September-October 2004
level scorecard through strategic
Alignment at Tata Motors'
Commercial Vehicle
Business Unit
By Lauren Keller Johnson, Contributing
How did India's largest commercial vehicle maker turn a
$108.62 million loss into a $107 million profit in just two
years -as well as win entry into the Balanced Scorecard Hall
of Fame? By aligning every manager and employee securely
behind a radical new corporate strategy.
Tata Motors' Commercial Vehicle
'" Business Unit (CVBU) is India's
largest manufacturer of trucks,
tractor-trailers, buses, off-road
vehicles, and defense vehicles.
One of the 10 most successful
commercial vehicle manufacturers
worldwide, CVBU sells to more
than 70 nations. In fiscal year
2002-2003, the division accounted
for a whopping 600/0of Tata
Motors' inventory turnover.
But in 2000, things didn't look so
rosy. That year, CVBU logged the
first loss in its 50-plus years -
.;
to the tune of $108.62 million.
Ravi Kant, CVBU's executive
director (the equivalent of CEO),
laid out an aggressive new plan
to reverse the slide. The plan
called for serious cost cutting
across unit operations and more
effective strategic planning and
execution. The division decided
to adopt the Balanced Scorecard
as a key tool in these efforts. As
K.C. Girotra, general manager
of CVBU's Lucknow plant and
an early leader of the scorecard
initiative, explains, "The BSC built
naturally on our company's use of
SQDCM [safety, quality, delivery,
cost, and morale], a methodology
that [Daimler] Chrysler uses and
that we adopted in 1997. With its
emphasis on cause-and-effect
linkages among the various per-
spectives, the scorecard promised
to help us achieve even better
results than what we had
obtained so far with SQDCM."
To attain those results, the divi-
sion's executives knew they had
'\
Writer
to achieve enterprisewide align-
ment. To that end, they assembled
a high-level steering committee
comprising cross-functional heads
and other key officers, such as
the regional sales managers, who
reported to Kant. This committee
then appointed a core scorecard
team of five individuals to work
with the steering committee to
build and deploy the corporate
strategy map and scorecard. Both
teams committed to monthly
meetings, where they reviewed
progress, prioritized objectives
for strategic business units, and
allocated resources to the most
vital objectives and initiatives.
As another step in securing hori-
zontal alignment, senior leaders
also defined new cross-functional
responsibilities for themselves.
For instance, while one plant
manager was given ownership
of the objective of driving cost
reduction across CVBU, another
became accountable for imple-
menting quality improvement
strategies across the organization.
The division's approach to
cascading the scorecard to secure
vertical alignment has proved
just as thorough as its horizontal-
alignment efforts. Once the
corporate BSC was finalized,
the scorecard team shared it with
the heads of CVBU's strategic
business units, helping them
develop their own strategy maps
and scorecards, and populate
them with appropriate objectives
and initiatives. Each cascaded
scorecard is linked to the high-
objec;tives. But the steering com-
mittee and scorecard team didn't
mandate objectives to SBU lead-
ers. Rather, they challenged each
reporting organization to define
strategies that would best enable
it to support CVBU's targets.
This technique yielded several
important benefits. It encouraged
second-tier managers to clearly
visualize the larger organization's
desired future direction and align
their own strategiesand supporting
initiatives behind it. It also fostered
a sense of ownership and account-
ability among these leaders. Lower-
level managers understood that
they had latitude in determining
how to achieve results, rather
than receiving mandates from
top executives. And it resulted in
cascaded scorecards that supported
CVBU's high-level strategy in
unique ways.
To illustrate, consider CVBU's
internal process objective
"Enhance product and service
quality levels." (See Figure 1, next
page.) This corporate-level objective
shows up in the company's
]amshedpur manufacturing plant's
strategy map in two process
objectives: "Quality and consistency"
and "Ensure new products adhere
to cost, time, and quality targets."
In the Sales and Marketing map,
the supporting objective is "Install
sales process to all dealerships."
In addition, CVBU executives
realized that although cascaded
maps should be based on higher-
level maps and contain the same
perspectives, "local tailoring"
was essential. While the Sales
and Marketing map contains the
same four perspectives as the
CVBU map, it is geared toward
supporting the growth aspect of
CVBU's strategy rather than the
cost-containment aspect. Such
customizing helps to ensure that
the business units make the best
use of their strengths to support
high-level strategic objectives.
 Balanced Scorecard
Figure 1. Linking CascadedScorecardsto the Corporate Strategy
16' '" tii, I
CVBU uses several approaches
to secure vertical alignment down
to the employee level. At annual
"town hall" meetings at each
plant, Kant communicates the
division's mission, vision, values,
and strategy. He then invites
employees to ask questions. "At
these meetings," Girotra says, "we
might see workmen standing up
and asking things like, 'Why are
we making more fully built vehi-
cles now and fewer chassis that
can be custom-built into buses or
other vehicle types?'" Answers to
such questions (in this case,
because the customized-chassis
approach had caused serious.
delays for companies that selected its alignment efforts by sharing
this option) deepen employees'
understanding of the corporate
strategy and their role in executing
it. CVBU also uses surveys to
assessemployees' strategic under-
standing and has defined major
performing areas (MPAs) for
each manager and employee that
tie directly to the person's depart-
ment scorecard. For example, a
sales and marketing manager's
MPAs might include conducting
product demonstrations in northern Our hope is that these partners
India for particular product models,
increasing market share for the
pickup truck segment in India,
and creating model dealerships
in a specific region of India. .
To subscribe to Balanced Scorecard Report, call 800.668.6705.Outside the U.S.,call 617.783.7474.bsr.harvardbusinessonline.org
I..~I
Report
industry at times. For example,
when National Thermal Power, a
major utilities company in India,
heard about CVBU's scorecard
experience and expressed curiosity
about it, the division invited NTP
representatives to come learn
more. CVBU's scorecard team
members have also visited other
(i';;O., companies to explain the benefits
...
",...~'"'1~
-",...",.~. of using the BSC. According to
Girotra, "We've made a commitment
to sharing our scorecardexperience,
even with a competitor."
Manufacturing
balanced
scorecard Though CVBU has just a few
years of scorecard work under
its belt, its efforts seem to be
generating positive results
already. For example, in just two
Compensation is tied to perform- years, its $108.62 million loss
ance on MPAs. turned into a $107 million profit
-due in large part to execution
In cascading and integrating its
of the cost-cutting component of
BSC initiative, CVBU demonstrated
the division's new strategy. And
the power of both vertical and
revenues have grown 40% in the
horizontal alignment for organiza-
last two years -at least double
tions seeking to execute corporate
what CVBU's nearest competitor
strategy. In Girotra's words, "We
has achieved. 8
are a large organization. With
26,000 employees, more than 100 Reprint #BO409E
independently owned dealerships,
three large manufacturing plants,
and 200 different products, we
had to ensure strong alignment
both up and down as well as
across the division."
The division has recently extended
its scorecard experiences and
results with partners outside CVBU's
boundaries -such as its inde-
pendent dealers, vendors, vehicle
service stations, and joint-venture
collaborators. As Girotra explains,
"We want them to know the
benefits we've gained from the
scorecard, including increased
customer focus, improved
processes, and understanding of
cause-and-effect relationships.
will also start using the scorecard,
which would enable the whole
system to improve." \,..,
.This expanding of alignment
reaches even beyond CVBU's