Bsc Hall Of Fame E-land.pdf

A Balanced Scorecard Hall of Fame™ Profile

E-Land Group

HARVARD BUSINESS SCHOOL PUBLISHING

What is the Balanced Scorecard Hall of Fame? The Balanced Scorecard Hall of Fame for Executing Strategy™, administered by Balanced Scorecard Collaborative, recognizes organizations that have achieved breakthrough performance largely as a result of applying one or more of the five principles of the Strategy-Focused Organization. These principles, formulated by Balanced Scorecard creators Robert S. Kaplan and David P. Norton, are described in detail in their book The Strategy-Focused Organization: How Balanced Scorecard Companies Thrive in the New Business Environment (Harvard Business School Press, 2001). BSC Hall of Fame members are personally selected by Drs. Kaplan and Norton. To learn more about Hall of Fame selection criteria and Hall of Fame members, visit bscol.com.

The Five Principles of the Strategy-Focused Organization Each of the five principles of the Strategy-Focused Organization include specific management best practices that contribute to the achievement of breakthrough results. These best practices—validated through ongoing research with Hall of Fame organizations and hundreds of other users of the Balanced Scorecard around the world— must be embedded in any organization that wants to make strategy execution a core competency. Principle #1. Mobilize Change Through Executive Leadership Executive leadership, driven by a need for change, supports the drive to establish a new way of managing based on a performance-oriented culture. Principle #2. Translate the Strategy into Operational Terms The Balanced Scorecard is used to translate the strategy into a language that everyone understands. Principle #3. Align the Organization to the Strategy The scorecard is used to cascade the strategy to all parts of the organization and align resources needed to accomplish the strategy. Principle #4. Motivate to Make Strategy Everyone’s Job The reward and recognition system is used to align individual behavior with performance objectives called for by the strategy. Principle #5. Govern to Make Strategy a Continual Process Strategy execution is linked to the budget, and a reporting system based on scorecard measures is used to provide feedback on strategic performance.

Balanced Scorecard Hall of Fame Profile: E-Land Group

Table of Contents Profile ......................................................................................1 Key Results ............................................................................7 Takeaways ..............................................................................7 SFO Spotlight (best practices) ........................................8 Strategy Map ......................................................................11 To Learn More ....................................................................12

For South Korea’s E-Land Group, the late 1990s Southeast Asian financial crisis represented a critical turning point. While other companies failed or faltered, the clothing manufacturer/retailer dedicated itself to sharpening its competitive strengths with a strategy based on operational excellence and innovation. With the Balanced Scorecard as its guiding framework and a world-class knowledge management system, E-Land today stands as a striking example of the power of employees in successful strategy execution.

ABOUT E-Land Group Industry: Primarily apparel, but also general merchandising stores, discount stores, department stores, hotels, furniture, restaurants, school and church construction, and e-business consulting Originally a small clothing store in Seoul, E-Land Group is today a retailing giant with worldwide sales, as well as a diversified enterprise. Founded in 1980, the company pioneered the franchise concept in Korean retailing. Of its eight strategic business units, four are clothing and retail concerns and a fifth serves the clothing franchise operations. E-Land’s early ascent and, later, stellar rise in the aftermath of the 1997 Southeast Asia currency crisis are a testament to the company’s strategic discipline and rigorous management practices. Its structure and processes—and empowerment of the employee as front-line knowledge agent—enable it to keenly monitor changing customer tastes and marketplace trends and to adapt its strategy with agility. Net revenues: 2.07 trillion Korean won (KRW) (approximately $2 billion)* Retail outlets: 404 company-owned; 2,700 franchisee-owned Personnel: 4,000 Inducted into the Balanced Scorecard Hall of Fame: 2004 * Based on the July 14, 2005 exchange rate, where 1,031 KRW = 1 USD

Seoul, South Korea–based E-Land transformed itself from a small clothing store to a billion-dollar retail giant using a constellation of forces: a knack for identifying market niches, design development, and low-priced production, along with a talent for cultivating corporate synergies. Founded in 1980, E-Land pioneered the franchise concept in Korean retailing. Today, E-Land Group’s eight strategic business units (SBUs) include the following: • E-Land Co., Ltd. (adult casual wear; 810 stores) • E-Land World Co., Ltd. (children’s clothing and underwear; 1,504 stores) • 2001 Outlet Co., Ltd. (the only apparel discount department store in Korea; comprises six outlets and one hotel) • EL International Co., Ltd. (accessories, ladies’ apparel, casual clothing, and food; 360 stores) • Lead Co., Ltd. (interior design, mainly of E-Land’s franchise stores) • E-Land Systems Co., Ltd. (IT solutions and e-business consulting) • Francia Co., Ltd. (furniture; 90 stores) • E-Land Development Co., Ltd. (construction specializing in schools and churches) But E-Land’s dizzying ascent stalled in 1997 with the Southeast Asian financial crisis. The catastrophe was precipitated when the South Korean company Hanbo Steel collapsed with $6 billion in debts. Banks throughout Asia suffered massive losses owing to nonpayment of loans, which in turn spurred the rapid and sharp devaluation of regional currencies—driving many organizations into bankruptcy. Like other regional organizations left standing, E-Land had to reappraise and refocus its strategic positioning. To reactivate—and sustain—its previous success, company executives decided to draw on E-Land’s 1

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Balanced Scorecard Hall of Fame Profile: E-Land Group

proven strengths in productivity and innovation. They committed E-Land to a strategy of operational excellence coupled with world-class innovation. They also knew they had to strengthen the corporation’s strategic management and organizational learning processes. CEO, Chairman, and founder Park Sung-soo identified the BSC as just the methodology to support this ambitious transformation. And according to Chief Knowledge Officer (CKO) Chang Kwang-kyeu, “There was a firm conviction that the BSC would make a substantial contribution to building a process of organizational learning within our workforce.”

perspective); and “Corporate value improvement” and “Brand value improvement” (financial perspective).

The pilot programs’ success demonstrated the critical importance of having BSC champions—catalysts for wider employee buy-in—within each unit. It also showed the wisdom of testing a new methodology on a small scale.

During the pilots, task force members guided SBU leaders in developing, implementing, and managing their own BSCs. The pilot programs’ success demonstrated the critical importance of having BSC champions—catalysts for wider employee buy-in— within each unit. It also showed the wisdom of testing a new methodology on a small scale. Manager Kim Kwang-rae, who led the Roem SBU and served as the BSC change agent during the pilot program, likens the scorecard methodology to “great medicine.” As with an experimental drug or treatment, Kim explains, the piloting of the BSC verified the “medicine’s” potential value, its “fit for the body type,” and the proper application to “overcome the [ailment and] regain health.” Both E-Land, Ltd. and Roem rewarded their employees with performancebased bonuses for exceeding targets during the pilot.

Underlying the new strategic vision was Park’s deepseated belief in the employee’s role in determining organizational success. Employees, he maintains, want to succeed. And when they’re clearly informed about the company’s objectives, they are motivated to excel. From this conviction sprang E-Land’s strategic emphasis on human and information capital, an emphasis that has delivered spectacular performance— notably, a thirtyfold increase in net profit from 1998 to 2004. Trying the Scorecard on for Size E-Land piloted the BSC in 1998 at E-Land Co., Ltd., its oldest casual-clothing unit. Senior executives, expecting resistance from unit executives who were busy recovering from the currency crisis, saw a pilot program as the only way to secure unit leaders’ buy-in. An in-house task force from Group headquarters, self-taught in the BSC, facilitated the program, with the active involvement of the unit head. The unit developed a strategy map featuring the four traditional perspectives, which contained objectives such as “Easy access to information” and “Acquire core knowledge and share information” (in the learning and growth perspective); “Shorten production lead-time” and “Build nice shopping environment” (internal process perspective); “Positive buying experience” and “Good brand image” (customer

Within one year, E-Land, Ltd. had doubled its productivity. A second pilot program, at Roem (an SBU within EL International Co., Ltd. focusing on ladies’ casual wear and jewelry), yielded a 50% productivity increase in its first year. Roem’s strategy map also emphasized knowledge sharing and continuous learning in its learning and growth perspective. Its remaining perspectives contained such objectives as “Low material cost” and “Store display management” (internal process); “Satisfied customer” and “Good brand image” (customer); and “Improving profitability” and “Improving capital productivity” (financial).

The two pilot programs also opened doors for highpotential employees to demonstrate their strategic thinking and engineer valuable process improvements— and earn valuable recognition in the process. (See “Driving Sales Revenue at Roem,” p. 5, for one example.) Communicating Strategy to the Workforce E-Land has established a communication program to ensure that all employees remain aware of and fully understand the organization’s strategic priorities. At the crux of this program is the monthly strategy review conducted by teams and business units. At these gatherings, managers and employees assess performance on strategic objectives, amend objectives and initiatives if necessary, and share knowledge gained over the previous month. They also present after-action reviews of completed initiatives—analyzing the key factors in both successful and failed efforts, and developing new plans for the following months. 2

© 2005 by Harvard Business School Publishing and Balanced Scorecard Collaborative, a Palladium company

Balanced Scorecard Hall of Fame Profile: E-Land Group

A Performance-Oriented Culture In 2001, the E-Land Group rolled out the BSC to its remaining six units. Corporate implemented its own BSC in 2002. The BSC proved to be “the turning point” in advancing E-Land toward a performanceoriented organizational culture, says E-Land BSC Program Manager Kim Gyo-yeon. The company linked incentive compensation to the BSC from the start, though developing individual targets proved painstaking. Executives needed time to define targets that were neither too low nor too high. They also wanted to ensure that nonfinancial indicators in particular were fair across SBUs, given the units’ relative variation in market position and profit-loss results. Though the employees who took part in the two pilot programs earned performance-based bonuses from surplus profits, E-Land did not establish a formal incentive compensation program based on individual contributions until 2002. As CKO Chang notes, waiting until 2002 enabled executives to ensure that “we were confident that each BSC contained the right objectives and measures and that we were accurately weighting the value of each nonfinancial measure in driving financial outcomes.” Ultimately, the incentive compensation system hinged on a bonus fund allotted to each SBU based on its financial and nonfinancial performance—from which bonuses were distributed to individual employees based on their own performance. Executives also knew that employee and organizational objectives had to be linked—and organizational performance made transparent—to the company’s then 2,300 employees. (Forty-one percent of E-Land’s workforce is devoted to sales and sales management; another 21% is in design and development; and 21% fills clerical and administrative positions.) Employee performance had to be equally transparent. A prime example: early on, some employees were wary of the “value-added employee” measure, which tracked employee unit productivity. But once they saw these actual figures alongside some of the company’s negative financials, they understood the reason for budget cutbacks—and perceived the direct connection between their efforts and improved performance. Equally important, they shared the same sense of urgency for change that managers were feeling. The Knowledge Management/Strategy Connection

Driving Sales Revenue at Roem In late 2000, E-Land’s Roem unit renovated 100 stores in just eight months, with an eye toward revitalizing the brand. However, though brand awareness did increase, actual sales growth fell short of expectations—spawning concern among investors and store owners. The company challenged managers to identify strategies for doubling monthly sales revenues from 50 million to 100 million KRW. Many managers considered this objective impossible, given the small size of most stores’ sales floors and the brief retailing experience of many employees. Primed for the challenge, Chung Soo-jung, a store manager, tackled the problem by first defining the factors that generate sales revenue. She calculated that sales growth depended on the number of customers entering a store, their rate of purchase, the unit prices of the products they bought, and their rate of repeat purchases. By personally observing shoppers, she then learned that, on average, 170 people visited her store every day. Thirty-five percent of them bought something, at an average purchase price of 40,000 KRW. And 5% of them made repeat purchases. Chung next set out to increase each of these factors— launching initiatives that drew additional window shoppers into her store and that inspired them to buy more once they were in the store. But because she was limited by the store’s size, she focused her efforts on raising customers’ repeat purchase rate. Her results proved remarkable: sales in the first half of 2001 were 202% higher than the same period in the previous year. And by November 2001, sales volume had reached 20 million KRW—double the goal the company had set. According to Roem’s CEO Oh Sang-heun, Chung’s success demonstrated a “can-do” spirit to other store managers who blamed flat sales on the current economic downturn and delivered only lukewarm performance. It also showed the power of effective cause-and-effect thinking—and of a clear performance objective in motivating people to excel. Chung’s success formula has been acknowledged as a best practice in E-Land’s apparel marketing and has been benchmarked by many other company affiliates. In addition, she won the “Most Outstanding Person” award at E-Land’s 2001 Knowledge Festival, and was promoted to the officer position of brand manager at Roem the following year.

Knowledge management formed the cornerstone of E-Land Group’s operational excellence strategy. Thus the CKO’s team (which includes the in-house 3

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Balanced Scorecard Hall of Fame Profile: E-Land Group

BSC consultants) created an integrated knowledge management/performance management infrastructure. Key components included tools and processes for capturing and sharing best practices and lessons learned—specifically, an online knowledge management system (KMS) that is fully integrated with E-Land’s BSC. Software for automating the scorecard was initially developed in-house in early 1999, and was

“We often find that the best practices created by one team had previously been discarded as impossible by others. This is proving to be a great way to motivate employees to stretch their thinking, which is the cornerstone of the innovation strand of our corporate strategy.” –CKO Chang Kwang-kyeu

based on an online analytical processing (OLAP) tool that allowed analysis of performance at multiple levels in the organization. Since then, two of E-Land’s business units have automated their BSCs through a certified vendor’s application. As another step toward managing knowledge, a Chief Strategy Officer (CSO) communicates the company’s vision, mission, and strategy to the SBUs. He also oversees all monthly BSC review meetings. In the Group-level monthly review—an intensive, two-day event at which participants gather at 6:30 in the morning and push on until 11:00 at night—the CEO, CSO, and CKO receive strategy updates from SBU heads, assess strategic objectives and measures, and reevaluate the link between employee and corporatelevel objectives. E-Land also makes the knowledge capital/value creation connection in other ways than through its CSO and CKO roles. Every year, business leaders use BSC indicators to prepare a Knowledge Asset Monitor (KAM), an assessment of each unit’s process infrastructure and competencies. They then use this assessment to set mid- to long-range corporate strategy. Based on the work of knowledge management thought leader Karl Erik Sveiby, a KAM enables organizations to evaluate their external and internal intangible assets—such as customer and supplier relationships, business processes, and managerial competencies.1

Celebrating and Rewarding Knowledge In addition to working with the KAMs generated at Group level, employees participate in corporate and SBU evaluation meetings to review actions and initiatives and debrief on outcomes, both successful and failed. Lessons learned are presented at the company’s semiannual Knowledge Festival if they meet following criteria: • The new knowledge had to be applied on the work site. • Its application had to generate a tangible result. • The discoverer must provide sufficient information for others to use the knowledge at their own work sites. • The knowledge must be able to help enhance the company’s productivity within the next two years. Individuals and teams responsible for exceptional discoveries are known as “knowledge capitalists” and receive the E-Land Knowledge Award, which includes a financial reward and a promotion. Chang maintains that the Knowledge Festival and Knowledge Award send a powerful message to the entire workforce: that the company prizes the contribution of mission-critical knowledge by individuals and teams, and that it prioritizes the sharing of best practices across the organization. Moreover, he says, “we often find that the best practices created by one team had previously been discarded as impossible by others. This is proving to be a great way to motivate employees to stretch their thinking, which is the cornerstone of the innovation strand of our corporate strategy.” A Tale of Lingerie Display: Knowledge Management in Action The innovative thinking of Kang Shin-geun, a production manager in E-Land’s intimate apparel unit, is one example of the power of knowledge management at the company. The business unit had been using window displays (in both companyowned and franchise stores) to spur female shoppers’ interest in lingerie sets. However, the upper and lower components of these sets were made of different materials and were provided by different suppliers, so components for a single set of lingerie were sent separately from the factories to E-Land’s warehouses. If one component arrived before the other, the stores had to wait for delivery of the other before they could display the entire product as planned. Result? Lost selling opportunities. 4

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Balanced Scorecard Hall of Fame Profile: E-Land Group

To address this problem, executives challenged the unit to improve the warehousing of product sets. The company defined a metric known as “set warehousing rate”—which tracks the on-time arrival rate of set products (those that have several components made by different suppliers) from the factory to the warehouse. “Set warehousing rate” is the number of sets delivered on time divided by the number of all sets designed in that season.

guidance of the CSO and CKO, executives annually conduct a comprehensive assessment of corporate and SBU strategies and the scorecard overall, using this eight-stage process:

To improve performance on this important metric, Kang discovered and removed a key barrier to set warehousing: inadequate communication among manufacturing plants. He encouraged plant managers to regularly inform one another of their jobs’ status, so they could better coordinate the warehousing of complete sets. The unit’s sales ballooned 33% in the next year, and the set warehousing rate rose from a dismal 11% to 56%. Kang won the E-Land Knowledge Award and is recognized as an expert on the use of Goldratt’s theory of constraint to remove barriers to progress.2

2. Clarify the strategy and prepare two- to three-year strategic scenarios. Scenarios for each year may emphasize different high-level objectives, such as “Improving productivity,” “Enhancing profitability,” or “Growing sales 20%.” These objectives, in turn, are backed (respectively) by strategies such as “Productivity management through measurement repositioning,” “System-improving incentives,” and “Expanding the importing route.”

Knowledge Trees and Ad Hoc Workshops The “knowledge tree”—a template used at every level within E-Land—is another useful tool for linking knowledge management to strategy. The knowledge tree aligns objectives, initiatives, and action plans to the organization’s strategic objectives, and includes targets and schedules. Every employee’s action plan is entered into the KMS, which everyone can access. Action plans include descriptions of employees’ new experiences that created valuable new knowledge that can be shared across the company. Executives scan the KMS each week, discussing new learnings at their weekly off-sites and identifying up-and-coming talent based on the information found in the action plans. Employees, knowing their contributions to best practices are visible to top management, feel even more motivated. As another element in its KMS, E-Land created its off-the-job meetings (OJM) program. Through this initiative, managers can request that ad hoc workshops be convened to tackle specific tasks or problems that prove difficult to address in the workplace or that require intra-team or cross-functional sharing of knowledge. Established in 1998, OJM has proven indispensable in enabling E-Land’s managers to execute the company’s strategy. Continuous Feedback, Evolving Strategy Retailing’s volatility demands that strategy be evaluated and, if necessary, refreshed regularly. Thus, with the

1. Analyze research data on changes in market dynamics and customer requirements. For example, in the children’s wear market, the customer value proposition was changed from “low price” to “high quality” and “comfortable store environment.”

3. Assess SBU strategies and scorecards to confirm alignment with corporate strategy. E-Land conducts a rigorous, structured three-month process each year to assess that each SBU’s (or brand’s) strategy is up to date and still conforms to the overall corporate strategic direction. First, the CSO systematically examines each aspect of SBU strategy; then each SBU executive repeats the process, using the strategy map and strategy knowledge tree. Next, executives perform horizon analysis and brand life cycle analysis on each brand. Once each brand is strategically positioned (or repositioned), E-Land can align SBU strategy and corporate strategy. 4. Review/amend the strategy map and metrics. After the analyses, executives make whatever adjustments are needed to targets (for example, if a brand is beginning to mature, the sales growth targets would likely be lowered.) E-Land sets standardized values each year, which it presents as a guideline to all SBUs. 5. Develop methods for measuring newly added objectives. For example, for the internal process objective “Improve shop image,” the ROEM brand BSC initially used “number of shop interiors remodeled.” After 2000, this measure was discontinued and replaced with “number of stores with more than 100 million KRW in monthly sales” and “number of new shops.” 6. Help SBU leaders establish team and individual objectives. Unit managers conduct one-on-one interviews with individual employees to review objectives and develop plans and new targets for achieving them. 5

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Balanced Scorecard Hall of Fame Profile: E-Land Group

7. Have individual employees record their knowledge trees and action plans in the KMS. Transparency is key, and E-Land executives believe the ability to see everyone’s objectives is both a learning tool and motivating force.

Knowledge Management Award, given by the Korea Management Association and Korea Economic Daily.

8. Determine who will manage strategic initiatives launched at the enterprise or division level, then launch projects. SBU executives, using input from their human resources manager, choose managers to oversee strategic initiatives. Expertise and commitment are the most important factors in the choice.

2004: Chairman Park receives the Grand Award of Most Respected CEO from the Federation of Korean Industries. That same year, E-Land also wins the Forbes Quality Management Grand Award for Knowledge Management, the Grand Award for Social Welfare (given by the Korea Economic Daily), the Korean President’s Award for the Logistics Industry, and the Grand Award for Ethical Management (bestowed by the Korea Management Association).

Indeed, through the use of this process, E-Land’s strategic focus has shifted—from operational excellence (1998 to 2001) to, more recently, customer value. (As part of this shift in focus, the company changed 30% to 40% of its KPIs since adopting the BSC.) In particular, with brand equity now providing its primary competitive advantage, E-Land wants to better understand customers’ perceptions of its brands—and respond proactively. In 2003, E-Land’s acquisition of numerous apparel brands (Deco Co., Ltd., New Core Co., Ltd., El Den, New Golden, and Caps) made brand management more crucial than ever. Accordingly, the company has regularly conducted broad customer and market research to refine and revise strategy. Knowledge Management Pays Off E-Land’s integration of knowledge and strategy management has paid big dividends. From 1998 to 2004, for example, Group revenues have more than doubled—from 550 billion KRW (about $US 533.5 million) in 1998 to 2.07 trillion KRW (about $2 billion) in 2004.3 During those same years, net profit after taxes skyrocketed from approximately $8.6 million in 1998 to $276.4 million in 2004. Meanwhile, the company’s employee satisfaction index rose from 5.5 (on a 1 to 10 scale) in 1999 to 7.4 in 2004. Since 2002, E-Land has also garnered a long list of honors from publications, trade groups, and the government. The following list says it all:

2002: Maeil Economic Daily and Booz Allen again honor E-Land for its “Knowledge-Based Transformation” with their fourth Knowledge Management Award.

So zealous is E-Land about the role of information capital and knowledge in its strategic success that the company has spread its message to hundreds of South Korean companies through lectures at business conferences. Twice, representatives of the company have even been invited by the Blue House (the office of South Korea’s president, Roh Moo-hyun) to deliver lectures on how knowledge management, based on the BSC framework, can be implemented within government organizations. As BSC Program Manager Kim observes, the BSC is not merely a system, but a “core management competency” at E-Land. This powerful management discipline will no doubt help propel the organization to even greater heights—demonstrating the value of human knowledge in strategic success, even for a product as tangible as clothing. 1

Karl Erik Sveiby, The New Organizational Wealth: Managing and Measuring Knowledge-Based Assets (Berrett-Koehler, 1997).

2

Not to be confused with constraint theory, which relates to the mathematics of engineering shortcuts in working through permutations that involve many variables to avoid computational dead-ends. Goldratt’s theory of constraint concerns an overall framework for helping businesses identify practical solutions to change. Goldratt also offers specific ideas about how manufacturers can apply his principles to solve production problems.

3

Based on the July 14, 2005 exchange rate of 1,031 KRW = 1 USD.

2000: Korea Ratings selects E-Land as a member of the “Clean Company Club,” based on its sterling restructuring practices. In addition, Maeil Economic Daily and Booz Allen honor E-Land’s “good KM start” with their second Knowledge Management Award. 2001: The Economist bestows its CFO Asia Best Practices Award in Turnaround Management on E-Land. The company also wins the New Millennium

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© 2005 by Harvard Business School Publishing and Balanced Scorecard Collaborative, a Palladium company

Balanced Scorecard Hall of Fame Profile: E-Land Group

KEY RESULTS • From 1998 to 2004, E-Land Group revenues more than doubled, hitting approximately $2 billion. • In that same period, net profit after taxes increased thirtyfold, to $276.4 million. • Employee satisfaction has increased substantially. On a scale of 1 to 10, it rose from 5.5 in 1999 to 7.4 in 2004. • Since implementing the BSC, E-Land continues to capture numerous honors from leading economic publications (including The Economist, Forbes, Korea Economic Daily, and Maeil Economic Daily), industry associations (such as the Korea Management Association and the Federation of Korean Industries) and the government. It is most often recognized for its excellence in knowledge management. • The South Korean president has invited E-Land executives to give lectures on how knowledge management and the Balanced Scorecard can be used in government organizations. • By encouraging the achievement of seemingly impossible goals—and rewarding the results— E-Land empowers employees and encourages a performance-oriented, innovative culture.

TAKEAWAYS • A pilot program is a good way to begin adopting the BSC, particularly for large organizations. It helps prove the value of the BSC methodology, thus quelling the objections of naysayers, and allows companies to iron out any implementation problems. • Transparency is paramount. When you give employees a view of company performance, you help them understand their connection to corporate performance and strategy. When you show them cause-and-effect, they learn to apply it in their own role. They also become more invested in outcomes. By publicizing and rewarding success, you encourage problem solving and innovation by all. • Rigorous processes and systems that contain feedback mechanisms help ensure the organization adapts to market forces and internal change. • Recognition is just as important as cash compensation in motivating employees. • Realize the importance of continual organizational learning to strategy execution. • Even in more traditional industries such as manufacturing and retailing, intangible assets— human and information capital—provide the competitive edge.

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Balanced Scorecard Hall of Fame Profile: E-Land Group

SFO SPOTLIGHT All Balanced Scorecard Hall of Fame organizations exemplify the five principles of the Strategy-Focused Organization. E-Land Group is especially noteworthy as an exemplar of the following SFO best practices: • Case for change clearly articulated: In the wake of the late 1990s financial crisis in Asia, E-Land executives recognized the urgent need for a new strategy—and a system with which to implement it. Moreover, E-Land’s scale now posed a greater challenge to the company in adapting readily to the volatility of the retail market. E-Land required new, more rigorous processes by which to gauge change, overcome production and other operational problems, reach new levels of performance, and leverage unit successes enterprisewide. [Principle #1: Mobilize Change Through Executive Leadership]

• Vision and strategy clarified: E-Land executives realized that cost cutting could not be a path to sustaining performance in the new business environment. Chairman Park Sung-soo understood that harnessing and disseminating employee knowledge and promoting best practices could be the means of achieving a strategy of operational excellence and innovation—and a high-performance culture. [Mobilize principle] • Strategy map developed and Balanced Scorecard created: Recognizing the hurdles to manager buy-in (weariness from job pressures, employees’ apprehension about being measured), E-Land piloted the BSC at two SBUs in succession. An in-house task force from Group headquarters has helped all the SBU teams build their strategy maps and BSCs. Objectives, measures, and initiatives are reviewed monthly and annually at all levels and revised as necessary. With the shift in strategy from operational excellence (1998 to 2001) to customer value (2001 to the present), some 30% to 40% of the corporation’s key performance indicators have changed. [Principle #2: Translate the Strategy into Operational Terms] • Targets established: Targets are monitored monthly and revised, as needed, every year. As part of its eight-step annual planning process, E-Land performs two types of analysis—horizon and brand life cycle—from which it repositions each brand. Brand maturity governs target setting. For example, executives project slower growth at a more mature product line, and thus lower the line’s targets accordingly. [Translate principle] • Corporate role defined: E-Land Group headquarters sponsored the BSC program from its inception and carefully designed an implementation strategy to yield the greatest buy-in from the start. The company provided internal consulting resources through a task force to help SBU executives design strategy maps and BSCs, and to this day oversees and coordinates all strategy review activities. Corporate also developed the knowledge management program, processes, and system, which are used uniformly by all SBUs. [Principle #3: Align the Organization to the Strategy]

• Corporate– SBUs aligned: Through intensive monthly meetings, E-Land Group executives monitor the progress and strategic alignment of all SBUs. The annual planning processes represent another way in which SBUs stay in sync with corporate’s overall strategic goals. [Align principle]

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Balanced Scorecard Hall of Fame Profile: E-Land Group

SFO SPOTLIGHT • Strategic awareness created: Instead of a traditional campaign to inform employees about the strategy, E-Land takes a more action-oriented approach to inculcating strategic awareness. Transparency about company performance is a major factor in fostering awareness. For example, early on, employees were wary about being measured on their unit productivity; but upon seeing the figures alongside the negative company financials, they understood the need for budget cutbacks and the link between individual productivity and company performance. E-Land widely publicizes success stories within the corporate family as a way of promoting innovative, creative thinking by employees that yields strategic results. The company also communicates the strategy by routinely involving employees in corporate and SBU strategic evaluation meetings. Best-practice sharing validates the effectiveness of the strategy, which, in turn, enhances employees’ strategic orientation and understanding. [Principle #4: Motivate to Make Strategy Everyone’s Job]

• Personal goals aligned: Each employee has a customized program by which he or she is aligned to the company strategy. This includes an action plan, objectives, targets, and a timetable. [Motivate principle] • Personal incentives aligned: To secure early buy-in, the company rewarded employees at the two units that piloted the scorecard with bonuses for exceeding targets. Executive compensation has been linked to the BSC from the time each unit’s BSC was launched. But the enterprise waited until 2002 before formally tying non-executive incentive compensation to the BSC. Executives wanted to be sure BSCs contained the right objectives and measures, and that they were weighting nonfinancial measures appropriately. Awards and recognition play an equally important role in incentivizing individual performance. Individual successes are widely touted through the knowledge management system, and prestigious Knowledge Awards honor important employee and team contributions. [Motivate principle] • Competency development aligned: Every employee has an individual knowledge list consisting of his or her strategic goals and an action plan and timeframe for achieving them, along with measures. Plans and their results are entered into the knowledge management system, which is shared by all SBUs and visible to all E-Land employees. By using the BSC to pinpoint performance gaps, tasking employees to devise solutions, and publicly recognizing those employees, E-Land has promoted a culture of knowledge sharing and problem solving— thus boosting employee competency on an ongoing basis. [Motivate principle] • Strategic review meetings conducted: E-Land’s extensive, almost exhaustive, strategic checks-and-balances involve a variety of regular strategy and BSC reviews in which all employees participate. These include monthly team, SBU, and Group-level meetings in which performance against objectives is scrutinized, objective and targets amended (if necessary), progress on initiatives evaluated, and successes and failures studied. Every year, E-Land conducts an eight-step assessment that combines BSC evaluation with scenario planning, brand and market analysis, and general strategic planning. [Principle #5: Govern to Make Strategy a Continual Process]

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© 2005 by Harvard Business School Publishing and Balanced Scorecard Collaborative, a Palladium company

Balanced Scorecard Hall of Fame Profile: E-Land Group

SFO SPOTLIGHT • Knowledge sharing linked to strategy: Knowledge sharing is both art and science at E-Land, with multiple processes dedicated to capturing and disseminating employee knowledge and best practices to leverage success. Employees’ own action plans and performance results are entered into the knowledge management system, which is accessible to all. The Knowledge Asset Monitor is used by business unit executives to assess process infrastructure and competencies, and to further apply this information to set mid- to long-range corporate strategy. Knowledge trees and templates are used throughout the enterprise. The ultimate recognition is the Knowledge Award, given out annually to teams and individuals. At the semi-annual Knowledge Festival, employees convene to exchange ideas and compete for the coveted annual award. [Govern principle] • Strategy management office established: Through the roles of the corporate-level chief strategy officer (CSO) and chief knowledge officer (CKO), E-Land has institutionalized a strategy management process that encompasses the entire organization. The CSO and CKO coordinate the BSC, administer performance review, and oversee alignment, all with the partnership of other top executives. Strategy is reviewed and revised regularly as conditions dictate, and objectives, measures, and targets are adjusted accordingly. A rigorous strategic planning process is undertaken every year. [Govern principle]

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© 2005 by Harvard Business School Publishing and Balanced Scorecard Collaborative, a Palladium company

Balanced Scorecard Hall of Fame Profile: E-Land Group

THE E-LAND CO., LTD. STRATEGY MAP

Improve corporate value

Financial Perspective

Increase customer satisfaction

Customer Perspective

Build brand image

Internal Perspective

Manage customer information channels*

Successfully launch new brands

Create satisfying shopping environment

Create positive buying experience

Keep consistent quality level

Develop on-target products

Manage marketing productivity

Manage customer loyalty

Maintain defective goods prevention process

Shorten production lead-time

Customer relationship

Learning & Growth Perspective

Manage financial resource productivity

Improve brand value

Provide easy access to information

Make access to stores easy

Develop new channels

Manage core suppliers

Build nice shopping environment

Enter core business area

Manage store productivity

Supply high-quality service

Maintain product display for easy selection

Continously renew and redesign store interiors

Standardize service

Operational excellence to support customer value

Acquire core knowledge and share information

Develop pool of management candidates

Issue rewards and incentives for employee expertise

Employee satisfaction and growth * Information sources such as a Gallup survey or preseason product show

Strategy map of E-Land Co., Ltd., E-Land Group’s oldest casual-clothing unit and first BSC adopter.

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© 2005 by Harvard Business School Publishing and Balanced Scorecard Collaborative, a Palladium company

Balanced Scorecard Hall of Fame Profile: E-Land Group

TO LEARN MORE Editorial Advisers

To learn more about E-Land and its Balanced Scorecard program, see:

Robert S. Kaplan Professor, Harvard Business School

• Balanced Scorecard Hall of Fame Report 2005, which features a profile on E-Land and the 17 other Hall of Fame inductees from 2004 (Product #9157).

David P. Norton President, Balanced Scorecard Collaborative

• The Balanced Scorecard Report article “Integrating Knowledge Management with the BSC at E-Land Group,” by Lauren Keller Johnson, Contributing Writer (with James Creelman), BSR September–October 2005 (Reprint #B0509B).

Robert L. Howie Jr. SVP, Balanced Scorecard Collaborative

• The BSC library: BSC portal members with access to the library can search the keyword “E-Land” for a complete list of resources, including conference presentations and executive video interviews. (For information on becoming a BSC Portal member, go to www.bscol.com.) • Web site: www.eland.co.kr

Edward D. Crowley Executive Director–HBR Specialty Publications Publisher

Director of Research Randall H. Russell Balanced Scorecard Collaborative Editor Janice Koch Balanced Scorecard Collaborative Writers Lauren Keller Johnson James Creelman Design Robert B. Levers About Balanced Scorecard Collaborative

ADDITIONAL RESOURCES • For more information on the StrategyFocused Organization (SFO) principles, visit BSC Online. Membership is free. Go to www.bscol.com/bsc_online. • For additional guidance on the SFO principles, and to learn about best practices in use at other organizations that have successfully executed strategy, go to www.bscol.com/toolkits. Here, you’ll find many resources available for purchase, including Strategy Execution Toolkits. • For access to the largest compilation of published materials on the Balanced Scorecard and the Strategy-Focused Organization, visit www.sfo.harvardbusinessonline.org.

Balanced Scorecard Collaborative (BSCol), a Palladium company, is a global family of professional service firms that helps clients use the Balanced Scorecard to successfully execute strategy. BSCol offers a wide range of services, including education (conferences, publications, research), training (public seminars, in-house, online), consulting (strategy, performance, change), and technology (“BSC Portal™,” “BSC First Report™,” toolkits). To learn more, visit www.bscol.com, or call 781.259.3737. About Harvard Business School Publishing Harvard Business School Publishing is a not-for-profit, wholly owned subsidiary of Harvard University. The mission of Harvard Business School Publishing is to improve the practice of management and its impact on a changing world. We collaborate to create products and services in the media that best serve our customers—individuals and organizations that believe in the power of ideas. Ordering Information To order additional copies of this profile (in print or by download), call HBSP at 1-800-668-6705 (617-783-7474 outside the U.S.) and request product #124X or visit www.sfo.harvardbusinessonline.org and insert the product number into the search field, or type in “Hall of Fame.” Here you’ll find a list of all available Hall of Fame profiles and other products for the Strategy-Focused Organization. © 2005 by Harvard Business School Publishing and Balanced Scorecard Collaborative, a Palladium company. Quotation is not permitted. Material may not be reproduced in whole or in part in any form whatsoever without permission from the publisher. Balanced Scorecard Hall of Fame for Executing Strategy™ and Balanced Scorecard Hall of Fame Profiles™ are trademarks of Balanced Scorecard Collaborative. The trademarks referenced in this publication are the property of their respective owners.

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© 2005 by Harvard Business School Publishing and Balanced Scorecard Collaborative, a Palladium company

TRANSLATE STRATEGY INTO ACTION WITH THE BALANCED SCORECARD REPORT The ability to execute strategy is the most important capability an organization needs to quickly adapt and thrive in today’s global economy. But implementing strategy may be the single most difficult task you face. For twelve years, Strategy-Focused Organizations like Motorola, Hilton Hotels, Equifax, Thomson Financial, Siemens, and literally thousands of others have been using the Balanced Scorecard to transform strategy into action. Now you too can benefit from an invaluable tool that’s helping companies around the world get the most from their Balanced Scorecards—the Balanced Scorecard Report newsletter. Every issue is packed with the latest thinking of BSC founders Robert Kaplan and David Norton and their five principles of the Strategy-Focused Organization—principles that can help you translate ideas into action— MOBILIZE change through executive leadership TRANSLATE the strategy into operational terms ALIGN the organization to the strategy MOTIVATE to make strategy everyone’s job GOVERN to make strategy a continual process Each bimonthly issue of Balanced Scorecard Report takes you behind the scenes through case studies of actual BSC implementations. These case studies showcase organizations that have achieved tremendous results with the BSC and will help speed your own BSC program.

The Balanced Scorecard Report is a resource you’ll return to again and again—subscribe today.

1-800-668-6705 bsr.harvardbusinessonline.org

The Balanced Scorecard Hall of Fame™ Profile Series Learn how each of these Balanced Scorecard Hall of Fame organizations became strategy-focused. Each individual profile provides a source of information on how to “do it right”, including a profile narrative, StrategyFocused Organization spotlight best practices, key results and takeaways.

Chrysler Group City of Charlotte Crown Castle International Economic Development Administration (U.S. Department of Commerce) Hilton Hotels Media General Mellon Europe Mobistar Motorola’s Government and Enterprise Mobility Solutions Royal Canadian Mounted Police Tennessee Valley Authority Unibanco U.S. Army To learn more visit: www.sfo.harvardbusinessonline.org or call 1-800-668-6705 (617-783-7474 outside U.S.)

HARVARD BUSINESS SCHOOL PUBLISHING

Product Number 124X