Measuring. Paying for

The Balanced Scorecard Measuring R lt / Results/ Paying for Performance www.bodamer.com Setting the Context • The regulatory environment • If your...
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The Balanced Scorecard

Measuring R lt / Results/ Paying for Performance

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Setting the Context • The regulatory environment • If your subsidy ended tomorrow, would your company survive? • What is the cost of lost opportunity from capex delays & missed cell p phone sales? • Competition • Cultural transformation

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Getting Started

First, you need a strategy. p y Vision. Company p y Mission. Company

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But Vision and Strategy alone are not enough Barriers exist…

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The Business Plan St t Strategy Only 10% of organizations execute their strategy

Barriers to Strategy Execution

Vision Barrier Only 5% of the workforce understands the strategy

People Barrier Only 25% of managers have incentives linked to strategy

Mgmt. Barrier 85% of management teams spend less than 1 hour/month discussing strategy

Resource Barrier 60% of organizations don’t link budgets with strategy

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Why BSC? • Two key issues: – Effectively measuring Company’s performance – Successfully implementing Company’s strategy

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Cultural Transformation • • • • • •

Accountability Pay for performance Defined roles and responsibilities Shared ownership in results Getting personal p mindset Competitive

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The Balanced Scorecard • D Developed l d in i 1990’ 1990’s b by R Robert b tK Kaplan l and d David Norton, Harvard Business School • Adopted by almost 50% of Fortune 1000, 1000 widely-used by many firms

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Balanced Scorecard Definition • Carefully selected set of measures derived from a Company’s Strategy Measurement System Strategic Management System Communications Tool

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Balanced Scorecard M Measurement t System S t

• T Translate l t Vision Vi i & Strategies St t i into i t M Measurable bl Goals and Objectives • 4 Perspectives

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The Balanced Scorecard Financial OBJ

MEASURE

Customer OBJ

MEASURE

TARGETS

TARGETS

INIT.

Internal Processes

Vision and Strategy

INIT.

OBJ

MEASURE

TARGETS

INIT.

Learning/Growth OBJ

MEASURE

TARGETS

INIT.

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Financial Perspective • Tells if strategy execution is leading to improved bottom-line results. • Typical measures are: – Profitability – Revenue Growth – Costs

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Customer Perspectives • Who are our target customers, and what is our value proposition? • Customer C expectations, i needs, d d desires i • Measures used: – Customer C stomer satisfaction – Customer loyalty – Market share – Customer acquisition

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Internal Process Perspectives • Your daily business operations p , provisioning, p g, new • Product development, installs, maintenance, post sale service, billing • Helps measure how your company does it’s core business support functions

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Learning & Growth P Perspective ti • Foundation for the Balanced Scorecard p p • Human resource perspectives – Employee Skills – Employee Satisfaction

• Training and other resources • Knowledge sharing across the company

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Balanced Scorecard Definition • Carefully selected set of measures derived from a Company’s Strategy Measurement System Strategic Management System Communications Tool

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Balanced Scorecard St t i Management Strategic M t System S t • Evolution from a measurement tool • Used to align daily actions with a Company’s Strategy • Used as a strategic management system, the scorecard alleviates many barriers to strategy implementation

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Balanced Scorecard St t Strategy Only 10% of organizations execute their strategy

Removes Barriers…

Barriers to Strategy Execution

Vision Barrier Only 5% of the workforce understands the strategy

People Barrier Only 25% of managers have incentives linked to strategy

Mgmt. Barrier 85% of management teams spend less than 1 hour/month discussing strategy

Resource Barrier 60% of organizations don’t link budgets with strategy

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Balanced Scorecard 1.

Overcoming Vision Barrier through Translation of Strategy – – –

Translating T l ti Company’s C ’ strategy t t iinto t objectives, bj ti measures, targets and initiatives Quantify vague & nebulous terms Statement that h the h Company desires d i to h have ““Superior i Service”…through scorecard development, group determines that 95% on-time installs fits “superior service service”

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Balanced Scorecard 2. Overcoming the People Barrier – Cascading the Scorecard –



Give all employees an opportunity to demonstrate how their daily activities contribute to the Company Company’ss strategy Opportunity to tie incentives and rewards to specific business unit outcomes

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Balanced Scorecard 3. Overcoming the Resource Barrier – –



Tie the budgeting and strategic planning process together Human & Financial resources needed to achieve scorecard targets should drive the budget…rather than taking last year’s numbers and adding 5%. Helps prioritize initiatives

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Balanced Scorecard 4. Overcome Management Barrier – Strategic Learning –

E Ensure training t i i is i relevant l t tto iindividual di id l jjob b

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Balanced Scorecard Definition • Carefully selected set of measures derived from a Company’s Strategy Measurement System Strategic Management System Communications Tool

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B l Balanced d Scorecard S d • Communications Tool – A well constructed scorecard describes your Company Company’ss strategy and makes vague worlds of vision and strategies come alive through clear and objective performance measures”

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Balanced Scorecard • More importantly, helps improve employee understanding of the Company’s Strategy – Sharing of information as a critical communications tool – Everyone really starts paying attention when they understand the impact on pay

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Aligning Employees Employees-Cascading • Cascading is developing BSC at each level of your Company…different business units or departments. • Helps employees at all levels understand C Company strategy, and d how h they h can iimpact results. • Start St t att th the ttop. W Work kd down.

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BSC in Budgeting Financial Perspective

Internal Process Perspective

Customer Perspective

Learning & Growth Perspective

Mission, Values Vision & Strategy

Objectives, Measures and Targets

Balanced Scorecard

Balanced Scorecard Drive Budgets

Cascaded Balanced Scorecard

Operating and Capital Budgets Investments necessary to support the achievement of Balanced Scorecard Targets across the Company drive the budgeting process

Business units and departments within the Company develop Balanced Scorecards based on influencing high-level objectives www.bodamer.com

Representative Balanced Scorecard Measures & Compensation

Financcial Persppective

EBITDA Definition: Earnings Before Interest, Taxes, Depreciation & Amortization What it is: It’s the operating cash flow of the consolidated company

Why we’re It’s “the bottom line” and a better indicator of financial performance than Net Income. Income using i it: i Management has ability to effect result.

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Financcial Persppective

LoB EBITDA Definition: Earnings Before Interest, Taxes, Depreciation & Amortization for each subsidiary line of business What it is: It’s the operating cash flow of CATV, Internet, etc. etc

t s a bette better indicator d cato o of financial a c a pe performance o a ce Why we’re we re It’s than Net Income. Need ability to track LoB using it: performance

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Financcial Persppective

ARPU Definition: Average Revenue Per User

What it is: It’s basically the average monthly bill our customers pay for service.

Why we’re One of our goals is to grow customer spending with us by selling more data data, features features, CATV using i it: i premiums, etc.

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Financcial Persppective

CPGA Definition: Cost Per Gross Add

What it is: A measure of the sales & marketing costs associated with getting a customer.

Why we’re Managing CPGA ensures we’re not overspending to get customer revenue annuities. annuities using i it: i It’s a significant expense entirely within management’s control.

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Financcial Persppective

Capital Project Completion Definition: Measures timely compliance with annual capital plan. What it is: A quarterly measure of % completion of projects relative to the project implementation plan.

Why we’re It’s critical we execute the capital deployment plan as services (and revenues) depend on the using i it: i infrastructure investments.

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Financcial Persppective

Capital Project Expenditures Definition: Measures conformance to annual capital budget. What it is: A quarterly measure of dollars spent relative to the project capital budgets.

Why we’re Capital investment amounts have a substantial impact on overall company financial results. results We using i it: i need to manage these costs to ensure the viability of the projects they support.

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Financcial Persppective

Writeoffs Definition: Uncollectable amounts billed.

What it is: Lost revenue.

Why we’re As a measure of billing accuracy and rational credit policies. policies using i it: i

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Custom mer Persppective

Net Adds Definition: Monthly sales, net of customer attrition

What it is: The net increase in customers each period

Why we’re Because it encapsulates two measures, gross adds and churn using i it: i

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Custom mer Persppective

Customer Satisfaction Definition: Customer Satisfaction Index: % POSITIVE & % EXCELLENT What it is: Derived from customer satisfaction surveys. Measures overall % positive and % excellent ratings. i

Why we’re Because increased satisfaction reduces churn. A critical measure of competitiveness. competitiveness using i it: i

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Interrnal Proccess

Manage to BSC Definition: Measures compliance in managements conformance to this BSC methodology. What it is: Developing reports to track KPI results and sharing with the Board

Why we’re As a measure of billing accuracy and rational credit policies. policies using i it: i

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Interrnal Proccess

Service Activation Times Definition: Measure the speed in which various services are activated (eg: Service Orders Trouble Tickets) Orders, What it is: A measure of company efficiency and the quality of the customer experience. experience

eep wait a t ttimes es to a minimum. u . Enhance a ce Why we’re we re Keep customer satisfaction. using it:

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Interrnal Proccess

Billing Processing Times Definition: Amount of time from billing cutoff to mailing. What it is: A measure of company efficiency in billing

Why we’re Timely billing is critical to cash flow. using i it: i

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Interrnal Proccess

Network Performance Definition: Various measures to assess the performance of company networks What it is: Measures include: wireless dropped calls %,

wireless call blocking %, call failures%, internet & CA CATV network k uptime i %

Why we’re If the network is not performing, customers will churn churn. using i it: i

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Learniing & G Growth

Communication Definition: Monthly staff meetings to communicate results of BSC KPIs What it is: Each manager communicates to his/her staff.

Why we’re Keep the company informed, allow for feedback and needed adjustments to achieve goals. goals using i it: i

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Learniing & G Growth

Training Definition: Formal & on the job training: 40 hours/employee/year What it is: Training relevant to ensure employees have the relevant knowledge to perform their jobs

Why we’re We’re in a very dynamic industry. It’s critical staff is competent competent. using i it: i

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Compensation

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Performance Based Comp. • Performed a weighted average payroll analysis, by salary & position • Varying at risk amounts, based on responsibility level, examples: – Sr. Management—15% at risk with additional exceptional performance incentive. – Managers—12% Managers 12% at risk – Staff—10% at risk g g at risk – Plant,, Clerical & Engineering—8% www.bodamer.com

Learn More: Albert Bodamer [email protected]

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