What is mean by Vision? What is mean by strategy? Why is it difficult to implement

strategy? A new approach to strategy

implementation Foundation of the Balanced Scorecard BSC as a Performance Management

System BSC as a Business Management

System How does BSC benefit organisations? Success stories Conclusions

What is mean by Vision? What is mean by strategy? Why is it difficult to implement

strategy? A new approach to strategy

implementation Foundation of the Balanced Scorecard BSC as a Performance Management

System BSC as a Business Management

System How does BSC benefit organisations? Success stories Conclusions

Agenda: Agenda:

“The Day you don’t face any problem/Challenges, Think and You will realize that ur walking on the wrong path.”

By: Swami Vivekanand

VISION, MISSION AND VALUESVISION, MISSION AND VALUES

Vision: Defines the desired or intended future state of a specific organization or enterprise in terms of its fundamental objective and/or strategic direction.

Mission: Defines the fundamental purpose of an organization or an enterprise, basically describing why it exists.

Values: Beliefs that are shared among the stakeholders of an organization. Values drive an organization's culture and priorities.

“Developing and communicating the company’s unique position, making trade offs and forging fit among activities” -----Michael E Porter

“A unified, comprehensive and integrated plan designed to assure that the basic objectives of the enterprise are achieved”----William F Glueck

What is mean by strategy? What is mean by strategy?

Why is it difficult to implement strategy?Why is it difficult to implement strategy?

Strategy implementation becomes difficult as organizations faceone or more of these challenges…

Findings of a Survey of 200 major companies, by a consultancy firm Renaissance Worldwide and CFO Magazine

Why is it difficult to implement strategy?

Findings of a Survey of 200 major companies, by a consultancy firm Renaissance Worldwide and CFO Magazine

•Thus organization gets in to a trap where ……… •Visions Are Not Actionable• Goals and Rewards Are Not Linked to

Strategy•Resource Allocation Is Not Linked to

Strategy•Feedback Is Tactical, Not Strategic

Conclusion – You cannot manage strategy with a system designed for tactics.

Because of “Thought – Action” GapBecause of “Thought – Action” Gap

GAP between STRATEGY and ACTION PLAN Strategic Initiative – What do we need to do?

Personal Objectives – What do I need to do?

Satisfied Shareholder

Delighted Customer

Effective Processes

Motivated &Prepared

Workforce

Strategic Outcome

?????????

Balanced ScorecardBalanced Scorecard

A new approach to strategy implementation - BSC

What is the Balanced Scorecard?

The The BalancedBalanced Scorecard (BSC) is a Scorecard (BSC) is a comprehensive management performance control tool comprehensive management performance control tool with a strong focus on vision and strategy. with a strong focus on vision and strategy.

The strategy is translated into specific tactical The strategy is translated into specific tactical performance-driving activities. performance-driving activities.

Measures are established for each activity. Measures are established for each activity.

USE

Implementing Balanced Scorecards typically includes four processes:

Translating the vision into operational goals; Communicating the vision and link it to individual

performance; Business planning; Feedback and learning, and adjusting the strategy

accordingly.

WHY NEED A BALANCED SCORECARD?

WHY NEED A BALANCED SCORECARD?

The Source of Value Has Shifted From Tangible to Intangible Assets

Intangible Assets

Tangible Assets

38% 62% 85%

38%

15%

62%

1982 19921 20002

percentage of market value related to…

1. Brookings Institute2. Baruch Lev analysis of

S&P500 companies

VALUE CREATION: INTANGIBLE ASSETSVALUE CREATION: INTANGIBLE ASSETS

Intangible Assets Do Not Have A Direct Impact on Financial Results — They Have Second- or Third-Order Impacts

Conventional approach to managing financial & operational indicators insufficient

Balanced Approach to Strategy Implementation should includes focus on customer/stakeholder & learning, growth & innovation

Understanding & managing/leveraging inter-relationships between the above areas necessary for value creation

Service Quality

Customer Confidence Revenue

Customer Retention

Training

InformationTechnology

BALANCED SCORECARDBALANCED SCORECARD

Balanced Scorecard’s key theme is not about Measurement as the term would outwardly convey

Its about

“Value creation -Execution of Strategy”

Year 1992, Robert S. Kaplan and David P. Norton.

Balanced Scorecard

Company’s dashboard

The Balanced Scorecard provides a four perspective frameworkto formulate strategy and translate it into operational terms

BSC as a Performance Measurement Tool

The The

Balanced ScorecardBalanced Scorecard

VISION VISION STRATEGYSTRATEGY

Performance Measures

THE BALANCED SCORECARD - INDICATORS

1. The Learning and Innovation

This perspective includes employee training and

corporate cultural attitudes related to both individual and corporate self-improvement. 2. The Internal Business

Process

This perspective allow the managers to know how well their business is running, is there any scope to improve

anyfurther

THE BALANCED SCORECARD - INDICATORS

4. The Financial Perspective

Kaplan and Norton do not disregard the traditional need for financial data. Timely and accurate financial data will

always be a priority

3. The Customer Perspective

This perspective emphasises customer focus and customer

satisfaction.

EVERY MEASURE IN BS CULMINATES IN TO FINANCIAL OUTCOME -

ORGANIZATIONAL LEARNINGTraining Time, Turnover, Staff Satisfaction Score

BUSINESS PROCESS IMPROVEMENTCycle Time, Defects, Activity Costs

CUSTOMER SATISFACTIONMarket Share, Survey Scores, Complaints

FINANCIALSTRENGTH

Product Profitability,EBIT

Financial Innovative and Learning

Internal Business Process

Customer

Assured market share

R& D Achievement

New product line

Customer retention (gets hooked to the Co).

Growth in revenue.

Employee training

Productivity Cost effective product

Growth in market

Test marketing

Better production planning

Assured acceptance

BALANCED SCORECARD – CAUSE EFFECT RELATIONSHIP AMONG INDICATORS

BALANCED SCORECARD – CAUSE EFFECT RELATIONSHIP AMONG INDICATORS

Examples-

Indicators -

BSC acts as a Strategic Management/ Implementation Tool Which Helps in ……

Validation/Enhancement of Strategy Validation/Enhancement of Strategy Getting clear consensus on the sameGetting clear consensus on the sameArticulation and Communication of Vision & Mission into key Articulation and Communication of Vision & Mission into key strategic objectivesstrategic objectivesCreation of Strategic Maps at corporate and SBU levelCreation of Strategic Maps at corporate and SBU level Alignment of the entire organization to the strategyAlignment of the entire organization to the strategyBrings in Clarity and Transparency – enhanced Brings in Clarity and Transparency – enhanced understanding of strategic objectives down to operating understanding of strategic objectives down to operating levellevelMake customer focused organizationMake customer focused organizationProvides unambiguous measures for performance controlProvides unambiguous measures for performance controlConsensus on ownership of objectives at all levels of Consensus on ownership of objectives at all levels of managementmanagementPrioritization of strategic action plans Prioritization of strategic action plans Makes strategic planning a continuous process Makes strategic planning a continuous process

How does BSC benefit organizations?

How does BSC benefit organizations?

Provides a “BALANCED” Performance Management Tool –

Adequate balance between lead and lag measures/indicatorsAdequate balance between lead and lag measures/indicatorsHelp organization remain pro-activeHelp organization remain pro-activeProvides macro perspective to senior management – Provides macro perspective to senior management –

no more longer working in “silos” no more longer working in “silos” Clear linkage and alignment of individual and enterprise Clear linkage and alignment of individual and enterprise performanceperformanceFlexible KRA’s depending on the business needs of the organizationFlexible KRA’s depending on the business needs of the organizationHelps achieve financial results by managing simultaneously non Helps achieve financial results by managing simultaneously non financial measuresfinancial measures

STRATEGY MAPS TO INDIVIDUAL SCORECARD

SCORECARD DESIGN & ROLLOUTSCORECARD DESIGN & ROLLOUT

BALANCED

SCORECARD

S T R A T E G Y

Mobilize change through

executive leadership

Change people, make

strategy everyone’s

everyday job

Align the organizati

on to create

synergies

Translate the

strategy to operational

terms

Integrate improvement programmes

with scorecard

BALANCED

SCORECARD

S T R A T E G Y

Translate the

strategy to operational

terms

SCORECARD DESIGN & ROLLOUTSCORECARD DESIGN & ROLLOUT

Brand / product development, sales, service, operations, logistics..

Activities needed to create the required customer value propositionand differentiation and the desired financial outcomes

Organization infrastructure, skills, capabilities, knowledge of employees, working climate..

The ability to execute internal business processes in newdifferentiated ways

Who are the target customers that will generate the revenue growth?

What are the objectives and how do we measure success with them?

What are the financial objectives for growth and productivity?

What are the major sources of growth?

TRANSLATE : STRATEGY INTO 4 COMPONENTSTRANSLATE : STRATEGY INTO 4 COMPONENTS

Vision and Strategy

Financial Perspective

Customer Perspective

Internal Perspective

Learning and growth

Perspective

BALANCED

SCORECARD

S T R A T E G Y

Align the organizati

on to create

synergies

SCORECARD DESIGN & ROLLOUTSCORECARD DESIGN & ROLLOUT

ALIGN: USE STRATEGY MAP TO BUILD CAUSE & EFFECT RELATIONSHIPSALIGN: USE STRATEGY MAP TO BUILD CAUSE & EFFECT RELATIONSHIPS

Improve ROCE

Revenue Growth Strategy Productivity Strategy

Build the Franchise Increase Customer Value

Improve Cost Structure

Improve Asset Utilization

A Motivated and Prepared Workforce

New Revenue Sources Customer Profitability

Cost per Unit Asset Utilization

Price

Financial Perspective

Customer Perspective

Internal Perspective

Learning & Growth Perspective

Product/Service Attributes

Strategic Competencies

Strategic Technologies

Climate for Action

“Build the Franchise” “Increase Customer Value”

“Achieve Operational Excellence”

(Innovation Processes)

(Customer Management Processes)

(Operations & Logistics Processes)

Customer Value Proposition

Quality

Operational Excellence

Product Leadership

Customer Satisfaction

Customer Acquisition Customer Retention

Time Function Service Relations Brand

Relationship Image

Market Share

Review

Review

Review

ReviewReview

Review Review

Review

Review

ALIGN : FLOW OF THE SCORECARD ALONGTHE ORGANIZATIONALIGN : FLOW OF THE SCORECARD ALONGTHE ORGANIZATION

Production Shift

Scorecard

Packing Shift

Scorecard

Production Daily

Scorecard

Maintenance Daily

Scorecard

Department Weekly

Scorecard

Packing Daily

Scorecard

PC/QC Daily Scorecard

Maintenance Weekly

Scorecard

PC/QC Weekly

Scorecard

Plant Head :Weekly Value Loss Scorecard & Analysis

SCORECARD DESIGN & ROLLOUT

BALANCED

SCORECARD

S T R A T E G Y

Change people, make

strategy everyone’s

everyday job

Con

scio

us

Un

con

scio

us

Incompetent Competent

Direct Delegate

Support Coach

The Four States of Mind!

Con

scio

us

Un

con

scio

us

Incompetent Competent

Compliance Culture

Understanding Usage

Minds Path Matrix

……No shortcuts No shortcuts possible...possible...

CHANGE : MINDS PATH MATRIX

CHANGE : MINDS PATH MATRIXCHANGE : MINDS PATH MATRIX

Compliance Culture

Understanding Usage

• People understand that they are “being told” to do something new.

• God knows why because they don’t see the use of it !!

• This is normally viewed as extra non-value added responsibility.

• If you stop checking, they will stop trying.

• People start realising why the data recorded in the system might be of use to them and the business in the future. Process transformation begin to inspire confidence

• There is some light at the end of the tunnel.

• You still need to keep them on close track however.

• Recording this new or extra data and working in a new way has now become a fact of life. Process compliance is high

• They now start using (read : analyzing) the scorecards.

• Meetings are held to review the data. The wheel starts turning!

CHANGE: MINDS PATH MATRIX

Compliance Culture

Understanding Usage

• People understand that they are “being told” to do something new.

• God knows why because they don’t see the use of it !!

• This is normally viewed as extra non-value added responsibility.

• If you stop checking, they will stop trying.

• People start realising why the data recorded in the system might be of use to them and the business in the future. Process transformation begin to inspire confidence

• There is some light at the end of the tunnel.

• You still need to keep them on close track however.

• Recording this new or extra data and working in a new way has now become a fact of life. Process compliance is high

• They now start using (read : analyzing) the scorecards.

• Meetings are held to review the data. The wheel starts turning!

• People don’t think about the new system& processes anymore. It is THEIR system now.

• They fully optimize the usage of data gathered at all levels.

• They use the Scorecards to drive improvements in business performance.

• They improve details of the systems as per the requirements.

Success

Hope

ProblemDefinition

Solution Development

Solution Implementatio

n

Culture Change

Pain

The Mind’s Path To SuccessCHANGE MANAGEMENT

SCORECARD DESIGN & ROLLOUT

BALANCED

SCORECARD

S T R A T E G Y

Integrate improvement programmes

with scorecard

SCORECARD’S ROLE IN TRANSFORMATION

Scorecard is an indispensable tool to manage & monitor a transformation/business performance improvement programme

Scorecard Implementation needs to be supported by functional/departmental initiatives

Scorecard supported by a Transformation Initiative drives Business Results

INTEGRATE : GOALS, MEASUREMENT & IMPROVEMENT INITIATIVES

When you first launch your Initiative, you probably want to use an Output Measurement. Once the Initiative is up and running, integrate your measurement to an Outcome to see if the Initiative is really having strategic impact.

InitiativeInitiative Output Output MeasurementMeasurement

Outcome Outcome MeasurementMeasurement

Lean Process / Lean Process / Six SigmaSix Sigma

Number of Number of Projects Defined Projects Defined by Regionby Region

Overall reductions in Overall reductions in errors, reworks, and errors, reworks, and cycle timescycle times

Employee Employee Competency Competency ModelsModels

% of Employees % of Employees who have a who have a Competency Competency Model in placeModel in place

Higher skill levels of Higher skill levels of employees using the employees using the modelsmodels

INTEGRATE :GOING FROM OUTPUT TO OUTCOME

SCORECARD DESIGN & ROLLOUT

BALANCED

SCORECARD

S T R A T E G Y

Mobilize change through

executive leadership

MOBILIZE : TOP MANAGEMENT COMMITMENT

1.Creating the Climate for Change

Unfreeze the organization

Show the need for change

2. Creating the Leadership Team

Breaking down functional bias

3. Creating the Vision and Strategy

BSC as a “visioning process”

BSC to clarify the strategy

4. Creating Team Accountability

Accountability for cross-functional strategic themes at Executive Team level

A successful Balanced Scorecard program starts with a recognition that it is not a “metrics” project, it’s a “change” process.

Strategic Learning Loop

Initiatives & Programs

test the hypotheses

Output(Results

)

reporting

Management Control Loopfunding

Input(Resource

s)

update the strategy

PERFORMANCE

85% of management

teams spend less than one hour per month on

strategy issues

92% of organizations do not report on lead

indicators

60% of organizations don’t link strategy & budgets

78% of organizations lock budgets to an annual cycle

20% of organizations take more than 16 weeks to

prepare a budget

STRATEGY

BALANCED SCORECARD

BUDGET

MOBILIZE :TIGHT FOCUS & EXTENSIVE REVIEW

MOBILIZE : RED BUTTONS TO AVOID

Middle Management Team: Lack of Senior Management Commitment

Done by One or Two Individuals

Held at the Top: For Senior Management Only

Too Long a Development Process: “Best Becomes the Enemy of the Good”

Treating the Balanced Scorecard as a Systems Project

Done Only for Compensation

Not Treated as a Change Management Project

CONTEXT

Focus on Top line. ICICI Bank perceived to be very aggressive on sales , very poor on service.

For bottom-line to improves it was important for the bank to be a service leader.

Improved Service Leads to improved productivity & profit Generates a positive word of mouth. Attracts new customers Provides a competitive advantage.

More difficult and slower for a competitor to respond to service improvement than to price change.

Help us retain customers. Cheaper to retain customers than to acquire new ones

•Patent Score for Process Improvements•SWIFT Training to Branches, Terminator Workshops

•Performance within TATs•Quality•Productivity•% Complaints to Transactions•Branch Contacts with Customers, Delivery Success Rate %

Research, Education & Teaching

TERMINATOR : ZERO UNHAPPINESS

Internal Processes

Mission

To ensure that the all causes of Unhappiness for Customer are fully

Terminated in order for the bank to vie for Service Leadership

•Customer Complaints•Customer Feedback Scores•Repeat Contacts•Request Closure beyond 24 Hours

Customer

•Cost of Complaints•% of Business through Cross Selling•Average Revenue Per Customer

Financial

ZERO UNHAPPINESS SCORECARD BRANCHES-SAMPLE

Sample Scorecard Scorecard presented &

reviewed in fortnightly reviews

All variances are linked to RCA

Comparison of Monthly Performance Vs. Budget

Focus on Top Service Failures

Key Indicators Focused On : Number of Service Failures, Quality, Service Request Closed within TAT

Top Branch CRs# Feb

Budget Feb Actual

Variance J an '05 Dec '04 Nov '04

Ikit not activated 125 50 75 169 245 422

Instruction for A/c closure not executed 120 80 40 242 139 182

Cash Deposited At Branch Not Credited 90 86 4 121 209 188

Address change not done 140 137 3 183 187 189

Transfer Of Accounts related issues 65 55 10 88 169 168

A/c Not Opened 20 4 16 37 131 101

Outstation collection - Dispute in Amt 20 2 18 50 64 66

FD Renewal not done - deposits 10 9 1 8 32 23

TDS Amount Deducted Disputed 5 5 0 11 13 10

Fixed deposit not linked to account 5 0 5 6 10 6

Form 15 H Not Entered 0 0 0 0 0 1

Cash Deposit In Atm Not Crdited 12 4 8 21 35 56

Fixed Deposit Interest Chq Not Received 2 0 2 3 3 8

Local Outwrd chq returned physical chq not recd 5 3 2 11 17 24

TOTAL 619 435 950 1254 1444

Total Quality Budget Feb 1-15Variance J an Dec Nov

Quality -North 90% 90% 0% 45% 55% 58%

Quality -East 90% 83% -7% 69% 58% 70%

Quality -West 90% 95% 5% 65% 59% 59%

Quality -South 90% 79% -11% 60% 58% 58%

Overall Branch Banking 90% 87% -3% 60% 58% 61%

Total TAT Budget Feb 1-15Variance J an

Total CR beyond 24 hours 0 51 -51 82

Zero Unhappiness Scorecard -Deposits - Branches

Top Branch CRs# Feb

Budget Feb Actual

Variance J an '05 Dec '04 Nov '04

Ikit not activated 125 50 75 169 245 422

Instruction for A/c closure not executed 120 80 40 242 139 182

Cash Deposited At Branch Not Credited 90 86 4 121 209 188

Address change not done 140 137 3 183 187 189

Transfer Of Accounts related issues 65 55 10 88 169 168

A/c Not Opened 20 4 16 37 131 101

Outstation collection - Dispute in Amt 20 2 18 50 64 66

FD Renewal not done - deposits 10 9 1 8 32 23

TDS Amount Deducted Disputed 5 5 0 11 13 10

Fixed deposit not linked to account 5 0 5 6 10 6

Form 15 H Not Entered 0 0 0 0 0 1

Cash Deposit In Atm Not Crdited 12 4 8 21 35 56

Fixed Deposit Interest Chq Not Received 2 0 2 3 3 8

Local Outwrd chq returned physical chq not recd 5 3 2 11 17 24

TOTAL 619 435 950 1254 1444

Total Quality Budget Feb 1-15Variance J an Dec Nov

Quality -North 90% 90% 0% 45% 55% 58%

Quality -East 90% 83% -7% 69% 58% 70%

Quality -West 90% 95% 5% 65% 59% 59%

Quality -South 90% 79% -11% 60% 58% 58%

Overall Branch Banking 90% 87% -3% 60% 58% 61%

Total TAT Budget Feb 1-15Variance J an

Total CR beyond 24 hours 0 51 -51 82

Zero Unhappiness Scorecard -Deposits - Branches

SCORECARD RELATED RCA : DELIVERABLES NOT RECEIVED

Apart from wrong creation, dispatch/delivery related issues needed focus

•Key Issue: RTO returns would sit at the branches, waiting for customer to collect them •Solution: Outbound Calling

•Every deliverable cleared resulted in a happy customer, lesser rework & cost savings•Average Contact Ratio:65%

Data :Nov04-Jun 05

RCA: DELIVERABLES NOT RECEIVED

RCA : DELIVERABLES NOT RECEIVED Issue :E-search Update

E-search information for certain deliverables not updated/ available resulting in inadequate /incomplete information to customers & Service Request creation errors

Initiative :E-Search Update (CTD Initiative) Identified mandatory uploads for First Contact Resolution related to

RPC/ CPC processes Designed and finalized the file formats for all mandatory uploads -

easy reading for front end National Co-ordinator appointed to tracking e-search open cases and

timely uploads I-KIT AOF Rejections,Modification Request Rejections,Nomination

Rejection Letters Nomination Registration Request Rejections,Non I-Kit SB/FD-RD AOF Rejections,Transfer of Account- Rejections,Transfer Cheque Returns, ATM Retained Cards,TDS - Form 15G Rejections etc.

4307529

9037555

14793313

21799520

29187237

37593205

Oct-04 Nov-04 Dec-04 J an-05 Feb-05 Mar-05

TERMINATOR RESULTS- COST SAVING THROUGH FAILURE REDUCTION

RESULTS - SERVICE FAILURES AS % OF TRANSACTIONS

47211

629267162476392

102705108124

8480585096

86549

79463 80410

55161

0.09%

0.17%

0.26%0.27%

0.20% 0.20% 0.21% 0.18% 0.17%

0.11%0.12%

0.15%

0

20000

40000

60000

80000

100000

120000

Apr-04 May-04 Jun-04 Jul-04 Aug-04 Sep-04 Oct-04 Nov-04 Dec-04 Jan-05 Feb-05 Mar-05

Months

# of

Crit

ical

Req

uest

s

0.00%

0.05%

0.10%

0.15%

0.20%

0.25%

0.30%

% a

ge

to T

ota

l T

ran

sact

ion

s

# of Critical Requests % Age to Total Transactions (RHS)

RESULTS – QUALITY OF REQUEST HANDLING

55%

62% 62%64% 64%

68% 69%72%

68%

77%

88% 87%

30%

50%

70%

90%

Apr-04 May-04

Jun-04

Jul-04 Aug-04

Sep-04

Oct-04 Nov-04

Dec-04

Jan-05 Feb-05

Mar-05

RESULTS-CUSTOMER FEEDBACK SCORES

74%

78%80%

64%

70%

85%88% 87%

63%

67%

75%

83%

56%

62%

77%80%80%

82%80% 81%

76%

72%

55%

65%

75%

85%

Q-I '04 Q-II '04 Q-III '04 Jan'05 Feb'05 Mar'05

Phone banking Liability Branches

Asset Branches- Home Loan Asset Branches- Consumer Loan

Some Other Success stories through BSC….

BSC is highly effective management system to align company’s vision & mission to strategy and activities

BSC provides management with a comprehensive picture of company’s operations

BSC to be used as an integral part of a company’s planning process in order to realize its fullest potential

Conclusion

Gives the complete picture of the employee as well as the organizational performance.

It guides users in determining the critical success factors and performance indicators.

Strategic review or analysis of the organizational capabilities and performance.

Focusing the whole organization on the few key things needed to create breakthrough performance.

Integrating and directing the performance and efforts from the lowest levels in the organization to achieve excellent overall performance.

Conclusion

“YOU SEE, ALL THE RIGHT THINGS ARE WRITTEN IN BOOKS AND RESEARCH PAPERS.

THE TRICK IS TO ENSURE THAT THERE IS NO GAP BETWEEN WHAT IS WRITTEN IN THE BOOKS AND YOUR VISION; FROM WHAT IS HAPPENING ON THE SHOP-FLOOR AND WHAT IS GOING ON IN THE MARKETPLACE.

THAT IS EXECUTION. THAT IS WHAT MAKES THE DIFFERENCE”

MUKESH AMBANI