The strategy focused organization how balanced scorecard companies thrive

The strategy focused organization how balanced scorecard companies thrive

Роберт Каплан, Дэвид Нортон

Организация, ориентированная на стратегию

The Strategy-Focused Organization: How Balanced Scorecard Companies Thrive in the New Business Environment

Robert S. Kaplan, David P. Norton

В индустриальную эпоху стоимость компании создавалась по большей части за счет материальных активов, превращения сырья в конечный продукт. Но лишь за десятилетие с 1982 по 1992 год доля балансовой стоимости, созданной таким образом, в рыночной стоимости компаний снизилась почти вдвое – с 62 до 38 %. И уже тогда ей пророчили лишь 10–15 % к концу XX века.

В информационную эпоху залогом успеха стало управление стратегиями, которые базируются на нематериальных активах: взаимоотношениях с клиентами, инновационных продуктах и услугах, высокоэффективных оперативных процессах, информационных технологиях и базах данных, навыках и мотивации персонала.

Но оказалось, что прекрасно продуманной стратегии создания стоимости компании недостаточно. Гораздо важнее – способность ее реализовать. Именно здесь компании сталкиваются с наибольшими трудностями. Как заставить организацию действовать согласно стратегии, словно единый целеустремленный механизм? Дэвид Нортон и Роберт Каплан нашли ответы на эти вопросы.

Новые условия деятельности компаний в информационную эпоху, когда конкурентные преимущества в большей степени стали основываться на нематериальных активах, потребовали и новой системы оценки результатов. Еще в начале 1990-х авторы разработали для этого сбалансированную систему показателей, которая и стала ключом к созданию концепции стратегически ориентированной организации.

Опыт компаний, внедривших сбалансированную систему показателей, говорит о том, что она позволяет не только адекватно оценивать деятельность, но и воплощать в жизнь стратегические планы. А анализ этого опыта помог авторам вывести пять принципов стратегически ориентированной организации и понять, как именно использовать сбалансированную систему показателей для реализации этих принципов.

5 принципов стратегически ориентированной организации

Стратегия каждой компании уникальна и требует различных организационных изменений для ее реализации. Поэтому процесс создания стратегически ориентированной организации не универсален. Но в его центре всегда лежит стратегия.

1. Перевод стратегии на операционный уровень. Чтобы стать центральным звеном менеджмента, стратегия должна ясно и доходчиво информировать о поставленных целях и способах их достижения в контексте деятельности компании. Для этого общие стратегические положения должны быть переведены в цели, гипотезы, показатели и задачи.

2. Создание стратегического соответствия организации. Только совместная слаженная деятельность ведет к выдающимся результатам. Для этого стратегии множества разрозненных подразделений должны быть органично и действенно взаимосвязаны. А если речь идет о корпорации, то не для того ли она существует, чтобы создавать синергию своих составляющих?

3. Стратегия как повседневная работа каждого сотрудника. Стратегия должна реализовываться на всех организационных уровнях. Без активного участия каждого сотрудника этого не достичь. Но чтобы вносить вклад в общие усилия, во-первых, работник должен понимать стратегию и знать, как именно он может способствовать ее реализации на своем участке. Во-вторых, необходимо, чтобы он был заинтересован в достижении стратегических целей.

4. Стратегия как непрерывный процесс. Реализация стратегии – это не разовое мероприятие. И не стоит рассчитывать на успех, если обсуждение стратегии не включено в повестку ни одного совещания руководства. Реализация стратегии требует не только тактического, но и стратегического менеджмента.

5. Активизация изменений как результат активного руководства топ-менеджеров. Успешная реализация стратегии требует изменений во всех составляющих компании. Инициирование и координация этих изменений – задача тех, кто стоит у руля. Насколько они активны в этом, настолько изменения и произойдут. В частности, готовы ли они сами меняться?

Принцип 1. Перевод стратегии на операционный уровень

Стратегия – лишь один из этапов в непрерывной логической цепочке действий: от формулирования миссии до непосредственного ее воплощения исполнителями. Она представляет собой ряд взаимосвязанных гипотез, описывающих путь компании к будущей желаемой позиции. Следующий этап – перевод стратегии в действие. Для этого стратегия должна быть сформулирована и описана настолько доходчиво и понятно, насколько возможно. Система сбалансированных показателей и стратегическая карта – логический и всеобъемлющий способ формулирования стратегии в понятных терминах и причинно-следственных связях.

Сбалансированная система показателей переводит общие положения стратегии в цели и показатели, которые позволяют оценивать и анализировать процесс реализации стратегии. Стратегическая карта системы описывает гипотезы стратегии – логику причинно-следственных отношений между составляющими стратегии.

Архитектура стратегической карты и системы показателей (четыре составляющих)

Стратегическая карта формируется сверху вниз: от финансовой составляющей к составляющей обучения и роста.

Четыре взаимодополняющих стратегических направления

Стратегическая карта описывает, как стратегические направления задействованы в контексте каждой составляющей.

В коммерческих компаниях стратегия направлена на создание стоимости для акционеров. Она определяет одну доминирующую финансовую цель как долгосрочный критерий успеха: ROI, ROCE, EVA и т. п. В некоммерческих учреждениях ориентирована на клиентов или население.

Две основные финансовые стратегии:

Стратегия роста фокусируется на развитии новых источников доходов и прибыльности за счет:

• организации франчайзинга (новые источники дохода);

• увеличения потребительской ценности (повышение прибыльности существующих клиентов).

Стратегия эффективности направлена на сокращение затрат и повышение производительности за счет:

• улучшения структуры издержек (снижение удельных затрат);

• более эффективного использования активов (существующие активы, приростные инвестиции).

Стратегия эффективности дает результаты быстрее, чем стратегия роста. Но связь между финансовой составляющей и общей стратегией возникает только при балансе роста и эффективности.

Это сердцевина стратегии, которая формулирует предложение потребительской ценности за счет:

• Выбора целевых сегментов рынка. Выбор целевой аудитории, ассортимента продукции и потребностей клиентов, которые будут главными для компании, имеет решающее значение для стратегии. Но не менее важно и решение о том, что с другими сегментами рынка компания не будет развивать отношения. Именно целевые клиенты определяют показатели клиентской составляющей сбалансированной системы показателей.

• Способа выделиться на этих сегментах по сравнению с конкурентами.

The Strategy-Focused Organization

by Robert S. Kaplan and David P. Norton

In the following excerpt they tell how Mobil NAM&R applied the last of those principles—mobilizing leadership for change— in transforming the company from «an underperforming organization that was inwardly focused, bureaucratic, and ineffecient into the leader in its industry.»

Perhaps the most puzzling and problematic aspect of creating Strategy-Focused Organizations is how to sustain the effort. Many companies have managers who have read the articles and the books, attended the conferences and the seminars, and returned to their organizations to lead inspiring projects that developed wonderful, strategic Balanced Scorecards. But not all of these companies were able to sustain the energy to deliver the results we reported in Chapter 1. What helps to distinguish organizations that sustain their projects to breakthrough performance from those that tried it but never delivered the results?

When Bob McCool became head of Mobil NAM&R in 1992, he made it clear that the performance of the past was not acceptable; things had to change. Working with his leadership team, he developed a vision and a strategy for how these changes would be achieved. The Balanced Scorecard played an instrumental role in this process. While the pieces of the strategy existed, they were fragmented; some observers referred to it as «strategy du jour.» The Balanced Scorecard helped to make this a single, integrated strategy. Heads of shared service units—marketing, human resources, and information technology, among others—were included in the membership of the leadership team to ensure that information about customers, people, and technology were incorporated in the strategic thinking and planning. Several of these key ingredients had been lacking in past discussions. Accountability for pieces of the strategy was now clearly established within the team.

McCool and Brian Baker played central roles in communicating the new strategy and the Balanced Scorecard throughout the organization, devising new compensation systems linked to the scorecard and revising the planning and budgeting processes to support the strategy. They also reinforced the strategy and the scorecard at every opportunity, especially in their face-to-face meetings with employees and managers.

First Quarter, 1995
A critical incident occurred early in 1995 that revealed the commitment of the executive leadership team both to the new strategy and to the Balanced Scorecard. The winter (first quarter) of 1995 was unusually warm in North America. Sales of home heating oil and natural gas were below normal, and Mobil’s revenues fell far short of the budget. In April 1995, McCool led a meeting at headquarters to review the first quarter’s results. People entered the room trembling, as they knew that financial performance would be below expectations and that, in the past, poor financial results had led to people being fired. McCool opened his remarks by confirming people’s fears that the first quarter results had fallen far below plan. But he continued in an unexpected way:

From what I can see, we had a good quarter even though financial results were disappointing. The poor results were caused by unusually warm winter weather that depressed sales of natural gas and home heating oil. As you know, this is also the first quarter we are operating with the Balanced Scorecard, so I can see performance across a broader set of indicators. Market shares in our key customer segments were up. Refinery operating expenses were down. And the results from our employee-satisfaction survey were high. In all the areas we could control, we moved the needle in the right direction. We actually had a pretty good quarter. Keep up the good work.

The audience was stunned. Never before had a senior executive of the company congratulated and encouraged them after disappointing financial performance. But what had McCool seen? The poor financial performance was due to unusual external conditions that the employees could not control. The nonfinancial measures on the scorecard, which employees could influence and control, were all moving in favorable directions. McCool confirmed his belief in the strategy when he confidently told the employees to stay the course, to keep improving the performance driver measures on the scorecard. And his faith was soon confirmed: By the end of the year, Mobil had become the most profitable company in the industry.

Sustaining the Scorecard
Once the Balanced Scorecard had been installed at Mobil, it became the agenda for an annual meeting of the top 125 managers in January to discuss scorecard objectives, measures, and targets for the new year and to share best practices across the business units and shared service units. The meeting was called the «Balanced Scorecard Conference,» but, of course, the meeting was about the division’s strategy and its execution. When the major meeting of the Executive Leadership Team and senior managers is labeled the «Balanced Scorecard Conference,» managers throughout the organization don’t have any trouble interpreting the commitment of senior executives to using the scorecard to create the Strategy-Focused Organization.

The responsiveness of the new system to the evolution of the strategy can be powerful. Brian Baker described it this way: «I firmly believe that if I change one measure on my scorecard, change will happen.» Baker is saying that by changing a measure on the scorecard, 7,000 people become aware of it, their compensation will be affected by it, and millions of dollars of initiatives will be shifted by it. When the changes are integrated into the management system in this way, the change has been institutionalized.

The role of the Executive Leadership Team evolved over time. Bob McCool retired in 1996. Brian Baker was promoted from executive vice president to the head of NAM&R, and Baker further emphasized the use of the scorecard, ensuring continuity of direction. He maintained the use of the scorecard in discussions with business unit managers for compensation, for planning and budgeting, and for monthly management reviews, thereby reinforcing the central role of the scorecard in Mobil’s management system.

Inspired and dedicated middle managers can sustain quality improvements, local process improvements, and many other change programs. Middle managers can also implement programs that have been ordered from centralized corporate staff groups. But creating an entire organization that is aligned to and focused on the strategy requires the active and ongoing leadership of the senior executive team as occurred at Mobil. We are skeptical that significant results can be delivered with the Balanced Scorecard without such active leadership and ongoing reinforcement.

Mobil launched its Balanced Scorecard project in 1994. The following year, 1995, was the first in which Mobil operated with a scorecard. To expand on the results reported in Chapter 1, we collected data from the company for the five years from 1994 to 1998 (in late 1999, Mobil merged with Exxon to become ExxonMobil). Figure 2-10 shows the elements of Mobil’s dramatic turnaround to industry-leading profitability.

The productivity strategy created a 20-percent reduction in the cost of refining, marketing, and delivering a gallon of gasoline. Mobil produced the equivalent of about 12 billion gallons of gasoline per year, so that even small changes in operating costs per gallon had an enormous impact on the bottom line. Better utilization of existing assets created additional improvements in cash flow. The productivity strategy was accomplished using several key drivers:

None of this success would have occurred without a complete cultural shift at the grassroots of the organization. Annual human resource surveys showed that only 20 percent of the workforce understood Mobil’s strategy in 1994. By 1998, awareness and understanding exceeded 80 percent.

From The Strategy-Focused Organization

Excerpted from The Strategy-Focused Organization: How Balanced Scorecard Companies Thrive in the New Business Environment, HBS Press, 2000.

Kaplan, R. S. and D. P. Norton. 2001. The Strategy-Focused Organization: How Balanced Scorecard Companies Thrive in the New Business Environment. Boston, MA: Harvard Business School Press.

Summary by Abby Farrell
Bachelor of Accountancy Program
University of South Florida, Fall 2003

Chapter 1: Creating the Strategy-Focused Organization

Organizations today use decentralized business units that focus on intangible knowledge, capabilities, and relationships created by employees. Some organizations understand that strategy must become a continual and participative process. The change from centralized command, and financial measures that come from past actions can no longer measure the objectives that need to be addressed. We must measure the strategy and the best tool to implement such a practice is the balanced scorecard.

The Balanced Scorecard allows organizations to build a management system that manages strategy; a strategy-focused organization. Strategy means communicating in a way that everyone can understand a plan for success. Focused means navigation in the organization to align strategy, and organization means to mobilize all employees to act in different ways that will link together across the business. The Balanced Scorecard provides a framework to look at strategy from four different perspectives; Financial, Customer, Internal Business Processes, and Learning and Growth. It gives managers the accurate information to make important decisions that effect everyone in the company.

There are a handful of examples of organizations that have been successful in using the Balanced Scorecard, such as Mobil North America Marketing and Refining, CIGNA Property & Casualty Insurance, Brown & Root Energy Services, Rockwater Division, and Chemical (Chase) Retail Bank. All of the prior companies mentioned used the five principles of a strategy-focused organization:

1. Translate the strategy to operational terms,
2. Align the organizational strategy,
3. Make strategy everyone’s everyday job,
4. Make strategy a continual process, and
5. Mobilize through executive leadership.

These five principles help companies achieve such focus and alignment. The illustration below provides a graphic view of the ideas in this chapter.

Strategy Maps

A strategy map is a tool for translating strategy into operational terms as indicated in the graphic illustration above. Strategy maps, combined with balanced scorecards, provide a new framework for describing and implementing strategy. Kaplan and Norton define a strategy map as «a logical comprehensive architecture for describing strategy. It provides the foundation for designing a Balanced Scorecard that is the cornerstone of a strategic management system.» (p. 10). Several strategy maps are illustrated below.

Chapter 2: How Mobil Became a Strategy-Focused Organization

It all started with a desire for a 5% increase in ROCE (return on capital employed) and a way to plan : normal» productivity and growth. Mobil launched the Balanced Scorecard project in 1994. Bob McCool became CEO of NAM&R (Mobil North America Marketing and Refining) in 1992 and spotted a need for a new strategy that would improve the organization. They exercised the 5 principles of a Strategy-Focused organizations, and even beat the odds in an unfavorable market. They scrutinized the productivity and growth aspects. The productivity theme focused on cost reduction and asset intensity. The growth component focused on volume growth rate versus industry growth rate, and percentage of volume in premium grades.

They examined the customer perspective, dividing the consumers into 5 categories;

Road warriors (higher-income, middle-aged men), which made up 16% of sales,
True Blues (men and women who were loyal to a brand name),
Generation F3 (men and women constantly on the go) at 27%,
Homebodies at 21% (Housewives) and
Price Shoppers (are not loyal; looking for the lowest price) at 20%.

Mobil had to choose whom to cater to. They chose to cater to Road Warriors, True Blues, and Generation F3 to sustain premium prices and commodity products. Mobil identified attributes that should appear at all Mobil stations such as clean bathrooms, safe well-lit stations, and speedy purchases. They decided to have mystery shoppers evaluate the performance being followed by the employees. Mobil also started to focus on independent owners of the gasoline station. Mobil had not considered them as a component of strategy in the past. Mobil now decided to adopt objectives that would be profitable for both Mobil and the franchise operators.

Mobile started to develop win-win relationships with every aspect of the business they were involved in. They developed scorecard-building processes. Even the truck drivers who carried the gas were instructed to drive safer, be reliable, and be a ‘good neighbor’ (make sure everything in the station is safe). They were warned that mystery shoppers would inspect them as well. Unexpected feedback came from the truck drivers when they started calling with similar experiences, such as this one.

«You had better get someone from region up to this station fast. If a mystery shopper showed up there, the station would flunk and our ‘delight the consumer’ score would be destroyed. The Mobil sign is broken, half the lights are out, the restrooms are filthy, the convenience store is serving stale doughnuts, and running out of stock, and the employees are yelling at the customers. This is not the new Mobil strategy of ‘fast, friendly service.'»

This type of feedback helped the company clean up the areas of Mobil that were struggling with the new and improved concepts.

Another attribute, speedy purchase, caught the attention of a manager by the name of Joe Giordano. He conceptualized a simple device that allowed the customer the pleasure of not having to dig through their wallet or purse trying to find a credit card or cash to pay for gas. This device would attach to the key chain, and is now know as the Speedpass.

Chapter 3: Building Strategy Maps

«The key for implementing strategy is to have everyone in the organization clearly understand the underlying hypotheses, to align resources with the hypotheses, to test the hypotheses continually, and to adapt as required to real time.»

A strategy map makes the outcome more apparent to the users and helps the company build a cause-and-effect perspective. When looking at the financial portion of growth and productivity, it clarifies non-financial measures such as quality, improving the product, and availability. The BSC also improves indirect linkages to intangible assets. Kaplan and Norton continue to discuss the metaphoric recipe of intangible ingredients, such as skill, technology, and the environment internal processes that take place.

A mission is important not only to managers, but to everyone in the organization. Vision and strategy complement each other, but there needs to be a strategy in order for anything to be achieved. The BSC helps keep the organization focused on its strategy in making the vision a reality. These ideas are conveyed in the graphic illustration below.

There are four themes to provide a way to segment strategy:

Build the franchise,
Increase customer value,
Achieve operational excellence, and
Be a good corporate citizen.

It helps build long-term (build the franchise), mid-term (increase customer value), and short-term (operational excellence) cause-and-effect relationships. Revenue growth focuses on building strategy and increasing customer value while productivity is composed of improving cost structure and improving asset utilization. Product leadership, customer intimacy, and operational excellence are activities that lead to competitive advantages.

An example of a strategy map that had a vision is Store 24. It caters to teenagers and the store wanted to differentiate themselves from other stores by providing entertaining and unexpected fun during the shopping experience. They ensured this goal by investing in training for staff, and producing innovative new layouts to ban boredom while shopping. They reached their goal by creating a vision and compiling a strategy to achieve uniqueness in their industry. Store 24’s strategy map is represented in the graphic illustration below.

The BSC is a good indicator of success in a company because it identifies, and aligns the components in an organization together. Some strategies such as KPI (key performance indicators) and constituent/stakeholder scorecards may not lead to successful outcomes because they do not reflect the strategy of the organization. You can’t look at the scorecard and understand the strategy. BSC helps to adapt vision, strategy, and outcomes so that it is more conceivable to those who have to implement it. This idea is illustrated in the Generic Balanced Scorecard Strategy Map provided below.

Chapter 4: Building Strategy Maps in Private Sector Companies

This chapter illustrates how the strategy maps discussed in chapter 3 encourage operational excellence. The book gives a few examples of companies that were successful. The National Bank Online Financial Services (OFS) was one of the companies that knew they needed to communicate the strategy of setting goals to customers, managers, and employees, and they needed to focus on their internet service sector. In 1994, they had only 20,000 customers using OFS, and that jumped to 350,000 in just four years. They established a new goal: To reach their millionth customer using OFS by 2000. OFS set three themes:

1. To retain high-valued customers.
2. Increase revenue per customer.
3. Reduce cost per customer.

They focused on differentiating factors including speed, response, security, fair price, and reliability. As they communicated this through the OFS chain, they got feedback from everyone throughout the company, which helped build the Balanced Scorecard objectives. OFS also cross-sold new products through 3 rd party alliances via the internet, from flower for Mother’s Day, to carpet cleaner.

Other organizations discussed in this chapter include Fannie Mae, Nova Scotia Power, Inc., and AgriChem Manufacturing Industries. The chapter includes some rather involved strategy maps for Nations Bank’s online service, Fannie Mae and AgriChem. An adaptation of Fannie Mae’s strategy map appears below.

Chapter 5: Strategy Scorecards in Nonprofit, Government, and Health Care Organizations

Nonprofit and government agencies have trouble defining strategy. Using the BSC, they must change their focus from product leadership and customer intimacy to local processes and improvement. Unfortunately, many of these organizations use KPI (key performance indicators) scorecards as a guiding map instead of concentrating on the specific objectives.

These agencies had trouble with what goals to place at the top of their hierarchy. They chose both donor and recipients. The government agencies had 3 objectives; Cost incurred, value created and legitimizing support.

The city of Charlotte focused on a mission. «Community of choice for living, working and leisure activities.» They were unsure how to implement the strategy, but they came up with a plan that had 5 themes; Community safety, Transportation, City with in a city, Restructuring government, and Economic development, placing citizens at the top of their BSC (balanced scorecard).

Another example of a government agency is VBA (Veterans Benefit Admin). They also had 5 measures; Customer satisfaction (Veterans), Cost (taxpayer), Speed, Accuracy, and Employee development. Now these government agencies had a way to measure their performance.

DDT (Division in US Department of Transportation) was the first government agency to develop a BSC. They use to compare results with only speed processing but changed their objectives through the BSC and processing times have dropped, and customer satisfaction has increased.

Overall, the BSC helped all these organizations to highlight the importance of human resources mixed with their primary functions. It goes to show that the BSC is not just for companies but can also enhance performance for government agencies as well.

Chapter 6: Creating Business Unit Synergy

Organizations need to determine how to add value to their business so that the whole is greater than the sum of its parts, hence the term, synergy. For example, retailers and wholesalers should prefer to work with only 1 supplier because they receive benefits such as: Discounts in bulk purchases, and special prices and supplier attention.

There were many different case studies of synergy in organizations, and I will explain the case study of Charlotte, NC. The city manager, after developing a BSC (balanced scorecard), asked all the functional operating units to develop individual BSCs. For example, transportation, police stations, community development, etc. had to come up with their own measures of success. The transportation operating division added measures such as, ‘availability of safe, convenient transportation’ and ‘improve service quality.’ Such measures were incorporated into the departmental BSC of Charlotte, NC as well.

The police station worked hard on implementing their plans by revoking liquor licenses of alcoholic beverage outlets because of numerous nuisance complains, thus allowing other businesses to operate in the community. This was also a way to mitigate crime.

The city also developed cabinets, which consisted of department heads that could influence the strategic themes. The BSC brought these people together once a month to plan new initiatives to strengthen neighborhoods. For example, an important retailing giant packed up and left a local shopping mall, which raised important questions as to why they left.

BSC’s strategy for the customer-based units provide guidance to operating functional units.

Chapter 7: Creating Synergies through Shared Services

Creating a BSC for shared services should align strategy so they add value. They link shared service units with business units. The two models for developing shared serviced are:

The Strategic Partner Model which is a partner to the process of reflecting the strategy, and
The Business-in-a-Business Model, in which they view other business units as their customers.

Shared Service units (SSU’s) create external value and create a linkage to the Strategic Business Units (SBU’s). This requires four components:

1. Service agreement which defines expectations about services and costs.
2. The shared service units scorecard.
3. The linkage scorecard and
4. Customer feedback.

And example that has been used consistently throughout this summary is Mobil North, which undertook this strategy. This two-tiered scorecard helped Mobil establish a clear understanding between the internal customer and service provider. Shell Services International also had a service level agreement that included performance measures such as

1. Customer Satisfaction
2. Quality of support (speed of delivery)
3. Technical end-to-end measurements and
4. Business alignment (ease of doing business.)

This BSC and customer feedback helped to identify processes that needed improvement by lowering costs using new Web-based technology and cross-functional efforts. The BSC allowed joint ventures to create value to a company as well. The BSC for SSU’s identified and clarified opportunities for synergy.

Chapter 8: Creating Strategic Awareness

When launching new strategies, the entire company must be involved. Executive and BSC advocates came up with creative ways to achieve this extensive, continuous goal. Companies wanted workers to find new ways to conduct their day-to-day business. In order to translate the idea to reality, they stressed top-down communication and evaluated by results, not activities. ‘Just because a message has been sent doesn’t mean it’s been received.’ They decided to reach the masses of employees through awareness by quarterly meetings, brochures, monthly newsletters, education programs, and company intranet. Mobil posted their BSC everywhere on bulletins at every site, had a newsletter, and the president appeared in a 1 hour briefing to the results of the BSC performance, and to respond to questions of the employees. In 1995, only 30 people were aware and showed up. In 1999, over 500 people showed up.

Companies utilize the internet as well. Motorola created a website to spread awareness of their BSC. Sears created a map of the retail company and plotted the successive decades to show how they got to where they are now. Sears became a compelling place to work, shop, and invest.

Strategy trees communicated the messages further by linking the elements of the company. This helped to clarify objectives that contributed to the overall organization and relate the cross-functional relationships. Mobil held meetings and had employees go up to the strategy tree to point out where they were on the tree and how they contributed to the impact of the overall financial assessment, ROCE. Employees and everyone in the organization must understand the measures of the strategy to impact the organization in a positive way.

Chapter 9: Defining Personal and Team Objectives

MBO (Management By Objectives) has become more bureaucratic and burdensome today because it is more of a traditional way to ask people to do their jobs. It reinforces narrow, functional thinking. Another problem is that the Human Resources function does not typically align to strategy. Only 51% of senior managers have personal goals linked to strategy, 21% of middle managers and 7% of employees, respectively. In order to bridge this gap between company and personal objectives, Strategy-Focused Organizations have planned five ways to link them;

1. The Super Bowl approach
2.Alignment with strategic initiatives
3. Integration with existing planning and quality processes
4. Integration with human resource processes
5. Personal Balanced Scorecards.

The ‘Super Bowl’ approach was used by Mobil. They used the analogy of offense, defense, coaches, and support groups working together to represent how a football team could be synergized to perform a common goal. Mobil implemented a few measures to accomplish their goals. Their measures included Gasoline volume, Return on capital employed, Customer complaints, Mystery shopper rating, and commitment to dealers. The personal incentive was a bonus and a vacation trip if the goals were met. Mobil would win the Super Bowl if they hit their measured targets and everyone would get a bonus and a vacation. The only weakness in the Super Bowl strategy is that the objectives are still top-down. But the Super Bowl approach seems to be a simple, clear, focused measure for the employees to achieve.

Another example of an entity that needed to link the organization to personal goals is the city of Charlotte. They linked the department’s BSC measures to the departments high-priority programs. They developed a WIIFM (What’s in it for me?) approach and the program was structured so that the worker’s could clearly define and formulate a plan of execution for their measures. The employees had a clear understanding of how they would be evaluated; however, it is structured in a way that individuals had no role for innovation or cross-training initiatives that will limit the success of the BSC in the long-run.

Chapter 10: The Balanced Paycheck

Some companies don’t have the cash to present to their employees, so they use a point system, such as the one used by Texaco Refinery. The point system rewards the employees with redeemable prizes.

Companies must be careful in tying compensation to the BSC because they may be sending the wrong message. ‘We can’t measure what we want, so we have decided to want what we can measure.’ If a company gets tied into non-financial metrics based on a now obsolete set of processes, companies can find it difficult to change the BSC measures if they are focused on the wrong objectives.

Chapter 11: Planning and Budgeting

Traditional budgets are tools of repression rather than innovation because everyone is minimizing to get the lowest numbers financially. Managers use budgets to accomplish vital organizational functions:

1. Establish performance targets.
2. Allocate resources to enable performance targets to be achieved.
3. Assess performance relative to targets, and
4. Update the targets based on new information and learning.

So, how can you link the budget to the BSC? What will take the traditional budget’s place? Companies can use a step-down approach to make the transition, as illustrated below.

Mobil North tried to tie incentive compensation to achieving targets on the BSC. For example, a score of 1.25 would represent top competitor performance, and a 0.75 would represent well below the industry average performance. If the company achieved a score of 1.25, management would receive a 20% bonus while a 0.75 score would give them a 1% maximum bonus. As a result of tying in compensation, the meetings were a highlight to the members of the company, and their bonuses have remained between 17-19% since they began the system.

Budgets are primarily operational and strategic. The operational side forecasts the revenues expected from goods sold. It takes into consideration the current customers and products and new customers and new products. Kaplan and Norton suggest using activity-based costing because of the simplicity of understanding an ABC system. They do, however, stress that it would be extremely difficult to change costing systems because of the detail one would have to specify, such as details about production and sales. Most of the organization’s spending on resources will be determined in its operational budget.

Strategic budgeting is when you identify what new operations are required and new capabilities must be created. The process allows initiatives to help the company achieve their objectives, and serve as an ends themselves. In other words, the company should not confuse completion as the target rather than improvement of effectiveness. Continuous improvement is the goal.

Chemical Retail Band had many initiatives, 70, and complained they could not possibly have room to improve at this point. They simultaneously had too many and too few initiatives. They tried to link the initiatives to the BSC, and more than 1/3 of the initiatives were irrelevant. Chemical Retail Bank retired some of the old irrelevant initiatives freeing up money and time so they could concentrate on the true initiatives while constantly improving them.

One way National Bank Online Financial Services solved this problem was by establishing a set of criteria for budgeting objectives. Their criteria provide the following advantages.

1. Helps OFS achieve a strategic objective (defined by the three strategic themes outlined in the BSC).
2. Builds a competitive advantage.
3. Builds a sustainable point of differentiation.

Budgets can be tedious work, but by using strategy focused budgets they can improve the focus on new decisions and motivate workers to comply with the new budget.

Chapter 12: Feedback and Learning

The strategy articulated on the BSC must be correct in order for the organization to succeed. Meetings also must emphasize strategy, not tactics. Meetings become more interesting because it introduces a new culture on teamwork when they incorporate BSC measures in management meetings. AT&T Canada’s CEO, Bill Catucci, set up an organized theme to achieve productive meetings as illustrated in the graphic below.

Studies also showed that employee attitudes were linked to customers. Employees had the ability to recommend products to friends, family, and other customers. The company intranets started to allow access by their employees to the BSC. Because new strategies come from within, such as Mobil’s speedpass, this would be an efficient way to communicate through the organization. This also means that lots of factors in the organization must change.

Chapter 12 addresses ‘Store 24’, and their idea of ‘Ban Boredom’. The organization quickly found out that customers would rather receive their products quicker, so they changed their theme to ‘Cause You Just Can’t Wait’. The BSC allowed the company to see what the problem was, and adapt and modify. The way the company handles the changes within the organization tells a lot about how the new culture will emerge. The primary focus of the BSC is to focus on processes. When the evolution of computers being able to hold large amounts of information came to be, lots of companies were reluctant, but eventually had to change their old habits. They have to focus on the way leaders integrated activities to mobilize their organizations to maintain momentum for change.

Chapter 13: Leadership and Mobilization

When there is an urgency for change in a company, a good place to start planning the change is to develop a BSC. National Bank Online Financial Services developed there SC by setting targets for example, they wanted to triple their customer base in less than 3 years. They also wanted to become the first internet bank with 1million customers and reduce cost per customer by 35%. They strived to reach these targets by strategically aligning them in the BSC.

Although it is popular for companies to ask their employees to double sales or marketing threefold, they fail to provide a means to achieve the goals. The BSC provides a road map for such a dramatic internal change.

Mobil North had a problem with seeing the benefits from their vertical integration strategy or corporate-level strategy. They weren’t sure if the corporate BSC was making an impact to add value on non-financial and financial measures. Since they have three segments, exploration and production, marketing and refining, and chemicals, they decided to explicate the synergies, rational, and value of their individual strategies through the BSC.

GTE used shared service units in the HR department, and developed a BSC at human resources. They constructed a strategy to promote successful measures, such as communications in the business unit, skills, and knowledge of the product. The shared service unit in Europe was asked to encompass their strategies with 8 other business units and 11 functional units. The IT team also taught about cause-and-effect linkages to ensure the BSC related to strategy objectives, not just operational improvements.

The same words mean different things to different people, but when the statements are translated into measures that everyone understands, the vision and strategy become clear. Leadership style should focus on communication, team building, and empowerment. However, you want to focus on successful measures, not quarterly earnings, for example. That promotes short-term thinking, instead of investing in the long-run.

Chapter 14: Avoiding Pitfalls

Companies that have a program of measurement installed in their organizations typically also have better teamwork and communication. The following illustration shows that, on average, a ‘balanced measurement company’ seems to have more alignment than a ‘non-balanced measurement company’.

Some companies have difficulty implementing the BSC because of transitional, design, and process issues. Transitional issues occur when the company wants to down-size or cut costs. They look at the BSC as part of the problem. They throw out the ideas the BSC offers, and try to ingrain their own ideas into the organization. Design failure is when the BSC has too many or too few measures or objectives. The measures can’t be linked to the BSC, or the BSC doesn’t have enough linkages. Process failure occurs when any of the following are present:

1. Lack of senior management commitment.
2. Too few individuals involved.
3. Keeping the BSC at the top.
4. Too long a development process; the BSC as a one-time measurement project.
5. Treating the BSC as a systems project.
6. Hiring inexperienced consultants.
7. Introducing the BSC only for compensation.

The BSC should be used as a tool of communication and linking strategy. It would be wise to try and avoid the pitfalls discussed in the above summary in order to reap the rewards of the BSC.

Related Summaries:

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Kaplan, R. S. and D. P. Norton. 1996. The Balanced Scorecard: Translating Strategy into Action Boston: Harvard Business School Press. (Summary).

Kaplan, R. S. and D. P. Norton. 1996. Using the balanced scorecard as a strategic management system. Harvard Business Review (January-February): 75-85. (Summary).

Kaplan, R. S. and D. P. Norton. 1997. Why does business need a balanced scorecard? Journal of Cost Management (May/June): 5-10. (Summary).

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Kaplan, R. S. and D. P. Norton. 2001. Transforming the balanced scorecard from performance measurement to strategic management: Part I. Accounting Horizons (March): 87-104. (Summary).

Kaplan, R. S. and D. P. Norton. 2001. Transforming the balanced scorecard from performance measurement to strategic management: Part II. Accounting Horizons (June): 147-160. (Summary).

Kaplan, R. S. and D. P. Norton. 2004. Measuring the strategic readiness of intangible assets. Harvard Business Review (February): 52-63. (Summary).

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A recent study of 275 professional portfolio managers reported that the ability to execute strategy was more important than the quality of the strategy itself (“Measures That Matter,” Ernst & Young, Boston, 1998). Strategy implementation was the most important factor shaping these portfolio managers’ assessment of management and corporate valuations. This finding seems surprising, since for the last two decades, management theorists, consultants and the business media have focused on how to devise strategies to generate superior performance. Apparently, strategy formulation has never been more important.

Yet, other observers concur with the portfolio managers’ opinion that the ability to execute strategy can be more important than the strategy itself. In the early 1980s, a survey of management consultants reported that less than 10 percent of effectively formulated strategies were implemented successfully (Walter Kiechel, “Corporate Strategists Under Fire,” Fortune, Dec. 27, 1982). A 1999 Fortune article, in a cover story of prominent CEO failures, concluded that the emphasis placed on strategy and vision created a mistaken belief that the right strategy was all that was needed to succeed. The authors concluded that “…in the majority of cases—we estimate 70 percent—the real problem isn’t [bad strategy]…it’s bad execution.” (R. Charan and G. Colvin, “Why CEOs Fail,” Fortune, June 21, 1999). Thus, with reported failure rates in the 70- to 90-percent range, we can appreciate why sophisticated investors have concluded that execution is more i m p o rtant than good vision.

WHY ORGANIZATIONS HAVE DIFFICULTY IMPLEMENTING STRATEGY

Strategy expert Michael Porter describes the foundation of strategy as the “activities” in which an organization elects to excel. If the foundation of strategy is, as Porter maintains, the “selection and execution of hundreds of activities,” then strategy cannot be limited to a few people at the top of an organization (Michael Porter, “What Is Strategy,” Harvard Business Review, November/December 1996).

Strategy must be understood and executed by everyone. The organization must be aligned around its strategy, and performance management systems help create that alignment. Herein lies one of the major causes of poor strategic management. Most performance management systems are designed around the annual budget and operating plan. They promote short-term, incremental, tactical behaviour. While this is a necessary part of management, it is not enough. You cannot manage strategy with a system designed for tactics. It is our belief that it is this need—the need for strategic enterprise management—that has been driving the widespread adoption of the Balanced Scorecard.

THE BALANCED SCORECARD: A NEW APPROACH TO IMPLEMENTING STRATEGY

The simple idea behind the Balanced Score c a rd Concept (BSC), which we first introduced in a 1992 Harvard Business Review article, is that an organization’s strategy must be translated into terms that can be understood and acted upon (R. Kaplan and D. Norton, “The Balanced Scorecard: Measures That Drive Performance,” Harvard Business Review, January/February 1992). A BSC uses the language of measurement to more clearly define the meaning of strategic concepts like quality, customer satisfaction and growth. A scorecard that accurately describes the strategy can serve as the organizing framework for the management system.

Organizations that were early adopters of the Balanced Scorecard have shown impressive results to date. Consider the following case studies:

Brown & Root Energy Services (Rockwater Division). The division president introduced the Balanced Scorecard to the management team in 1993 to help clarify and gain consensus on the strategy for two newly merged engineering companies. The new strategy transformed the division from one competing solely on price, selling engineering hours on cons t ruction projects, into one that could formulate price based on the value it contributed to its targeted customers. The scorecard-design process built the new management team, identified attractive new customer segments, new views of the customer value proposition, and gained consensus on the new approach for moving forward. By 1996, Rockwater was first in its niche in both growth and profitability.

Chemical Retail Bank (now Chase Bank). The BSC was introduced in 1993 to help the bank assimilate an acquisition, to introduce more integrated financial services, and to accelerate the use of electronic banking. The BSC clearly defined the strategic priorities and provided a structure to link strategy and budgeting. In the space of three years, profitability increased by a factor of 20.

These four examples illustrate the power of the BSC approach. These executive teams successfully executed their strategies when the majority of their colleagues could not. But the speed with which the results were achieved spotlights the potential that exists for every organization. The capabilities for success were already present in these organizations, which had achieved their breakthrough results with the same people, the same facilities, and mostly the same products and services. People already had the skills and knowledge needed to execute the strategies. But they lacked focus, alignment and an understanding of where the organization was trying to go. The BSC eliminated these barriers and provided the focus that unlocked the strategic skills and knowledge of the organization.

Companies that successfully implement scorecards reinvent every part of their management system to focus on strategy. This is a significant departure from traditional management programs that link performance to financial frameworks—budgets or even newer shareholder value approaches (or non-financial frameworks like Total Quality). The successful organizations created a performance-management program that put strategy at the centre of its management processes. Our continuing research has revealed a set of five principles (see Figure 1) that permit organizations to become strategy-focused, enabling them to execute their strategies rapidly and effectively.

1. MOBILIZE CHANGE THROUGH EXECUTIVE LEADERSHIP

A successful BSC program starts with the recognition that it’s not a “metrics” project, but a “change” project. The single, most important condition for success is the ownership and active involvement of the executive team. Strategy re q u i res change from every part of the organization. If those at the top are not energetic leaders of the process, change will not take place and the opportunity will be missed.

John Kotter describes how transformational change must begin at the top, with three discrete actions by leaders. The leaders of successful BSC programs clearly followed this model (John Kotter, Leading Change, Harvard Business School Press, 1996).

Establish a sense of urgency. Before change can occur, the organization must be “unfrozen” to understand why dramatic change is needed. In the case studies presented above, the companies were experiencing difficult and challenging times. The need for change, apparent to executives at the top, was not always apparent to the rest of the organization. People were comfortable with the status quo. They needed to accept that change was necessary and inevitable if they were going to be able to generate the benefits of a new strategy. The first step in the change process for each of these organizations was making the need obvious to all.

Create the leadership team. The dynamics of the executive leadership team usually determine whether the BSC succeeds. The leaders of successful BSC adopters recognized that their current collection of functional specialists had to be transformed into a strategically focused, cross-functional, integrated team. Members of executive teams tend to view management issues from their individual, functional perspectives. These executives often have surprisingly little awareness of how other functions work.

Each of the early adopters supplemented their traditional executive team with managers who were experts on the strategic issues. The new strategies at Mobil and Chemical Bank were based on customer segmentation. Both companies added a marketing executive to an executive leadership team that had previously consisted of functional and business unit heads. The addition of new perspectives was critical in breaking down the traditional barriers to teamwork that had existed at the top.

Develop the Vision and Strategy. The creation of a shared vision and strategy was an effective way to build an executive leadership team (in contrast to a collection of individual business unit heads who met periodically to discuss business issues). The framework of the BSC guided the team in its development of a new vision and strategy. A tremendous amount of cross-fertilization took place as each element of the strategy was adapted to the score card format. At Mobil, the strategic issues surrounding customer segments (marketing), yield optimization (manufacturing), cost of capital (finance), and supply-chain management (transportation, pipeline) became the shared issues of the executive team. Historically, each of these issues was considered the domain of a single functional executive.

2. TRANSLATE STRATEGY INTO OPERATING TERMS

Putting strategy at the centre of the management system implies that strategy can be described so that it can be understood and acted upon. Unfortunately, there are no standards for strategy. If we are going to build management systems around strategies, we need a discipline for describing strategy that is both reliable and consistent.

The Balanced Scorecard provided that discipline for the successful organizations. In addition to building scorecards, the process helped executive teams to better understand and articulate their strategies. The foundation of the design is a Strategy Map, shown in Figure 2, which defines the “architecture” of the strategy. The description begins with the financial perspective of the shareholder (or appropriate key constituent in non-profits). It defines the relevant long-term indicators of success (e.g., ROI, shareholder value) and divides it into a long-term (growth) and a short-term (productivity) component.

The revenue-growth strategy requires a specific value proposition, in the customer perspective, that describes how the organization will create differentiated, sustain-able value for targeted segments. Different value propositions and different target customers result from different strategies. In general, we find three types of value propositions in practice: price, relationship and innovation. (Michael Treacy and Fred Wiersma, The Discipline of Market Leaders, Addison-Wesley, 1995). The design of the internal perspective links internal business processes to the customer value proposition. The value chain of the organization can be divided into three or four generic processes: innovation, customer management, operations/logistics and regulatory/society. Finally, the learning and growth perspective defines the competencies, technologies and climate required to support the unique demands of the customer value proposition and the internal processes.

Once the Strategy Map has been defined and agreed on by the executive team, designing a scorecard that measures and targets is a straightforward process. The Strategy Map approach highlights the fact that Balanced Scorecards should not just be collections of financial and non-financial measures, organized into four perspectives. In fact, Balanced Scorecards should reflect the strategy of the organization. A good test is whether you can understand the strategy by looking only at the scorecard and its Strategy Map. Strategy scorecards, along with their graphical representations on strategy maps, provide a logical and comprehensive tool to describe strategy. It communicates clearly the organization’s desired outcomes and its hypotheses about how these outcomes can be achieved.

3. ALIGN THE ORGANIZATION WITH THE STRATEGY

The BSC is a powerful tool to describe a business unit’s strategy. But organizations consist of numerous sectors, business units and specialized departments, each with its own operations and often its own strategy. If synergy is to occur, the strategies across these units should be coordinated. The BSC can and should be used to define the strategic linkages that integrate the performance of multiple organizations. This is not an easy task. Functional departments, such as finance, manufacturing, marketing, sales, engineering and purchasing, have their own bodies of knowledge, language and culture. Functional silos arise and become a major barrier to strategy implementation, since most organizations have great difficulty communicating and coordinating across these functions. For organizational performance to be more than the sum of its parts, individual strategies must be linked and integrated. The corporate role defines the linkages expected to create synergy and ensures that the linkages actually occur.

Figure 3 shows the linkages at the Mobil North American Marketing and Refining division. The high-level strategic themes (in No.1) guide the development of the Balanced Scorecards in the business units (in No.2) that are either geographic regions or product lines, such as lubricants. Each unit formulates a strategy appropriate for its target market in light of the specific circumstances it faces (competitors, market opportunities and critical processes) but that is consistent with the themes and priorities of NAM&R. Without corporate prompting, these joint activities typically don’t take place. The Corporate Scorecard provides the communication and coordination mechanism across business unit scorecards. The measures at the individual business unit levels do not have to add to a corporate or divisional measure, unlike financial measures that aggregate easily from subunits to departments to higher organizational levels. The business unit managers choose local measures that influence, but are not necessarily identical to, the corporate scorecard measures.

Beyond aligning the business units, strategy-focused organizations must also align their staff functions and shared service units, such as human resources, information technology, purchasing, environmental and finance (No.3 of Figure 3). Often, this alignment is accomplished with a service agreement between each functional department and the business units. The service agreement defines the menu of services to be provided, including their functionality, quality level and cost. The service agreement becomes the basis of the Balanced Scorecard constructed by the functional department. The department’s customers are the internal business units, the value proposition is defined by the negotiated service agreement, and the financial objectives are derived from the negotiated budget for the department. Next, the department identifies the internal process, and learning and growth objectives that drive its customer and financial objectives.

When this process is complete, all the organizational units—line business units and staff functions—have well-defined strategies that are articulated and measured by Balanced Scorecards and strategy maps. Because the local strategies are integrated, they reinforce each other. This alignment allows synergies to occur so that the whole exceeds the sum of the parts. Linkages can also be established across corporate boundaries (as in No.4 of Figure 3). Several companies constructed Balanced Scorecards to define their relationships with key suppliers, customers, outsourcing vendors and joint ventures. Companies use such scorecards with external parties to be explicit about (1) the objectives of the relationship, and (2) how to measure the contribution and performance of each party in the relationship by factors other than price or cost.

4. MAKE STRATEGY EVERYONE’S JOB

Sources have estimated that approximately 50 percent of all work performed in industrialized countries today is knowledge work. Workforce knowledge re p resents an asset that we are just beginning to use effectively. In this structure, strategic information and decision-making can no longer be limited to executives and senior managers. Knowledge workers make strategic choices every day. Successful BSC users took steps to ensure that everyone in the organization understood the strategy, was aligned with it, and capable of executing it. Traditional human resource systems and processes played an essential role in enabling this transition.

Communication and education to create awareness: A prerequisite for implementing strategy is that all employees understand the strategy. A consistent and continuing communication program is the foundation for organizational alignment. No single medium is sufficient to transform everyone’s understanding of the strategy. It must be conveyed in all communication media and vehicles and reinforced by the personal behaviour of executives.

Personal alignment: All of the successful BSC users aligned individuals with the strategy through personal goal-setting processes; some have even created personal scorecards. Setting objectives for individuals, of course, is not new. Management-by-Objectives (MBO) has been around for decades. But MBO is distinctly different from the kind of alignment achieved with the BSC. The objectives in an MBO system are established within the structure of the individual’s organizational unit, reinforcing narrow, functional thinking. The individual objectives established within the framework of the BSC are cross-functional, longer-term and strategic.

Incentive compensation: Those who implemented the BSC successfully moved quickly to link incentive compensation to targeted scorecard measures. This linkage unleashed powerful forces. Most successful BSC users ultimately conclude that, to modify behaviour as required by the strategy and as defined in the scorecard, change must be reinforced through incentive compensation. When the BSC is linked to the incentive compensation program, there is a visible increase in the level of interest in the details of the strategy.

5. MAKE FORMULATING STRATEGY A CONTINUAL PROCESS

Most organizations build their management processes around the budget and operating plan. The monthly management meeting reviews performance versus plan, discusses variances from past performance, and requests action plans for dealing with short-term variances. Such tactical management is necessary, but in most organizations that is the only thing management does. Besides the annual strategic planning meeting, no meeting occurs where managers discuss strategy. We surveyed participants at conferences and learned that 85 percent of their management teams spend less than one hour a month discussing strategy. Companies with the BSC adopt a new “double-loop process” to manage strategy. The process integrates the management of tactics with the management of strategy, using three important processes, as depicted in Figure 4.

First, organizations link strategy to the budgeting process. They use the Balanced Scorecard as a screen for evaluating potential investments and initiatives. Companies usually have an operating budget that authorizes spending for producing and delivering existing products and services, and marketing and selling them to existing customers. These organizations now introduce a strategy budget to fund initiatives that will develop entirely new capabilities, reach new customers and markets, and make radical improvements in existing processes and capabilities. This distinction is essential. Just as the Balanced Scorecard attempts to protect long-term objectives from short-term sub-optimization, the budgeting process must protect the long-term initiatives from the pressures to deliver short-term financial performance.

The second step in making strategy formulation continual is to introduce a management meeting to review strategy. As obvious as this step sounds, such meetings didn’t exist in the past. Now, management meetings are scheduled on a monthly or quarterly basis to discuss the Balanced Scorecard, so that a broad spectrum of managers come together to monitor organizational performance against the short-term targets for the scorecard’s financial and non-financial measures. The managers check whether strategic initiatives are being implemented as planned. On the surface, the process is similar to the typical monthly operating reviews. However, instead of reviewing only financial performance, managers now review the performance of, and take corrective actions for, all the measures on the Balanced Scorecard. The process creates a focus on strategy that did not exist before.

Information feedback systems change to support the new management meetings. Many organizations create an open reporting environment in which performance results are made available to everyone in the organization. Building upon the principle that “strategy is everyone’s job,” they empower “everyone” by giving them the knowledge needed to do their jobs. At Cigna Property & Casualty, a first-line underwriter saw performance reports before a direct-line executive if she happened to be monitoring the feedback system. Such open sharing of strategic information creates a set of cultural issues that revolutionize traditional, hierarchical approaches to information and power.

The third and final step for making strategy development continual sees a process evolve for learning and adapting the strategy. The initial Balanced Scorecard represents hypotheses about the strategy; at the time of formulation, it is the best estimate of the actions expected to create long-term financial success. The scorecard-design process makes the cause-and-effect linkages in the strategic hypotheses explicit. As the scorecard is put into action and feedback systems begin their reporting on actual results, an organization can test the hypotheses of its strategy to see whether its strategy is working. Some, like Brown & Root and Sears, did the testing formally, using statistical correlations between measures on the scorecard to determine whether, for example, employee empowerment programs were increasing customer satisfaction and improving various processes. Others, like Chemical Bank, tested the hypotheses more qualitatively at meetings, where managers validated and refined the programs being used to drive service quality and customer retention. Mobil’s EVP Bob McCool commented on the difference:

“In the past, we were a bunch of controllers sitting around talking about variances. Now we discuss what’s gone right, what’s gone wrong. What should we keep doing, what should we stop doing? What resources do we need to get back on track?”

A new kind of energy is created. People use terms like “fun” and “exciting” to describe the meetings. One senior executive reported that the meetings became so popular that “there was standing room only and he could have sold tickets to them.”

Companies also use the meetings to search for new strategic opportunities that aren’t currently on their scorecard (see Henry Mintzberg, “Crafting Strategy,” Harvard Business Review, July/August 1987, and Gary Hamel, Leading the Revolution, Harvard Business School Press, 2000, for discussions of emergent strategy). Events can occur that were not anticipated at the time the strategy and scorecard were conceived. Ideas and learning emerge continually from within the organization. Rather than waiting for next year’s budget cycle, the priorities and the scorecards are updated immediately. Much like a navigator guiding a vessel on a long-term journey, constantly sensing the shifting winds and currents and constantly adapting the course, the executives of successful companies use the ideas and learning generated by their organization to fine-tune their strategies. Instead of being an annual event, strategy formulation, testing and revision become a continual process.

BEING STRATEGY-FOCUSED

The Balanced Scorecard has enabled organizations to introduce a new governance and review process, one focused on strategy, not tactics. The new governance process emphasizes learning, team problem-solving and coaching. Review meetings now look into the future, exploring how to implement strategy more effectively, and identifying the changes that need to be made in the strategy—based on what has been learned from the past.

This is a management process attuned to the needs of contemporary businesses. The essential ingredient is a simple framework and tool that allows strategy to be articulated clearly. Without such a strategic framework, there can be no strategic management system. The Balanced Scorecard is the heart of the management system that strategy-focused organizations will use to build their future.

This article is adapted from an article originally published in the Balanced Scorecard Report, a newsletter published jointly by the Balanced Scorecard Collaborative and Harvard Business School Publishing. It summarizes material contained in the authors’ book, The Strategy-Focused Organization: How Balanced Scorecard Companies Thrive in the New Business Environment, Harvard Business School Press, 2001.

Ключевые идеи книги: Организация, ориентированная на стратегию. Роберт Каплан, Дэвид Нортон

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The Strategy-Focused Organization: How Balanced Scorecard Companies Thrive in the New Business Environment

Robert S. Kaplan, David P. Norton

Реализовать стратегию

В индустриальную эпоху стоимость компании создавалась по большей части за счет материальных активов, превращения сырья в конечный продукт. Но лишь за десятилетие с 1982 по 1992 год доля балансовой стоимости, созданной таким образом, в рыночной стоимости компаний снизилась почти вдвое – с 62 до 38 %. И уже тогда ей пророчили лишь 10–15 % к концу XX века.

В информационную эпоху залогом успеха стало управление стратегиями, которые базируются на нематериальных активах: взаимоотношениях с клиентами, инновационных продуктах и услугах, высокоэффективных оперативных процессах, информационных технологиях и базах данных, навыках и мотивации персонала.

Но оказалось, что прекрасно продуманной стратегии создания стоимости компании недостаточно. Гораздо важнее – способность ее реализовать. Именно здесь компании сталкиваются с наибольшими трудностями. Как заставить организацию действовать согласно стратегии, словно единый целеустремленный механизм? Дэвид Нортон и Роберт Каплан нашли ответы на эти вопросы.

Новые условия деятельности компаний в информационную эпоху, когда конкурентные преимущества в большей степени стали основываться на нематериальных активах, потребовали и новой системы оценки результатов. Еще в начале 1990-х авторы разработали для этого сбалансированную систему показателей, которая и стала ключом к созданию концепции стратегически ориентированной организации.

Опыт компаний, внедривших сбалансированную систему показателей, говорит о том, что она позволяет не только адекватно оценивать деятельность, но и воплощать в жизнь стратегические планы. А анализ этого опыта помог авторам вывести пять принципов стратегически ориентированной организации и понять, как именно использовать сбалансированную систему показателей для реализации этих принципов.

5 принципов стратегически ориентированной организации

Стратегия каждой компании уникальна и требует различных организационных изменений для ее реализации. Поэтому процесс создания стратегически ориентированной организации не универсален. Но в его центре всегда лежит стратегия.

1. Перевод стратегии на операционный уровень. Чтобы стать центральным звеном менеджмента, стратегия должна ясно и доходчиво информировать о поставленных целях и способах их достижения в контексте деятельности компании. Для этого общие стратегические положения должны быть переведены в цели, гипотезы, показатели и задачи.

2. Создание стратегического соответствия организации. Только совместная слаженная деятельность ведет к выдающимся результатам. Для этого стратегии множества разрозненных подразделений должны быть органично и действенно взаимосвязаны. А если речь идет о корпорации, то не для того ли она существует, чтобы создавать синергию своих составляющих?

3. Стратегия как повседневная работа каждого сотрудника. Стратегия должна реализовываться на всех организационных уровнях. Без активного участия каждого сотрудника этого не достичь. Но чтобы вносить вклад в общие усилия, во-первых, работник должен понимать стратегию и знать, как именно он может способствовать ее реализации на своем участке. Во-вторых, необходимо, чтобы он был заинтересован в достижении стратегических целей.

4. Стратегия как непрерывный процесс. Реализация стратегии – это не разовое мероприятие. И не стоит рассчитывать на успех, если обсуждение стратегии не включено в повестку ни одного совещания руководства. Реализация стратегии требует не только тактического, но и стратегического менеджмента.

5. Активизация изменений как результат активного руководства топ-менеджеров. Успешная реализация стратегии требует изменений во всех составляющих компании. Инициирование и координация этих изменений – задача тех, кто стоит у руля. Насколько они активны в этом, настолько изменения и произойдут. В частности, готовы ли они сами меняться?