The Strategy-Focused Organization: A book review by Bob Morris

Posted on: April 17th, 2011 by bobmorris

The Strategy-Focused Organization: How Balanced Scorecard Companies Thrive in the New Business Environment
Robert S. Kaplan and David P. Norton
Harvard Business Press (2000)

The Perilous “Journey” to Breakthrough Performance

Note: This is another “business classic” I read when it was first published and then recently re-read it. If anything, the value of what it offers is much greater now than it was then.

If you have not already read Kaplan and Norton’s The Balanced Scoreboard, I presume to suggest that you do so prior to reading this book, if at all possible. However, this sequel is so thoughtful and well-written that it can certainly be of substantial value to decision-makers in any organization (regardless of size or nature) if they are determined to “thrive in the new business environment.” Research data suggest that only 5% of the workforce understand their company’s strategy, that only 25% of managers have incentives linked to strategy, that 60% of organizations don’t link budgets to strategy, and 85% of executive teams spend less than one hour per month discussing strategy.

These and other research findings help to explain why Kaplan and Norton believe so strongly in the power of the Balanced Scorecard. As they suggest, it provides “the central organizing framework for important managerial processes such as individual and team goal setting, compensation, resource allocation, budgeting and planning, and strategic feedback and learning.” After rigorous and extensive research of their own, obtained while working closely with several dozen different organizations, Kaplan and Norton observed five common principles of a Strategy-Focused Organization:

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

The first four principles focus on the Balanced Scorecard tool, framework, and supporting resources; the importance of the fifth principle is self-evident. “With a Balanced Scorecard that tells the story of the strategy, we now have a reliable foundation for the design of a management system to create Strategy-Focused Organizations.”

After two introductory chapters, the material is carefully organized and developed within five Parts, each of which examines in detail one of the aforementioned “common principles”: Translating the Strategy to Operational Terms, Aligning the Organization to Create Synergies, Making Strategy Everyone’s Job, Making Strategy a Continual Process, and finally, Mobilizing Change Through Executive Leadership. Kaplan and Norton then provide a “Frequently Asked Questions” section that some readers may wish to consult first.

There are many pitfalls to be avoided when designing, launching, and implementing the program which Kaplan and Norton present. These pitfalls include lack of senior management commitment, too few individuals involved [or including inappropriate individuals at the outset], keeping the scoreboard at the top, too long a development process (when, in fact, the Balanced Scorecard is a one-time measurement process), treating the Balanced Scorecard as an [isolated] systems project, hiring consultants lacking sufficient experience with a Balanced Scorecard, and introducing the Balanced Scorecard only for compensation.

When organizations experience one or more of these pitfalls, their key executives can soon become impatient, confused, frustrated, and ultimately, opposed to Balanced Scorecard initiatives. It is imperative to understand both what the Balanced Scorecard must be (e.g. cohesive and comprehensive) and what it must not be (e.g. fragmented and episodic). Kaplan and Norton correctly note that the journey they propose “is not easy or short. It requires commitment and perseverance. It requires teamwork and integration across traditional organizational boundaries and roles. The message must be reinforced often and in many ways.”

Those who are determined to achieve organization-wide breakthrough performance are fortunate to have Kaplan and Norton as companions every step of the way during what is indeed a perilous “journey.”

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