Bsc workshop

Cascading the Balanced Scorecard at Commercial Vehicle Business Unit, Tata Motors An in-depth training and development seminar March 8 - 9th, 2004 C LARITAS A SIA ‘FOCUS ON THE FUTURE’

Our agenda Module 0 Welcome Module 1 The rationale for balanced scorecard Module 2 Cascading the balanced scorecard Module 3 Strategy mapping in detail Module 4 Developing your cascaded strategy maps – workshop exercises Module 5 Developing performance measures – workshop exercises Module 6 Resource allocation through initiatives prioritisation Module 7 Designing an ongoing management process Module 8 Next steps

Welcome! This course is designed to introduce the complete balanced scorecard process and to provide a framework for reaping the benefits from balanced scorecard within Tata Commercial Vehicles The course is a hands-on working session designed to equip you to champion and lead subsequent activities on balanced scorecard within Tata Commercial Vehicles We will start with a review for the rationale behind balanced scorecard We will identify best practice by reviewing external case studies, but most importantly by working with your scorecards that have already been developed. From concept to implementation!!!!

Getting to know each other Your questions or concerns regarding this seminar or any balanced scorecard experiences to date? Your role Your current knowledge level

Module 1 The rationale for Balanced Scorecard

Interactive session 1 What are key issues facing today’s CEO?

Organisations are facing change at unprecedented speed Capability to respond to the unforeseen! Globalisation CRM M&A Technology innovation Accountability Costs AND

More than ever, we need clarity on our organisational goals “ Business Strategy is now the single most important issue … and will remain so for the next five years” Business Week

And, we need to able to implement our strategies more effectively “ Less than 10% of strategies effectively formulated are effectively executed” Fortune

Strategic planning is the tool we use to establish our direction If you don’t know where you are going, then…….. Any road will do!!!!

Interactive session 2 What are problems with typical strategic planning?

Some of the ‘problems’ with strategic planning Question What did you do differently as a result of the last strategic planning process?? Once a year Limited participation Form filling exercise ‘ Secret’ Not linked to budgeting

Interactive session 3 What are problems with implementing strategy?

Some of the ‘problems’ with implementing strategy Question Do you have the time to think about the strategy?? Managing to budget Not understanding the strategy Today’s crisis No ‘real’ information Inadequate resources

What we must fix There must be a shared consensus on the strategy at the executive level We must communicate the strategy to the organisation We must ‘translate’ the strategy into meaningful objectives which all employees can identify with Personal goals, targets and rewards should be clearly linked to the strategy Business processes should support achievement of the strategy Management reporting should be designed around strategic goals Management must lead by example

We need better processes in strategy formulation and in managing strategy implementation A new culture of performance management based on a single integrated business process

Many organisations have been successfully deploying an approach based around balanced scorecard Strategy Formulation Strategy Refining Global External Issues Local External Issues B S C Strategy “ Stress Test” Costing ETC. Strategic Initiatives Performance Measures Budgeting New Technologies HR Knowledge Mgmt Management Reporting Continuous Re-forecasting Strategy Loop

The history of a journey Measurement System Strategy Implementation Total Strategy Management Articles in Harvard Business Review: “ The Balanced Scorecard — Measures that Drive Performance” January - February 1992 “ Putting the Balanced Scorecard to Work” September - October 1993 “ Using the Balanced Scorecard as Strategic Management System” January - February 1996 1996 2000 2004 1992 1996 2000 2004

Traditional BSC model Balanced Scorecard provides a framework to translate strategy into operational terms. Profitability Growth Shareholder Value Organisation Vision Price Service Quality Market Innovation Continuous Learning Intellectual Assets Strategy is ‘described’ using four ‘perspectives Cause and effect is a key element Measures are developed to monitor performance “ If we succeed, how will we look to our shareholders?” “ To achieve our vision, how must we look to our customers?” “ To satisfy our customers, what management processes must we excel at?” “ To achieve our vision, how must our organisation learn and improve?” Cycle Time Productivity Cost Financial Perspective Customer Perspective Internal Perspective Organization Learning

The terminology of balanced scorecard Measures are important, BUT not the whole picture!!!!! Perspectives Themes Measures Targets Accountability Initiatives Objectives

Successful Balanced Scorecards start with a strategy map Example Mobil (US Marketing & Refining ) Growth Theme Improve quality of revenue by understanding customer needs and differentiating ourselves accordingly. Productivity Theme Maximize utilization of existing assets and integrate the business to reduce total delivered cost. Financial Perspective Return on Capital Increased from 6% to 16% Competitive Position (profitability) From last (1993) to first (95, 96, 97, 98) Volume Growth Exceeds industry by 2-2.5% annually Reduce Cash Expenses Down by 20% Improve Cash Flow From -$500 M/Yr to +$700 M/Yr Customer Perspective Internal Perspective Customer Satisfaction Continuous improvement for 3 consecutive years Speedpass Active Increasing at rate of 1M per year Dealer Quality Perfect Orders Continuous improvement for 4 consecutive years Learning & Growth Perspective Quality Capacity Utilization Safety Lost work incidents down from 150 to 30 per year Environmental Number of incidents reduced by 63% Continuous improvement for 4 consecutive years Annual value of lost yield reduced from $175m to $50m Product Innovation Customer Management Operational Excellence Good Neighbor Motivated & Prepared Workforce Continuous improvement for 4 consecutive years Strategic Awareness Annual employee survey shows awareness of strategy increased from 20% to 80% Source: The Balanced Scorecard D. Norton & R. Kaplan

Balanced Scorecard terminology Objectives Fast ground turnaround Statement of what strategy must achieve and what’s critical to its success Target 30 Minutes 90% The level of performance or rate of improvement needed Cycle time optimization Key action programs required to achieve objectives Initiative Measurement On Ground Time On-Time Departure How success in achieving the strategy will be measured and tracked Strategic Theme: Operating Efficiency Profitability Financial Learning More customers Ground crew alignment Lowest prices Fewer planes Customer Internal Fast ground turnaround Strategy Map: Diagram of the cause-and-effect relationships between strategic objectives Flight Is on time

Balanced Scorecard example % Ground crew trained % Ground crew stockholders Objectives Measurement Market Value Seat Revenue Plane Lease Cost FAA On Time Arrival Rating Customer Ranking (Market Survey) On Ground Time On-Time Departure Strategic Theme: Operating Efficiency Initiative Cycle time optimization program ESOP Ground crew training Quality management Customer loyalty program Target 30% CAGR 20% CAGR 5% CAGR #1 #1 30 Minutes 90% yr. 1 70% yr. 3 90% yr. 5 100% Profitability Financial Learning More Customers Ground Crew Alignment Lowest Prices Fewer Planes Customer Internal Fast Ground Turnaround Flight Is on Time Profitability More Customers Fewer planes Flight is on -time Lowest prices Fast ground turnaround Ground crew alignment

The Strategy Focused Organisation 1 2 3 4 5 Source: The Strategy Focused Organization D. Norton & R. Kaplan

Summarising The Balanced Scorecard gives us the framework to describe our strategy (perspectives) The Strategy Map is how we describe the detail of our strategy Themes help us focus on specific aspects

Some Goals of the Balanced Scorecard Translate a strategy into operational terms Ensure that the components of the strategy -- objectives, measures, and initiatives -- are aligned and linked Communicate the strategy throughout the organisation Form the basis of an effective and integrated strategic management process

Scorecard Benefits for Your Organisation? Clarify the vision Gain consensus and ownership Align the organisation Integrate strategic planning Drive resource allocation Improve management effectiveness The Balanced Scorecard is a tool and framework with a number of applications that can be tailored to the situation.

Understanding how to measure performance Measures and targets are the tools of strategy assessment What should we measure & what constitutes a stretch target? Strategy Map Measures & targets

But having a plan is no good if you can’t allocate resources in support of it!!! Are you clear where the ‘dollars’ are being spent? What percentage of your budget is ‘spent’ even before the start of the financial year? What funds are available for real ‘breakthrough’ activities? Can you make an effective case for budget funds? Is there a clear process to link strategy and budgeting?

Given a focus on driving change, how do we ensure effective resource prioritisation? Initiative mapping allocates effort Strategy Map

The final component involves risk assessment Risk is assessed at each stage and risk action plans developed Strategic Planning Processes Risk Management Processes Strategy Map Development Measures & Targets Identification Initiative Alignment Risk Identification & Prioritization Risk Mitigating Strategies and Action Plans Developed Key Performance Indicators Identified Key Risk Indicators Identified Strategic Alternatives Assessment Strategy Refinement & Agreement Action Plan Development & Implementation Strategy Formulation Risk Scenario Analysis Risk Scenarios Strategic Risks Risk Tolerance Business Model Environment Options

In summary Strategic planning is THE most important part of the total annual cycle The process needs careful planning to maximise the value of the output Planning techniques like strategy mapping can hugely add to the clarity and focus of the deliverables Budgeting should be integrated around the plan Effective performance measures must be put in place to track progress Resources must be ‘freed up’ to achieve value creation Risk issues must be factored in A redesigned ‘process of management’ will ensure effective ongoing decision making Effective information feedback systems are key to making it all happen Focus on the Future!

Module 2 Cascading the balanced scorecard

We have seen previously how the strategy map drives the measures,……… Measures and targets are the tools of strategy assessment What should we measure & what constitutes a stretch target? Strategy Map Measures & targets

… ..and helps to prioritise resources Initiative mapping allocates effort Strategy Map

Strategies are executed through operational units. The strategies of the operational units must be integrated if organization purpose and synergies are to be achieved. LINE BUSINESSES SUPPORT UNITS CORPORATE SBU A SBU B SBU C SBU D CORPORATE SCORECARD Strategic Agenda Measures EXTERNAL PARTNERS Customer Scorecards Distributor Scorecard Joint Venture Scorecard Vendor Scorecard New Venture Scorecard Outsourcer Scorecard #1. A Corporate Scorecard defines overall strategic priorities. #3. Each Support Unit develops a plan and BSC for “best practice” sharing to create synergies across SBUs. #2. Each SBU develops a long-range plan and BSC consistent with corporate strategic agenda. #4. Plans and BSC’s define relationships with external partners consistent with SBU strategy. 1. Financial Growth 2. Delight the Consumer 3. Win-Win Relationships 4. Safe & Reliable 5. Competitive Supplier 6. Good Neighbor 7. Motivated & Prepared 8. Quality xxx xxx xxx xxx xxx xxx xxx xxx xx xx xx xx Finance Marketing Distribution Procurement Purchasing Safety Human Resources Information Technology There is usually more than one balanced scorecard in an organisation – we call this process ‘cascading’

Why cascade? The Tata Commercial Vehicles balanced scorecard reflects the objectives, measures and targets at the total Tata Commercial Vehicles management level Individual business units need to link their goals and objectives to the Tata Commercial Vehicles goals and objectives Support functions also need aligned objectives

Understanding the cascade process There are a number of different approaches to cascading a balanced scorecard Three sample approaches: Shared Organisation Unit Identical objectives (Parent) (Child)

Understanding the cascade process There are a number of different approaches to cascading a balanced scorecard Three sample approaches: 2) Contributory Organisation Unit Translated objectives (Parent) (Child)

Understanding the cascade process There are a number of different approaches to cascading a balanced scorecard Three sample approaches: 3) Hybrid Organisation Unit Identical, translated & unit specific objectives (Parent) (Child)

Method 3 is likely to be more appropriate in a diverse organisation It offers more flexibility It provides for flight specific goals to be defined It allows for flights to develop more targeted measures It doesn’t stop you adopting either of the other approaches if that fits your needs

In their latest book, Norton and Kaplan look at experiences derived from what is the most important part of all balanced scorecards The visual representation of our strategy A way to define ‘discrete’ components of strategy The basis for resource prioritisation The guide to setting meaningful measures 2004

So what is a strategy map? “ Strategy is a hypothesis…… The essence of implementing strategy is to have hypotheses clearly understood in the organisation, to align resources with the hypotheses, to test the hypotheses continuously, and to adapt as required in real time. We refer to these hypotheses as strategy maps” Balanced Scorecard Report David Norton and Robert Kaplan

A strategy map is an X and Y axis diagram Customer Proposition Internal Processes Learning & Growth Financial Theme A Theme C Theme B The X Axis consists of the generic four perspectives of balanced scorecard The Y Axis consists of strategic themes which are specific to each organisation

Experience shows two types of strategy map Type A Customer Proposition Internal Processes Learning & Growth Financial Theme A Theme C Theme B Strategic themes run from top to bottom through all four perspectives

Type A : ‘Wells Fargo On-Line Financial Services’ Learning & Growth Internal “ Add and Retain High Value and High Potential Value Customers” “ Increase Revenue Per Customer” Maximize Profit “ Reduce Cost Per Customer” Financial Migrate Customers Increase Efficiency Develop Customer Self-Help Manage Alliance Costs Streamline Manual Processes Automate Processes Develop Customer Self-Service Grow Internal Revenues Increase Fees and Balances Grow Revenues from Non-Branded Sources Identify and Develop Third Party Relationships Attract and Retain Key Players and Staff in General Enhance Bench Strength and Succession Planning Increase Manager Competency and Functional Technical Competency at All Levels Continue Development of organisation and Culture Deploy Scorecard and Embed Develop and Implement Cost-Effective Marketing Plans, Sales Tools and Evaluation Techniques Including the Effective Use of Data Migrate Mass Consumers to On-Line Increase Customers’ Use of On-Line Reduce Cost Per Customer for the Bank Increase Revenue Per Customer Cross-Sell Branded Products and Services Customer Grow Revenue Value Proposition Basic Requirements Differentiators Time Savings Security Price Reliability Multiple Channels Service Features/Ease of Use Products New Manage Attrition Develop and Implement Cost Effective Marketing programmes Migrated Continue Leadership in Superior Product and Features Development Add & Retain High Value and High Potential Value Customers Develop Superior Service Capability Maximize Reliability EXAMPLE Strategic themes run from top to bottom through all four perspectives

Experience shows two types of strategy map Type B Customer Proposition Internal Processes Learning & Growth Financial Theme A Theme C Theme B Strategic themes are developed within internal perspective only

Type B : ‘Mobil US Marketing & Refining’ Increase ROCE to xx% Revenue Growth Strategy Productivity Strategy New Sources of Non-Gasoline Revenue Increase Customer Profitability Through Premium Brands Become Industry Cost Leader Maximize Use of Existing Assets Create Non-Gasoline Products & Services “ Build the Franchise” “ Increase Customer Value” “ Operational Excellence” “ Good Neighbor” Improve Environmental, Health and Safety Understand Consumer Segments Best-In-Class Franchise Teams Improve Hardware Performance Improve Inventory Management On-Spec On-Time Industry Cost Leader A Motivated and Prepared Workforce Aligned Personal Growth Climate for Action Functional Excellence Leadership Skills Integrated View Competencies Process Improvement Y2K Technology Speedy Purchase Friendly Helpful Employees Financial Perspective Customer Perspective Internal Perspective Learning & Growth Perspective Help Develop Business Skills More Consumer Products Recognize Loyalty Differentiators “ Win-Win Dealer Relations” “ Delight the customer” Strategic themes are developed within internal perspective only

There’s no absolute rule, but experience over a number of years shows some regularly recurring categories of themes. Typically these are: ‘ Build the franchise’ – relating to new business opportunities ‘ Increase customer value’ – relating to how we build on customer relationship ‘ Achieve operational excellence’ – relating to our internal cots and efficiency management ‘ Be a good corporate citizen’ – relating to our business and environmental corporate practices How do you develop the themes Note how themes have a ‘doing’ thrust

Example: Increase customer value may be described by differing organisations as: Expand into overseas markets Develop new product lines Grow through vertical integration Or some combination of the above Within any of these ‘theme types,’ the exact components vary by organisation and reflect the specifics of the strategic approach Note how constructing these themes has a significant impact on bringing clarity to our strategy It tells us what we do- it also tells us what we don’t do

Some general rules for themes Themes represent the ‘how’ in your strategy Typically there will be between 3 and 5 key themes Less than 3 themes indicates little ‘how’ Too many themes may mean a fragmented strategy Themes should be ‘discrete’ and non-overlapping Type B strategy maps are more common and easier to construct Themes are an ‘engineers’ way to view strategy

Now that we understand themes, lets look in more detail at the ‘X axis’ Customer Proposition Internal Processes Learning & Growth Financial

The Financial Perspective -goals/typical areas for consideration Goals of the Financial Perspective Create awareness of accountability to shareholders Determine the financial objectives upon which the company will be measured by shareholders and management Establish the “financial gap” that will clarify the magnitude of change required Build an economic model clarifying the critical drivers of growth and productivity Use the economic model to identify strategic issues How Do We Close the Gap? Maximize Return on assets Profitable growth by by Define the Performance Gap 800 450 The Gap” $350 Million increase (75% Increase) ‘ 99 ‘ 02 PBIT (Profit Before Interest and Tax) Manage Operation costs

The Customer Perspective - goals/typical areas for consideration Focus the company on satisfying customer/market demands Articulate the objectives upon which the company will measure its success in satisfying market/customer demand Identify the drivers of loyalty, and Demonstrate how the company will differentiate itself in the eyes of customers. Goals of the Customer Perspective Value Proposition = (Product / Service Attributes) + Image + Relationship Functionality Quality Price Time Generic Model

The Internal Perspective - goals/typical areas for consideration Identify core business processes Customize the generic value chain to specifics of the business Identify elements that must be added or created to achieve the top-down financial and customer objectives Assess the operating characteristics of core processes Impact on time, cost, quality Opportunities for rationalization or integration Goals of the Internal Perspective Innovation Cycle Operations Cycle Post-Sale Service Cycle “ Operational Excellence” Develop Products/ Services Create Service Offering Sell the Products/ Services Provide Customer Service Optimiseation Distribution & Execution Generic Value Chain Model “ Customer Management” “ Innovation” Satisfy Customer Needs Identify Customer Needs

The Learning & Growth Perspective -goals/typical areas for consideration Create awareness of Learning and Growth’s fundamental role in driving long-term performance Identify the specific Learning & Growth requirements for each learning and growth objective Goals of the Learning & Growth Perspective organisation Learning = ƒ Knowledge & Technology Assets Climate for Action , , Sample Generic Learning & Growth Objectives: Employee Competencies Typical Learning & Growth Objectives Employee Competencies Knowledge & Technology Assets Climate for Action Increase Employee Satisfaction Retain key people Drive productivity Leverage Core competencies Leverage technologies Capture Best practices Seek and protect patents, copyrights Ensure Strategic Information is accessible Set accountability / empowerment Create line of sight between objectives and scorecard Encourage cross-functional teaming

Some general learnings No two strategy maps look the same Most strategy maps are the result of a number of iterations during development The process of building the map is as valuable as the end product Themes bring segmentation and focus

Strategy maps in support functions -Example of an HR scorecard Financial Learning & Growth Internal Customer Organizational Competency Organizational Efficiency Leadership & Talent Support Business Growth Performance Based Culture Manage HR Cost Efficiency Operating Efficiency Themes Customer Objectives Strategic Objectives Organisational Enablers Leadership/ Competencies & Skills Retention of Leaders Change & Performance Driven Culture Optimize Human Capital Align HR Strategy with Business Strategy Rewards Performance/ Execution Right People, Right Job, Right Time Optimizing Service Delivery through Streamlined Processes & Automation Performance Driven Internal Group/Division/Subsidiaries External Statutory Bodies/Vendors/Consultants Employees Strategic Business Partner Financial Destination

Some thoughts on support function strategy maps The same ‘x axis’ applies Themes often split between ‘effectiveness’ and ‘efficiency’ They can be quite hard to develop There is a tendency to over elaborate Don’t create them unnecessarily!!

Module 4 Developing your cascaded strategy maps Workshop exercises

KEY CHALLENGES 1. Creation of world class products  Performance  Cost  Time 2. Successful exploration of new Frontiers  Markets  Businesses  Alliances, etc. 3. Continuous cost reduction 4. Organization to make it happen  Competencies  Performance ethic 5. Develop attitude for being World class 6. Develop passion for Customer Satisfaction 7. Create in customer, a blindfold trust in our Quality The most important challenges being faced by CVBU are…

Be amongst the top 5 profitable CV manufacturers globally Be a dominant player in domestic market in all segments Enhance product offerings Excel in Corporate governance social responsibility Financial Customer Business Process Learning & Growth Revenue growth Productivity improvement Enhance Value for Channel partners OF1 OF2 OC4 OP4 OC2 Increase accessibility for customers Identify and acquire Information technologies in line with company strategy Align employees to company strategy OL1 A motivated, prepared and disciplined workforce OL5 OC3 Excel in the journey to excellence (TBEM) Culture and climate for action Strategic competencies Corporate Citizenship Channel Partner End Consumer OL6 Map and source/ develop strategic competencies Enhance Employee satisfaction OL3 Continuous Improvement Be the lowest cost manufacturer of CVs globally CVBU Strategy Map 2003-04 Value proposition OF5 Value creation Create High performance culture amongst employees OL4 OL2 Enhance Customer satisfaction through safe, reliable and good value products and services OC1 STRATEGIC OBJECTIVES – Strategy Map Design and Development (NPI) Install Globally benchmarked processes in... OP1 Manufacturing & Vendor management OP2 Sales & Marketing OP3 Grow non-cyclical business revenue (Export + Defence + LOB4 + FBV + Plant sales ) Grow International Business OF3 OF4 Tata Commercial Vehicles strategy map Strategic Objectives

Lets get real – Lets start building a strategy map for your organisation Take some time to look at the components of financial strategy What are the main opportunities for revenue growth? What is the plan for cost and/or productivity savings? What about asset utilisation? Considering the above factors, review the financial perspective for your business unit

Review your financial imperatives What do your stakeholders require from you? What constitutes financial success? What is your revenue growth strategy (if any)? What is your cost management strategy? What is your asset management strategy? Financial strategy is more than just staying within budget

Creating the model of strategy The financial model What is our overarching financial goal, and how will we achieve it? Sources of revenue Asset utilisation Cost & productivity management Financial goal (NEV, ROCE Etc.)

Creating the model of strategy The financial model (cont.) Establishing the source of revenue growth? Sources of revenue New product New customer Old customer Old product Increased customer penetration (65%) New customer acquisition (35%)

Creating the model of strategy The financial model (cont.) Establishing the role of asset management? A/cs receivable Capex Asset utilisation Stock Cash A/cs payable Working capital

Creating the model of strategy The financial model (cont.) Establishing the impact of cost and productivity Cost & productivity management

Lets get real – Lets start building a strategy map for your organisation Take some time to review how you will segment your customers For each customer group, what are the customer value propositions? Considering the above factors, review the customer perspective for your business unit

Lets get real – Lets start building a strategy map for your organisation Take some time to review the internal perspectives of the various strategy maps that we have seen in this workshop Identify the major themes that apply to your organisation. Define some more detailed strategic objectives within each theme. Considering the above factors, review the internal perspective for your business unit

Creating the model of strategy The critical internal processes The themes are probably more than just operational excellence Be a Good Citizen Regulatory Processes Provide Operational Excellence Operational Processes Increase Customer Value Customer Management Process Build the Franchise Innovation Process

Identify key themes Themes represent the ‘how’ in your strategy Typically there will be between 3 and 5 key themes Themes are a way of breaking down the strategy into discrete deliverables Be prepared to iterate!!! Themes create the way in which we think about the deliverables of the organisation

Build objectives within each theme Expand coverage of profitable outlets Improve call frequency Increase availability of key packages Ensure Product Availability Establishing cause and effect is a key element

Lets get real – Lets start building a strategy map for your organisation Consider the components that we previously looked at in learning &growth For each component identify the critical areas in your organisation that might inhibit you from realising the strategies already described Set objectives to focus on how to overcome these issues Considering the above factors, review the learning & growth perspective for your business unit

Creating the model of strategy The learning & growth infrastructure What are the people, infrastructure and culture issues? Strategic Competencies Strategic Technologies Climate for Action [ ) ] ( ) ( ) ( + +

Module 5 Developing Performance Measures Workshop exercises

Interactive session What makes a good measure?

The role of measures To communicate purpose To shape behaviour To provide feedback on performance Measuring the ‘wrong’ things can be more harmful than not measuring!!!

The need for leading and lagging measures Our scorecard will be a balance of leading and lagging measures Lagging measures valid our past performance e.g. operational readiness They help us understand if our strategy is working Leading measures are the drivers of future performance e.g. average time to requisition They help us understand what we can manage today

We need to fully define measures before we can report on them Strategic Objective: Names the objective Measure: Names the measure Measurement Intent : Describes the measure and the reasoning behind its selection as an indicator of progress against this strategic objective. Measurement Definition/Formula: Provides a detailed formula for the calculation of a numerical value for the measure Source For and Approach to Setting Targets: Identifies the report, document, system or individual from which the information will be obtained Target Setting Responsibility: Person Tracking / Reporting Responsibility: Person Measure Availability: date Target: date Frequency of Update: Identifies how often it is calculated Units of Measure: Identifies the units in which the measure will be reported Accountability for Meeting Target: Person Notes/Assumptions: Clarifies terms in the formula as necessary Highlights key assumptions underlying the formula Measurement Information Is: ___ Currently Available ___ Available With Minor Changes Data Elements and Sources: The data elements required to calculate this measure and the source systems, databases, documents, etc. of those data elements 2002Actual 2003 0047 2004 Lists numerical targets by year for the various component of the formula where relevant. For 2002 list targets by quarter and year. 1Q 2Q 3Q 4Q Full Year Target Next Steps:

Be aware of the following issues Setting too many measures Measures lacking targets Just looking at what we measure today Inability to collect data

What about target setting? Targets are key to monitoring performance Targets are set for the duration of the strategic plan Targets cannot be set in isolation ‘ Sanity checking’ is necessary Modeling is a good idea

Can everything be measured ‘ Proxies’ can often be developed in hard to measure areas Don’t create meaningless measures Be wary of just measuring activity Absence of data doesn’t devaluate the need for it – it just shows up gaps in our current information management systems Index measures can confuse if not used properly

Mandated measures In addition to the centre and services level measures which you develop, it may be the case that HSA will require some additional measures to be recorded by all organisational units. These measures may be needed where: A consolidated measure is needed at HSA level Performance comparisons are required at HSA level Have you decided on these?

Lets get real – Lets start building the measures Consider the strategy map that you have recently created Review your existing measures and see if they are comprehensive Will you add more measures? Will you drop any measures? Develop a revised framework of measures for your business unit

Module 6 Resource allocation through initiatives prioritisation

Defining initiatives Initiatives are ‘change’ agents They will help us achieve our targeted performance Every initiative should have an impact on achieving one or more strategic objective Not all objectives need initiatives Initiatives are our link to resource planning and budgeting Initiatives are not ‘business as usual’ How many initiatives are underway in your organisation?

Initiatives close a performance gap Initiatives help close the gap between our current and desired performance INITIATIVE Implement automated case management system and train Every Rep in 99 Customer Satisfaction Survey Rating 90% favorable overall Measure Target Target Actual 90% 45% $M gap Measures track our progress toward achieving and communicating the intent of the objective MEASURE / TARGET OBJECTIVE Increase Customer Satisfaction Objectives articulate the components of our strategy

Initiative mapping is a valuable tool Objectives Asset Productivity Be the Lowest Cost Service Provider New Revenue Sourcing Timely response Promised Delivery Partnering Integrate and Align Resources New Service Development Focused Technology Dvpmt Perfect fulfillment Performance Leadership Strategic Comp. and Skills Individual and Team Perf Customer Sensitive Culture Perspective Financial Customer Internal Learning and Innovation Initiatives

Initiatives prioritisation processes can be developed Fit Business Case Time to result Strategic Importance Cost ($) Lapse Time (Months) Very Low Low Moderate High Very High Very High > $1m High $1m - 750k Moderate 750k - 500k Low 500k - 350k Very Low < 350k Very Long > 18 Long 18 - 12 Moderate 12 - 9 Short 9 - 6 Very Short < 6 Scores Weight Criteria 0 25 50 75 100

Module 7 Designing an ongoing management process

Report design – the most neglected component of balanced scorecard A new type of management report is required Reporting should be presented in terms of ‘prioritised issues’ not tables of numbers Use graphics to aid communication of messages. Ensure commentary on performance issues is provided by objective owners Use initiative linkage to identify opportunities and problems

A framework for the report Strategy Map Prioritised by business impact within theme Ranked by theme impact on total organisational result Year end ‘credibility’ reporting‘windsock’ $ t Budget Likely outcome Commentary Asjsjsjjsjshfhf Hfhfhfhdhdhhd Dhdhhd Jdjjdjdjdjjdjdj Related initiatives Jdkkdkdjdjdjdjdjjdjjd dhhdhdhhddhdhhdhd Detailed analysis of related operational objectives within -theme

Year end forecasting options The ‘Windsock’ Copyright Metapraxis Ltd

Innovative reporting techniques - 1 Copyright Metapraxis Ltd

Financial Perspective F6 – Increase fee based income Comments Objective Supported Measure Intent Initiatives Supporting F6 None identified. 4Q00 value 4Q00 target Year to date fee based income 15% >10% y 5% 8% 10% 15% 10% 10% 10% 10% 10% 1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01 1Q02 during quarter target return index see also: Performance Owner: Coordinator: Reporter: Typical BSC report page

Be aware of the data issues Not all data will be collected today You can implement without all the data being present You must design ongoing data collection procedures Data reporting deadlines need to be established A Balanced Scorecard Coordinator should be appointed

Communication is a key success factor Communication starts with the kick-off meeting Communication is necessary throughout the three stages A formal communication plan should be developed

A communication planning template WHO User Groups WHAT Method of Communication WHEN Frequency of Communication WHO Responsibility for Communication Materials required Initial Education Ongoing Information

For more information on the Balanced Scorecard... Contact Nigel Penny at +65 9815 7830

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