Strategy Cascading: 4 Methods to Link Corporate and Functional Strategies

A good strategy implies coherence between objectives at each level of organization. In strategic planning, this coherence is achieved by cascading or alignment of strategy scorecards. 

Cascading Method 1: Align Strategy Scorecards by Perspectives
Cascading method 1:
Alignment by perspectives.
Cascading Method 2: Cascading or Alignment by Normalized Goals
Cascading method 2:
Alignment by normalized goals.
Cascading Method 3: Direct Cascading or Cascading by KPIs
Cascading method 3:
Direct cascading by KPIs.
Cascading Method 4: Alignment by Context
Cascading method 4:
Alignment by context.

Key topics:

Introduction to Strategy Cascading

A corporate level strategy cannot be used directly by business units or front-line employees; the high-level goals simply won’t make much sense for functional level managers. The strategy needs to be cascaded.

Our definition of cascading overlaps with the idea of value-based strategy decomposition1:

Strategy cascading is splitting up the high-level goals and strategic ambitions of the stakeholders into small, preferably independent sub-goals or sub-strategies that can be quantified by the value for stakeholders.

The History of Cascading Term

The term strategy cascading was introduced in earlier works on the Balanced Scorecard framework2 as a way to populate the strategy scorecards through the organization.

Later, authors of the Balanced Scorecard concept shifted3 from the term “cascading” (which implies a top to bottom, waterfall approach) to a more general term “alignment.”

Strategic alignment implies achieving coherence between the organization’s actions, goals, strategy, values, and on the highest level, organization’s purpose4.

Cascading or Alignment is Discussion Around Strategy

Both cascading and alignment are based on the analysis of the strategic ambitions of the stakeholders.

  • In a case of cascading, this analysis is performed by the top managers, and the results are mandated (cascaded) to the lower levels.
  • In a case of alignment, the role of discussion increases, the new sub-strategies might be suggested by the teams and individuals, pass a strategy sandbox and be aligned with an overall strategy.

The Choice of Strategy Architecture

On the practical level, possible approaches to cascading or alignment depend on the choice of strategy architecture:

  • The monolith strategy architecture with hierarchy of the goals prioritizes the top to bottom cascading.
  • The architecture of aligned strategy scorecards is more flexible and works for both cascading and alignment.

Strategic planning starts with the stakeholders and their strategic ambitions. When implementing strategy by doing value-based strategy decomposition, we make the high-level goal more specific by adding sub-goals and quantifying them. We also try to split up the high-level goals into independent sub-goals so that we can execute them simultaneously.

Monolith Strategy Architecture with Hierarchy of the Goals

In theory, we can follow the monolith strategy approach infinitely by cascading goals and assigning owners to specific branches. The disadvantage of this approach is that a strategy described with such monolith architecture is hard to maintain and hard to communicate across the company.

  • Monolith strategy architecture is like keeping all sub-strategies in one huge spreadsheet file.

The Architecture of Aligned Strategy Scorecards

The response to this challenge is to use the architecture of aligned strategy scorecards where each scorecard:

  • Can be independent or
  • Can be connected with an overall strategy
  • The connection can be hierarchical or by selected normalized goals

While we’ll use the terms cascading and alignment interchangeably in this article, on a practical level, the preferred architecture for strategy is the one based on the aligned strategy scorecards.

Who is Responsible for Cascading?

Since the first version of this article published more than a decade ago, on working with the clients of BSC Designer, we learnt important nuances about the cascading/alignment in practice.

It’s worth dividing the cascading into:

  • The practical cascading methods that we discuss below, and
  • Cascading from a managerial point of view, e.g., delegating and deciding who will be “doing the “cascading” itself.

Some organizations attempt to outsource cascading to external consultants or internal practitioners rather than involve key people from all departments. We discussed these nuances and shared some examples of cascading from a managerial point of view.

Cascading Methods: Practical Examples

Strategy cascading is splitting up the high-level goals and strategic ambitions of the stakeholders into small, independent sub-goals.

This definition gives us a starting point for successful cascading – understanding the stakeholders of your organization, their needs and priorities.

As for the choice of cascading tools, there are three common techniques for cascading/alignment:

Let’s discuss these three cases.

Cascading Method 1: Align Strategy Scorecards by Perspectives

Application area: most strategy scorecards. Difficulty: easy.

To illustrate the alignment by perspectives, let’s use:

  • A scorecard for corporate level strategy, and
  • Several scorecards for function level strategies

Cascading Method 1: Align Strategy Scorecards by Perspectives

If all scorecards have the same structure of perspectives, then we can use those perspectives to align the scorecards.

  • The Finance perspectives of all functional scorecards will contribute to the Finance perspective of the Corporate Level scorecard.
  • The Customer perspectives of the functional scorecards will contribute to the Customer perspective of the Corporate Level scorecard.
  • And so on.

Cascading by perspectives - Corporate level strategy

Contribution by Normalized Performance Data

By “contribute,” in this case, we mean that we use the performance of the functional scorecards within specified perspectives to calculate the overall performance of the corporate level scorecard.

With this approach, we don’t use the specific values of the indicators, we first normalize them.

Aligned scorecards architecture in My Scorecards section

This gives us flexibility to align together strategy scorecards that don’t look comparable. For example, we can align together:

  • Corporate strategy
  • Sales scorecard by local offices
  • Overall marketing strategy
  • Cybersecurity strategy

Application Area of Alignment by Perspectives

This approach to alignment is possible only in cases when:

  • All strategy scorecards share the same perspectives.
  • The connection of the scorecards makes business sense.

For example, if there is a KPI scorecard that helps to measure the training effectiveness according to the four-level model (different perspectives are used), we won’t be able to align it with the strategy scorecard. At least not using this method.

While the names of the perspectives match, it doesn’t guarantee that the business logic behind these perspectives is the same. For example, the “customers” of quality strategy (developers, testers, end-users) and the “customers” of procurement strategy (procurement team, internal customers, suppliers) are different. Technically, we could compare the performance of both strategy scorecards, but it would be hard to say what kind of customer strategy was quantified in the end and if this number makes business sense.

What if the strategy scorecards don’t share the same logical structure? The alignment by perspectives might not have a business sense. In this case, we can use method 2 – align by normalized goals.

Cascading Method 2: Cascading or Alignment by Normalized Goals

Application area: business frameworks & canvases, KPI scorecards. Difficulty: medium.

The cascading by perspectives that we discussed above works well in the case of strategy scorecards that share a common structure of perspectives.

What if we need to:

  • Align a strategy scorecard with a KPI scorecard (perspectives won’t match), or
  • Align a strategy scorecard with some business framework or canvas?

Cascading Method 2: Cascading or Alignment by Normalized Goals

In these cases, there is neither a shared set of perspectives nor straightforward business logic for connection.

This challenge is typical in the early stages of strategic planning, when new strategic hypotheses need to be validated through execution.

Let’s use this case as an illustration:

  • A strategy team does strategic analysis with the PESTEL framework and detects Cybersecurity as one of the emerging challenges.
  • As a response to the detected challenge, the team (1) creates a cross-functional strategy that should combine the (2) findings of the strategic analysis with (3) sub-goals defined in cybersecurity and quality scorecards.

The solution will be to:

  • Use the strategy architecture of aligned scorecards.
  • Normalize goals according to the measurement scale to make them comparable.
  • Align by normalized goals and keep important contextual information.

To illustrate this approach in practice, we’ll follow three steps:

  1. Create a cross-functional strategy scorecard.
  2. Show how the findings of strategic analysis (PESTEL framework) can be aligned with a cross-functional scorecard.
  3. Align independent strategy scorecards (Quality and Cybersecurity) with a cross-functional scorecard.

(1) Creating a Cross-Functional Strategy Scorecard

Let’s create a new blank scorecard and rename it the “Cross-Functional Strategy.”

Our goal is to combine on this scorecard:

  • The results of PESTEL analysis
  • Sub-goal from Cybersecurity scorecard
  • Sub-goal from Quality scorecard

(2) Using the Results of PESTEL Analysis

PESTEL is one of the strategic analysis tools. Its template is available among other business frameworks in BSC Designer.

One of the findings of PESTEL analysis in the Technological perspective is the Cybersecurity trend.

Let’s use it as a context for our cross-functional scorecard:

    1. Open the results of PESTEL analysis.
    2. Switch to the Strategy Map tab.
    3. Select Cybersecurity in Technological perspective.
    4. Click the Export button on the toolbar.

Selecting trend on the PESTEL analysis map

  1. Select “Cross-functional scorecard” as a target document.
  2. Select “Learning perspective” as a new parent.

The tool suggests as two options:

  • Copy, or
  • Link

The copy option will simply copy the finding of the PESTEL analysis to the cross-functional scorecard. Once copied, there will be no connection to the original PESTEL analysis, except the historical record (see the Context tab > History of Changes) for the created item, which will indicate that this item was originally created in the PESTEL template.

The copy option is suitable for the case when you plan to further develop the item in the cross-functional scorecard.

The link option will establish a connection with the original item in the PESTEL template.

The link option is suitable for the case when you plan to further develop the item in the PESTEL analysis and want to have it as a reference in the cross-functional scorecard.

(3) Aligning Quality and Cybersecurity Scorecards

To align a quality scorecard with a cross-functional scorecard:

  1. Open the quality scorecard in a separate tab in your browser.
  2. Select Prevent Critical Quality Problems from the Internal perspective of quality scorecards.
  3. Copy the goal (Tools > Copy indicator).
  4. Switch to the cross-functional scorecard.
  5. Select the Internal perspective and paste the goal (Tools > Paste indicator).

To align the cybersecurity scorecard with a cross-functional scorecard, follow the same steps:

  1. Open the cybersecurity scorecard.
  2. Select Regular data security audits from the Learning perspective.
  3. Copy this goal and paste it into the Internal perspective of the cross-functional scorecard.

Review of Results

Cross-functional scorecard that combines findings of PESTEL analysis and goals from functional scorecards.
Cross-functional scorecard that combines findings of PESTEL analysis and goals from functional scorecards.

We created the cross-functional scorecard according to the requirements of the case:

  • The copy of the trend detected by the PESTEL analysis establishes the necessary context.
  • The cross-functional scorecard is aligned with two other scorecards by the goals.
  • We can develop the cross-functional scorecard further to add more goals and specific initiatives.

Cascading Method 3: Direct Cascading or Cascading by KPIs

Application area: mainly limited to financial indicators. Difficulty: hard due to using non-normalized data.

Direct cascading or cascading by KPIs creates the hierarchy of the KPIs, where lower-level indicators contribute to high level.

The application area of such a type of cascading is limited to business domains where activity is quantified using exactly the same methodology. A typical example of direct cascading is the sales indicator. On a high level, it will be total sales that can be easily cascaded to sales by local offices and even sales by individuals.

Cascading Method 3: Direct Cascading or Cascading by KPIs

The obvious disadvantage of this approach is the limited number of business activities, where such direct cascading makes sense. For example, cascading marketing and product development activities in this way won’t be successful because of the difficulty in finding a quantification approach that works for all levels of organizational hierarchy.

Even in the business domains, where quantification is possible on various levels (like sales), direct cascading is not an ideal solution as it considers performance metrics in isolation from other factors that might have affected performance data.

Cascading Method 4: Cascading by Context

Application area: any component of strategy or functional scorecard. Difficulty: easy.

In contrast to alignment based on data, the contextual connection between elements of scorecards doesn’t involve the performance data of goals or indicators. Instead, we establish logical or contextual relationships between the items.

Align goals by context or by data in BSC Designer

Here are some practical examples of contextual relationships:

  • The initiative from one of the scorecards supports goals and initiatives in other scorecards.
  • The identified risk is affected by various uncertainties described in the form of success factors from different scorecards.
  • A goal from one scorecard explains why we approach another goal or initiative from a specific angle.

Cascading Method 4: Alignment by Context

To align two items (goals, initiatives, or indicators) by context:

  • Open scorecards in separate tabs.
  • Select one item and copy it (Tools > Copy).
  • Select another item and use the paste function (Tools > Paste).
  • When the software asks, select the “Link by Context” option.

The created contextual link will be displayed on the Context tab for both items:

The "Relates to" contextual connection between two items

Understand the Impact of Cascaded Strategies

Once the connections between the scorecards are established, we can define more precisely how the sub-strategy affects the overall strategy:

  • Its impact compared to other sub-strategies.
  • Its role as success factor or expected outcome.

We can also prepare strategy for execution by:

  • Delegating and creating a feedback loop.
  • Creating a strategy sandbox where teams and individuals can work on prototypes of sub-strategies.
Cascading or Alignment of Strategy Scorecards in BSC Designer

Impact of the Scorecard is Defined by Its Weight

We aligned two market penetration strategies with corporate level strategy…

  • Should they contribute to the overall strategy in the same way?

Depending on your vision of market penetration strategies, the strategy scorecard that describes a high margin market can have a higher weight in a corporate strategy.

The impact of the strategy scorecard on corporate-level strategy is defined by its weight

To automate this in BSC Designer:

  • Select the cascaded item.
  • Switch to the Performance tab.
  • Adjust its weight.

Impact as Success Factor or Expected Outcome

When we align two scorecards, we create a connection between the scorecards.

By default, the output of one scorecard contributes to the output of another scorecard, but it’s also possible that the output of one scorecard contributes as an input to another scorecard.

Depending on the type of indicator (leading or lagging), it impacts differently on the overall performance of its parent goal. Learn more about the difference between leading and lagging indicators.

To automate this in BSC Designer:

  • Select the cascaded item.
  • Switch to the Context tab.
  • Change its type to Leading indicator.

Delegate and Create a Feedback Loop

The objective of cascading is to split up high-level goals into smaller, independent sub-goals.

  • The decomposition gives organizations the possibility to delegate those goals to subordinates and provide a reporting framework.

The feedback loop powered by approved performance indicators helps validate the results faster and ultimately improves the value created for the stakeholders.

At the same time, linking those performance indicators to the reward system might be a bad idea. The metrics that served well for understanding performance and learning from mistakes start to fail once linked to the bonuses. The paradox is explained by Goodhart’s law. In a different article, we discussed the best practices for using compensation and reward KPIs.

To automate delegation in BSC Designer:

  • Open the strategy scorecard.
  • Select a goal or an initiative.
  • Use the Owners control on the data tab to assign an owner for the item.

Strategy Sandbox to Involve Team in Strategy Description

A good strategy is a product of discussion. Ideally, teams and individuals should have a possibility to:

  • Formulate their own sub-strategies.
  • Do initial validation of the strategic hypotheses.
  • Align new sub-strategies to the overall strategy.

As a response to the challenges of VUCA world, a concept of participative strategy design5 seems to get a positive impulse in the minds of executives.

It’s easy to automate this idea in the architecture of aligned strategy scorecards.

In BSC Designer:

  • Go to the My Scorecards section.
  • Create a group called “Strategy sandbox.”
  • Give full rights to all internal stakeholders of your organization, and
  • Encourage teams and individuals to create prototypes of their strategy scorecards.

Cascading: Executive Summary

Strategy cascading is splitting up the high-level goals and strategic ambitions of the stakeholders into small, preferably independent sub-goals that can be quantified by the value for stakeholders.

On a practical level, we use the architecture where strategy is presented as a set of aligned strategy scorecards.

We have several methods to automate the alignment between the scorecards:

  • Aligning a functional scorecard with a corporate-level scorecard by perspectives, or
  • Aligning by specific business goals to create a cross-function scorecard.
  • Direct cascading

Once we aligned the scorecard, we can further develop them:

  • Add local-level goals, initiatives, and performance indicators.
  • Assign weights to specify the impact of sub-strategy.
  • Define if the sub-strategy contributes as a success factor or outcome.
  • Delegate strategy scorecards to teams and individuals.
  • Involve teams and individuals in strategy description.
  1. Decomposition of the Goals in Strategic Planning: Full Guide” Aleksey Savkin, BSC Designer, September 30, 2022.
  2. The Strategy Focused Organization, Robert S. Kaplan, David P. Norton, Harvard Business School Press, 2001
  3. “Alignment: Using the Balanced Scorecard to Create Corporate Synergies,” Robert S. Kaplan, David P. Norton, Harvard Business Review Press, 2006
  4. A Simple Way to Test Your Company’s Strategic Alignment, Jonathan Trevor and Barry Varcoe, HBR, 2016
  5. Leaders Need to Get Comfortable Collaborating on Strategy, Graham Kenny, HBR, 2023
Cite as: Alexis Savkín, "Strategy Cascading: 4 Methods to Link Corporate and Functional Strategies," BSC Designer, November 12, 2014, https://bscdesigner.com/cascading.htm.

2 thoughts on “Strategy Cascading: 4 Methods to Link Corporate and Functional Strategies”

  1. How we know that how and to what level/percentage cascaded objective support objective at higher level? Similarly, if multiple cascaded objectives are supporting one parent/top level objective, should we use their % contribution/weight OR what can be the best way to represent it?

  2. Hi Faisal,

    If the goal is to get a numeric value, then you can do it easily with BSC Designer using indicator’s weight. Create a container indicator and use weighted average for its value; then put inside indicators for the sub-levels.

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