The Strategy-Focused Organization: How Balanced Scorecard Companies Thrive in the New Business Environment

Now, the creators of the revolutionary performance management tool called the Balanced Scorecard introduce a new approach that makes strategy a continuous process owned not just by top management, but by everyone. In The Strategy-Focused Organization, Robert Kaplan and David Norton share the results of ten years of learning and research into more than 200 companies that have implemented the Balanced Scorecard. Drawing from more than twenty in-depth case studies-including Mobil, CIGNA, Nova Scotia Power, and AT&T Canada-Kaplan and Norton illustrate how Balanced Scorecard adopters have taken their groundbreaking tool to the next level. These organizations have used the scorecard to create an entirely new performance management framework that puts strategy at the center of key management processes and systems.

Kaplan and Norton articulate the five key principles required for building Strategy-Focused Organizations: (1) translate the strategy to operational terms, (2) align the organization to the strategy, (3) make strategy everyone's everyday job, (4) make strategy a continual process, and (5) mobilize change through strong, effective leadership. The authors provide a detailed account of how a range of organizations in the private, public, and nonprofit sectors have deployed these principles to achieve breakthrough, sustainable performance improvements.

Presenting a practical, proven framework steeped in rich case study experience, The Strategy-Focused Organization helps solve a universal management problem-not just how to formulate strategy, but how to make it work. Building on one of the most revolutionary business ideas of our time, this important book shows how today's leaders can shape their own companies to meet the challenges and reap the rewards of a new competitive era.

Robert S. Kaplan is the Marvin Bower Professor of Leadership Development at Harvard Business School. David P. Norton is President of Balanced Scorecard Collaborative, Inc.

Building on their Balanced Scorecard approach, Kaplan and Norton have developed an impressive framework in The Strategy-Focused Organization for the implementation of strategy. They have found that 90% of strategic initiatives fail due not to formulation but to implementation difficulties. Successful implementation of strategy requires all parts of an organizations to be aligned and linked to the strategy, while strategy itself must become a continual process in which everyone is involved. The Balanced Scorecard, originally seen by the authors as a measurement tool, is now presented as a means for implementing strategy by creating alignment and focus.

Financial measures report on lagging financial indicators. The Balanced Scorecard aims to report on the drivers of future value creation. The book shows in detail how this is done from four perspectives: Financial, customer, internal business perspective, and learning and growth (these are outlined on p.77). These four perspectives produce a highly detailed framework when combined with the five 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 everyday job. 4: Make strategy a continual process. 5: Mobilize change through executive leadership.

Absorbing every detail of this book will require many hours. The sheer detail of this complex system requires considerable attention, perhaps more than some readers can muster, but clearly distinguishes this work from many books full of business fluff. The style tends to be turgid and pedantic while being admirably complete. Readers can grasp the essence of the book's central points by reading only Chapter 1 (Creating the Strategy-Focused Organization), Chapter 3 (Building Strategy Maps), and Chapter 8 (Creating Strategic Awareness). Skip quickly through the chapters in Part Two: Aligning the Organization to Create Synergies. This section is the least engaging of the five. The balanced scorecard approach to strategy will appeal to those with a systematizing frame of mind. The book is filled with complex diagrams of corporate processes consisting of interrelated boxes and forces.

This approach is extremely detailed and complex. It requires a major commitment and effort. Though the authors claim it can be implemented by smaller organizations, this will be more challenging than for large companies who can commit a team full time to working out the details.

Much of the value of the approach may lie not so much in following through on completely working out the balanced scorecard but on absorbing the lessons regarding organizational integration across silos and the importance of clarity about mission, strategy, and goals. The balanced scorecard is one way to achieve and implement this clarity but not the only way. Another would be continual reiteration of these (as in Confessions of An Extraordinary Executive). Some companies may benefit from strict use of this system, including finding units of measurement for its implementation. Others will gain much from applying the insights without such a formal and complete implementation.


The Perilous "Journey" to Breakthrough Performance   July 7, 2001
Robert Morris (Dallas, Texas)
66 out of 66 found this review helpful

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. 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) which is 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 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 which 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."


Best Practices in Organizational Communication   November 24, 2000
Professor Donald Mitchell (Thanks for Providing My Reviews over 97,000 Helpful Votes Globally)
67 out of 69 found this review helpful

The Strategy-Focused Organization clearly deserves more than five
stars. It is one of the ten most important business books of the past
decade. The book successfully outlines an enormous improvement in
communications practices for making important changes in for profit
and nonprofit organizations. The communications stall is the most prevalent one
in most organizations. Application of the authors' ideas can bring
about a significant improvement in our society.

This book is an
interim report on the application of the authors' concept, the
Balanced Scorecard (introduced in 1992 and described in the book of
the same name, published in 1996). The purpose of the book is to
provide "a roadmap for those who wish to create their own
Strategy-Focused Organization . . . [by employing the Balanced
Scorecard]."

If you don't know what the Balanced Scorecard is,
let me briefly describe it for you. A Balanced Scorecard adds several
important measures to the ones normally found in the accounting
system, designed to measure those areas where performance most
directly and powerfully affects strategic position. Such areas
include innovation, organizational learning, effectiveness in key
tasks, and performance with key audiences like customers. The
measures are chosen to reflect the systematic effects of how the
organization's overall value and performance are improved, and are
displayed in a Strategy Map that communicates those ideas to one and
all. In doing so, the Balanced Scorecard is the applied solution to
many of the issues raised about how to establish a learning
organization in Peter Senge's The Fifth Discipline.

Most new
business concepts do not last long enough to warrant a study on their
effectiveness. The ones that do, like reengineering a few years ago,
usually display more problems than successes. The Balanced Scorecard
concept is the exception. The results have been very positive for
almost all those who have employed it.

The key seems to lie in
having everyone in the organization have a more complete understanding
of what the organization is trying to accomplish. As such, the
authors have actually uncovered something much more significant than a
strategy communications process. Harvard Business School Professor
and accounting guru (Activity-Based Costing) Bob Kaplan and consultant
David Norton have uncovered a best practice in how to communicate any
important message in an organization. Although the book does not
address that latter point, discerning readers will quickly spot it.
Presumably the authors will too at some point, and a future book will
begin to address this important application.

The focus of this
book is on how Balanced Scorecard "adopting companies used [it]
. . . to implement new strategies." The finding is that with
"their new focus, alignment, and learning, the organizations
enjoyed nonlinear performance breakthroughs." This is quite
remarkable because organizations have reported in the past that
implementing new strategies is one of the most difficult tasks they
ever take on. Studies cited by the authors point to one problem being
that most people in the organization are never clear on what the new
strategy is. So if careful coordination and purposeful change are
required, the speeding relay team may instead drop the baton along the
way.

The Balanced Scorecard provides for a fundamental strategic
control mechanism in the same way that the budget provides an
operational control. The Balanced Scorecard is at the center of the
organization's business planning, getting feedback to improve learning
about how to proceed and then translating the organization's vision
for each employee. This feedback is critical because most initial
concepts for strategy are flawed in fundamental ways. As the authors
point out, strategies should be treated as hypotheses, rather than as
commandments written permanently in stone. Only by uncovering those
flaws and correcting them does a new strategy have a good chance of
succeeding.

The book features a lot of case histories that explain
what the most successful organizations have done to apply the Balanced
Scorecard. These are particularly valuable for making the key
elements of the Balanced Scorecard clearer. For example, the book
contains many pages of Strategy Maps for different organizations.
These maps connect financial, customer, internal process, and learning
objectives in an explicit description of how improvement in each area
is connected to each other one, and to the organization's overall
objectives. Without these detailed examples, it would be very hard to
grasp the heart of the communications process involved here.

These
financial and nonfinancial metrics can then be used to create personal
objectives for each person in the organization for contributing to the
ultimate success. Management by objectives measures and compensation
systems can be connected to the new strategy in this way.

The
research emphasizes several important themes:

(1) Translate the
strategy into operational terms

(2) Align the organization to create
necessary synergies

(3) Make strategic initiatives everyone's
everyday job

(4) Make strategy a continuing process

(5) Mobilize
change through executive leadership

I especially found the surveys
helpful for describing what was different about the effectiveness of
organizations using the Balanced Scorecard. They outperform the other
companies by about 100 percent in having everyone in the organization
understand what the organization's strategy is.

The book also
contains a very helpful section of frequently asked questions about
the Balanced Scorecard.

Let me be sure that you understand what the
limitation of the Balanced Scorecard is. If you conceptualize a
strategy that is not as good as one that your competitor develops, you
will still be vulnerable to losing ground until such time as you
reconceptualize your strategy. The Balanced Scorecard can help you
realize that that task is needed and provide some clues, but this
process will be most helpful to those who excel at conceiving of
pre-emptive strategies that their organizations have advantages in
implementing.

After you have finished reading, sharing and
applying these lessons, I suggest you think about where else people
need better communications processes. Then abstract the elements of
this model to apply in those circumstances as well.

Get where you
want to go more rapidly!



The best strategy book this year   October 5, 2000
Jussi Bjorling
39 out of 40 found this review helpful

At first, I was afraid that this book was going to go down the same path that it seems every business book is treading these days: innovate, empower, repeat. However, while the authors of this outstanding work may occasionally sound like their guru colleagues, their book is far more intellectually sound, vastly more detailed, and ultimately far more useful than the flimsy writing that dominates the business shelves.

Kaplan and Norton have done their homework. For every suggestion, they provide a wealth of examples, and they are intellectually honest enough to discuss all the evidence, including that which may run against them. As a result, I have great faith in the soundness of their conclusions. Absolutely a must-read for anyone interested in the evolution of business strategy.


suitable for small-medium size companies too.   March 18, 2001
T SANTOSO (Surabaya, Jatim Indonesia)
35 out of 36 found this review helpful

This book has been on my shelves for 2 months before i read it. I know this is an important work, but I initially think it will only be suitable to large corporations.

After reading it i realize that this can ultimately be apiled to small/med size companies. Companies with revenue of less than 500K USD/year revenue can reap similar benefit compare to the fortune 500 companies by implementing it.

The samples shown in the book make it easier for the reader to copy and adapt for their own organisation. Most samples are derived from the big-companies (typical harvar business book ;-))), but we can adapt it to our (small company) needs.

Focus on chapter 3, about STRATEGY MAP. this is most important. And the GENERIC STRATEGY MAP can be appleid to most organisation with minimum of ajustments. COPY and ADAPT. we can not afford to hire the expensive consultants, so we have to be our own consultant. And this book is a good guide.

Most small companies do not even have VISION, MISSION etc statements. But the balance scorecard helps us focus on strategy, objectives, measures, target and INITIATIVES that are measurable, in a more descreptive ways. This is in a sense a HOW-TO book about strategy, and about measurements.

I've decided to use the sytem for our company sam-design.com which now has 58 people, and sell the intangibles (designs). We won Andersen Consulting (Accenture now) award of ENTERPRISE-50 (awards for most promising small and medium size companies in Indonesia) last November. We think that the strategy describe in the book will boost our company's growth despite the slowdown of the internet.

I started to read the book with much skeptism but ended up recommending it to many friends, write a review about it for local magazine and promoting the idea of strategy based on balance scorecard. ( I did read the original balance scorecard book which was published in 96, interested in the idea for a while but did not implement any of it).

So for the small companies out there, go and get the book, this is not only for the big-boys....