Key success factors in development of strategy maps
There is no universal solution to problems arising from implementation of Balanced Scorecard and development of strategy maps. Most business owners, top managers and BSC specialists will prove this fact. The format and the contents of strategy maps depends on a number of factors: industry, size and age of the company, corporate culture, organization structure, mission, values, strategic goals etc. It is impossible to offer any generalized advice. At the same time, it is possible to view some peculiarities of implementation of strategy maps which sometimes become critical success or failure factors.
First and foremost, business owners have to understand that Balanced Scorecard is not magic tool that can turn any mediocre company into a successful transnational business with billions of dollars in profits. There is no way that can happen. Balanced Scorecard and strategy maps are simply tools that can be both helpful in harmful depending on who uses them. There are so many pitfalls and mistakes that business owners and top managers make when implementing Balanced Scorecard that this system has received a huge portion of criticism. Balanced Scorecard requires considerable monetary and human resource investments. This article views the most typical in common aspects of strategy maps implementation that lead to success.
Involvement of personnel
If top managers of the company are not supported by ordinary employees then implementation of strategy maps will be quite problematic. Moreover, it takes a long time before all company employees clearly understand the concept of this project and its impact on the company everyday activity. During this period it is extremely important that all company employees understand values, ideas and management philosophy of the strategy maps. At that, company personnel should enjoy attention of the top management that should allocate relevant resources to prepare and implement a project. Companies that fail to properly support the project as a rule lack enthusiasm regarding strategy maps and implementation of Balanced Scorecard in general. It should be noted that both personnel and top management responsible for implementation of Balanced Scorecard must be enthusiastic about this idea, no matter what problems and obstacles are met on the way.
One of the major problems in implementation of strategy maps is involvement of personnel in development of the company mission, its strategic goals, as well as promotion of BSC methodology in general. If employees have the wrong concept of a strategy map they may consider it to be another control instrument but not the tool used in implementation of company strategic goals. Besides, involvement of personnel in development of strategy maps and company corporate mission is also imperative. In such a way, the company may use efforts of individual employees aimed at implementation of common strategic goals. There is another way to instill the feeling of involvement and desire to participate in the project. Top management of the company may organize contest among employees who would suggest any ideas regarding implementation of strategy maps, development of the company mission, core values etc.
Clear setting of priorities
The recent decade saw a great number of serious changes in the companies. Implementation of numerous projects and use of various theories of organization structure improvements resulted in justified irritation of personnel. That’s why the theory of strategy maps may be considered as another innovative project which will spoil life and break everyday routine for the entire company. Most employees will believe that strategy maps will only add a great amount to work. Advantages of this project may be forgotten and chances for positive implementation and impact of strategy maps on the company performance make equal zero. As a result, the right moment of strategy map implementation has an exceptional importance. Ability of top managers to clearly explain the project goals and its ties with previously implemented projects also plays an important role. For example, if the company has already used total quality management methodology, managers may refer to this project and explain what additional advantages the theory of strategy maps has.
Initiative group
The concept of strategy maps aims at providing top management with the most complete picture reflecting company position, its strengths and weaknesses. That’s why initiative group should consist of representatives of various functional divisions and administrative branches. Moreover, group members should have the chance to express their opinions on any and all issues and problems appearing during strategy map implementation process. Many companies form initiative groups with mostly economists and accountants which is a very common mistake. No wonder that their strategy maps have a bias in favor of financial figures.
Initiative groups usually consist of 4-15 persons. It seems impossible to determine the right number of initiative group members. On the one hand, a huge initiative group is very slow to act, while on the other hand all business units and apartments should have their representation in the initiative group.
Implementation scope of strategy maps
If the project covers too many problems or implies involvement of a great number of people, there is the risk that it will become too inflated and “eat up” much of corporate resources. Company management may need too much time to get employee support in implementation of strategy maps, and desired results will never be obtained. The project may require too much time of top managers, many of whom will consider it “wasted time”. Some companies try to fight this trend by introducing so-called “pilot” projects in separate department or business units. In such a way, the company may learn useful lessons from such experiments. Obtained experience will be very useful in implementation of strategy map on a larger scale. There is another advantage of a “pilot” project – it helps win employees’ trust to the project. Attitude of ordinary employees regarding positive and negative features of strategy maps mean much more than ardent speeches and statements by top managers and external advisors.
Still, some companies prefer to implement strategy map concept on a company level claiming that strategy maps include a great number of issues and problems, which makes it impossible to implement them on lower levels.
Ties with the corporate culture
There is a core principle – strategy maps should be related to corporate mission and strategic goals. Before development and implementation of strategy maps, it is necessary to perform decomposition of corporate strategy goals to the level of subdivisions, business units, departments and individual employees through creation of relevant key performance indicators. If strategy maps are not related to company strategy there is the risk of imbalance between goals of different departments. It is also important to keep balance between talking about strategy and doing something to implement strategic goals. Experience shows that unfortunately many employees are eager to talk about strategy without paying too much attention to their everyday duties and responsibilities. That’s why some companies prefer to charge a small initiative group with strategy development, while the personnel is developing action plans, sets of indicators as well as setting local objectives.
Clear and consistent system of key performance indicators
Indicators selected to be used in strategic maps should be unambiguous and unified for all company departments. If the company wants to compare results of departments and business units then evaluation methodology should be clearly defined and unified at the corporate level from the very beginning. This information should be available in understood for all employees through shared database. However, if it seems impossible to find a unified indicator for a certain activity aspect, it does not mean that the company should give up implementation of any indicators at all.
Proper balance and cause and effect ties between indicators
Strategic goals of the company are traditionally set with the help of financial indicators. Strategic management and performance evaluation systems with a financial constituent part make it possible to control financial indicators almost on the everyday basis. But many companies experience difficulties with evaluation and control of nonfinancial indicators, which are, as known, extremely important for any company. Strategic maps do not only broaden concept and perception of business but also show impact of key performance indicators on one another.
Even if the company has no information on such influence for the previous years, it is very important to discuss this issue. Even if there are no opportunities to clearly set these cause and effect ties, as a rule managers have their own concepts and understanding of interrelation between indicators.
Setting clear and realistic goals
Every indicator should have corresponding goals. In order to make employees trust strategic maps, these goals should be communicated with the company mission and strategic goals. Secondly, they should be realistic and achievable. At the same time, the goals should be rather ambitious to stimulate company growth and development. Company personnel should believe that it is possible to achieve goals, otherwise are very few chances for success.
Goals are set both in the short- and long-term. Short-term goals are usually to be implemented in 3-18 months, and they have an intermediary nature in relation to long-term goals. To control implementation of short-term goals it is necessary to perform evaluation of corresponding indicators as often as possible, for example once a month.
To the contrary, long-term goals cover the period from 2 to 5 years. Such goals can be modified and amended during the process of strategy development. Relevant indicators are to be measured once a quarter or once a year.
Relation with the existing managerial control system
Sure thing, any company already has own system of managerial and operational control. That’s why it is very important that Balanced Scorecard in the concept of strategy maps is well integrated into the existing controlling and reporting system. The system of budgeting and stimulation methodology must comply with the requirements of strategy maps and key performance indicators. In course of time existing management and control systems acquire the same format as the strategy maps and Balanced Scorecard in general.
Flexibility of indicators and methods of their evaluation
One of the greatest advantages of Balanced Scorecard is that it is possible to change indicators and assessment methods in course of time, as internal and external environment change. Markets are very volatile and it is very important to timely react to changes. Indicators should be simple, clear and what is more important – adjustable.
