How to tap the power of Balanced Scorecard for financial services organizations This book explains how financial services organizations can build and implement a Balanced Scorecard (a strategy management framework) that can deliver accountability, transparency, and risk management.

Introduction xiii CHAPTER 1: THE CURSE OF LIVING IN "INTERESTING TIMES," THE CREDIT CRUNCH, AND OTHER CHALLENGES 1 Executive Summary 1 Introduction 2 The Impact of the Credit Crunch 2 Deregulation, Globalization, and Technology 6 The Collapse of Customer Loyalty 6 Scorecard Pioneers 9 Other Scorecard-Using Financial Services Companies 10 Conclusion 11 CHAPTER 2: DESCRIBING THE BALANCED SCORECARD 13 Executive Summary 13 Introduction 14 The Scorecard's Origins 14 A Balanced Measurement System 15 The Emergence of the Strategy Map 15 The Strategy-Focused Organization 19 Enterprisewide Alignment 25 Creating a Board Scorecard System 27 The Office of Strategy Management 31 The Execution Premium Model 38 Conclusion 41 CHAPTER 3: THE BALANCED SCORECARD AND RISK MANAGEMENT 43 Executive Summary 43 Introduction 43 Linking Strategy Management with Risk Management: A History 44 Strategic Risk Management: The New Core Competency 48 Risk-Based Performance 53 A Risk Balanced Scorecard 55 The Five Principles of SRM 60 Conclusion 64 CHAPTER 4: BUILDING A STRATEGY MAP 67 Executive Summary 67 Introduction 67 Start with the Strategy 68 SeniorManagement Must Own the Strategy Map 72 Strategy Clarification 73 The Use of External Facilitation 73 Creating Objectives 78 Strategic Themes 80 Risk-Balanced Scorecard 85 Value Creation Map 88 Risk Map 91 Conclusion 92 CHAPTER 5: SELECTING METRICS AND TARGETS 95 Executive Summary 95 Introduction 95 The Critical Few Measures 96 Key Performance Questions 97 KPIs 101 Common Definitions 108 Key Risk Indicators 111 A Risk Scorecard 117 Selecting Targets 118 Comparative Performance Goals 121 Conclusion 123 CHAPTER 6: SELECTING INITIATIVES 127 Executive Summary 127 Introduction 127 Organizational Awareness of the Importance of Initiatives 128 The Challenges of Selecting Initiatives 128 Linkage to the Strategy Map 129 Stratex 129 Initiative Prioritization 130 Conclusion 135 CHAPTER 7: CASCADING THE BALANCED SCORECARD: THE STRUCTURAL CHALLENGES 137 Executive Summary 137 Introduction 138 Strategic Line-of-Sight 138 Mandated Objectives and Measures 139 An Ideal Scorecard Cascade 139 Scorecard Pilots 140 A Hybrid IT Strategy Map: The Case of the Bank of England 146 To Cascade or Not to Cascade? 150 Conclusion 156 CHAPTER 8: CASCADING THE BALANCED SCORECARD: THE CULTURAL CHALLENGES 159 Executive Summary 159 Introduction 160 Transparency and Accountability 160 Fear ofMeasurement 161 A Major Change Effort 163 Senior Management Behavior 167 Local Champions 170 Communications 170 Conclusion 172 CHAPTER 9: INDIVIDUAL PERFORMANCE APPRAISAL AND INCENTIVE COMPENSATION 175 Executive Summary 175 Introduction 176 Personal Scorecards 176 Arguments Against the Personal Scorecard 177 Truncated Personal Scorecards 178 Competency Development 178 Personal Scorecards for the Senior Team 179 Linking Performance to Pay 179 The Arguments AgainstMaking the Link 184 Making the Choice 185 Conclusion 185 CHAPTER 10: GETTING THE BEST FROM SOFTWARE 189 Executive Summary 189 Introduction 189 The Benefits of Automation 190 What Software Cannot Do 193 Certified Vendors 194 Criteria for Choosing Software 195 Advanced Performance Institute Software Selection Criteria 196 Developing an IT Strategy 199 Strategy and Risk Management 201 Conclusion 202 CHAPTER 11: ALIGNING BUDGETING AND PLANNING WITH STRATEGY THROUGH THE BALANCED SCORECARD 205 Executive Summary 205 Introduction 206 The Shortcomings of the Budget 206 Out of Step with Strategy 207 The Scorecard Driving the Budget 208 Devolved Responsibility 210 Alternatives to Conventional Budgeting 210 Reporting Risk 219 Stratex 220 Conclusion 221 CHAPTER 12: CONCLUSION AND ACTION ROADMAP 225 Executive Summary 225 Part One: The Future of the Balanced Scorecard Within Financial Services Organizations 226 Part Two: Action-Oriented Roadmap 228 Parting Remarks 233 Index 235