Initially developed as a performance measurement system, the Balanced Scorecard has now become one of the most popular management tools used to align and focus the entire organization on implementing and improving its strategy. It doesn’t matter how good your company’s strategy is. As long as the employees across the organization do not broadly understand the senior executive’s strategy proposition and how they intend to drive the company to the next level, the strategy becomes completely useless. Employees must pursue goals that are consistent with, and lead to, the achievement of the organization’s strategy.
Once the organization has developed and defined its strategy, it needs to communicate it to build organizational alignment. Everyone in the organization needs to have a clearer understanding of the objectives and measures that make up the corporate scorecard and how their specific actions are making a difference and helping the company achieve its strategic objectives. Just because you have developed the Balanced Scorecard for your organization does not mean that you will automatically outperform your rivals.
The Corporate Scorecard needs cascading or driving down to the lower levels of the organization i.e. developing scorecards at each and every level of the organization. If value is to be derived from this cascading process it is important that all the business unit, departmental, team or personal scorecards developed link back to the overall objectives of the organization. It is this clear line of sight from strategic to operational to tactical decisions that creates alignment and drives execution.
Evidence has shown that unclear goals and objectives and lack of alignment of goals often lead to work complexity and poor execution. A great way to visually communicate how different parts of an organization’s strategy relate to each other is with strategy maps. These are visual displays of an organization’s strategy and objectives. One of the benefits of using the strategy map to communicate and align corporate strategy is that it allows employees to quickly identify the relationships between strategic, business unit, departmental, team and personal objectives and how metrics impact performance directly and indirectly.
When asked these questions, leaders should be able to answer them convincingly:
- Are goals publicly known and communicated broadly across the organization?
- Does your organization have clear alignment of goals from top to bottom?
- Do people at every level of the organization know how their daily operations contribute to the successful execution of the company’s strategy?
- Do people across the organization have the relevant information for their specific role to make well-informed decisions, when and where they need to make them?
- Do people across the organization have dashboards and scorecards in their everyday work environments that provide them with personal, team and or group performance?
Unfortunately, in many organizations the answers to these questions is no. Employees have very little knowledge of how what they are doing directly or indirectly impacts overall performance of the organization. This is a bit worrying because in today’s knowledge economy, employees possess vast amounts of knowledge and can easily move with it anywhere. These employees are seeking meaning and contribution in the workplace. Apart from earning monetary rewards, they also want to be seen as adding value. The lack of alignment between personal objectives and corporate strategy obscures the hope of finding this true meaning and contribution in the workplace.
By cascading the Balanced Scorecard to the lower levels of the organization, business leaders are able to demonstrate to employees that what they are doing is indeed critical to the overall success of the organization and this alignment of metrics effectively leads to intelligent execution that is aligned to the overall company objectives. This is so because important business information is distributed across the organization in ways that are significant for individuals based on their roles and responsibilities.
Because the cascading process aligns employee actions and strategy, organizations that have successfully aligned their employee’s activities with the organization’s strategy have realized improved results and outperformed their rivals. Employees in these organizations are able to answer this critical question, “How do I add value and make a meaningful contribution to our success?”
Cascaded successfully, the Balanced Scorecard and cascading scorecards create a monitoring environment that is horizontally and vertically aligned with your organization.