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for how we set out, monitor, and track our strategy delivery. It facilitates a discussion for a Senior Management Team to:
Articulate and agree what needs to be done to deliver the strategy
• Work out what the overall business milestones and activities should be
• What success looks like and how we should measure it
• What really is business critical and requires more effort
• What resource and skills & capabilities we need.
We intended to do this anyway…..the Balanced Scorecard provides us with the process and tools to do it better”
3.2 Unum Corporation
A Fortune 500 company, Unum is a market leader in disability, group life, long term care and voluntary benefits, with operation in the US, Canada, the UK, Continental Europe, Bermuda and Latin America.
Unum had become a complex organization through growth and acquisitions, and the chairman recognized that a single focus on a financial result would be difficult to communicate effectively, and would not reflect the diverse challenges of the corporation. The need for a BSC came when the organization required a new set of goals that everyone could relate to and that would focus the employees’ energies on improving customer-facing performance while improving further shareholder returns. In essence, he wanted a balanced set of measures that would reflect the interests of all Unum’s stakeholder groups. James Orr III, chairman and chief executive at the time, created a team of 13 senior managers to develop this new set of
“balanced” goals and measures.
Although some outside experts were used to facilitate the early meetings, it was the team itself which owned the process and chose the final set of interlocking goals and measures.
It is worth pointing out that that Unum’s strategic goals and measures are to support a clearly defined and meaningful corporate vision. This helped facilitate a specific vision statement for each of its four scorecard perspectives.
Unum’s vision was “We will achieve leadership in our business”. This may sound like a
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generic statement that could be applied to any company in any industry, but this vision was supported with a description of what the vision meant:
• “Leadership does not necessarily mean a dominant market share. Rather, we will achieve leadership in areas that are meaningful and important to our business and market”.
• “We will focus our business on special risk-relieving products for which we can establish and sustain profitable positions. Development of these products will be driven by the needs of the customer, in both domestic and international markets”.
Furthermore, corporate values play a key part in creating a culture where employees are motivated towards achieving breakthrough business performance. These values are:
• We take pride in ourselves and the organization’s leadership position
• We value and respect people
• We value customers
• We value communication
Unum’s BSC consists of four perspectives:
• UNUM people
• Operating effectiveness
• Customer satisfaction
• Shareholder value
During the implementation, Eileen Farrar, vice president of human resources noted that one of the main challenges, but also a key element for achieving corporate goals and for making the scorecard meaningful to all employees is investing time and energy into employee communication. Farrar found that implementing a scorecard is a process of relentless communication and education that must be explained in a way that makes sense within the context of the employee’s own working environment.
Just like ENERCO’s case, it was important to obtain senior manager’s participation, but it was just as important to be able to “cascade” the decisions made at that level to all levels in the
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organization. Otherwise, the results will be unsatisfactory without a doubt.
At a corporate level, Unum has clearly defined what it means by each of its scorecard perspective visions. In this case, starting with “We will have the mind of a customer and the pride of an owner” as the vision for the people perspective, the company has communicated throughout the organization that Unum’s employees should think like a customer, be interested in results, discover better ways, live by our word, continuously grow and learn, strive together towards our goals, feel accomplished and recognized, value differences, master change, share and listen.
Unum is making sure that this happens in 3 main ways:
• A benchmark survey measuring employees’ perception of whether this behaviors are actually being “lived” within the organization
• Employees within Unum America developed a trust workshop focusing on the barriers that exist in the company to stop employees trusting managers. Findings are shared throughout the organization.
• 360 degree appraisal system
Also, to contribute to all the perspectives, the chairman constantly charges teams to focus on developing some area of best practice, in order to look at how that area can be improved and sharing that information throughout the organization. He also holds an annual chairman’s review, in which he meets with a group of selected employees from each operating company or function and discuss how they perceive the progress towards the company’s goals. The chairman’s belief in the scorecard was shown in UNUM’s Annual Report 1997, where, in his letter to shareholders, he outlined the progress against each of the scorecard perspectives.
Having the chairman’s support in this initiative was one of the key success factors at Unum, and it is definitely an element that must be considered when implementing a BSC anywhere.
No matter how articulated the process is, or how sophisticated the BSC to be implemented, the deployment will not be effective without having set this milestone first.
In Unum’s case, for the deployment of the corporate scorecard, each operating unit was charged with finding its own way to achieve the strategic goals. Again, it was important to obtain the full support of the director of each unit, since that person would be handling the
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rest of the deployment process. All initial efforts would’ve stopped at the operating unit’s level otherwise.
Farrar said: “It is up to the management of each company to decide on the most effective way to move that company towards strategic goals. At unit level, it is the responsibility of the manager to roll the unit’s goals back to company and corporate goals. However, annual business goals will not be accepted unless they represent progress towards our corporate goals.”
Alignment was also ensured with Unum’s performance contracts, in which individual objectives support the scorecard goals. This way, you can clearly see the line of sight from employee performance through unit, company and ultimately to corporate performance.
In conclusion, Unum’s BSC is still evolving, but we have to admit that it was a success in its initial implementation. This was the result of getting some fundamental things right, such as:
1. The original BSC was built on the success of Unum’s corporate goal, but it was designed to reflect the changes to the organization and a new set of business challenges
2. The chairman was totally committed to creating the BSC, and he has been involved in the creation and communication to stakeholder groups.
3. Senior managers at Unum owned the process of building the BSC, and used external help only as facilitators in early meetings.
4. Unum already had a clearly defined and meaningful corporate vision 5. The BSC was designed to meet specific time-sensitive goals
6. The reason behind the BSC’s goals and measures were clearly explained to all employees at all levels of the organization
7. The company focused on internal communications
8. All individual performance contracts reflect the scorecard’s four perspectives
With the help of the BSC, the company improved its operating cost structure by 22 per cent over a 1992 base year, and was on its way to achieve the 1998 of 33 per cent. Unum also exceeded its People perspective’s goals, winning a top employer award from several
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magazines including Fortune, Working Mother, Business Week and Equal Opportunity. And although UNUM did not reach their aggressive goal of reaching top-quartile performance of the Standard & Poor’s 500 at 1997 year-end, the company did make the second quartile, and delivered annualized returns of 30.2 per cent. This excellent performance helped rank the company 39th of the 457 current Standard & Poor 500 companies with 10-year stock histories.