One of the keys to achieving improved business performance and organizational success is having the ability to design and monitor the right and appropriate performance metrics capable of giving insights into the operations of the business.
The balanced scorecard, one of the most popular strategic performance management tools used by many organizations to monitor business performance has had both its success and failure stories. Focusing on four perspectives – Financial, Customer, Internal Business Processes and Learning and Growth, the model is widely used to choose measures and targets to track.
Formulating a business strategy is one thing and implementing a successful one another thing. For the process to be successful, there is need to cascade and link performance measures on individuals. Cascading strategy using one of the performance management tools – the Strategy Map, helps identify the cause-and-effect relationships that exist between higher and lower level strategic objectives. Managers must be aware and understand the benefits that derive from using a strategy map to communicate strategy enterprise-wide.
This is where the balanced scorecard falls short. The model’s main focus on placing measures under the four perspectives fails to show the cause-and-effect thinking and hence the drivers of business performance. By adopting the use of the strategy maps, the organization is able to identify and evaluate various drivers of business performance which in turn enables business process improvement initiatives to be implemented.
The following are key to cascading and linking performance measures on individuals:
1. Communicate the strategy down the organizational hierarchy: Managers and employees at lower levels of the hierarchy need to be aware of the strategic objectives of the organization and how they are expected to contribute towards the achievement of those targets. The key is breaking down the corporate strategy into operational objectives, measures and targets that link back to the corporate measures. Communicating strategy enterprisewide, also allows for functional co-ordination and reduction of duplication of effort and resources.
2. Always ask the right questions: Strategy Mapping is all about identifying and evaluating the cause-and-effect relationships that exist within business processes and functional objectives. Unlike the balanced scorecard which answers the WHAT question of measures to monitor under each perspective, cascading strategy answers the WHAT, WHY, HOW and WHO questions. For example, if one of the goals is ‘improving sales revenue’, adopting the cause-and-effect thinking will help you ask and find solutions to questions like:
• What is the goal?
• Why is this necessary?
• How are we going to achieve that?
• Who needs to be part of the team?
By asking more questions, this will help you identify individuals and organizational functions that need to work together to meet the chosen targets and goals.
3. Engage people: By engaging people and asking them for their contribution, the probability of getting buy-in is high. Successful strategy execution involves team work. Engagement is also necessary for informing employees the benefits that will derive from cascading and linking performance measures and the risks of not doing so either. When there is buy-in, it makes the process less prone to resistance leading to wider achievement of the objectives.
4. Establish Accountability: There should be ownership of cascaded measures and objectives at different levels of the organization. The person charged with this responsibility should act as the agent of change, linking his function/team with other organizational teams/functions. Establishing accountability also enhances feedback, recognition of the system and communication of results regularly.
5. Review and Control Performance: There is need to regularly monitor the performance of the strategy mapping process to establish whether strategic goals and objectives are being met. If not, such a formal review will help you develop and implement corrective measures.