Strategy Map Framework • The strategy map framework is presented in the following slides. • This framework describes the types of strategic target that should be presented in each perspective, namely the financial perspective, customers, internal business process, and learning & growth perspective. www.exploreHR.org 50
Strategy Map Framework Long-term Shareholder Value Cost Efficiency Revenue Growth Financial Price Quality Service Availability Brand Customer Operations Customer Innovation Regulatory Management Management Processes and Social Processes Processes Processes Internal Process Organization Capital Information Capital Learning & Growth 51 Human Capital www.exploreHR.org
Financial Perspective • In private companies, the financial perspective is the main objective (ultimate goal) – without having to sacrifice the interests of other relevant stakeholders (community, environment, government, etc.) • In the financial perspective, the strategic goal is the long-term shareholder value. This goal is driven by two factors, namely : revenue growth and cost efficiency. www.exploreHR.org 52
Strategic Objectives in Financial Long-term Shareholder Value Cost Efficiency Revenue Growth Improve Cost Structure Increase Asset Utilization Expand Revenue Opportunities Enhance Customer Value www.exploreHR.org 53
Customer Perspective • This perspective is very instrumental, because without customers, how can a company survive? • Customer perspective covers the following elements: • Customer acquisition • Customer retention • Customer profitability • Market share • Customer satisfaction www.exploreHR.org 54
Strategic Objectives in Customer Customer Retention Customer Profitability Customer Satisfaction Market Share Customer Acquisition Price Quality Service Availability Brand 55 www.exploreHR.org
Internal Process Perspective • This perspective reflects the processes in key business that should be optimized in order to meet the needs of the customers. • There are four main themes in this perspective, namely: • Operations Management Process • Customer Management Process • Innovation Process • Regulatory and Social Process www.exploreHR.org 56
Strategic Objectives in Internal Process Operations Customer Innovation Regulatory Management Management Processes and Social Processes Processes Processes Processes that Processes that Processes that Processes that produce and enhance customer create new improve deliver products value products and communities and and services services the environment • Supply • Selection • New Ideas • Environment • Production • Acquisition • R&D Portfolio • Safety & • Distribution • Retention • Design/ Health • Growth Develop • Employment • Launch • Community www.exploreHR.org 57
Learning & Growth Perspective • This perspective reflects the capability that a company should have, namely: • Human Capital • Organization Capital • Information Capital • This perspective shows us that good human resource development system, organizational system and information system forms a solid foundation for improving company performance. www.exploreHR.org 58
Strategic Objectives in Learning & Growth Human Capital Organization Information Capital Capital • Skills • Culture • Systems • Knowledge • Leadership • Database • Attitude • Organization • Networks Development www.exploreHR.org 59
Strategy Map Template • The following slide displays the strategy map template comprising of four perspectives : financial, customer, internal business process, and learning & growth. www.exploreHR.org 60
Strategy Map Template Enhance Long-term Shareholder Value Improve Increase Revenue Growth Cost Efficiency Financial Build High Expand Enhance Performance Products Market Share Brand Image Customer Achieve Drive Demand Manage Dramatic Implement Good Operational through Customer Growth through Environmental Excellence Relation Innovation Policy Internal Process Management Learning & Growth Build Learning Expand Capabilities with Culture Technology Develop Strategic Competencies www.exploreHR.org 61
The Balanced Scorecard Focuses on Factors that Create Long-Term Value • Traditional financial reports look backward – Reflect only the past: spending incurred and revenues earned – Do not measure creation or destruction of future economic value • The Balanced Scorecard identifies the factors that create long-term economic value in an organization, for example: – Customer Focus: satisfy, retain and acquire customers in targeted segments – Business Processes: deliver the value proposition to targeted customers • innovative products and services • high-quality, flexible, and responsive operating processes • excellent post-sales support Customers – Organizational Learning & Growth: • develop skilled, motivated employees; • provide access to strategic information Processes People • align individuals and teams to business unit objectives . 62 © 1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved.
Our Research Has Identified Four Barriers to Strategic Implementation The People Barrier The Vision Barrier The Management Barrier Only 25% of managers have Only 5% of the work force 85% of executive teams spend less incentives linked to strategy understands the strategy than one hour per month discussing strategy 9 of 10 companies fail to execute strategy 60% of organizations don’t link budgets to strategy The Resource Barrier Today’s Management Systems Were Designed to Meet The Needs of Stable Industrial Organizations That We’re Changing Incrementally You Can’t Manage Strategy With a System Designed for Tactics © 1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved. 63
Why are Companies Adopting a Balanced Scorecard? • Change The Revenue Gr owth Str ategy The Pr oductivity Str ategy Formulate and communicate a new strategy “Imp rove stability by b roadening the sources of revenue fr om “Imp rove oper ating effi ciency by shifti ng custo me rs to more cost - for a more competitive environment current customers” effective channels of distribution” •Growth Impro ve Financial Returns Per spective Increase revenues, not just cut costs and enhance productivity B roaden Impro ve Revenue Operating • Implement Mix E fficiency From the 10 to the 10,000. Every employee Increase Increase Custom er implements the new growth strategy in their Custome r Custome r Per spective day-to-day operations Confidence in S atisfaction Our Finan cia l Throu gh Superio r © 1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved. A dvice E xecution Understand Develop Cross -Sell S hift to Minim ize Inter nal Custome r New the Product P roblems Per spective S egments P roducts Line A ppropriate P rovide Channel Rapid Response Increase Lear ni ng E mployee Per spective P roductivity Develop Access to A lign S trategic S trategic P ersonal S kills Information Goals 64
How Do They Do It? The Seven Ingredients of Highly Successful Balanced Scorecard Programs 1. A Process to Mobilize the Organization and Lead Ongoing Change 2. Scorecards That Describe the Strategy 3. Linking Scorecard to Create an Organization Alignment 4. Continuous Communication to Empower the Workforce 5. Aligning Personal Goals, Incentives, and Competencies With the Strategy 6. Aligning Resources, Budgets and Initiatives With the Strategy 7. A Feedback Process That Encourages Learning and Experience Sharing © 1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved. 65
Not all Environments are Appropriate for a Balanced Scorecard • Balanced Scorecard must be driven from the top: – CEO/COO as sponsor – Executive leadership team commitment • A clear sense of purpose is required to: – Drive change – Clarify and gain consensus about strategy – Build a senior executive team – Focus the organization: align programs and investments – Integrate cross-functionally – Educate and empower the organization • The dynamics of the senior executive team will determine whether the Balanced Scorecard becomes a strategic management system © 1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved. 66
Key Pitfalls to Avoid Process Philosophy • Middle management task force • Measurement to control; not to • Not driven by senior executive communicate team • Management dictating actions • Only one or a few individuals vs. employee improvisation to involved achieve desired outcomes • Too long a development • For management only, not process (allowing the “best” to be the enemy of the “good”) shared with all employees • Delay introduction because of missing measurements • Static not dynamic process • Treating the BSC as an EIS © 1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved. 67
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