Indianapolis Life Insurance Company

Enterprise Level Balanced Scorecard Workshop I

Strategies & Critical Success Factors

2

Agenda

• Balanced Scorecard Overview 1:30 - 2:00

• Vision and Objectives Confirmation 2:00 - 2:15

• Breakout Session I: Critical Success Factors 2:15 - 3:30– Breakout Groups

– Coffee Break

– Reconvene & Present

• Breakout Session II: Measures 3:30 - 4:15– Breakout Groups– Coffee Break– Reconvene & Presentations

• Discussions & Next Steps 4:15 - 5:00

3

Why Measure?

• Provide a vehicle to communicate and gain consensus on the vision and strategies

• Identify roles, responsibilities and accountabilities throughout the organization

• Assist in prioritizing initiatives to optimize resource allocation

• Help identify what should be focused on

• Identify areas for improvement

• Provide information to support decentralized decision making

“You can’t manage what you can’t measure” Bill Hewlett, Hewlett Packard

4

Measurement Definition :

Reporting & Analysis:

Given performance signals, what can be done to improve results?

How to report & analyze performance measures most effectively?

Evaluation & Improvement:

What measures reflect strategy execution? Process

Strategic

Individual

Quick Continuous

Re-engineerFocus

ImprovementPortfolio

StakeholderValue

Balanced Scorecard Process

The Balanced Scorecard is a Continuous Process

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Translating the Vision & Strategy

A Good Balanced Scorecard Tells the Story of Your Strategy and Vision

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Tracking & Measuring the Vision Requires...

The Vision

…describing the destination with much greater precision.

t

t StrategyStrategy

Critical Success Factors (CSFs)Critical Success Factors (CSFs)

MeasuresMeasures

Growth &Innovation

CustomerSatisfaction

PeopleCommitment

Process Quality

Financial

Vision

Balanced Scorecard:

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Identifying Critical Success Factors

Improve Returns

Improve Returns

Broaden Revenue

Mix

Broaden Revenue

Mix

Broaden Skills

(Financial Planning)

Improve Customer

Information

Improve Customer

Information

Employee Satisfaction

Employee Satisfaction

Cross-Sell the Product Line

Cross-Sell the Product Line

Understand Customer Segments

Understand Customer Segments

Develop Offerings

Develop Offerings

Increase Customer

Confidence in our Advice

Align Reward Systems

Align Reward Systems

Financial Perspective

Customer Perspective

Internal Process Perspective

Employee & Innovation Perspectives

(A Set of Cause and Effect Relationships)

Strategy: Revenue Growth

7

Identifying Performance Measures

Improve Returns

Improve Returns

Broaden Revenue

Mix

Broaden Revenue

Mix

Broaden Skills

(Financial Planning)

Improve Customer

Information

Improve Customer

Information

Employee Satisfaction

Employee Satisfaction

Cross-Sell the Product Line

Cross-Sell the Product Line

Understand Customer Segments

Understand Customer Segments

Develop Offerings

Develop Offerings

Increase Customer

Confidence in our Advice

Align Reward Systems

Align Reward Systems

Financial Perspective

Employees & Innovation

Customer Perspective

Internal Process Perspective

• Return on Investment

• Revenue Mix

• Revenue Growth

• Customer Satisfaction Survey

• Customer Retention

• Depth of Relation

• Share of Segment• Product Development Cycle Time• Revenue from New Products• Hours with Customers• Cross-Sell Ratio

• Employee Satisfaction• Revenue per Employee• Training & Development Index• Compensation Benchmark• Strategic Information Availability

Every Measure Ultimately Ties to a Financial Result

Strategy: Revenue Growth

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Developing a Scorecard

The VisionThe Vision

StrategyStrategy

Financial PerspectiveFinancial Perspective

CSFInitiative

InitiativeTargetMeasure“If we succeed, how will we look to our shareholders?”

Improve Returns ROI

Diversify Mix Revenue Mix

Shareholder Value EVA

Customer PerspectiveCustomer Perspective

CSFInitiative

InitiativeTargetMeasure“To achieve our vision, how must we look to our customers?”

Delivery Time Cycle Time

Quality Quality Index

Price Competitive Price Benchmark

Internal Process PerspectiveInternal Process Perspective

CSFInitiative

InitiativeTargetMeasure

“To satisfy our customers, in which business processes must we excel?”

New Products Prod. Development Cycle Time

Efficiency %Non-Value Added/Value Added

Cross-Selling Cross-Sell Ratio

Employees & InnovationEmployees & Innovation

CSFInitiative

InitiativeTargetMeasure

“To achieve our vision, how will we sustain innovation, & change & develop our people?”

Retention Retention Ratio

New Products % Revenue from New Products<2yrs

High Morale Absenteeism

Step 1: Confirm/Define the Shared Vision

Step 2: Clarify/Articulate Strategies to Achieve the Vision

Step 3: Define Critical Success Factors (CSFs) for Various Perspectives

Step 4: Determine Performance Measures

Step 5: Establish Short & Long Term Measure Targets

Step 6: Define Initiatives to Reach Targets

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Measurement Logic

Enterprise

Shareholder Value

Operations Management

Time, Cost, Quality

Distribution Management

Customer SatisfactionCustomer Penetration

Product-Market Management

POS & ClaimsNew Business & UW

Portfolio ProfitabilityTime to Market

Customer Care

Revenue GrowthOperational Efficiency

Information & Financial Services

Financial Operations

Operational Efficiency& Effectiveness

Com

mu

nic

atin

g S

upportin

g

Enterprise Scorecard Development

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Defining Measures

Performance Scorecards

Executive Interviews & Facilitated Sessions

“Quigley” Analysis

Design Team Findings &

Recommendations

Business Unit Strategic Plans

Long Term Vision of Performance

Management across Indianapolis Life

“Rollout” Philosophy

IS/IT Implications

AffiliationImpact

E & Y Insurance &

Annuities Databases

12

Confirming the Vision & Strategies

Vision

Strategies

CSFs

Measures

Definition:Longer-term direction of where Indianapolis Life aspires to be, how and on what basis to compete. Inspirational, and understandable throughout the organization

Key Worksteps:

• Review current vision and strategy statements

• Revise vision and strategies

• Present findings to group

13

Scorecard Template

To be an innovative, growing, high performance, public financial services enterprise that makes the future better for all our stakeholders.

Our

Obj

ecti

ves

Our

Vis

ion

Our Measures of Success

• Attracting

• Connecting

• Developing

• Empowering

• Building new and existing distribution systems

• Co-marketing, private label relationships

• Affiliations and acquisitions

• Pricing, persistency, mortality, investments, expenses

•Create economic value for investors

•Products and services to meet customer needs

•Productive, mutually beneficial relationships with distribution partners

•Employee owners

•Good corporate citizens

Create value for all stakeholders

Grow profitablyWin through people

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Determine Critical Success Factors

Vision

Strategic Thrusts

CSFs

Measures

Definition:What needs to happen to execute strategy successfully. CSF’s must be:• Actionable• Associated with Business Decisions• Specific and• Measurable

Key Worksteps:• Review Strategies• Establish Agreed Upon List of CSFs Necessary

to achieve the objective• Narrow CSFs

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Areas Critical from a Financial Perspective

• Growth– Revenues

– Operating Earnings

– Capital

• Profitability– ROE

– ROA

– EPS

• Consistency in results

• Quality earnings (GFO)

• Clearly articulated strategies

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Areas Critical from a Customer Perspective

• Accuracy

• Quality

• Timeliness

• Cost effectiveness

• Support

• Handling customers with multiple products

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Areas Critical from a Process Perspective

• Business Fundamentals– Issuing

– Billing

– Paying commissions

– Calculating policy values

• Time, cost and quality

• Production costs

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Areas Critical from a Development & Growth Perspective

• Empowered personnel

• Maintaining and enhancing the culture

• Education and training

• Retention and development

• Management skill sets

• Communication and information sharing

• Accountability

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Exercise - 60 Minutes (CSFs)

Breakout Groups• 3 Groups

• Complete Cause & Effect Diagrams

• Narrow CSF’s to “Vital Few”

• Return to facilitator

• 10-Minute break

• Group “Reporter” Present Findings

Questions:

1) What must be done to reach our objectives?2) What is the relationship between financial and non-financial factors?3) Are these CSF’s measurable3) Are these complete and accurate?

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Breakout Groups

Jim

Steve

Jack

Karla

1 - Sun Room 3 - Board Room2 - Library

Greg

Larry H.

Linda

Gene

Gary

Marc

Jon

Lisa

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Critical Success Factors Group 1

Financial

Customer

Processes

Learning & Growth

Critical Success Factors

Objectives: Win through people, Grow profitably, Create value

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Critical Success Factors Group 2

Financial

Customer

Processes

Learning & Growth

Critical Success Factors

Objectives: Win through people, Grow profitably, Create value

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Critical Success Factors Group 3

Financial

Customer

Processes

Learning & Growth

Critical Success Factors

Objectives: Win through people, Grow profitably, Create value

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Next Steps

• Enterprise Scorecard– Refine measures of success

– Complete data dictionary

– Formula

– Availability

– Data Source

– Missing Measures Program

– Frequency of reporting

– Responsibility

– Establish targets

– Align initiatives (tactics) to measures

• Cascade Measures– Determine entities for scorecard (measurement logic)

– Develop measurement “package” for defining measures

• Reporting– Identify reporting package (Manual vs. Automatic)

– Identify reports (drilldown, composition)