GOAL SETTING:

FROM
MBO &
BALANCED
SCORECARDS

Ngo Quy Nham

AGENDA

Goal setting BSC System

What are goal Explain the
systems & How Management System
to set goals?. Based on Balanced
Scorecard
MBO Explained
Objectives & Key Results
How goals are set in Explain OKRs and its
an effective way and Application
its application.

Balanced Scorecards Q&A

Explained
Explain the content of
BSC and application
 APPROACHES TO ESTABLISHING GOALS
Traditional Goal Setting
1. Broad goals are set at the top of the
organization.
2. Goals are then broken into sub-goals for
each organizational level.
3. Assumes that top management knows
best because they can see the “big
picture.”
4. Goals are intended to direct, guide, and
constrain from above.
5. Goals lose clarity and focus as lower-level
managers attempt to interpret and
define the goals for their areas of
responsibility.
Goal-Setting Theory

16–4
Effect of Goal Difficulty on Performance

High
Task Performance

Area of
Optimal
Goal
Difficulty

Low Moderate Challenging Impossible

Goal Difficulty
NGO QUY NHAM, MBA
APPROACHES TO ESTABLISHING GOALS
Management By Objectives
PARTICIPATIVE DECISION MAKING
Specific performance goals are
jointly determined by
employees and managers.

A
EXPLICIT
GOAL SPECIFIC PERFORMANCE PERIOD
D B
Simple, sensible, Every goal needs a target
significant date, so that employees
C have a deadline to focus
on and something to
work toward
PERFORMANCE FEEDBACK
Progress toward accomplishing goals
is periodically reviewed and rewards
are allocated on the basis of progress
towards the goals.
Steps in a Typical MBO Program
1. The organization’s overall objectives and strategies are formulated.
2. Major objectives are allocated among divisional and departmental
units.
3. Unit managers collaboratively set specific objectives for their units
with their managers.
4. Specific objectives are collaboratively set with all department
members.
5. Action plans, defining how objectives are to be achieved, are
specified and agreed upon by managers and employees.
6. The action plans are implemented.
7. Progress toward objectives is periodically reviewed, feedback is
provided.
8. Successful achievement of objectives is reinforced by performance-
based rewards.
Does MBO Work?
• Reason for MBO Success
• Top management commitment and involvement
• Potential Problems with MBO Programs
• Not as effective in dynamic environments that require constant resetting of
goals.
• Overemphasis on individual accomplishment may create problems with
teamwork.
• Allowing the MBO program to become an annual paperwork shuffle.
THE
BALANCED
SCORECARDS
MOST ORGANIZATIONS HAVE DIFFICULTY
EXECUTING THEIR STRATEGIES
“The prize for closing the
strategy-performance gap is “Less than 10% of
huge – increasing strategies effectively
performance by at least formulated are
50% for most organization.” effectively executed”

Harvard Business Review Fortune

“In the majority of

cases – 70% - the real
80% of enterprises fail at
strategy execution problems isn’t bad
strategy….. It’s bad
execution.”
Bossidy & Charan
Harvard Business Review Strategy Execution
HARVARD’S RESEARCH IDENTIFIED FOUR BARRIERS TO
STRATEGY EXECUTION

The Vision Barrier

Only 5% of the workforce

understands the strategy

The People barrier The Management Barrier

80% of
85% of executive teams
Only 25% of managers have enterprises fail at spend less than one hour per
incentives linked to strategy strategy month discussing strategy
execution

60% of organizations don’t

link budgets to strategy

The resource barrier

HARVARD BALANCED SCORECARD
Southwest Airlines’ Strategy
The Balanced Scorecard connects a strategy map to
measures, targets, and initiatives.
WHAT IS BALANCED SCORECARD?
A method implementing a
business strategy by
• … translating into a set of
performance measures drived
from strategic goals
• …allocating rewards to
executives and managers based
on their success at meeting or
exeeding the performace
measures.
<Kaplan & Norton, 1996>
WHAT IS BALANCED SCORECARD?
01 Strategic Management System

02 Communication Tool

03 Management System
FOUR BSC PERSPECTIVES
Strategy – Strategic Map – BSC
 A management system built around a Strategy Map and
Balanced Scorecard helps to address both problems.

Financial Perspective
Sustained #1. Financial performance, a lag
Shareholder
Value indicator, measures the tangible
Productivity Revenue Growth
outcomes from the strategy.
Customer Perspective

Product/Service Attributes Relationship Image

#2. The customer value proposition
Price Quality Time Function Relation Brand
defines the source of value.

Process Perspective #3. Strategic processes create value for

Operations Customer
customers and shareholders.
Innovation Regulatory and
Management Management
Processes Social Processes
Processes Processes

Learning & Growth Perspective

Human Capital #4. Aligned intangible assets drive

Information Capital
improvement in the strategic
processes
Organization Capital

Copyright © Robert S. Kaplan, 2013 6

FINACIAL PERSPECTIVE
• To satisfy our shareholders, what financial
and regulatory objectives must we
accomplish?
FINACIAL PERSPECTIVE
• To satisfy our shareholders, what financial
and regulatory objectives must we
accomplish?
 CUSTOMER PERSPECTIVE
To achieve our vision and financial goals, what
customer needs must we serve?
 CUSTOMER PERSPECTIVE
To achieve our vision and financial goals, what
customer needs must we serve?
Customer Perspective
Possible Performance Measures

o Customer Satisfaction (Average)

o Satisfaction Gap Analysis (Satisfaction vs. level of Importance)
o Satisfaction Distribution (% of each area scored)
INTERNAL BUSINESS PROCESS PERSPECTIVE

To satisfy our customers, in which business

processes must we excel?
 INTERNAL BUSINESS PROCESS PERSPECTIVE
To satisfy our customers, in which business
processes must we excel?
 Internal Perspective
To satisfy our customers, in which business
processes must we excel?

Possible Performance Measures

o Cycle Time
o Completion Rate
o Workload and Employee Utilization
o Transactions per employee
o Errors or Rework
Learning and Growth
To achieve our goals and
accomplish core activities, how
must we learn, communicate and
work together?

Possible Performance Measures

o Employee Satisfaction
o Retention and Turnover
o Training Hours and Resources
o Technology Investment
 Volkswagen do Brasil Balanced Scorecard:
Metrics and Accountability
VP Sales & Marketing Achieve sustainable
VP Finance & Corporate Strategy
Achieve Market Metrics: Metrics:
and positive
Share growth 2.1 Market Share 1.1 EBITDA
2.2 Price Index
financial results 1.2 Return on Investment
2.3 Contribution Margin 1.3 Operating Profit as % of Revenue
2.4 Vertriebsleistung 1.4 Facility & Tool Investments
1.5 Net Cash Flow
Director Quality Assurance Director Corp. Affairs & Press
Satisfy the Metrics: Metrics:
3.1 Things Gone Wrong Improve company
customer’s 4.1 Image Quality Index
3.2 Repair per 1000 image 4.2 New Car Buyer
expectations 3.3 Costumer Satisfaction Index 4.3 Employees Image Index
3.4 Audit Note

Develop dealer Guarantee

VP Product VP Create and manage VP Operations
customer oriented Development Metrics:
Increase direct a robust production
organization into
Metrics: processes Operations volume strategy to
10.1 Accomplish Prod.
more service innovation Metric: adapt to industry
efficiency Planning
direction management 6.1 Implementation of volatility
.

8.1 Hours per Vehicle 10.2 Achieve Installed

unique selling point
Capacity
VP Sales & Mkt VP Product VP HR &
Guarantee reliable VP Supply
Metrics: Organization
5.1 High Performance
Achieve launch Development Increase indirect
Metrics:
Supplier → Metrics:
management Metrics: processes Manufacturer 11.1 Cripple Index
Program .
9.1 Efficiency
5.2 Quality Index Service efficiency 7.1 Releases at right efficiency processes 11.2 Supply Program
Indicator Management
5.3 Customer Satisfaction moment 9.2 # of Kaizen
with Last Visit 7.2 Change of Parts 11.3 Quality Rates
Projects Supplier
5.4 Repeated Repair at critical phases
Develop attractive and Become sectorial
Achieve high performance Develop sustainability as
innovative product reference for authorities
culture management principle New
portfolio and representative entities
Director Product VP HR & Organization Director Governmental VP HR & Organization
Planning Metrics: Affairs Metric:
Metrics: 13.1 Gallup Index Metrics: 15.1 Ethos Indicator
12.1 Brazilian Market Survey 13.2 Cooperation Barometer 14.1 Radar report
12.2 Launching Strategy 13.3 Training hours/employee .
14.2 Agreements Success Index
12.3 Product Portfolio Renew 13.4 Fitness Index 14.3 Representative Level in
13.5 Executive Competence Index external entities
13.6 Cell Leaders Screening 29
Copyright © Robert S. Kaplan, 2013 20
DOES BSC WORK?
 VWB’s Strategy Map: Acao para Vencer (Act to Win)

Copyright © Robert S. Kaplan, 2013 19

 Volkswagen do Brasil Balanced Scorecard:
Metrics and Accountability
VP Sales & Marketing Achieve sustainable
VP Finance & Corporate Strategy
Achieve Market Metrics: Metrics:
and positive
Share growth 2.1 Market Share 1.1 EBITDA
2.2 Price Index
financial results 1.2 Return on Investment
2.3 Contribution Margin 1.3 Operating Profit as % of Revenue
2.4 Vertriebsleistung 1.4 Facility & Tool Investments
1.5 Net Cash Flow
Director Quality Assurance Director Corp. Affairs & Press
Satisfy the Metrics: Metrics:
3.1 Things Gone Wrong Improve company
customer’s 4.1 Image Quality Index
3.2 Repair per 1000 image 4.2 New Car Buyer
expectations 3.3 Costumer Satisfaction Index 4.3 Employees Image Index
3.4 Audit Note

Develop dealer Guarantee

VP Product VP Create and manage VP Operations
customer oriented Development Metrics:
Increase direct a robust production
organization into
Metrics: processes Operations volume strategy to
10.1 Accomplish Prod.
more service innovation Metric: adapt to industry
efficiency Planning
direction management 6.1 Implementation of volatility
.

8.1 Hours per Vehicle 10.2 Achieve Installed

unique selling point
Capacity
VP Sales & Mkt VP Product VP HR &
Guarantee reliable VP Supply
Metrics: Organization
5.1 High Performance
Achieve launch Development Increase indirect
Metrics:
Supplier → Metrics:
management Metrics: processes Manufacturer 11.1 Cripple Index
Program .
9.1 Efficiency
5.2 Quality Index Service efficiency 7.1 Releases at right efficiency processes 11.2 Supply Program
Indicator Management
5.3 Customer Satisfaction moment 9.2 # of Kaizen
with Last Visit 7.2 Change of Parts 11.3 Quality Rates
Projects Supplier
5.4 Repeated Repair at critical phases
Develop attractive and Become sectorial
Achieve high performance Develop sustainability as
innovative product reference for authorities
culture management principle New
portfolio and representative entities
Director Product VP HR & Organization Director Governmental VP HR & Organization
Planning Metrics: Affairs Metric:
Metrics: 13.1 Gallup Index Metrics: 15.1 Ethos Indicator
12.1 Brazilian Market Survey 13.2 Cooperation Barometer 14.1 Radar report
12.2 Launching Strategy 13.3 Training hours/employee .
14.2 Agreements Success Index
12.3 Product Portfolio Renew 13.4 Fitness Index 14.3 Representative Level in
13.5 Executive Competence Index external entities
13.6 Cell Leaders Screening 32
Copyright © Robert S. Kaplan, 2013 20
The Balanced Scorecard and KPIs
 OKRs FRAMEWORK
(Objectives – Key results)
WHAT IS OKR?
• Objectives and Key Results (OKR) is a framework/approach for setting
and tracking goals within organizations.
• The purpose of OKRs are to connect company, team, and personal
goals to measurable results while having all team members and
leaders work together in one, unified direction.
• The framework originated from MBO framework
• The development of OKRs is generally attributed to Andy Grove who
introduced the approach to Intel during his tenure there.
WHAT IS OKR?
STRATEGY – OBJECTIVES – KEY RESULTS
EXAMPLE OF OKR by INTEL
INTEL CORPORATE OBJECTIVE
Establish the 8086 as the highest performance 16-bit microprocessor
family, as measured by:
KEY RESULTS (Q2 1980)
• Develop and publish five benchmarks showing superior 8086 family performance (Applications).
• Repackage the entire 8086 family of products (Marketing).
• Get the 8MHz part into production (Engineering, Manufacturing).
• Sample the arithmetic coprocessor no later than June 15 (Engineering).”
EXAMPLE OF OKR
EXAMPLE OF OKR
Anatomy of Effective Objectives
Anatomy of Effective Key Results
Process of creating KRs: CRAFT
THE MAIN BENEFITS OF OKR
• Agility: Shorter goal cycles enable faster adjustments and better adaptation to
change, increasing innovation and reducing risks and waste.
• Alignment and cross-functional cooperation: The use of shared OKRs improves
collaboration among different teams, solving interdependencies and unifying
competing initiatives.
• Clear communication: Transparency and simplicity enable the team to understand
the goals and priorities of the organization as well as how each individual can
contribute.
• Employee engagement: OKR bi-directional approach for goal setting connects the
employees with the company’s objectives, increasing engagement.
• Focus and discipline: The reduced number of goals creates focus in the
organization and disciplines efforts and initiatives.
• Bolder goals: Decoupling OKRs from compensation and using stretch goals, even
partially, enable the team to set bolder, challenging goals.
MBO VS OKRs
MBO Intel OKRS

“What” “What” and “How”

Annual Quarterly or Monthly

Private and Siloed Public and Transparent

Top-down Bottom-up or Sideways (~50%)

Tied to Compensation Mostly Divorced from Compensation

Risk Averse Aggressive and Aspirational”

Sources: Doerr, John. “Measure What Matters: How Google, Bono, and the Gates
Foundation Rock the World with OKRs”. Apple Books.
MANAGING WITH OKRS
The Cycle
• Monday meeting
• Logistics
• Priorities
• Status
• Engagement
• The bigpicture
• Mid-Quarter Check-Ins
• Quarterly Reviews
• Diagnose Issues Using the “Five Whys”
MANAGING WITH OKRS
The Cycle