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Use Strategy Maps with the Balanced Scorecard

Describe Strategy Using Linked Objectives to Visualise the Strategy

Jan 20, 2009 Roger Lever

A balanced scorecard helps a strategy-focused organisation to align and focus on strategic execution. Strategy maps visually describe the strategy using linked objectives

A balanced scorecard offered an approach for a business to translate strategy into operational terms, to align the organisation to the strategy and make it everyone's day job. Making strategy a continual process allowed the leadership to focus on strategy execution. However, describing the strategy is not always easy and strategy maps provide a tool to describe and visualise the strategy making it easier to develop the balanced scorecard.

Development of Strategy Maps

Kaplan and Norton built on their Balanced Scorecard (BSC) work in 2004 with Strategy Maps: Converting Intangible Assets into Tangible Outcomes, noting that "Various studies indicated that 70 percent to 90 percent of organizations failed to realise success from their strategies." Whilst working with over 300 organisations the importance of clear and agreed objectives and the need to link them in cause and effect relationships to build alignment to those objectives was identified. This insight led to the development of strategy maps as an additional tool for the balanced scorecard -- describing strategy with explicit cause and effect relationships among the objectives in the four BSC perspectives.

Strategy Maps Describe How the Organisation Creates Value

BSC objectives within the learning and growth perspective, internal perspective, customer perspective and financial perspective are linked together through cause and effect relationships. Consequently strategy maps visually represent how specific objectives in learning and growth link through to individual internal objectives and from there to the customer objectives and finally to the financial objectives. This network of relationships needs to adhere to some principles to ensure effective strategies and objectives are developed:

Strategy balances contradictory forces, balancing long term with short term objectives, for example long term investment versus short term cost control
Strategy is based on generating [unique] customer value. Identifying target customers and the value proposition to convert them to loyal customers
Value is created through internal business processes [operations, customer management, innovation, regulatory and social] and the execution of those processes leading to tangible effects for customer and financial objectives

Align Intangible Assets to Strategy

Kaplan and Norton identify three targets for aligning intangible assets to strategy:

Role - strategic roles that align resources with strategic themes
Portfolio - information and systems that align with strategy
Continuous Improvement - leadership that aligns organisational culture with continuous improvement

Use Strategy Maps with Balanced Scorecard

Strategy maps are an important tool to help the strategy focused organisation to develop a balanced scorecard. Linking the objectives of the BSC four perspectives both describes strategy and shows, through the cause and effect relationship, how internal objectives affect both the customer and financial objectives. This approach allows for an effective visualisation and communication of business strategy and therefore strategic execution. Find out more at the Balanced Scorecard Institute.

The copyright of the article Use Strategy Maps with the Balanced Scorecard in Business Management is owned by Roger Lever. Permission to republish Use Strategy Maps with the Balanced Scorecard in print or online must be granted by the author in writing.

Strategy Map