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Book Review by Manjari Agrawal

20th June 2012

About the Authors

Translating Strategy into Action

David P. Norton Robert S. Kaplan

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Definition

Balance Scorecard is a management tool that provides stakeholders with a comprehensive measure of how the organization is progressing towards the achievement of its strategic goals.

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Why Do We Need a Balanced Scorecard?

“Business Strategy is now the single most important issue… and will remain so for the next five years”Business Week

“Less than 10% of strategies effectively formulated are effectively executed”

Fortune4

The Vision Barrier

Only 5% of the work force understands the strategy

The Management Barrier

85% of executive teams spend less than one hour per

month discussing strategy

60% of organizations don’t link budgets to strategy

The Resource Barrier

9 of 10 companies fail to execute

strategy

The People Barrier

Only 25% of managers have incentives linked to strategy

Four Barriers to Strategic Implementation

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Balanced Scorecard Pyramid

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Translating Vision and Strategy: Four Perspectives

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Implementation Steps

1. Initiative must start at the top

2. Requires teamwork, collaboration

3. Interview senior managers

4. Gain consensus

5. Expand consensus

6. Selection of metrics

7. Roll-out

8. Periodic reviews

9. The scorecard evolves with the organization

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BSC Team Roles

• Assumes ownership• Provide Information on strategy and methodology• Commit resources

Executive Sponsor

Champion

Team Members

Organization Change Expert

• Ensure all relevant material is available to team.• Facilitates the development of an effective team

through coaching and support.

• Provide knowledge of business unit/ function• Act as BSC ambassadors within their business

units.

• Increase awareness of organizational change issues.

• Investigates change affecting the BSC project.

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Selection Criteria for Performance Measurements

Relevant

Measurable

Actionable

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How many measures on a Balanced Scorecard ?

Between 4 to 7

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Seven ingredients of successful Balanced Scorecard

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

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The Road to Disaster

1. Senior management not committed

2. Lack of consensus3. Consultants4. Failure to communicate5. Lack of “push-down”6. Only few individuals involved7. Static not dynamic

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Sample Metrics for an ITES Company

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Company Strategy – Sample Scorecard

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Success Stories

Commercial Vehicle Business

Unit

2000

to

2002

# 40% Increase in Revenue

Lakshmi Machine

Works Limited

2004

to

2008

Revenue Profit$120M

to

$504M

$8.8M

to

$84.8M

TNT Express Services UK & Ireland

2007

to

2009

# On time delivery increased by 5%

# Market share increased by 14%%

# Employee retention increased by 66%

Companies which Implemented Balanced Scorecard

About 50% of Fortune 1000 companies in North America and about 40% of those in Europe use the Balanced Scorecard (Fortune 2002)

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