Balanced Scorecard Quick Wins (2)
Mihai Ionescu, Senior Strategy Consultant, Owner Balanced Scorecard Romania, Author.
This is the second part of this article. You can read the first part here.
The BSC Knowledge & Know-how Quick Wins
Even before the Strategy Management System based on the BSC framework goes live, there are a significant number of Knowledge & Know-how Quick Wins that are harvested before or during the implementation project. This article is focused on this type of Balanced Scorecard Quick Wins.
3. Organizational Alignment (XPP: Align the Organization)
3.1. The Alignment process. The Aligned Objectives
Issues: One of the main causes for Strategy Execution's failure is the limitation of the Strategic Plan execution's accountability to the executive & management team, without the full involvement and contribution of the employees form all levels of the organization. Furthermore, the way the Strategic Objectives are aligned isn't always clearly understood when designing the Strategic Plan.
Quick Wins: Gaining a clear understanding of the Organizational Alignmentprocess and methodology, including the Individual Alignment. Understanding how the Alignment process is used as a top-down and bottom-up process, including the individual-level bubbling-up contribution. Clarifying how to identify the three types of Aligned Objectives.
3.2. The Objective-level Alignment
Issues: In many cases, the Alignment process is in fact a cascading one, that is performed only vertically, or - in the best case - vertically and horizontally, where the horizontal alignment is considered between a number of support and operational Strategic Business Units (SBUs).
Quick Wins: Clarifying the three types of Aligned Objectives and gaining the know-how of the Objective-level Alignment, which aligns each Strategic Objective of an SBU either vertically, to the corresponding organizational-level objective, or horizontally, as driving objective, to the driven objective of another SBU, adapting the vertical and horizontal alignment process to the reality of the effective processes inter-dependencies between the SBUs, as Internal Suppliers and Internal Customers.
3.3. The Contributory Strategic Objectives identification
Issues: The often superficial or ad-hoc identification of the SBUs contributing to the accomplishment of certain organizational-level Strategic Objectives leads to an approximate Alignment and, in consequence, to the reduction of Strategic Plan's successful execution. This is the Alignment uncoupling, which we can notice - for instance - when all the SBUs' driving contributory objectives are achieved, but the corresponding driven organization-level objective is not.
Quick Wins: Understanding the accurate methodology for identifying or validating the departmental-level contributory Strategic Objectives, increasing the probability of the corresponding driven organizational-level Strategic Objectives' accomplishment and avoiding the Alignment uncoupling.
3.4. The Top-Down and Bottom-Up Alignment process
Issues: Even if the Alignment principles are adhered to, the process often becomes laborious and complex, due to the improper sequencing of the chain of Alignment workshops and the lack of updating, as the Alignment progresses. The Alignment often becomes a formal and artificial, Top-Down process, only.
Quick Wins: Gaining the know-how of the Top-Down + Bottom-Up loop Alignment process methodology and understanding how the sequencing of the Alignment workshops is determined, based on the Internal Customer - Internal Supplier rating, in order to reduce the number and the complexity of the Alignment updates and the difficulty of the Alignment Wrap-Up, at the end of the chain of Alignment workshops.
3.5. The External Alignment process
Issues: Sometimes regarded as 'nice in theory', the External Alignment process is often not applied in practice, due to the lack of an effective Strategy-focused dialogue with customers, suppliers and partners. The External Alignment relaince solely on information supplied by the external parties, renders this capability useless or at least ineffective, in most cases.
Quick Wins: Understanding how the External Alignment System is designed and used, based not only on the information supplied by the external parties, but also on the information developed within the system and managed by the SBUs that interface with the external parties.
3.6. The Individual Alignment process and the Strategic Jobs Families
Issues: One of the major 'Achilles heel' of an effective Strategy Management System is represented by the application of the 'Strategy is everyone, everyday job' principle, stated by Drs. Kaplan and Norton, twenty years ago. But too many Balanced Scorecard implementations fall short of the full and correct Individual Alignment process setup, with serious consequences that often lead to the failure of the whole implementation.
Quick Wins: Gaining the know-how about the Individual Alignment process and about the Strategic Jobs Families' roles and engagement in the Strategic Plan's execution, based on their contribution to the departmental-level Strategic Initiatives' roll-out or realization.
3.7. The Individual-level Strategic Planning Dialogue
Issues: The perception that the Individual Alignment is only a cascading process, usually leads to employees' disengagement from Strategic Plan's execution, mainly because the employees don't feel that they have a stake in the Strategy and a motivation to involve into bringing it to fulfillment.
Quick Wins: Gaining the understanding of how the Individual Alignment works successfully, by engaging the employees in a Strategic Planning Dialogue, with the purpose of bubbling-up their front-line knowledge & understanding, resulting from their direct contact with the customers, the competition and the realities of the processes they are operating on a daily basis.
3.8. The Strategy Communication Plan and its execution
Issues: The aim to win the hearts and minds of the employees, during the Strategic Planning & Execution processes, is often ignored and the Strategy is not properly and systematically communicated to the employees, whether they are involved in the Strategic Planning process and in plan's execution, or not.
Quick Wins: Understanding how the Strategy Communication Plan is designed, scheduled and executed (target audience, channels, content, timing and frequency), following the multiple stages of the Strategy Dialogue and reaching all employees, irrespective of their involvement in Strategic Initiatives' roll-out or realization, or of their participation in the multiple stages of the Strategy Dialogue.
4. Operational Integration (XPP: Plan Operations)
4.1. Budget's correlation with the Strategy
Issues: Whenever the Strategic Plan and the Budget are designed in parallel, with little or no inter-correlation, the result is the low probability of Strategic Plan's successful execution. Many Strategic Initiatives are in fact under-funded or not funded by the expenses side of the Budget, with a direct negative effect on the required changes of the Capabilities System, whilst the income side doesn't account for the changes in the revenue structure, due to the new or updated mix of Strategic Choices.
Quick Wins: Understanding how to correlate the Budget with the Strategic Plan, including the definition / identification of the StratEx (the cumulative funding of the Strategic & Risk Mitigation Initiatives) and the quantification of Budget's variable expenses and anticipated income changes. Gaining the know-how of the methodology used to validate the initial Strategic Plan (including only the high-level Strategic Initiatives), before the full & detailed Strategic Plan is designed.
4.2. Operations Plans' correlation with the Strategy
Issues: The Operations Plans (mainly, S&OP - Sales & Operations Plans), which define the anticipated revenues and the costs structure along the entire core Value Chain of the company is often designed without an accurate correlation with the expected effects of Strategic Plan's execution, which induces changes in the way the revenues are generated and the costs are incurred. The result is an S&OP which requires multiple re-design reviews along the year, in response to the changes produced by the new Strategic Choices mix that is brought to life and by the Capabilities System reconfiguration.
Quick Wins: Understanding how the S&OP is correlated with the expected changes produced by Strategic Plan's execution, regarding the anticipated changes of the structure of revenue flows, required resources allocation and costs configuration.
4.3. The Core Resources Readiness correlation with the Strategy
Issues: The misunderstanding of the integrative role of the Strategy leads frequently to the co-existence of departmental 'strategies' that govern the planning and availability of core resources, like HR, or IT, which often diverge from the requirements of the changes mandated by the Strategy. This approach leads to a level of Core Resources Readiness that isn't synchronized with the Strategic Plan, reducing the probability of its successful execution.
Quick Wins: Gaining the understanding of Core Resources Readiness planning, in accordance with the requirements of the changes targeted by the Strategic Plan (the Learning & Growth perspective), at least for the human resources' competencies & skills and the IT infrastructure (hardware, communication and applications), IT services and information resources (sources, aggregation. analytics).
4.4. Continuous Improvement Programs' correlation with the Strategy
Issues: Very often the Continuous Improvement programs, based on Lean, Six Sigma, TQM, etc., are designed and rolled-out independently from the Strategy of the company. Sometimes, they even develop a 'strategy' of their own, although they are almost always focused on operational effectiveness.
Quick Wins: Understanding how the Continuous Improvement programs are integrated with the Strategy and focused towards the specific operational effectiveness areas that require Capabilities System changes, as mandated by the Strategic Plan (the Internal Processes perspective).
5. Strategic Plan Execution (XPP: Monitor & Learn)
5.1. The Strategy Management Cycle
Issues: Many times, the failure of Strategy's formulation and execution is determined by the lack of understanding of how the Strategy Management cycle works and especially of how Strategic Plan's execution is performed along the planning cycle (e.g. along the year).
Quick Wins: Gaining the understanding of the way the Strategy Management cycle is performed, with the correct sequencing of the required workshops for Strategy Formulation, Strategic Planning, Operational Alignment and Operational Integration, as well as with the rigorous drumbeat of Strategy Review Meetings and Model Review Meetings.
5.2. The Strategy Management function (OSM)
Issues: In many organizations, the responsibility for coordinating the Strategy Management process is spread thin or unevenly, being divided between the C-Level, Marketing, Finance or HR executives (with ad-hoc responsibility allocation variations from one organization to another), mainly because a Strategy Management organizational function does not exist.
Quick Wins: Understanding the roles of the Leadership Team, Core Team and Analytic Team during Strategic Management System's implementation and the roles of the Office of Strategy Management (OSM), during the course of the planning cycle, including its relationship with the other functions of the organization.
5.3. The Strategy Review Meetings
Issues: There a general confusion about what the 'strategy meetings' are all about. Many of us have attended such meetings that aim at reaching consensus about important 'strategic' decisions, usually by an executive team. Even the meetings that are strictly aimed at reviewing Strategy Execution's progress are structured in an approximate or ad-hoc way.
Quick Wins: Understanding the structure, workflow, deliverables and layered scheduling of the Strategy Review Meetings that have a unique aim: identifying the causes of the lack of performance and/or unacceptable risk exposure and taking the Corrective Actions, in consequence. With a single deliverable: the Corrective Actions Register or Report.
5.4. Strategy Execution Dynamics and the Model Review Meetings
Issues: In many initial or approximate Balanced Scorecard implementations, the Strategic Plan is static (in terms of Strategic Objectives and associated KPI & KRI Measures), leading to - at least - an inefficiency of the BSC model used along the planning cycle (e.g. over the year). The main reason: the lack of understanding the dynamics of the Strategic Planning and Strategic Plan's execution. Moreover, in many cases, the BSC Model is often updated in an ad-hoc manner.
Quick Wins: Gaining the understanding of the principles and the know-how of the methodology used to update the Strategic Plan along the planning cycle, as it is executed, correctly managing Strategic Objectives' life-cycle, and to correct the model strategic assumptions that have proven invalid and the Strategic Plan's model correlations that have been invalidated by the practical reality of plan's execution. Understanding the Strategic Uncoupling symptoms and how to diagnose Strategic Plan's model malfunctions. Understanding the structure, workflow, deliverables and layered scheduling of the Model Review Meetings.
5.5. The OSM executive relationship with the PMO
Issues: The failure to fully integrate the Strategy Management organizational function with the Project Management function leads to overlaps and even to counter-productivity in executing the Strategic Plan, strictly related to the Strategic Initiative's management and to the projects portfolio's priorities and [tactical] resources allocation.
Quick Wins: Understanding how to integrate and synchronize the activity of the OSM (Office of Strategy Management) with that of the PMO (Project Management Office), including the workflow of information exchange regarding Strategic Initiatives' priority, sequencing, updating, status reporting and the application of the Corrective Actions decided during the Strategy Review Meetings, when and where needed.
5.6. The OSM executive relationship with the Risk Management function
Issues: Wherever the Risk Management organizational function exists, there is often a certain level of disconnect and lack of integration with the Strategy Management organizational function. This leads to leads to overlaps and even to counter-productivity in executing the Strategic Plan, strictly related to its Strategic Risk Management role.
Quick Wins: Understanding how to integrate and synchronize the activity of the OSM (Office of Strategy Management) with that of the Risk Management organizational function, sometimes called RMO (Risk Management Office), including the workflow of information exchange regarding the Risk Factors, Risk Events and KRI Measures, concerning their identification, monitoring, calculation, as well as Risk Mitigation Initiatives' priority, sequencing, updating, status reporting and the application of the Corrective Actions decided during the Strategy Review Meetings, when and where needed.
6. Strategy Adaptation (XPP: Test and Adapt)
6.1. The Multi-annual Strategic Planning Breakdown update
Issues: The breakdown of Strategic Gaps' closing on multiple planning cycles (usually annual cycles) is often mismanaged and the Multi-annual Strategic Planning Breakdown update is performed superficially, usually by uselessly extending of already-achieved Strategic Objectives into the next planning cycle, or by scrapping them before their full achievement.
Quick Wins: Understanding the importance of the Strategic Planning breakdown on multiple consecutive planning cycles. Gaining the know-how of how to manage the Multi-annual Strategic Planning Breakdown update, by porting the Strategic Objectives that have been partially achieved or not achieved into the next Strategic Plan and how to update the corresponding Strategic Gaps' closing status based on the achieved, not achieved or partially achieved statuses of current Strategic Plan's Strategic Objectives.
6.2. Strategic Scenario Planning
Issues: The Strategy Adaptation, based on an Early Warning System or on any equivalent adaptation monitoring & triggering system, is often not extended to the Strategic Plan. This creates a significant delay between the changes of the Strategy, performed either by switching to predefined Strategic Scenarios or by employing other types of strategic trigger-reaction system, and the changes of the Strategic Plan and its execution, with a negative impact on Strategy's adaptation effectiveness.
Quick Wins: Gaining the know-how of correlating and synchronizing the Strategic Scenarios activation by the Early Warning System with the Strategic Plan changes and its execution, including the preparation & activation of the Strategic Plan changes, linked to the predefined Strategic Scenarios, as well as of updating the Hypothesis Register and the Tolerances Register, once a Strategic Scenario has been activated.
6.3. Strategy Testing through War Gaming
Issues: The anticipated competitive response to Strategy's execution is often ignored or down-played, leading to a reduction, or even canceling, of Strategy's execution expected effects. Furthermore, the benefits of bringing to life the Strategic Choices mix may be reduced by the changes in competitors' strategies that have been made during the last Strategy Execution planning cycle.
Quick Wins: Understanding how of the War Gaming method is used to adapt the Strategic Choices mix and next planning cycle's Strategy Execution based on the new positioning of the main competitors and on their response to the effects of our last planning cycle's Strategy's Execution.
6.4. Best Practices application to next cycle's Strategy Execution
Issues: The lack of a systematically managed and communicated Knowledge Base of Best Practices that have emerged from Strategic Plan's execution, is the main cause that makes the mistakes made during the last planning cycle to be repeated during the next one.
Quick Wins: Gaining the understanding of how the Knowledge Base of Best Practices system is managed and used throughout the organization, with a direct and specific application within the Strategic Planning and Alignment processes, as well as during Strategic Plan's execution.
You can read the first part of this article here. It includes:
1. Strategy Formulation (XPP: Develop the Strategy) 2. Strategic Planning (XPP: Translate the Strategy)
Your feedback is more than welcomed, as always.