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Matrices in Strategy Execution

Mihai Ionescu - Senior Strategy Consultant, Owner Balanced Scorecard Romania, Author.

The word balanced didn't become part of Balanced Scorecard in an innocent way. Beyond the typical opinions about the reasons for which the BSC model is balanced, its meaning has some more subtle and far-reaching implications. One of them has to do with the role and use of matrices in a Strategy Execution model.

One of these days I've stumbled upon a concept that tries to stuff all the relationships of a Strategy Execution model into matrices. Matrix after matrix, after matrix that people have to work with. What I thought was '... wow, this might work for robots, but certainly not for humans'.

Why? Because our brains instinctively understands relationships in a multi-dimensional manner. Following a neural network pattern, not a x-y matrix pattern, if you like. So, such a model can't work, in real life, because it pushes the role and use of matricesto an unbalanced extreme, where humans can't handle them well.

Why isn't the Strategy Map a matrix?

The Strategy Map is one of the fundamental cornerstones of the Balanced Scorecard framework. And that's not because it's viewed as a matrix of perspectives and themes, but because it succeeds to translate an organization's Strategy model into a visualrepresentation of strategic causality.

That's why the Strategy Map is such a strong communication tool, internally, but also externally. I mean, communication for humans, who never interpret it instinctively as a matrix view, but as a network view of causal relationships and inter-dependencies.

What would you say if I'll tell you that this is a Strategy Map?

Those who have seen many strategy maps would probably ask 'Have you gone mad?'Why, isn't this a nice piece of logical translation of the MVV into a very disciplinedmatrix of Strategy Objectives, placed on x-y coordinates according to our strategic perspectives and themes? What problem do you have with it?

  1. First of all, this can't be part of a strategic model, because Strategy is built on our decision to do certain things and not do others. What kind of strategic decision would we be talking about here, if we mechanically translate the perspectives and the themes into all our Strategic Objectives? Why aren't there any empty cells?

  2. Secondly, the causal relationships don't flow only along and within the themes verticals. How do you know that the 'P1 People Growth' objective (irrespective of what do we mean by that) won't drive the internal profitability, the customer sustainability or the internal compliance, for example? What kind of reality-based causality is this?

  3. Lastly, don't you feel that some of the objectives are named in a formal, artificialmanner? Because we had to fill all the matrix cells, we had to invent names for the objectives in some of the cells, even if they don't really have any strategic relevance. And there is only a short distance from that to an objectives names delirium.

So, don't we use any matrices?

Yes, we do. But because they are part of our strategic model, it doesn't mean that they are also part of the human user interface (of our management system) or, in other words, part of what everybody who contributes to the achievement of our Strategy works with. Those matrices only live in the background of our model and nobody interacts directly with them, for the reasons already mentioned.

Actually, the people who design software applications (including for BSC) know that they need a lot of relational tables, as part of the data model, tables which are, in fact, matrices. Without them, the system won't work. But the views that display the data or the relationships stored in those tables are rarely presented as matrices in the user interface.

So, what matrices do we use in Strategy Execution and what role do they play? Let's take an example of a real case, simplified for easy understanding purposes (not all the themes and objectives are shown).

The Strategy Map

Even if the perspectives and themes are not illustrated (on purpose), we can quickly understand, by looking at this simplified Strategy Map example, that the company is focused on growing their profitable penetration in the HoReCa market and that they intend to do that through a franchise system and a network of franchisees partners.

No matrix? No. But behind this model illustration, which everybody uses, there is one. Actually, a very important one, the Causality Matrix (or objectives-objectives matrix, as some people call it). What role does it have? The facilitation of building the set of hypothesis that are behind the cause-effect relationships (the arrows), drawn between the driving-driven Strategic Objectives.

The Causality Matrix

Behind each score placed in the cells of this matrix there is a hypothesis description, with pro-cons argumentation and conclusion, that is entered into our hypothesis register, which allows us to build the trace-ability of our model's chain of hypothesis. Whenever we realize that there is something wrong with our model (and there will always be something wrong with our model, unless we have a time-travel machine in our pocket), the hypothesis register and model's trace-ability are our rescue.

The Strategic Initiatives

Probably the most popular matrix used in the BSC-based Strategy Execution management systems is the Objectives-Initiatives matrix. Here is an example that is correlated with the Strategy Map presented above, with the specification of the estimated weighted contribution of each Strategic Initiative to the accomplishment of the associated Strategic Objectives. And, because we are talking about estimates, here it is - another set of hypothesis to be validated, and corrected when necessary, during our Strategic Plan's execution (see the 'learning' in the XPP Stage #5).

Vertical Alignment

The Vertical Alignment gives us another example of a matrix used in the Strategy Execution [management] system, linking the organizational Strategic Objectives with those brought into each vertically-aligned department Strategy Map and scorecard. But once that's done, nobody uses it directly anymore, it remains in the background, as we only look at the dependencies of an objective (which departments' objectives are linked to it), whenever its status shows that it's not accomplished as required, while the rest of the matrix is irrelevant, therefore not shown in the user interface.

For easier understanding, the simplified example uses a single business line case, but in cases of multiple business lines, or of more complex examples, you can see multiple SBUs vertically-aligned to the same organizational Strategic Objective (the case of contributory objectives). But something that you will certainly not see (at least not in Best Practice examples) are all SBUs vertically-aligned to all organizational objectives (no matrix cells empty ... you can imagine how it looks).

Let's take a different example (IKEA BSC), to clarify the contributory objectives alignment, since I've mentioned it. We'll look at two objectives, one in the Positioning & Financials perspective and another one in the People Development perspective.

ou can notice that the contributions to the achievement of the organizational objectives look different (no more bullets, like in the first example, but contributory weights). Why does the IKEA Food department contributes with 8% to the F2 organizational objective? Because the food sales (restaurant, food bar and food store) represent on average 8% of the overall sales of an IKEA store (furniture + food). That's the contributory weight criteria, for this objective. But why are the weights different for the D3 objective, which is a typical identical/mandatory objective, from the Alignment standpoint? Because the contributory weight criteria, in this case, is the number of employees ratio, not the sales ratio. I'm sure you've got the idea.

One more thing: If you look carefully at the first vertical alignment matrix example, you might ask: "Why isn't the P1 objective aligned to the Franchise Management department, as well?" Good question, since the word 'common' in objective's name suggests something like that, as in the IKEA example. Read further for the answer.

Here comes another Balanced Scorecard cornerstone. I still get this question very often "Can't we just call it Cascading, because it's easier to grasp than Alignment?" and my answer is "Have you seen a cascade flow both vertically and horizontally?"and when we talk about the Strategy Dialog (if the case) my next question is prepared: "Have you seen a cascade flow both downwards and upwards?"

For many years, the departmental-level Alignment of the BSC Framework was divided into Vertical Alignment, between the organizational Strategic Objectives and those of all the operational units (SBU - Strategic Business Units) and Horizontal Alignment, between some of the objectives of the SBUs and some of those of the support units (SSU - Strategic Support Units).

The practice has allowed in time us to refine this into what is called objective-levelAlignment, based on the Internal Supplier - Internal Customer relationship between departments, a relationship that may change direction, from one Strategic Objective that is horizontally aligned between them to another. Take a look at the matrix above.

The SM (Sales and Marketing) department depends on accomplishing most of its Strategic Objectives on the accomplishment of the corresponding aligned objectives of the FM (Franchise Management) and LO (Logistics) departments. For example, the accomplishment of SM's objective 'F1 Increasing our profitability' has a 30% dependency on the accomplishment of the aligned F1 objectives of the FM and LO departments. Therefore, both these departments have horizontally aligned their F1 objectives to SM's F1 objective.

An interesting thing happens when we look at the alignment of the FM and HR departments, as they change places, depending on the aligned objective. For instance, HR's objectives P2 and D3 have been aligned to FM's corresponding objectives, but for the objective 'D2 Effective franchisees support focus', the relationship has reversed: FM has aligned its objective to HR's, as only HR's D2 objective is vertically-aligned to the organizational level. This happens because only HR has the direct responsibility for obtaining the support of the other departments in accomplishing it, by focusing the entire organization on providing the strategically-important support required by the network of franchisees.


These are just a few examples of matrices used in the BSC-based Strategy Execution management. What is important to remember is that the apparent complexity of all these matrices, correlations and inter-dependencies system is virtually always hidden from the view of those who are contributing to Strategy's execution. However, the correct understanding of how they work and how they have to be set up is essential for having a Strategy Management system that produces results.

As always, your comments, questions or critique are more than welcome.

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