TagStrategy Alignment

Why You Need a Strategy Map

Rated as one of the most popular management tools, the balanced scorecard has been in use for more than two decades and the benefits gained by organizations that use the tool are widely evident. Initially designed as a measurement tool, the balance scorecard has transitioned into a useful strategic management tool.

Over the years, organizations that have adopted the balanced scorecard have managed to effectively measure performance and implement their strategies successfully.

In many organizations, very few employees have knowledge of the strategy being pursued. How is it possible then to effectively execute strategy if the very people charged with the responsibility of implementing it do not even understand it?

Without a complete description of strategy, it is very difficult for executives to easily communicate the strategy among themselves or to their employees. Furthermore, if there is no shared understanding of the strategy, it is also difficult for the executives to create alignment around it.

This lack of alignment often impedes successful strategy execution.

Strategy execution is far more important than strategy formulation. Working in harmony with the BSC, the strategy map helps executives to communicate the organization’s strategy clearly and briefly to all the stakeholders and execute it successfully.

It is therefore imperative for executives to understand strategy and be able to bring clarity to everyone in the organization that is charged with carrying it out.

For any strategy to be effective, it must contain descriptions of financial aspirations, market to be served, processes to be excelled in and the people who will be responsible for carrying it out. The strategy map achieves this. It provides the visual framework that integrates the organization’s objectives into the four perspectives of the BSC.

Furthermore, the strategy map helps you determine what you must do well in each of the BSC perspectives in order to successfully execute your strategy. It helps you describe your strategy in a uniform and consistent way that enables objectives and measures to be established and managed.

In other words, the strategy map provides the missing link between strategy formation and strategy execution. It illustrates the cause-and-effect relationships that link desired outcomes in the customer and financial perspectives to outstanding performance in critical internal processes.

So how can you successfully develop your strategy map? One important aspect to consider when building a strategy map and BSC measures is how many and which perspective you will choose. Depending on the nature of your organization it might be worthwhile for you to consider additional perspective to the four original perspectives – Financial, Customer, Internal Processes and Employee Learning and Growth.

Additional perspectives might be in the areas of innovation, R&D, environment, suppliers, CSR and governance. When choosing the perspectives of your strategy map and BSC it is important to ensure that your chosen perspectives communicate the complete story of your strategy and create a competitive advantage for your organization.

It is also important to capture the key stakeholders contributing to your organization’s success. However, take note that you do not need to include every possible contributor otherwise your map will become cluttered.

Since the main purpose of the strategy map and the BSC is to communicate clearly and briefly the organization’s key drivers, it is important that you select the perspectives that enable you to capture the organization’s key stakeholders and describe how you are going to serve each of them and thereby successfully implement your strategy.

Questions such as – What value propositions will ensure that our customers are satisfied and remain loyal? What processes must we excel at in order to drive this customer valued proposition, and what competences must our employees possess? – will help you develop a strategy map and BSC that clearly communicates your strategy and demonstrate how you plan to execute that strategy.

The success and credibility of your strategy map and BSC also depends on the pool of information used to develop them. You need to gather and review as much background material as you can find for each perspective.

Sources of material that can be used to gather information include annual reports, the organization’s mission statement, strategic plan, project plans, competitor data, analyst reports, benchmarking reports, trade journals and news articles. Since the sources of information vary, it is critical to ensure that the source documents provide a single view of your organization’s mission, core values, vision and strategies. Any discrepancies identified should be resolved.

To sum up, the strategy map is a one-page graphical representation of what you must do well in each of the four BSC perspectives in order to effectively execute your strategy. It helps you outline the critical objectives necessary for the success of your organization.

Remember, the essence of strategy is doing different things than your rivals to create value. Therefore, avoid copying the objectives and metrics of your competitors as these may prove counterproductive to your efforts.

Rather, first determine your organization’s value proposition and then seek to all value chain processes because it is the determination of the key drivers of your own organization that differentiates you from your rivals.

Cascading the Balanced Scorecard to Build Alignment

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.

 

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