Good strategy implies the coherence between objectives and the way people interpret them on each level of the organization. In the business scorecards this coherence is achieved via the cascading process. In this article I’d like to use some examples of cascading to summarize the best practices and typical pitfalls.
What is Cascading?
A top-level Balanced Scorecard cannot be used directly by business units or front-line employees; the scorecard needs to be cascaded:
- Cascading was introduced in earlier works about the Balanced Scorecard framework (see books reference below) as a way to populate the scorecard through the organization.
Cascading vs. Alignment
In the later works authors of the Balanced Scorecard concept shifted from the term “cascading” (that implies top-down approach to the translation of the strategy, which is not always the best scenario) to the “alignment.”
Both terms “cascading” and “alignment” refer to the discussion around the strategy and its objectives. This discussion makes it easy for business units to understand their role in strategy execution.
Scorecard Cascading or Strategy Alignment Exercise
Let’s take a simple example to show how strategy alignment (or cascading) works, what principles are important, and where typical pitfalls are. Any business has a website these days, so for an example, let’s take the discussion around a company’s online presence, customer experience and the company’s website.
Tier 1 – Strategy Map for Top Managers
For now, the strategy map and its objectives look very generic. Let’s see how it can be used for the further discussion around the strategy.
Tier 2 – Strategy Map for Business Unit
This might be a strategy map (a part of it) of the Marketing business unit (BU).
I believe it’s important to take a moment and analyze what we just did.
Cascading by objectives, not by measures
The most important: we did cascading by business objectives, not by measures. Although, measures can be cascaded by aggregating low level measures in higher level measure like, for example:
- Sales in Country = sum of the Sales in the regions, or
- User experience = index of Adjusted bounce rate and Time on site
This practice in the most cases this won’t make sense for strategy scorecard.
Business goals ownership
It was not that obvious on Tier 1, but on Tier 2 it is clear that any business objective must have its owner. A person who will respond for the execution of this objective, follow action plans and control respective measures.
The process is not always top-down as it might seems to be
Pay attention to the objective: “Build a modern website that works well on all devices.”
- The way this objective is formulated so that it implies that webmaster participated in the discussion.
Probably he said something like:
Visitors from our target group are using smart phones and tables actively; we need to improve the experience of these users on our website.
Such a statement actually explains and justifies the need for the website redesign, and explains the situation much better than a simple: “We need a responsive website.”
Choose a proper level of the details
Have a look at the objective “Build a modern website that works well on all devices” formulated in “Internal Business Perspective.” It’s vague enough and gives a person responsible for this objective a wide range of opportunities to achieve it.
- A good practice is to start with general sounding goal and allow a person responsible for the execution of this goal to formulate the details during the strategy discussion.
- A bad practice is to mandate very specific objective like “Build a website using ABC approach to the responsive design,” as most likely this will ruin any alternative opinions.
Tier 3 Strategy Map for Line-Level Employees
Here is where the real magic happens. If we did everything right on the previous steps, then we’ll be able to make strategy resonate with front-line employees (in this example, this will be the webmaster and content manager)
Objectives are defined by the team, not mandated from the top
As you can see for the Tier 3 strategy map most of the objectives were defined by the team:
- Promote content in social media,
- Prepare editorial calendar and guidance
- Choose fast website hosting and monitor its speed
- Build a website using responsive design
While only few were mandated from the top:
- Increase the number of leads generated by the website
Financial objectives lose their importance
As you can see, the cascading of the financial perspective from Tier 2 to Tier 3 was done formally. One understands that increasing the number of visitors and improving visitor to lead conversion rate would increase sales, but this is more the reminder of why these objectives are important from the financial point of view than a specific reference to the financial outcomes.
Cause-and-effect connections are very important
The most important thing that we did on each tier is keep the cause-and-effect connections between objectives. If this isn’t done, the strategy map of the next level will not make sense, and as a result, achieving coherence between business goals and respective actions won’t be possible.
An example of the bad strategy alignment is when your marketing team is chasing for an award-winning web design, instead of justifying their actions by a/b tests and tangible metrics like time on site, adjusted bounce rate %, etc.
With the current strategy map we can easily follow the logic from top level objectives down to the individual objectives and vise versa.
It is not a list of things to do
Make sure that the strategy map (especially one for the Tier 3) is not a list of things to do. It should contain the most important objectives, while more details are included in the supporting documentations and action plans. For example:
- In the “Customers” perspective we have the objective “Create search engines- and visitor- friendly content.” An action plan for this objective might be to compile a checklist for the content, and will ensure that this checklist is properly integrated into respective content creation system.
- In “Internal business processes” perspective we have the objective “Prepare editorial calendar and guidance.” It implies that there will be a business system that will ensure that engaging content is created regularly (not just a single Excel spreadsheet).
- In “Learning and growth” perspective there is the objective “Find out what technology works better by doing split tests.” It’s not about conducting a single split test, it’s more about ongoing a/b tests of any new ideas that appear on the technological horizon of webmaster.
Still, there are important goals that were not mapped
With properly organized discussion around strategy, you will have most of the most important opportunities on the table. Still, there is no guarantee that you’ll take into account everything after the first revision.
For example: your marketing team might suggest creating a new engaging content to improve user experience. That’s a good objective, and it is linked logically to the Tier 3 objective “Prepare editorial calendar and guidance.”
The issue is that improving user experience is not only about creating new content, but about removing old content that is outdated or simply is not good enough. It’s important to identify such ideas and put them on the map if needed.
Direct control and KPI reporting are NOT the results of cascading
There are many reasons why executives use business scorecards and cascade them thought the organization. The best practice is to use the Balanced Scorecard approach for strategy alignment as it was described in this article.
Also, we often see scorecards that are cascaded to the lower levels for the purpose of the reporting (or even direct control). The idea is that top manager scorecard will aggregate the values from lower level scorecards and present required information for the decision makers.
- It is important to understand, that in this case executives deal with KPI scorecard, which helps to track operational performance.
KPI and Strategy scorecards can hardly be combined, unless we are talking about business units that copy the parent strategy. This might be the case when an organization distributes its model into the regions, and they are following the strategy without adapting it to the local market.
- Strategy alignment is achieved by cascading of business goals. Cascading of some KPIs is possible, but reporting is not the purpose of business scorecard cascading.
On bscdesigner.com we are trying to engage with customers via surveys and pools, so here are some typical questions that people ask about cascading.
Is cascading a kind of delegation?
While there are a lot of shared best practices between scorecard cascading and task delegation these are different approaches. The main difference is that strategy cascading takes into account cause-and-effect connection between objectives (between perspectives and tiers).
How to cascade goals and quantifiable measures?
In this article the cascading of the business goals was explained. Cascading of the measures make sense when lower levels are scaled copies of the parent organization. In this case we are talking mostly about the cascading of KPI scorecard.
How to align KPIs with the business goals of different tiers
The right approach is to define business objectives first, and then choose appropriate measures to track their performance. In this case, the business context has a higher importance than KPI.
Why scorecards look similar though the organizations are different?
The Tier 1 strategy maps actually look similar as they are normally based on one of the three generic strategies. During the cascading and the strategy discussion it appears the Tier 2 and Tier 3 business scorecards are influenced by the company’s team and its experience much more.
How to communicate and share the whole strategy?
This is done via the cascading process described in this article. The idea is not to send an email with the company’s strategy to the persons involved, but to do a proper discussion about exactly how specific business units will help to achieve the strategy.
How to make sure that all management team interpret strategy in the same way
Well, it will never be interpreted in exactly the same way. Marketing will never have the same perspective as CEO has; CEO will never know all the details about marketing that are important to the strategy. The point is to create a base for the discussion, so that the marketing team would not just do their job, but understand its context. This article explains how one can create this context though the cascading process.
What to do if leaders don’t want to share their strategies with the rest of the organization
To ensure long term performance excellence one need to explain the goals to his team and find the ways to achieve these goals. Any organization in that or another way do a discussion around strategy. Even if strategy is not shared, there is always a chance that line-level will deduce what strategic objectives stands behind his or her job.
A leader should compare the risks of supporting “silo thinking” and the possible benefits of sharing the strategy. As a result, an appropriate form of strategy map with the adequate level of the details can be chosen.
Cascading in BSC Designer
The example scorecards for this article was created with BSC Designer as a separate .BSC projects. Feel free to download these projects and have a look at how they are working.
As it was explained in the article, some KPIs of the project can be cascaded. BSC Designer can automate this link.
Key Take Aways
- Cascading is about strategy discussion on various levels of organization that helps to align goals and action plans of business units and individuals with company’s strategy;
- Cascading is done by objectives, not by measures;
- It’s important to keep cause-and-effect connections;
- All business objectives should have an owner;
- Cascading is not top to down; it’s bidirectional process with a discussion origin;
Have you practiced Business Scorecard Cascading/Alignment in your company? Feel free to share your results or general thoughts in the comments.
One of our clients recently asked for a good book on cascading/alignment, so I opened a discussion on LinkedIn to get various points of view and recommendations. If you want to read more about the topic, check out these top 3 books:
- “Alignment: Using the Balanced Scorecard to Create Corporate Synergies,” Robert S. Kaplan, David P. Norton, Harvard Business Review Press, 2006
- “The Institute Way: Simplify Strategic Planning and Management with the Balanced Scorecard,” Howard Rohm and David Wilsey, The Institute Press, 2013
- “Strategy Mapping for Learning Organizations: Building Agility into Your Balanced Scorecard,” Phil Jones, Gower, 2011