Coffee Growers of Columbia
• Stakeholder satisfaction rose 9% to 16%
• Inventory turnover from 1.4 to 3.7
• Exports doubled in value
• Saved $20 million in one year on protective policing
• Operating profit grew 70%
• Debt down 36%
• Viewed as model organization by funding
organizations (4 years)
• Output per employee grew 65%
• Growers’ price yield increases from 84% to 93%
(3 years)
(3 years)
©2007 Balanced Scorecard Collaborative and Robert S. Kaplan  7
Strategy-Focused (Hall of Fame) Organizations Use Five Strategy Execution
Principles
I. MOBILIZE CHANGE THROUGH
EXECUTIVE LEADERSHIP
II. TRANSLATE STRATEGY TO
OPERATIONAL TERMS
V. GOVERN TO MAKE STRATEGY
A CONTINUAL PROCESS
IV. MOTIVATE TO MAKE STRATEGY
EVERYONE’S JOB
©2007 Balanced Scorecard Collaborative and Robert S. Kaplan  8
Strategy Maps and Balanced Scorecards Translate Strategy into Action
I. MOBILIZE CHANGE THROUGH
EXECUTIVE LEADERSHIP
II. TRANSLATE STRATEGY TO
OPERATIONAL TERMS
2.1 Strategy translated in strategy map
2.2 Strategy described in Balanced Scorecard
2.3 Targets identified for all measures
2.4 Strategic initiatives rationalized
2.5 Executives accountable for initiatives
V. GOVERN TO MAKE STRATEGY
A CONTINUAL PROCESS
IV. MOTIVATE TO MAKE STRATEGY
EVERYONE’S JOB
©2007 Balanced Scorecard Collaborative and Robert S. Kaplan  9
The strategy map aligns processes and intangible assets to deliver value to
customers and shareholders.
Productivity Strategy
Growth Strategy
Long-Term
Shareholder Value
Financial
Perspective
Improve Cost
Structure
Increase Asset
Utilization
Expand Revenue
Opportunities
Enhance
Customer Value
Customer Value Proposition
Customer
Perspective
Price
Quality
Availability
Selection
Functionality
Service
Product / Service Attributes
Operations
Management Processes
Process
Perspective
Supply
Produce
Distribute
Manage Risk
Partnership
Relationship
Customer Management
Processes
Select Customers
Acquire New Customers
Retain Existing Customers
Grow Business with
Customers
Innovation
Processes
Brand
Image
Regulatory & Social
Processes
Identify New Opportunities
Select the R&D Portfolio
Design and Develop
Launch
Environment
Safety & Health
Employment
Community
Human Capital
Learning &
Growth
Perspective
Information Capital
Organization Capital
Culture
Leadership
Alignment
Teamwork
©2007 Balanced Scorecard Collaborative and Robert S. Kaplan  10
University of Leeds Strategy Map:
070426_Strategy-Execution_IrishMgt_Inst_Norton_PRINT
©2007 Balanced Scorecard Collaborative and Robert S. Kaplan  1115
Strategy-Focused Organization Use a Best Practices Framework
II. TRANSLATE STRATEGY TO
OPERATIONAL TERMS
I. MOBILIZE CHANGE THROUGH
EXECUTIVE LEADERSHIP
V. GOVERN TO MAKE STRATEGY
A CONTINUAL PROCESS
3.1 Corporate contribution to strategy
defined
3.2 Enterprise scorecard guides business
units
3.3 Enterprise scorecard guides support units
3.4 Scorecards align suppliers and/or customers
3.5 Scorecard reports to board and/or shareholders
IV. MOTIVATE TO MAKE STRATEGY
EVERYONE’S JOB
©2007 Balanced Scorecard Collaborative and Robert S. Kaplan  12
3. Alignment: Cascade & Integrate Objectives Throughout the
Organization
Scorecard Cascade
Corporate
Scorecard
Shared Services
Business
Units
Departments
Teams &
Individuals
©2007 Balanced Scorecard Collaborative and Robert S. Kaplan  13
University of Leeds Cascades its University Strategy Map
Out to Each Academic Unit
Defined set of University Measures
Develop key University Targets
Develop Faculty Measures
Develop key Faculty Targets
©2007 Balanced Scorecard Collaborative and Robert S. Kaplan  14
Senior executives, business unit managers, and the CIO struggle with managing the
IT resource.
The three essential questions:
The CEO and CFO ask:
What is the return from
our investment in
Information
Technology?
Business managers ask:
Why can’t you run IT
more like a business
(and focus on me, your
customer)?
The CIO asks:
How can IT meet the growing needs of
its customers (the business units) given
the constraints placed on its resources?
©2007 Balanced Scorecard Collaborative and Robert S. Kaplan  15
Strategic Support Services Form the Bridge Between Enterprise and Functional
Strategy
HR
IT
FIN
1
2
Enterprise
Strategy
Strategic Support
Service Portfolio
(Strategy Map)
Strategic Information
Capital Portfolio
Strategic HR
Service Portfolio
•
Strategic Competency
Development
•
Organization and
Leadership development
•
Performance Management
Process
Strategic Financial
Service Portfolio
•
Technology Infrastructure
•
•
Transaction Processing
Applications
Transactions, Controls &
Processing
•
Analytic and Decision
Support Applications
External Compliance &
Communication
•
Planning and Decision
Support Services
•
©2007 Balanced Scorecard Collaborative and Robert S. Kaplan  16
Magnify the
Power of
Aerospace
Inc.
Through IT
Aerospace Inc. Enterprise Information Systems Strategy
Serve the National Interest and Increase Shareholder Value
Improve margins – V1
to
Realize the
Real-Time
Net-Centric
Strategy
that
Focused
Actions
“Guarantee
secure, reliable,
high-quality
solutions” – C1
Business and Technology Leaders say:
“Show
me the
value” – C2
“Deliver on commitments
to enable my Mission
Success” – C3
Our Diverse,
Empowered
Workforce
“Understand my
unique business and
customer” – C4
“Innovate with
me to win
business and
keep it sold” – C5
Run the Business
Earn Trusted Partnerships
Advance the Business
Continuously improve solutions,
performance, and responsiveness – P8
Anticipate, influence, and
deliver on expectations – P11
Transform AI through effective
collaboration,
net-centric capabilities,
and innovative solutions – P13
Build the next
generation
infrastructure
and business
systems – P6
Drive process
improvement
through innovative
information
access – P7
Understand and manage unit costs – P5
executes
Grow revenue – V3
Leverage investments – V2
Drive
standardization and
consolidation – P1
Strengthen
communication,
interactions, and
relationships – P10
Accelerate horizontal
integration – P12
Aggressively pursue knowledge of business strategies – P9
Achieve Operational Excellence Through Disciplined Performance
Effectively select and
leverage suppliers – P2
Attract, develop, and retain a talented,
energized, strategy-focused workforce – W1
Excel at program management
and system engineering – P3
Live our values and
demonstrate SPIRIT – W2
Optimize portfolios of
assets, initiatives, and
service offerings – P4
Promote creative thinking and
innovative solutions – W3
©2007 Balanced Scorecard Collaborative and Robert S. Kaplan  17
Strategy-Focused Organizations Use a Best Practices Framework
I. MOBILIZE CHANGE THROUGH
EXECUTIVE LEADERSHIP
II. TRANSLATE STRATEGY TO
OPERATIONAL TERMS
V. GOVERN TO MAKE STRATEGY
A CONTINUAL PROCESS
IV. MOTIVATE TO MAKE STRATEGY
EVERYONE’S JOB
4.1
4.2
4.3
4.4
Strategic awareness created
Personal goals aligned
Personal incentives aligned
Competency development aligned
©2007 Balanced Scorecard Collaborative and Robert S. Kaplan  18
Motivate to Make Strategy Everyone’s Job
Create Strategic awareness : “Communicate seven times seven different ways”
— Personal relevance (WIIFM) brings the strategy to life
— Sustained communication uses different channels to get the message across
• Leadership meetings
• CEO random visits to employees
• Dear Colleague Quarterly Letter in Mellon News
• Learning lunches & informal discussions
• Intranet
• Working groups facilitated by HR
• Staff briefings
Source: Presented by Jack Klinck, Vice Chairman, Mellon Europe at BSCol
European Summit, June 2005
©2007 Balanced Scorecard Collaborative and Robert S. Kaplan  19
You can’t tell them just once. “Communicate Seven Times, Seven Ways”
Posters
Portal
&
Website
Publications
Rolling Status
Year Over Year Conceptual Summary
Our Strategy Management
Training
Align Focus / Strategic
Priority throughout the
organization
Stage 3: The Strategy Refresh
The Heavy Lifting
(24-36 Months)
Synchronize strategy
content with changed
customer business
and technology
environments
Stage 2: The Early Execution
Learnings from the
QSRs reflected in Translate our
(12-24 Months)
Review
Strategy mgmt
Strategy
strategic priorities
organizational
processes and
All-PAs
Stage 1: The Launch
into operational
structure
tools
Focus
terms
(6-12 Months)
Eliminate standardized,
Alignment
Deep dives align
Company &
EIS
Balanced
simplified
roadblocks,
speeds
activity to strategy
Functional
Scorecard created
accelerate flow
cross-org
Strategy
Maps
Operationalize
2
1
per objective
excellence
authored
our Strategic
Aligned
to red
Translate
Executive
Priorities
PAs meet,
•Foci
objectives Business Area
Strategy
Engage QSR
Leadership
Develop
exploit
•Measures
focus and
Strategy Maps
•Initiatives
change mgmt,
comm.
Bus.
IS&S, Aero,
SFO
Organization
mobilization, and measurement
channel
Continual
Unit
Distinct org 3
tool
I&TS, Space
5
Alignment
communication
Process
Strat.
contributions,
plans
Maps
foci declared
Everyone's
Consistent
(MS2,
Job
review of each
Early QSRs
Shared
Alignment
…)
objective, focus Focus
4
Horizontally flow objectives analyzed
Training: Our Strategy
in QSRs
across organizations using
(Strategy Connections Mod. 1)
QSR cross-pollination
new Horizontal Team
Awareness
across orgs
QSR
Training:
PRS Objectives
Orgs
capability
Measures
Acting on a QSR Report,
aligned to Strategy
teamed by
span orgs,
Competency and Contribution Knowledge Base,
objective
reflect flow
Guidance Center
(StratConn 2)
shared focus
Accountable org for
Rebranding Quarterly focus, All-employee actions EIS per-objective
perf. to strategy
by objective on
performance
2
viewable by all
PASSPORT
set
© Lockheed Martin Enterprise Information Services
©2007 Balanced Scorecard Collaborative and Robert S. Kaplan  20
Alignment: “Put Yourself On The Map”
© Lockheed Martin Enterprise Information Services
©2007 Balanced Scorecard Collaborative and Robert S. Kaplan  21
Making Strategy a Continual Process: The role for scorecards and dashboards
I. MOBILIZE CHANGE THROUGH
EXECUTIVE LEADERSHIP
II. TRANSLATE STRATEGY TO
OPERATIONAL TERMS
V. GOVERN TO MAKE STRATEGY
A CONTINUAL PROCESS
A. RESOURCE MANAGEMENT
5.1 Budget is driven by strategy
5.2 Planning linked to strategy
5.3 Portfolio of strategic initiatives aligned to themes
B. KEY PROCESS MANAGEMENT
5.4 Process improvement aligned to strategy
5.5 Best practice sharing in place
IV. MOTIVATE TO MAKE STRATEGY
EVERYONE’S JOB
C. LEARNING & CONTROL
5.6 Strategy reviewed and adapted on a
regular basis
5.7 Data and analytics guide strategy
©2007 Balanced Scorecard Collaborative and Robert S. Kaplan  22
How the Closed-Loop Management System Links
Strategy and Operations 1. STRATEGY
5. STRATEGY TESTING AND
ADAPTING
a. Conduct profitability analysis
b. Conduct strategy correlation
analysis
c. Examine emerging strategies
DEVELOPMENT
a. Define mission, vision, and
values
b. Conduct strategic analysis
c. Formulate strategy
2. STRATEGY TRANSLATION
a. Define strategic objectives
and themes
Strategic Plan
.
StratEx
b. Select measures and targets
Balanced
Scorecard
c. Select strategic initiatives
Strategy Map
4. MONITORING AND LEARNING
d. Align the organization
3. OPERATIONAL PLANNING
a.
b.
c.
d.
Improve key processes
Develop sales forecast
Plan resource capacity
Prepare budgets
Operating Plan
b. Hold strategy
reviews
P&L’s
OpEx/CapEx
Dashboards
a. Hold
operations
reviews
EXECUTION
Results
Process
Initiative
Linking Process Management to BSC Strategic Processes
Strategy Map
SER RENTÁVEL EM 23% DO CAPITAL INVESTIDO E AUMENTAR O VALOR DA EMPRESA PARA US$ 300 MILHÕES EM 5 ANOS
Garantir rentabilidade
e atratividade do
negócio
Buscar diferenciais
competitivos percebidos e
valorizados pelos mercados
Gestão de Clientes
Excelência Operacional
Utilizar recursos
com eficiência
Perspectiva
Aprendizado e
Crescimento
Desenvolver
Logística
integrada com
níveis
adequados de
capital de giro
Prover tecnologia
de informação que
sustente os
requisitos do
negócio
Otimizar custos
fixos
Fortalecer
presença no
mercado externo
Estreitar
relacionamento
com centros de
decisão dos
clientes chave
Garantir
flexibilidade
Operacional
Reenergizar
pessoas
fortalecendo a
gestão por
resultados
A completely new set of value
attributes
Capacity Trading
Equipment Maintenance Support
Second Hand Equipment Trading
Export Support
“Rubber University”
General Mgmt Training
Equipment Selection Support
Yield / Scrap Benchmarks
Small Quantities
Formulation support
Operating procedures
AS-IS VALUE PROPOSITION
Fortalecer imagem da
marca Petroflex
Quality Control and Testing Procedures
Perspectiva
Mercado
Perspectiva
de Processos
Internos
Explorar novos
negócios de forma
seletiva
Sustentar
crescimento na
Indústria Geral
TO-BE VALUE PROPOSITION
Important value attributes
fixes
Material Selection (Rubber, Other
Chemicals)
Aumentar
participação de
outros clientes de
pneus
RELATIVE OFFERING LEVEL
Atuação diferenciada nos mercados doméstico e internacional
Taxes
Garantir plena
utilização das
plantas
Distribution Margin
Ter custos
competitivos
segundo padrões
internacionais
Manter níveis
adequados de
endividamento
Aumentar o
valor da
empresa
Aumentar
participação de
produtos de maior
valor agregado
Investment in Physical Space /
Inventory
Perspectiva
Financeira
To achieve this strategic process
objective, how must we improve?
KEY-ATTRIBUTES
Desenvolvimento Aplicado
Ser ágil e efetivo no
desenvolvimento de
soluções orientadas
aos clientes
Responsabilidade Social
e Corporativa
Perseguir boas
práticas de
Governança
Corporativa
Sustentar níveis
de excelência
em segurança,
saúde e meio
ambiente
Desenvolver
competências
estratégicas
CUSTOMER MGMT
Conscientizar
pessoas para atuar
de forma
responsável
16. HAVE A
STRONG
PRESENCE AT
EXTERNAL
MARKET
17. SEARCH LONG
TERM
RELATIONSHIPS
ALONG WITH
TARGET CUSTOMERS
21. SUPPLY
INFORMATION
TECHNOLOGY THAT
SUPPORTS
BUSINESS
REQUIREMENTS
22. EMPOWER
PEOPLE AND
FORTIFY VALUEORIENTED MGMT
APPLIED
DEVELOPMENT
18. BE AGILE AND
EFFECTIVE ON THE
DEVELOPMENT OF
CUSTOMERORIENTED
SOLUTIONS
23. DEVELOP
STRATEGY
COMPETENCIES
24. AWARE
PEOPLE TO ACT IN
CRITICAL
SUCCESS FACTORS
A RESPONSIBLE
BE CONTINUOUSLY
INNOVATIVE ON
OUR PRODUCT
LINES
MANNER
HAVE AN IN-DEPTH
UNDERSTANDING
ABOUT OUR
MARKETS AND
THEIR TARGETSEGMENTS
HAVE A
CONTINUOUS
MONITORING
PROCESS RELATED
TO OUR
PRODUCTS
PERFORMANCE
©2007 Balanced Scorecard Collaborative and Robert S. Kaplan  24
Linking a Balanced Scorecard R&D strategic objective to critical success factors and
metrics.
Strategic Objective and
Metrics
Critical Success
Factors
18. BE AGILE AND
EFFECTIVE ON THE
DEVELOPMENT OF
CUSTOMER-ORIENTED
SOLUTIONS

HAVE AN IN-DEPTH
UNDERSTANDING ABOUT
OUR MARKETS AND THEIR
TARGET-SEGMENTS
BE CONTINUOUSLY
INNOVATIVE ON OUR
PRODUCT LINES
Business
Processes Metrics

# of Protected
Ideas
ESTABLISH PRIORITIES
AND PROTECT NEW
PRODUCT IDEAS
HAVE A CONTINUOUS
MONITORING PROCESS
RELATED TO OUR
PRODUCTS PERFORMANCE
# of Co-created
Proposals
NEW PRODUCTS
PLAN AND STRATEGY
DEVELOPMENT
IDEA
TESTING
RDEI - R&D Effectiveness Index
Time-to-Market
PROPOSALS
DEVELOPMENT
% PerformanceControlled Products
SCHEDULING,
BUDGETING AND
PRIORITIES
ESTABLISHING
SALES AND NEW
PRODUCTS
DEVELOPMENT
EVALUATION
©2007 Balanced Scorecard Collaborative and Robert S. Kaplan  25
Dashboards articulate the critical link between strategy management and operations
management
MOVE
MODEL
MAP
THEME linked to
PROCESS
PROCESS supports
THEME
PROCESS linked to
METRICS
METRICS improve
PROCESS
 Identify operational processes key to executing strategy and manage those processes using
analytical models rather than instincts
 Analytical models identify drivers to the process and display these drivers on a dashboard
accessible to managers that can make an impact
 Drivers include not only financial (lagging) metrics, but operational, environmental, demographic,
and other situational leading indicators
 Models will be updated with actual results and the cause-and-effect correlations will be improved
 Dashboards tailored based on the user and the ability to “drill-down” from a strategic objective to a
low-level operational metric maintained across the enterprise value chain
©2007 Balanced Scorecard Collaborative and Robert S. Kaplan  26
With advances in technology, next-generation dashboards can now fulfill the role of
full-fledged performance management tools
Advanced
visualization
methods, with ability
to represent large,
complex data sets,
makes information
“actionable”
Alignment to
strategy – focused
on processes that
are key to overall
strategy execution
Pre-defined navigation
paths to facilitate analysis
and improve user
experience, improved
audit trails and data
transparency
Ability to display
data from multiple
sources, mix of
quantitative and
qualitative
information
©2007 Balanced Scorecard Collaborative and Robert S. Kaplan  27
How the Closed-Loop Management System Links
Strategy and Operations 1. STRATEGY
5. STRATEGY TESTING AND
ADAPTING
a. Conduct profitability analysis
b. Conduct strategy correlation
analysis
c. Examine emerging strategies
DEVELOPMENT
a. Define mission, vision, and
values
b. Conduct strategic analysis
c. Formulate strategy
2. STRATEGY TRANSLATION
a. Define strategic objectives
and themes
Strategic Plan
StratEx
.
BSC
b. Select measures and targets
c. Select strategic initiatives
Strategy Map
4. MONITORING AND LEARNING
d. Align the organization
3. OPERATIONAL PLANNING
a.
b.
c.
d.
Improve key processes
Develop sales forecast
Plan resource capacity
Prepare budgets
Operating Plan
b. Hold strategy
reviews
P&L’s
OpEx/CapEx
Dashboards
a. Hold
operations
reviews
EXECUTION
Results
Process
Initiative
Companies use strategy scorecards and operational dashboards to inform their
different management meetings.
 Operational Review Meetings: Role for KPI Dashboards
— Frequent (daily, twice weekly, weekly)
— Departmental and functional personnel
— Identify and solve operational problems (late deliveries,
equipment downtime, supplier problems)
— Promote continuous improvement (better, faster, cheaper)
 Strategy Review Meetings: Role for Balanced Scorecard and Time-Driven ABC Reports
— Monthly
— Management team; cross functional, multiple business units
— Discuss and solve problems with strategy implementation
— Manage product and customer profitability
©2007 Balanced Scorecard Collaborative and Robert S. Kaplan  29
The leadership team uses the BSC to review performance, test strategic hypotheses
and make informed decisions
Use of a BSC Report in
Strategy Review Meetings
1
Identify Performance Issues:
 Focus on the performance of objectives NOT measures.
I03 Identify Adverse Trends
2
3
Support trends
5
Analyze Objective Performance:
 What are the measures telling us? Are the
measures driving change and adding focus?
 What are the root causes of what’s occurring? What are
the expectations for the future? And, are current
initiatives sufficient to close the performance gap?
 Are initiative on track to deliver expected value? If
K01 Develop Quality Tracking Program
4
not, why and what can be done to remedy issues?
K01 Develop Quality Tracking Program
Develop program to track all incident root causes identified
during reviews and perform trend analysis
 What action steps – including additional or different
IO3 Identify Adverse
Trends
Application needs to be selected within next 60 days to stay
on schedule
initiatives - are required to improve performance
going forward?
Objective:
Discussion/Update:
6
7
Recommendations/Required Actions:
Person(s) Responsible:
Action Item Detail:
1.
2.
3.
Due Date:
Priority (A, B, C):
Take Action:
 Discuss and agree on how to remedy issues.
 Assign accountability to ensure decisions are
implemented.
ILLUSTRATIVE
©2007 Balanced Scorecard Collaborative and Robert S. Kaplan  30
How the Closed-Loop Management System Links
Strategy and Operations 1. STRATEGY
5. STRATEGY TESTING AND
ADAPTING
a. Conduct profitability analysis
b. Conduct strategy correlation
analysis
c. Examine emerging strategies
DEVELOPMENT
a. Define mission, vision, and
values
b. Conduct strategic analysis
c. Formulate strategy
2. STRATEGY TRANSLATION
a. Define strategic objectives
and themes
Strategic Plan
.
StratEx
b. Select measures and targets
Balanced
Scorecard
c. Select strategic initiatives
Strategy Map
4. MONITORING AND LEARNING
d. Align the organization
3. OPERATIONAL PLANNING
a.
b.
c.
d.
Improve key processes
Develop sales forecast
Plan resource capacity
Prepare budgets
Operating Plan
b. Hold strategy
reviews
P&L’s
OpEx/CapEx
Dashboards
a. Hold
operations
reviews
EXECUTION
Results
Process
Initiative
Software Role in Strategy Management
Application software should support the Balanced Scorecard approach to
creating a Strategy-Focused Organization:
 clearly communicate strategy and measures across the organization
 display linkages among objectives, measures, and initiatives
 capture and analyzing performance data across the organization
 provide relevant information on results in a clear, concise and useful manner
A systematic selection approach supports unlocking
the full potential of the Balanced Scorecard management system
©2007 Balanced Scorecard Collaborative and Robert S. Kaplan  32
Illustrative
The Objectives and Measures shown are for illustration purposes only.
©2007 Balanced Scorecard Collaborative and Robert S. Kaplan  33
What Are Some of the Benefits from Automated BSC Solutions?
“You don’t have to wait for the next meeting to be informed. Management meetings focus only on the real
issues…. We expect to save $5 mm a year from administration costs alone by replacing spreadsheet
managed Balanced Scorecards with [an automated application].”
Peter Geelen, CIO Philips Corporate Control
“Instant communication…. Easy to understand view of the data…. Saves 20 – 40 hours of labor per
month preparing charts…. Saves management time reviewing results.”
Ben Patterson, Unisys Corporation
“[The integration of an automated BSC application has increased the] visibility that we are experiencing
around the intangibles, the knowledge, the idea generation and helping that differentiate what we do.”
Michael Collins, WorldTravel BTI
Formally McCord Travel Management
©2007 Balanced Scorecard Collaborative and Robert S. Kaplan  34
Strategy-Focused Organizations Use a Best Practices Framework
II. TRANSLATE STRATEGY TO
OPERATIONAL TERMS
I. MOBILIZE CHANGE THROUGH
EXECUTIVE LEADERSHIP
1.1 Leaders drive strategy execution
1.2 Executives make case for change
1.3 Leaders reinforce strategic priorities
1.4 Well articulated strategy exists
1.5 Office of Strategy Management established
V. GOVERN TO MAKE STRATEGY
A CONTINUAL PROCESS
IV. MOTIVATE TO MAKE STRATEGY
EVERYONE’S JOB
©2007 Balanced Scorecard Collaborative and Robert S. Kaplan  35
Strategy Management: An Emerging Professional Group
Managing Strategy
CSMO
CFO
OPS
Managing Quality
Managing Money
Executive Team
• Black Belts
• ISO Certified
Managing
Customers
MKTG
• Accountants (CPAs)
• Controllers
Held together by
a shared view of
the strategy
CEO
• Market Research
• Brand Management
Managing
Technology
• Engineers
• Scientists
CIO
Managing People
• Aligning and Developing
CHCO
Human Capital
©2007 Balanced Scorecard Collaborative and Robert S. Kaplan  36
The Office of Strategy Management facilitates nine strategy management processes
throughout the year.
Strategy
Management
Processes
Q1
Enterprise
Strategic
Planning
Organization
Planning and
Alignment
Accountable
Executives
Annual Cycle
Q2
Q3
Q4
Annual Update of Strategy
• Clarify Vision
• Adapt Corporate Strategy
 CEO/Executive Team
 BSC Project Team (OSM)
Modify the Corporate Scorecard /
Strategy Map
Align the Organization
• Corporate and business units
aligned
• Business and support units aligned
• Board of Directors aligned
Modify Business and Support Unit
Scorecards
Financial &
Resource
Planning
Planning / Budgeting
• Budgets
• Finance
• Plans
• IT
• Initiatives
• HR
Employee Alignment
• Personal goals
• Employee incentives
• Personal development
Employee
Alignment
Review Strategy and Operations
Management
Control &
Learning
 LOB Leaders
 Support Unit Leaders
 BSC Project Team (OSM)




Chief Financial Officer
Human Resources Officer
Chief Information Officer
Chief Operating Officer
 Human Resources Officer
 CEO/Executive Team/OSM
Manage Strategic Initiatives
 Program Office (OSM?)
Share Best Practices
 Chief Knowledge Officer
Communicate Strategy
Coordinated
By
 Corporate Communications
O
F
F
I
C
E
O
F
S
T
R
A
T
E
G
Y
M
A
N
A
G
E
M
E
N
T
©2007 Balanced Scorecard Collaborative and Robert S. Kaplan  37