on 24 March 2006
This book is about organizational alignment. It is the fourth in a series of thought-leading books on how to translate strategy into actions - via balanced scorecard, strategy maps, and the strategy-focused organization.
The authors start with a wonderful story:
Imagine an eight-person shell racing up the river populated by highly trained rowers, but each with different ideas of how to achieve success. But rowing at different speeds and in different directions could cause the shell to travel in circles and perhaps capsize. The winning team invariably rows in beautiful synchronism; each rower strokes powerfully but consistently with all the others, guided by a coxswain [corporate center], who has the responsibility for pacing and steering the course of action.
Unfortunately, many firms are like an uncoordinated shell. They consist of strong business units, each populated by highly trained, experienced and motivated executives. But the efforts of the individual businesses are not coordinated.
Unsurprisingly, the authors suggest that their four scorecard perspectives on financials, customers, processes, as well as growth/learning also could be used to create organizational alignment and also find synergies, e.g.
- FINANCIAL: acquiring and integrating other firms, monitoring and governance processes, skills in negotiating with external entities (capital providers, etc.)
- CUSTOMERS: leverage common customers (cross-sales), corporate brand, common customer value propositions across the world,
- PROCESSES: exploiting core competencies in product or production technologies, sourcing or distribution skills, etc.
- LEARNING AND GROWTH: Enhancing human capital thru excellent HR practices, leveraging a common technology, sharing best-practices and knowledge.
The book does not only focus on how to align the corporate-level and businesses, it also covers how to align towards support functions (finance, IT and HR), external business partners (customers, suppliers) and even the board.
Don't buy this book as your first on scorecards. It requires that you have read some of the previous published articles or books by the author team. However, if you are a balanced scorecard practitioner, then this book adds yet another dimension to our understanding of how to make scorecard systems work in an organization.
Being a corporate strategist, I can use most of this thinking in my day-to-day work - and I can highly recommend it to all other scorecard insiders.
If you're interested in Balanced Scorecard, you should obviously read the core by Kaplan and Norton - especially the "Strategy-Focused Organization". But I also recommend a very capable book by the Swedes Olve et al (2003) - "Making Scorecards Actionable: Balancing Strategy and Control" - that even includes some thinking on why balanced scorecards go wrong - and what to do about it. Paul Niven (2005) does the same in his "Balanced scorecard diagnostics".
If you're even more interested in performance measurement systems, then do also consider "Performance Prism" by Neely et al (2002) that takes performance systems to the next level. Personally, I don't believe they've designed balanced scorecard's successor, but they have many interesting perspectives on stakeholders, choice of measurements, and the relationship between cause and effect.
MSc in International Business (Marketing & Management) and Graduate Diploma in E-business
After their article "The Balanced Scorecard - Measures That Drive Performance" appeared in Harvard Business Review" (January-February, 1992), Kaplan and Norton co-authored four books in which they expand and fine-tune several of their core concepts about the Balanced Scorecard. What we have in this volume is a brilliant analysis of how to use the Balanced Scorecard to create corporate synergies. As they observe in the Preface, they have identified five key principles "for aligning an organization's management and measurement systems to strategy":
1. Mobilize change through executive leadership.
2. Translate strategy into operational terms.
3. Align the organization to the strategy.
4. Motivate to make strategy everyone's job.
5. Govern to make strategy a continual process.
When gathering the information needed to write this book, Kaplan and Norton rigorously examined more than 30 organizations which include Bank of Tokyo-Mitsubishi, Citizens Schools, Hilton, IBM, Lockheed Martin, Media General, and the U.S. Army. Note how different these organizations are in terms of their respective products and services, markets, and potentialities for aligning their management processes and systems to the given strategy. I assume that the diversity of the exemplary enterprises during Kaplan and Norton's selection process was deliberate because they are convinced - as am I - that if the core principles of the Balanced Scorecard are applied effectively, any organization (regardless of its size or nature) can create highly beneficial synergies by getting its management and measurement in proper alignment with its strategy. In this book, Kaplan and Norton explain how to do that. Obviously, it is difficult to achieve such alignment and even more difficult to sustain it. Although a cliché, it remains true that change is the only constant. Moreover, change seems to occur much more rapidly now than ever before. What is in proper alignment today may not be tomorrow...or by the end of today
Nothing within an organization's structure can be in proper balance unless and until it is in proper alignment. Hence the importance of prioritization and, especially, of proportionality (e.g. allocation of resources). Here is a brief excerpt from Chapter 10. "The Balanced Scorecard, since its introduction in 1992, has evolved into the centerpiece of a sophisticated system to manage the execution of strategy. The effectiveness of the approach is derived from two simple capabilities: (1) the ability to clearly describe strategy (the contribution of Strategy Maps) and (2) the ability to link strategy to the management system (the contribution of Balanced Scorecards). The net result is the ability to align all units, processes, and systems of an organization to its strategy." With this brief statement, Kaplan and Norton suggest the interdependence of strategy, alignment, and executive leadership.
In my opinion, this is the most important book written thus far by Kaplan and Norton. In it, they develop in much greater detail many of the same concepts they examined in previous books but they also share what they have learned over the years about devising, implementing, and then sustaining (while fine-tuning) the "sophisticated system" to which they refer in the excerpt just provided. Their collaborative thinking, as is also true of every organization they discuss, continues to be "a work in progress."
Alignment is a superb addition to the remarkable series written by Professor Robert S. Kaplan and Dr. David P. Norton. If you have not yet read Strategy Maps, The Balanced Scorecard and The Strategy-Focused Organization, you should begin with those books before reading this one. With each book in the series, you'll find out more about how to create and use balanced scorecards . . . and your organization will prosper because of it.
Leaders have always found it much easier to formulate strategy than to turn strategies into accomplishments. As the authors note, many such organizations are like an uncoordinated 8-person rowing shell than a championship team.
In studies of the Balanced Scorecard Hall of Fame organizations, the authors learned that organizational alignment is a more important factor than mobilization, strategic translation, employee motivation and governance in achieving superior results during execution.
The authors identify eight essential check points for successful organizational alignment:
1. An enterprise value proposition (to lead strategic guidelines)
2. Board and shareholder alignment (to approve, review and monitor strategy)
3. Coordination between the corporate offices and the corporate support units (by creating corporate policies)
4. Coordination between the corporate office and the business units (business unit strategy matching the corporate direction)
5. Coordination between the business units and the support units (to create appropriate functional strategies)
6. Alignment between business units and their customers (an on-going to and fro)
7. Alignment among business support teams and their suppliers and external partners (to share problems and solutions)
8. Company support coordination (among the corporate support people and the business support activities)
To get a sense of the whole process, be sure to turn to figure 9-1.
The great strength of the book comes, however, in its many examples and case studies involving organizations like Aktira, Bank of Tokyo-Mitsubishi, Citizen Schools, City of Brisbane, DuPont Engineering Polymers, Handleman, Hilton Hotels, IBM Leasing, Ingersoll Rand, KeyCorp, Lockheed Martin Enterprise Information Systems, Marriott Vacation Club, MDS, Metalcraft (disguised name), Media General, New Profit Inc., Royal Canadian Mounted Police, Salmon recovery in Washington State, Sport-Man, Inc. Tiger Textiles (disguised name), and the U.S. Army.
Don't miss this book.