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September-October 2004

Alignment at Tata Motors'

Commercial Vehicle

Business UnitBy Lauren Keller Johnson, Contributing Writer

How did India's largest commercial vehicle maker turn a$108.62 million loss into a $107 million profit in just twoyears -as well as win entry into the Balanced Scorecard Hallof Fame? By aligning every manager and employee securelybehind a radical new corporate strategy.

'"Tata Motors' Commercial VehicleBusiness Unit (CVBU) is India'slargest manufacturer of trucks,tractor-trailers, buses, off-roadvehicles, and defense vehicles.One of the 10 most successfulcommercial vehicle manufacturers

worldwide, CVBU sells to morethan 70 nations. In fiscal year2002-2003, the division accountedfor a whopping 600/0 f TataMotors' inventory turnover.

But in 2000, things didn't look so

rosy. That year, CVBU logged thefirst loss in its 50-plus years -

to the tune of $108.62 million.Ravi Kant, CVBU's executivedirector (the equivalent of CEO),laid out an aggressive new plan

to reverse the slide. The plancalled for serious cost cuttingacross unit operations and moreeffective strategic planning and

execution. The division decidedto adopt the Balanced Scorecardas a key tool in these efforts. As

K.C. Girotra, general managerof CVBU's Lucknow plant and

an early leader of the scorecardinitiative, explains, "The BSC builtnaturally on our company's use of

SQDCM [safety, quality, delivery,cost, and morale], a methodologythat [Daimler] Chrysler uses andthat we adopted in 1997. With its

emphasis on cause-and-effectlinkages among the various per-

spectives, the scorecard promisedto help us achieve even betterresults than what we hadobtained so far with SQDCM."

To attain those results, the divi-sion's executives knew they had

level scorecard through strategicobjec;tives. But the steering com-mittee and scorecard team didn'tmandate objectives to SBU lead-ers. Rather, they challenged each

reporting organization to definestrategies that would best enableit to support CVBU's targets.

This technique yielded severalimportant benefits. It encouragedsecond-tier managers to clearlyvisualize the larger organization'sdesired future direction and align

their own strategiesand supportinginitiatives behind it. It also fostereda sense of ownership and account-ability among these leaders. Lower-level managers understood thatthey had latitude in determininghow to achieve results, rather

than receiving mandates fromtop executives. And it resulted incascaded scorecards that supportedCVBU's high-level strategy in

unique ways.

To illustrate, consider CVBU's

internal process objective"Enhance product and servicequality levels." (See Figure 1, next

page.) This corporate-level objectiveshows up in the company's

]amshedpur manufacturing plant's

strategy map in two processobjectives: "Quality and consistency"and "Ensure new products adhere

to cost, time, and quality targets."

In the Sales and Marketing map,the supporting objective is "Install

sales process to all dealerships."

In addition, CVBU executivesrealized that although cascadedmaps should be based on higher-level maps and contain the same

perspectives, "local tailoring"

was essential. While the Salesand Marketing map contains thesame four perspectives as theCVBU map, it is geared towardsupporting the growth aspect ofCVBU's strategy rather than thecost-containment aspect. Suchcustomizing helps to ensure thatthe business units make the bestuse of their strengths to support

high-level strategic objectives.

to achieve enterprisewide align-ment. To that end, they assembleda high-level steering committeecomprising cross-functional headsand other key officers, such asthe regional sales managers, who

reported to Kant. This committee

then appointed a core scorecardteam of five individuals to workwith the steering committee tobuild and deploy the corporatestrategy map and scorecard. Both

teams committed to monthlymeetings, where they reviewed

progress, prioritized objectivesfor strategic business units, andallocated resources to the mostvital objectives and initiatives.

As another step in securing hori-

zontal alignment, senior leadersalso defined new cross-functionalresponsibilities for themselves.For instance, while one plantmanager was given ownershipof the objective of driving costreduction across CVBU, anotherbecame accountable for imple-

menting quality improvementstrategies across the organization.

The division's approach tocascading the scorecard to secure

vertical alignment has provedjust as thorough as its horizontal-alignment efforts. Once the

corporate BSC was finalized,the scorecard team shared it with

the heads of CVBU's strategicbusiness units, helping them

develop their own strategy mapsand scorecards, and populatethem with appropriate objectivesand initiatives. Each cascadedscorecard is linked to the high-

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Balanced Scorecard Report

Figure 1. Linking CascadedScorecardso the Corporate Strategy

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Manufacturingbalancedscorecard

industry at times. For example,when National Thermal Power, amajor utilities company in India,heard about CVBU's scorecardexperience and expressed curiosityabout it, the division invited NTPrepresentatives to come learnmore. CVBU's scorecard teammembers have also visited other

companies to explain the benefitsof using the BSC. According toGirotra, "We've made a commitmentto sharing our scorecardexperience,even with a competitor."

Though CVBU has just a fewyears of scorecard work underits belt, its efforts seem to begenerating positive resultsalready. For example, in just twoyears, its $108.62 million lossturned into a $107 million profit-due in large part to executionof the cost-cutting component ofthe division's new strategy. And

revenues have grown 40% in thelast two years -at least doublewhat CVBU's nearest competitorhas achieved. 8

Reprint #BO409E

CVBU uses several approachesto secure vertical alignment downto the employee level. At annual"town hall" meetings at eachplant, Kant communicates thedivision's mission, vision, values,and strategy. He then invites

employees to ask questions. "Atthese meetings," Girotra says, "we

might see workmen standing upand asking things like, 'Why arewe making more fully built vehi-cles now and fewer chassis thatcan be custom-built into buses orother vehicle types?'" Answers tosuch questions (in this case,because the customized-chassisapproach had caused serious.delays for companies that selectedthis option) deepen employees'understanding of the corporatestrategy and their role in executing

it. CVBU also uses surveys toassessemployees' strategic under-standing and has defined major

performing areas (MPAs) foreach manager and employee thattie directly to the person's depart-ment scorecard. For example, asales and marketing manager'sMPAs might include conductingproduct demonstrations n northernIndia for particular product models,increasing market share for the

pickup truck segment in India,and creating model dealershipsin a specific region of India. .

\,..,

Compensation is tied to perform-ance on MPAs.

In cascading and integrating itsBSC initiative, CVBU demonstratedthe power of both vertical and

horizontal alignment for organiza-tions seeking to execute corporatestrategy. In Girotra's words, "Weare a large organization. With

26,000 employees, more than 100independently owned dealerships,three large manufacturing plants,and 200 different products, wehad to ensure strong alignmentboth up and down as well asacross the division."

The division has recently extendedits alignment efforts by sharingits scorecard experiences andresults with partners outside CVBU'sboundaries -such as its inde-

pendent dealers, vendors, vehicleservice stations, and joint-venturecollaborators. As Girotra explains,"We want them to know thebenefits we've gained from thescorecard, including increasedcustomer focus, improvedprocesses, and understanding ofcause-and-effect relationships.Our hope is that these partnerswill also start using the scorecard,which would enable the whole

system to improve.".This expanding of alignment

reaches even beyond CVBU's

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