2. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools Balanced Score Card (BSC) Using the Balanced Score Card (BSC) to empower the board of directors Dr. Nasser Mohammadi n.mohammadi@bpharmed.com Email: n.mohammadi@bpharmed.com Balanced Score Card (BSC)

3. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools Helping companies build strategy-focused organizations

4. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 3 Mission To facilitate the world wide awareness, use, enhancement, and integrity of the BSC as a value added strategic management process www.bscol.com

5. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 4 The 5 major roles of the board & strengthened by adopting a BSC Long term strategy and targets Acquisitions and divestitures Approve strategic direction Approve strategic direction Oversee financial performance Oversee financial performance Council the CEO Council the CEO Select & motivate executive Select & motivate executive Ensure compliance Ensure compliance

6. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 5 The 5 major roles of the board & strengthened by adopting a BSC Financial policy Capital expenditure Approve strategic direction Approve strategic direction Oversee financial performance Oversee financial performance Council the CEO Council the CEO Select & motivate executive Select & motivate executive Ensure compliance Ensure compliance

7. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 6 The 5 major roles of the board & strengthened by adopting a BSC Understand and mitigate risk Performance advice Approve strategic direction Approve strategic direction Oversee financial performance Oversee financial performance Council the CEO Council the CEO Select & motivate executive Select & motivate executive Ensure compliance Ensure compliance

8. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 7 The 5 major roles of the board & strengthened by adopting a BSC Executive performance and compensation Succession planning Approve strategic direction Approve strategic direction Oversee financial performance Oversee financial performance Council the CEO Council the CEO Select & motivate executive Select & motivate executive Ensure compliance Ensure compliance

9. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 8 The 5 major roles of the board & strengthened by adopting a BSC Regulatory requirements Stakeholder communications Approve strategic direction Approve strategic direction Oversee financial performance Oversee financial performance Council the CEO Council the CEO Select & motivate executive Select & motivate executive Ensure compliance Ensure compliance

10. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 9 The 5 major roles of the board & strengthened by adopting a BSC Value creationValue creation –Many direction do not have a full understanding of the business, its customers, operations and workforce. Approve strategic direction Approve strategic direction Oversee financial performance Oversee financial performance Council the CEO Council the CEO Select & motivate executive Select & motivate executive Ensure compliance Ensure compliance

11. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 10 The 5 major roles of the board & strengthened by adopting a BSC Strategic relevanceStrategic relevance –Many board meetings lack meaningful discussions on strategy and its execution. –Financial reports do not demonstrate a tight link to strategy. Approve strategic direction Approve strategic direction Oversee financial performance Oversee financial performance Council the CEO Council the CEO Select & motivate executive Select & motivate executive Ensure compliance Ensure compliance

12. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 11 The 5 major roles of the board & strengthened by adopting a BSC Risk perspectiveRisk perspective –Directors receive insufficient information on the risks that may keep the organization from achieving strategic targets and milestones Approve strategic direction Approve strategic direction Oversee financial performance Oversee financial performance Council the CEO Council the CEO Select & motivate executive Select & motivate executive Ensure compliance Ensure compliance

13. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 12 The 5 major roles of the board & strengthened by adopting a BSC VisibilityVisibility –External directors often lack a balanced set of indicators and tools to assess executive contribution and communicate organizational performance. Approve strategic direction Approve strategic direction Oversee financial performance Oversee financial performance Council the CEO Council the CEO Select & motivate executive Select & motivate executive Ensure compliance Ensure compliance

14. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 13 BSC framework Financial perspective Customer perspective Internal Process perspective Learning & Growth perspective

15. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 14 BSC framework Financial perspective Customer perspective Internal Process perspective Learning & Growth perspective Outcomes Drivers

16. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 15 BSC framework Financial perspective Customer perspective Internal Process perspective Learning & Growth perspective To satisfy shareholders, what financial objectives must be accomplished?

17. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 16 BSC framework Financial perspective Customer perspective Internal Process perspective Learning & Growth perspective To achieve the financial objectives, what customer needs must be met?

18. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 17 BSC framework Financial perspective Customer perspective Internal Process perspective Learning & Growth perspective To satisfy customers & shareholders, which internal business processes are critical?

19. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 18 BSC framework Financial perspective Customer perspective Internal Process perspective Learning & Growth perspective To achieve these goals, how must the organization be equipped?

20. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 19 How value is created by BSC strategy map? Traditional financial framework describes tangible outcomes Financial Long term shareholder value Grow revenueImprove productivity

21. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 20 How value is created by BSC strategy map? Customer value proposition establishes context for value Customer Customer value proposition Offering Relationship Service Brand

22. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 21 How value is created by BSC strategy map? Internal processes describe how value is created and sustained Innovation Process Customer Management Processes Operational Processes Social & Environmental Processes Internal

23. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 22 How value is created by BSC strategy map? Role & status of intangible assests is defined Learning & Growth Strategic Competencies Strategic Technologies Climate for Action Leadership & Governance

24. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 23 BSC map Learning &Growth Build & maintain a Customer centric culture Internal Retain expand Valuable relationship Acquire the Right customer Deploy Customer Knowledge Customer Know me & give Tailored advice Financial Grow revenue Grow earning

25. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 24 BSC map Objective:Objective: –Build & maintain a customer centric culture Measures:Measures: –Improvement on employee & customer poll Targets:Targets: –20% year 1 –30% year 2 –40% year 3 Initiatives:Initiatives: –Customer information system Financial Customer Internal Learning &Growth Build & maintain a Customer centric culture Retain expand Valuable relationship Acquire the Right customer Deploy Customer Knowledge Know me & give Tailored advice Grow revenue Grow earning

26. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 25 BSC map Objective:Objective: –Retain & expand valuable relationships Measures:Measures: –Share of customers with two or more products Targets:Targets: –40% year 1 –45% year 2 –50% year 3 Initiatives:Initiatives: –Sales effectiveness program Financial Customer Internal Learning &Growth Build & maintain a Customer centric culture Retain expand Valuable relationship Acquire the Right customer Deploy Customer Knowledge Know me & give Tailored advice Grow revenue Grow earning

27. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 26 BSC map Objective:Objective: –Know mw & give tailored advise Measures:Measures: –Share of customers with financial plans Targets:Targets: –5% year 1 –15% year 2 –25% year 3 Initiatives:Initiatives: –Brand image campaign Financial Customer Internal Learning &Growth Build & maintain a Customer centric culture Retain expand Valuable relationship Acquire the Right customer Deploy Customer Knowledge Know me & give Tailored advice Grow revenue Grow earning

28. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 27 BSC map Objective:Objective: –Grow revnue Measures:Measures: –Fee income as a % of revenues Targets:Targets: –20% year 1 –25% year 2 –30% year 3 Initiatives:Initiatives: –Brokerage & banking integration Financial Customer Internal Learning &Growth Build & maintain a Customer centric culture Retain expand Valuable relationship Acquire the Right customer Deploy Customer Knowledge Know me & give Tailored advice Grow revenue Grow earning

29. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 28 3 parts BSC system to enhance corporate governance Executive BSCExecutive BSC –Defines the strategic contributions of an executive –A key input to the board –A toll to assess & reward the performance of executives Corporate BSCCorporate BSC –Describes the enterprise strategy, measures & targets –A key input to the board –A tool to manage the performance of the enterprise Board BSCBoard BSC –Define the strategic contributions of the board –Clarifies the strategic information required by the board –A tool to manage the performance of the board & its committees

30. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 29 Objectives from strategy map Learning &Growth Improve knowledge & skill Internal Approve strategy &Oversee its Execution Strategic Objectives stakeholder Guide enterprise Performance Financial Enhance LT Shareholder value Improve productivityGrow revenue

31. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 30 Objective:Objective: –Improve knowledge & skill Measures:Measures: –% of directors literate in performance management Targets:Targets: –10% year 1 –40% year 2 –50% year 3 Initiatives:Initiatives: –Search firm project Objectives from strategy map Learning &Growth Improve knowledge & skill Internal Approve strategy &Oversee its Execution Strategic Objectives stakeholder Guide enterprise Performance Financial Enhance LT Shareholder value Improve productivityGrow revenue

32. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 31 Objective:Objective: –Approve strategy & oversee its execution Measures:Measures: –% of full board agenda allocated to strategy Targets:Targets: –30% year 1 –50% year 2 Initiatives:Initiatives: –BSC Objectives from strategy map Learning &Growth Improve knowledge & skill Internal Approve strategy &Oversee its Execution Strategic Objectives stakeholder Guide enterprise Performance Financial Enhance LT Shareholder value Improve productivityGrow revenue

33. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 32 Objective:Objective: –Guide enterprise performance Measures:Measures: –Hours spent in session Targets:Targets: –70 year 1 –90 year 2 –120 year 3 Initiatives:Initiatives: –Governance calendar project Objectives from strategy map Learning &Growth Improve knowledge & skill Internal Approve strategy &Oversee its Execution Strategic Objectives stakeholder Guide enterprise Performance Financial Enhance LT Shareholder value Improve productivityGrow revenue

34. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 33 Objective:Objective: –Enhance long term shareholder value Measures:Measures: –Price to earning ratio Targets:Targets: –8 year 1 –9 year 2 –10 year 3 Initiatives:Initiatives: Objectives from strategy map Learning &Growth Improve knowledge & skill Internal Approve strategy &Oversee its Execution Strategic Objectives stakeholder Guide enterprise Performance Financial Enhance LT Shareholder value Improve productivityGrow revenue

35. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 34 How the enterprise will create value? Customer Learning & Growth Internal processes Financial Through a high performance, customer-centric culture Achieve service excellence Acquire &build customer C.R.M. Relationship C.R.M. expand customer offering Accurately & consistently deliver What we promise Provide seamless Problem handling Does it right? Increase revenue growth Maximize shareholder value …………. Develop & deploy customer knowledge Acquire the right customers Retain & expand Valuable relationships know me & Give me tailored advise Grow earning Develop & integrate Competitive investment Capability Enhance Core Products Integrate channel capability Communicate full service Message to Market Give me Access to the right solutions Leverage express By developing and managing enduring relationships……………. Roll out quality improvement Approaches Build &maintain a Customer-centric culture Attract-Develop &retain A high performing & Diverse workforce

36. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 35 Resource allocation & business risks Learning &Growth Build & maintain a Customer centric culture Internal Retain &expand Valuable Relationship Acquire the Right customer customer Know me & Tailored advice Financial Increase revenue growth Grow Earning Deploy Customer Knowledge Strategic theme: Acquire & build relationship

37. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 36 Resource allocation & business risks Learning &Growth Build & maintain a Customer centric culture Internal Retain &expand Valuable Relationship Acquire the Right customer customer Know me & Tailored advice Financial Increase revenue growth Grow Earning Deploy Customer Knowledge Strategic theme: Acquire & build relationship Objective:Objective: –Build & maintain a customer centric culture Measures:Measures: –Improvement on employee and customer poll Targets:Targets: –2003 – 20% Initiatives:Initiatives: –Customer Information System (CIS) resources:resources: –$....... Milestones & risks:Milestones & risks: –Test runs complete by 11/25 –Data integrity

38. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 37 Resource allocation & business risks Learning &Growth Build & maintain a Customer centric culture Internal Retain &expand Valuable Relationship Acquire the Right customer customer Know me & Tailored advice Financial Increase revenue growth Grow Earning Deploy Customer Knowledge Strategic theme: Acquire & build relationship Objective:Objective: Retain &expand Valuable Relationships Measures:Measures: –Share of customers with two or more products Targets:Targets: –2003 – 40% Initiatives:Initiatives: –Sales training center resources:resources: –$....... Milestones & risks:Milestones & risks: –50% trained by 11/30 –Peers offering free checking

39. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 38 Resource allocation & business risks Learning &Growth Build & maintain a Customer centric culture Internal Retain &expand Valuable Relationship Acquire the Right customer customer Know me & Tailored advice Financial Increase revenue growth Grow Earning Deploy Customer Knowledge Strategic theme: Acquire & build relationship Objective:Objective: Know me & tailored advise Measures:Measures: –Share of customers with financial plans Targets:Targets: –2003 – 5% Initiatives:Initiatives: –Brand image campaign resources:resources: –$....... Milestones & risks:Milestones & risks: –Launch 11/15 –Low brand recall scores

40. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 39 Resource allocation & business risks Learning &Growth Build & maintain a Customer centric culture Internal Retain &expand Valuable Relationship Acquire the Right customer customer Know me & Tailored advice Financial Increase revenue growth Grow Earning Deploy Customer Knowledge Strategic theme: Acquire & build relationship Objective:Objective: Increase revenue growth Measures:Measures: –Fee income as a share of revenues Targets:Targets: –2003 – 20% Initiatives:Initiatives: –Brokerage & banking integration resources:resources: –$....... Milestones & risks:Milestones & risks: –11/15 joint offering defined –Field retention

41. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 40 Strategic expectations & measure strategic contribution Learning &Growth Attract, Develop & Retain A high performing & Diverse workforce Internal Retain & deepen Valuable Relationship Acquire the Right customers stakeholder Know me & Give tailored advise Financial Increase revenue growth Strategic objectives

42. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 41 Individual Objective:Individual Objective: –Retain the high performing talent Measures:Measures: –Retention rate Targets:Targets: –2003 95% Strategic expectations & measure strategic contribution Learning &Growth Attract, Develop & Retain A high performing & Diverse workforce Internal Retain & deepen Valuable Relationship Acquire the Right customers stakeholder Know me & Give tailored advise Financial Increase revenue growth Strategic objectives

43. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 42 Individual Objective:Individual Objective: –Identify targeted affluent and small business relationships. –Develop an account profile for each Measures:Measures: –Share of customers with 2 or more products Targets:Targets: –2003 40% Strategic expectations & measure strategic contribution Learning &Growth Attract, Develop & Retain A high performing & Diverse workforce Internal Retain & deepen Valuable Relationship Acquire the Right customers stakeholder Know me & Give tailored advise Financial Increase revenue growth Strategic objectives

44. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 43 Individual Objective:Individual Objective: –Deliver financial plans for targeted affluent and small business customers Measures:Measures: –Share of customers with financials plans Targets:Targets: –2003 5% Strategic expectations & measure strategic contribution Learning &Growth Attract, Develop & Retain A high performing & Diverse workforce Internal Retain & deepen Valuable Relationship Acquire the Right customers stakeholder Know me & Give tailored advise Financial Increase revenue growth Strategic objectives

45. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 44 Individual Objective:Individual Objective: –Enable key sources of revenue growth Investment offerings for the affluent & small business segment Deposit & credit offerings for the mass market Measures:Measures: –Fee income as a share of revenue Targets:Targets: –2003 20% Strategic expectations & measure strategic contribution Learning &Growth Attract, Develop & Retain A high performing & Diverse workforce Internal Retain & deepen Valuable Relationship Acquire the Right customers stakeholder Know me & Give tailored advise Financial Increase revenue growth Strategic objectives

46. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 45 BSC BSC can : 1.Improve transparency to shareholders 2.Reduce investor risk 3.Improve stock price

47. Dr.Nasser mohammadi : Balanced Score Card BSC as a board of directors tools 46 How empowered is your board? Corporate governance assessment questionsScore Appropriate strategic direction 1.Our directors have sufficient knowledge of the business to constructively review management’s strategy 2.Our directors fully understand the key drivers of value for the organization Oversee financial performance 3.Our directors understand the extent to which strategic expenditures are advancing the enterprise objectives they support 4.Our directors understand if corporate performance goals are being met Council the CEO 5.Our board meeting promote the level of strategic discussion necessary for the directors to benefit the CEO Select and motivate executives 6.Our board is equipped to effectively evaluate to management 7.Our board could quickly replace key executives if necessary Ensure compliance 8.Our directors can accurately identify key risks facing the enterprise and safeguards 9. Our external communication to shareholders and the financial community are clear, accurate and useful Score: 5) strongly agree, 4)agree, 3)neither agree/disagree, 2)disagree, 1)strogly disagree