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Aligning & Prioritizing Projects With Corporate Strategy Using Balanced ScoreCards Pankaj Bhawnani Senior Consultant, Project Management Fujitsu Consulting.

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Presentation on theme: "Aligning & Prioritizing Projects With Corporate Strategy Using Balanced ScoreCards Pankaj Bhawnani Senior Consultant, Project Management Fujitsu Consulting."— Presentation transcript:

1 Aligning & Prioritizing Projects With Corporate Strategy Using Balanced ScoreCards Pankaj Bhawnani Senior Consultant, Project Management Fujitsu Consulting (Canada) Inc. Aligning & Prioritizing Projects With Corporate Strategy Using Balanced ScoreCards Pankaj Bhawnani Senior Consultant, Project Management Fujitsu Consulting (Canada) Inc. PMI Dinner October, 2007

2 IntroductionObservation Problem Case StudyWhy?Solution 2 Outline Introduction What are we trying to solve? Case Study Observations How? Why? IntroductionObservation Problem Case StudyWhy?Solution

3 IntroductionObservation Problem Case StudyWhy?Solution Contact Information Pankaj Bhawnani Blog: 3

4 IntroductionObservation Problem Case StudyWhy?Solution 4 Introduction Doing the right projects vs. performing projects right Which projects should I do so that: Achieve alignment with Corporate Strategy Balance various stakeholder opinions Optimal use of resources and budget Take into consideration interdependencies between projects Minimize Risk Profile Maximize Return on Investment Achieve Transparency in Decisions

5 IntroductionObservation Problem Case StudyWhy?Solution 5 Problem Year 1 Year 2 Year 3 Stakeholders Resources and Budget Projects Interdependencies Prioritize Corporate Strategy Risk Profile

6 IntroductionObservation Problem Case StudyWhy?Solution 6 Why Do We Care? Survey on 507 companies on their management practices 53% of the CIOs say that their project prioritization is politically driven Only 68% agree that all the necessary business stakeholders are involved in setting project priorities Only 40% of the CIOs say that their companies use a portfolio management approach Source: CIO Insight Research Study on Project Management, 2004

7 IntroductionObservation Problem Case StudyWhy?Solution Why Do We Care? Alignment with strategic objectives Inefficient use of Resources Avoidance of low value projects Consensus needed for executing a project Sarbanes Oxley Act Transparency of Financial Decisions What to decide? Who decides? How to decide? (in the best interest of the company and their stakeholders) 7

8 IntroductionObservation Problem Case StudyWhy?Solution Value of a Disciplined Process Yes, there is a formal process in place. 62%33%5%1% There is no formal Process, but we do Discuss this issue Frequently enough. 23%58%16%3% No, it only comes up for major projects or initiatives. 8%44%39%3%6% No, it rarely if ever Is considered. 40%50%10% Budget closely aligned with strategy. Budget somewhat aligned with strategy Budget poorly aligned with strategy. Budget does not support strategy. Budget works Against strategy. Source: Ventana Research 8

9 IntroductionObservation Problem Case StudyWhy?Solution

10 IntroductionObservation Problem Case StudyWhy?Solution OPTIMIZATION MODELING START Solution END Defined ScoreCard Objectives & Investment Criteria of an Organization Priorities & weights Dependencies & Constraints Cost & Business Case F 2 (x) Objective Criteria F 1 (x) Subjective Criteria Bi-objective Release Planning Model Maximize Objective Function YEAR 1 YEAR 2 YEAR 3 Align Projects with Corporate Strategy WHAT-IF SCENARIOS Choose Plan Satisfactory? Evaluate alternatives Trade-off parameters No Yes Measure Each Project New Business Ideas Internal Process Financial Customer Growth Learning & Growth Vision & Strate gy 10

11 IntroductionObservation Problem Case StudyWhy?Solution Balanced Score Card A strategic Measurement and Strategic Management System which attempts to reconcile traditional financial measures with more forward looking, non-financial measures Employees can only implement a strategy when they clearly understand it, and whats their role in achieving companys strategic objectives Balanced Score Card was developed to bring strategy down to employees and help the whole organization in Alignment Top-down guidance with bottom-up execution 11

12 IntroductionObservation Problem Case StudyWhy?Solution Balanced Score Card – Contd. Vision & Strategy Vision & Strategy CUSTOMER To achieve our vision, how should we appear to our customers? ObjectivesMeasuresTargetsInitiatives FINANCIAL To succeed financially, how should we appear to our shareholders? ObjectivesMeasuresTargetsInitiatives INTERNAL BUSINESS PROCESSES INTERNAL BUSINESS PROCESSES To satisfy our shareholders and customers, what business processes must we excel at? ObjectivesMeasuresTargetsInitiatives INNOVATION AND LEARNING To achieve our vision, how will we sustain our ability to change and improve? ObjectivesMeasuresTargetsInitiatives 12

13 IntroductionObservation Problem Case StudyWhy?Solution Financial? Revenue growth rates Cost reduction Asset utilisation Project profitability To succeed financially, how should we appear to our shareholders? GrowthMaturityHarvesting Financial objectives tend to be influenced by the organization's position on the life-cycle curve. What should our balance sheet look like? 13

14 IntroductionObservation Problem Case StudyWhy?Solution Customer? What do our customers value most? Market Share Customer Retention Customer Profitability Customer Satisfaction Customer Acquisition Product / Service Attributes Customer Relationship Image and Reputation Organisational sub-units may have internal clients. To achieve our vision, how should we appear to our customers? 14

15 IntroductionObservation Problem Case StudyWhy?Solution Internal Business Processes? Improve quality Reduce cycle times Maximise production Maximise throughput Reduce cost per process Reduce cost per transaction CUSTOMER NEED SATISFIED SERVICE THE CUSTOMER NEED IDENTIFIED CREATE THE PRODUCT/ SERVICE OFFERING BUILD THE PRODUCTS/ SERVICES DELIVER THE PRODUCTS/ SERVICES IDENTIFY THE MARKET Innovation Process Operations Process Customer Service core competencies To satisfy our shareholders and customers, what business processes must we excel at? 15

16 IntroductionObservation Problem Case StudyWhy?Solution Learning and Innovation? Employee capabilities Information system capabilities Motivation Empowerment Alignment Internal & External R&D Highlight gaps in employee skills and information systems. To achieve our vision, how will we sustain our ability to change and 16

17 IntroductionObservation Problem Case StudyWhy?Solution Optimization Graph of Project Portfolios Project Dependencies P3 P4 P5 P6 P2 P1 P7 Projects P3 P4 P2 P Objective criteria + Subjective Criteria + * * *

18 IntroductionObservation Problem Case StudyWhy?Solution Strategy Map The Revenue Growth Strategy Improve stability by broadening the sources of revenue from current customers The Productivity Strategy Improve operating efficiency by shifting customers to more cost-effective channels of distribution Improve Returns Improve Operating Efficiency Broaden Revenue Mix Increase Customer Confidence in Our Financial Advice Increase Customer Satisfaction Increase Employee Productivity Access to Strategic Information Develop Strategic Skills Align Personal Goals Financial Perspective Customer Perspective Internal Perspective Learning Perspective Cross-Sell the Product Line Shift to Appropriate Channel Provide Rapid Response Develop New Products Minimize Problems Understand Customer Segments 18

19 IntroductionObservation Problem Case StudyWhy?Solution Case Study - Transportation Objectives Fast ground turnaround Statement of what strategy must achieve and whats 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 Increase Revenue Ground crew alignment Lowest prices Lower Costs Customer Internal Fast ground turnaround Strategy Map Flight is on time 19

20 IntroductionObservation Problem Case StudyWhy?Solution Case Study–Define Score Card Financial = 40% of the balanced approach ROI = 20% of financial Criteria 1 out of 5, ROI < % 2 out of 5, ROI 15 – % 3 out of 5, ROI 25 – % 4 out of 5, ROI 45 – % 5 out of 5, ROI > 65 % NPV = 20% of financial criteria 1 out of 5, NPV = negative 3 out of 5, NPV = $1 to $500,000 5 out of 5, NPV = > $500,000 Pay Back Period = 20% of financial criteria 1 out of 5, PBP >3 years 2 out of 5, PBP 2 – 3 years 3 out of 5, PBP 1 – 2 years 4 out of 5, PBP 6 months – 1 year 5 out of 5, PBP < 6 months 20

21 IntroductionObservation Problem Case StudyWhy?Solution Define Score Card - Financial Supports Incremental Revenue =20% of financial criteria 1 out of 5, no incremental revenue 3 out of 5, 0 – 5 % RASM over and above natural growth 5 out of 5, > 5 % RASM over and above natural growth Supports Cost Reduction = 20% of financial criteria 1 out of 5, no cost reduction 3 out of 5, adjusted CASM stays the same through natural growth. 5 out of 5, decreases CASM 21

22 IntroductionObservation Problem Case StudyWhy?Solution Define Score Card- Customer Customer = 20% of balanced approach Project delivers sustained improvement to the customer experience weighted at 40% of Customer Criteria 1 out of 5 = negative impact to guest experience 3 out of 5 = maintains guest experience or not applicable 5 out of 5 = improves guest experience Project provides improvement to consistency of customer experience and consistency of service weighted at 30% of customer Criteria 1 out of 5 = project splits service (creates channel inconsistency, inconsistent guest experience across touch points) 3 out of 5 = project maintains status quo or not applicable 5 out of 5 = project aligns & improves service offering (channel consistency, aligns experience across touch points) Project implementation gives access to new markets and/or new customers weighted at 30% of customer Criteria 1 out of 5 = No 5 out of 5 = Yes 22

23 IntroductionObservation Problem Case StudyWhy?Solution Define Score Card – Internal Process Internal Business Process = 20% of balanced approach Project improves service/product delivery processes, ie. Customer experience, safety, sales, route scheduling, OTP etc. Weighted at 60% of the Internal Process criteria 1 out of 5 = negative impact to processes 3 out of 5 = no impact or not applicable 5 out of 5 = improves processes Project improves corporate support processes i.e. hiring, accounting, etc. Weighted at 40% of the Internal Processes criteria 1 out of 5 = negative impact to processes 3 out of 5 = no impact or not applicable 5 out of 5 = improves processes 23

24 IntroductionObservation Problem Case StudyWhy?Solution Define Score Card Learning & Innovation = 20% of balanced approach Project supports recruitment and retention of people Weighted at 30% of Learning & Growth Criteria 1 out of 5 = negative impact to recruitment and retention 3 out of 5 = maintains current or not applicable 5 out of 5 = positive impact to recruitment and retention Project improves alignment of corporate success with personal success (rewards and recognition ) Weighted at 30% of Learning & Growth Criteria 1 out of 5 = negative impact to alignment of success 3 out of 5 = maintains current or not applicable 5 out of 5 = positive impact to alignment of success Project provides our people with tools required to do the job Weighted at 40% of Learning & Growth Criteria 1 out of 5 = negative impact, manual or inefficient processes 3 out of 5 = maintains current or not applicable 5 out of 5 = positive impact in providing tools required 24

25 IntroductionObservation Problem Case StudyWhy?Solution Case Study -Optimization Demo 25

26 IntroductionObservation Problem Case StudyWhy?Solution What-if Analysis What amount of resource would be needed to allow execution of top projects? 26

27 IntroductionObservation Problem Case StudyWhy?Solution What-if Analysis Which projects seem to be most attractive? 27

28 IntroductionObservation Problem Case StudyWhy?Solution What-if Analysis Which projects are most attractive for stakeholders? 28

29 IntroductionObservation Problem Case StudyWhy?Solution What-if Analysis Stakeholder Similarity Analysis 29

30 IntroductionObservation Problem Case StudyWhy?Solution Observations By connecting balanced score card directly with project management, were directly linking strategy with tactical execution Helps communicate the value of operational activities Make strategy a continuous process Bringing stakeholders together for consensus Effective leadership Strategic planning is at best about posing questions more than attempting to answer them Balanced Score Card should be implemented as a project and buy-in is critical If you cant measure it, you cant manage it 30

31 IntroductionObservation Problem Case StudyWhy?Solution Key References Alleman, Glen B., Using Balanced Scorecard to Build a Project Focused IT Organization (CH2M HILL), 2003 Benson, Robert J., Bugnitz, Thomas L., Walton, William B., From Business Strategy to IT Action: Right Decisions for a Better Bottom Line, John Wiley & Sons, 2004 Bower, Joseph L., Gilbert, Clark G., From Resource Allocation to Strategy, Oxford University Press, 2006 Cokins, Gary, Performance Management: Finding the Missing Pieces (to Close the Intelligence Gap) (SAS Institute Inc.) John Wiley & Sons, 2004 Kaplan, Robert S. and Norton, David P.,The Balanced Scorecard: Measures that Drive Performance, Harvard Business Review, 1992 Kaplan, Robert S. and Norton, David P., Putting the Balanced Scorecard to Work", Harvard Business Review, 1993 Kaplan, Robert S. and Norton, David P.,Using the Balanced Scorecard as a Strategic Management System, Harvard Business Review, 1996 Niven, Paul R., Balanced Scorecard Step-by-Step John Wiley & Sons, 2002 Porter, Michael E., Competitive Strategy, Simon & Schuster,

32 A Final Thought One of the most dangerous forms of human error is forgetting what one is trying to achieve. - Paul Nitze


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