Use Balanced Scorecard and Build Alignment
Alignment is Critical Success Factor of Effective Strategy Execution
Jan 21, 2009
Kaplan and Norton published their fourth book in 2006: Alignment: Using the Balanced Scorecard to Create Corporate Synergies. It is a testament to the popularity and usefulness of the original concept, and its subsequent development, that the Balanced Scorecard movement is still going strong since the release of the original article in 1992 and the first book in 1996.
Balanced Scorecard Hall of Fame
The Balanced Scorecard Collaborative has established a Hall of Fame and Kaplan and Norton classified the practices of this group with others to identify best practices for the Strategy Focused Organisation. The classification was based on the five key management processes deemed essential for a successful strategy implementation:
- Mobilisation: orchestrating change through executive leadership
- Strategy Translation: defining Strategy Maps and Balanced Scorecards
- Organisation Alignment: aligning corporate, business units, support units, external partners and boards with strategy
- Employee Motivation: providing education, development, communication, objectives, reward and recognition
- Governance: integrating strategy into planning, budgeting, reporting and reviews
The outcome: "Enterprises enjoying the greatest benefits from their new performance management systems are much better at aligning their corporate, business unit, and support unit strategies, and this indicates that alignment, much like the synchronism achieved by a high performance rowing crew, produces dramatic benefits."
Balanced Scorecard Alignment Sequence
The alignment process needs to bring together the key stakeholder units: board, corporate, strategic business unit, support units and key external stakeholders such as shareholders and customers. The alignment sequence is composed of a series of checkpoints that ensures each stage has been completed properly:
- Enterprise Value Proposition. Corporate defines strategic guidelines to shape strategies of other parts of the organisation
- Board and Shareholder. Board of directors reviews, approves and monitors the corporate strategy
- Corporate to Support Unit. Strategy is translated into policies and objectives that will be administered by the support unit
- Corporate to Business Unit. Corporate priorities are cascaded to business units for incorporation into business unit strategies
- Business Unit to Support Unit. Strategic priorities of business unit are incorporated into support unit strategies
- Business Unit to Customers. Priorities of the customer value proposition are communicated to select customers and also reflect customer feedback and customer measures
- Business and Support Units to Suppliers and External Partners. Shared priorities for suppliers, outsourcers and alliance partners
Build Alignment
Going through each stage of the alignment sequence ensures that the Balanced Scorecard has all elements of the internal and external organisation aligned. That alignment is crucial to strategy execution and is a critical success factor to a successful strategy implementation.
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