MANAGING ALLIANCES WITH THE BALANCED SCORECARD

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MANAGING ALLIANCES WITH THE BALANCED SCORECARD

118 Harvard Business Review January–February 2010

1767 JanFeb10 Kaplan layout.indd 1181767 JanFeb10 Kaplan layout.indd 118 12/8/09 10:18:22 AM12/8/09 10:18:22 AM

alliance is diff erent from a traditional, transaction- driven, customer-vendor model.”

After a series of workshops and interviews with each JSC member, the project team identifi ed the al- liance’s strategic objectives. Following BSC practice, it sorted those objectives into fi ve strategic themes:

Living the alliance: Ensure that we have the right culture (including trust), communication, leader- ship, people development, IT, and rewards and recognition.

Collaboration: Create the transparency we de- sire and make the best use of resources and services across organizations and third parties.

Speed and process innovation: Do things right; leverage our global expertise; and improve the start- up and management of studies to achieve break- through results.

Growth: Create the right portfolio of new prod- ucts; collaborate on decisions to develop com- pounds; improve investment management; and accelerate the fl ow of compounds into the clinical development phase.

Value for both: Create value for both organiza- tions by jointly driving all these activities.

The project team next worked with the JSC and the employees who would be involved in the alliance to draw a complete strategy map that showed how the objectives embedded in these various themes would collectively deliver value. In the exhibit “The Alliance Strategy Map” on page 116, the map is bro- ken down into four areas (or perspectives, in BSC parlance) that show how the objectives for the em- ployees and organizations feed into the objectives for business processes, which satisfy the needs of the al- liance’s customers. Fulfi lling customer expectations, in turn, creates value for the alliance’s stakeholders. These four perspectives correspond closely to those on a conventional map or scorecard, except here, the stakeholder perspective replaces the fi nancial one.

Three of the themes contain strategic objectives that cross multiple BSC perspectives. The speed and process innovation theme, for example, includes objectives in the business-process, customer, and stakeholder perspectives. Two themes exist in only one of the four perspectives. To further clarify joint expectations, the project team placed the expected

“wins” for each company next to each objective. These served as helpful reference points when the companies negotiated targets.

The process of reaching consensus on the themes, the objectives within each theme, and the overall

strategy map created buy-in and understanding among all participants. Alliance employees engaged in candid dialogue during joint working sessions about the potential benefits for each company. Having such frank conversations was the fi rst step toward achieving greater transparency and estab- lishing trust.

Next, the functional teams (which already ex- isted under the preferred partnership arrangement) put together scorecards for the fi ve themes, specify- ing metrics, targets, and initiatives for each objec- tive. (The scorecard for one theme is shown in the exhibit “The Collaboration Theme Scorecard.”) With the complete map and the fi ve theme scorecards in hand, the alliance managers could then determine the personal objectives of and rewards for each of the more than 500 employees involved in the alli- ance. Each company, of course, had its own incen- tive and reward system. But now the performance metrics for employees in the alliance were aligned with those identifi ed in the map and scorecards.

The functional teams used the map and score- cards to identify best practices and to redesign key business processes. All the joint clinical teams then implemented the improved processes in the trials for their compounds.

Finally, the alliance managers, with help from both companies’ internal communications depart- ments, led a major push to promote the message to alliance employees. Ambassadors used such tools as laminated strategy maps, video presentations by company executives and alliance leaders, and even an alliance game to make sure all stakeholders un- derstood the mission and the goals of the partner- ship. The ambassadors followed up with periodic newsletters and e-mails touting progress made on the fi ve strategic themes.

Establishing the Governance Structure Although drawing up the map and scorecard got the two companies and alliance employees on the same page, participants recognized that they needed a governance process to continually monitor the partnership and to keep it on track. The alliance managers asked five senior executives to become

“theme leaders”; each would be accountable for one theme’s objectives and would oversee related cross- functional initiatives.

The executives were supported by theme teams, employees who worked to ensure that the functional

Here are the teams and committees that keep the Solvay-Quintiles alliance on track.

JOINT STEERING COMMITTEE (1) Governs the alliance, provides leadership, and defi nes strategy

JOINT DEVELOPMENT COMMITTEE (1) Provides oversight, sets milestones, and monitors progress on clinical trials

PROJECT TEAM (1) Facilitates creation of alliance strategy map, strategic objectives, and scorecard of measures and targets

THEME TEAMS (5) Align functional and clinical team eff orts with each theme’s cross-functional objectives

CLINICAL TEAMS (1 PER COMPOUND) Manage strategic and operational aspects of conducting clinical trials

FUNCTIONAL TEAMS (MANY) Improve the major processes in the drug development cycle

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and joint clinical teams contributed to the theme’s cross-functional objectives. For example, the speed and process innovation team held regular meetings to stimulate ideas on improving and accelerating clinical trials and to share those suggestions with the functional and joint clinical teams. The theme teams also solicited suggestions from the func- tional and joint clinical teams on ways to achieve the theme’s strategic objectives. Theme team members presented the most promising initiatives to the joint steering committee. When proposals were approved, the theme teams then monitored their execution by the functional and joint clinical teams.

The Solvay–Quintiles joint steering committee meets quarterly to discuss the alliance’s progress. With input from the theme, functional, and joint clinical teams, the JSC monitors achievements, ad- dresses emerging relationship issues, reallocates resources, and makes decisions on any unresolved issues. It serves, in eff ect, as a court of fi nal appeal over disagreements about what projects should or should not be carried out by the alliance.

The theme team meetings and JSC reviews help the two companies resolve problems that, if left unchecked, would undermine the collaboration re- quired by the alliance. For instance, the theme teams realized that security systems and fi rewalls blocked employees of one company from accessing informa- tion stored inside the other. Because all sides had agreed that information sharing was a strategic prior- ity, the JSC felt empowered to work with the IT func- tions in each company to overcome their resistance to giving alliance employees access to Quintiles’s op- erational dashboards. Now members of the alliance can easily monitor the progress of clinical trials.

The Payoff The new approach has yielded impressive results. The alliance reduced total cycle time for clinical studies by approximately 40%, an achievement that brings new products to market much faster and leads to tremendous cost reductions. Three global registration programs were completed from 2003 to 2007, a much faster rate than the companies had pre- viously achieved. In addition, one functional team developed a new way to manage nonperforming sites (those recruiting inadequate numbers of pa- tients). That led to the alliance halving the number of nonperforming sites and saving €25,000 to €35,000 per site (a study can have 20 to 150 sites). Moreover, the teams felt that the shared understanding of joint

objectives on the strategy map empowered them to make strategic and scientific decisions much ear- lier in a clinical program’s design—saving time and money and, more important, keeping everyone’s focus on delivering the alliance strategy.

Members of the joint steering committee ac- knowledge that building the alliance strategy map and theme scorecards required more time than any map or scorecard built within their own companies. The process required aligning two organizations with entirely diff erent business models and cultures—one is a research-driven pharmaceutical company, the other an operationally oriented services company. Yet the JSC is so pleased with the benefi ts of the new management system that it is replicating the process with several key customer groups, medical special- ists in the world’s leading academic medical centers, and payer organizations.

We’ve described in detail the Solvay-Quintiles experience of using balanced scorecard techniques to create alliance value. But this experience is not unique. Infosys, the Indian IT services provider, has built more than two dozen “relationship score- cards” with customers and uses these in quarterly meetings with executives in its client organizations (see A. Martinez, “Infosys’s Relationship Scorecard: Transformational Partnerships,” HBS Case 109-006). LagasseSweet, a $1 billion wholesaler in the building services industry, also collaborates with its leading trading partners—manufacturers and distributors— to produce scorecards to measure performance. As a result it has saved millions of dollars and improved responsiveness, service, and availability up and down the supply chain. What’s more, it has identi- fi ed $150 million in new revenue opportunities.

FOR CROSS-ENTITY COLLABORATION to yield the high- est rewards, the partners must fi rst agree on strategy and then design metrics to determine how well the strategy is being implemented. They must commu- nicate a common vision and offer incentives that motivate employees to improve collaboration and deliver results. They also need a process that allows them to talk candidly about difficulties, resolve disputes, share information, and continually adapt the strategy to evolving external conditions as well as to newly created internal capabilities. The bal- anced scorecard management system provides a framework for partners to work collaboratively and productively to achieve benefi ts that neither could accomplish on its own. HBR Reprint R1001J

FOR FURTHER READING More than a decade ago, Robert Kaplan and David Norton introduced the balanced scorecard (BSC), which has transformed companies by helping top executives set corporate strategy and translate it into objectives, measures, and targets that the entire workforce understands.

To learn more, consult the following articles, which are available at www.hbr.org:

“Putting the Balanced Scorecard to Work” (HBR September–October 1993)

“Having Trouble with Your Strategy? Then Map It” (HBR September 2000)

“How to Implement a New Strategy Without Disrupting Your Organi- zation” (HBR March 2006)

“Mastering the Manage- ment System” (HBR January 2008)

MANAGING ALLIANCES WITH THE BALANCED SCORECARD HBR.ORG

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