Strategy maps as strategy visualization tools
Strategy maps are often used as an instrument for strategy visualization, as a linking element to the strategy and a part of management system, as well as a tool to develop and formulate strategies. Strategy maps help develop a structure for discussion of strategies and development of certain goals and tasks for all parts of organization. It is imperative to provide links to the strategy and goals of a higher level, which helps the entire organization understand company strategic logic. Most business experts and scholars are sure that the majority of company employees should know about strategy maps, and moreover, they should participate in the relevant discussions, otherwise evaluation and monitoring of key performance indicators will be considered a senseless ritual or even threat. It is only through involvement of personnel in discussion of strategy maps that the company can achieve success and make the most effective use of Balanced Scorecard.
The need to tie strategy with managerial control was one of the reasons for emergence of Balanced Scorecard. The other reason concerns necessitated to include non-financial indicators to the set of KPIs to be evaluated. Non-material assets are playing an increasingly important role in company success. Almost every organization needs to have own strategy and understand it. Most of the personnel has the right to offer their interpretation of the near future. For the company to act fast and in an efficient way, employees should understand their needs and capabilities, as well as future challenges offered by a new strategy. Consensus will be reached only in case people involved in discussion of strategy maps will participate in strategy maps development for departments they work in. Moreover, employees should have all necessary tools in order to analyze strategic goals and understand the ways they will be implemented.
Strategic maps are one of such tools. They look like a simplified review of a strategy which displays the way how the strategies will be implemented. There is a simple example – if you have the right personnel which performs the right actions, customers will be satisfied and business will grow. The strategy is based on a number of “ifs”. It means that certain actions must be performed in order to achieve certain results. Each strategic assumption is a hypothesis in which top management should believe. This is a sort of an axiom. These axioms are visualized in strategy maps which makes it possible to discuss any alternative actions, decisions and their consequences.
Strategy maps may play several roles:
- They make it possible to discuss cause and effect ties when making strategic decisions
- They are useful in a search for key performance indicators
- A complete strategy maps may be used to communicate strategy and internal logic. It answers the question “Why are we so sure to achieve success?”
Norton and Kaplan have developed a great variety of strategy maps for various organization types. They have also made an assumption that there are “general” (common) parts of strategic maps. For example, customer perspective is closely connected to “assumed value” chosen by the company.
Recommendations
Strategy maps may have different formats. Some companies are using ready made patterns, while others develop strategy maps from the ground up. Irrespectively of the chosen methods and formats, business owners and top managers need to remember the following:
- Group of people which will be participating in discussion of strategy maps should be quite numerous. It doesn’t matter, which methods the company chooses for implementation of Balanced Scorecard: from top to the bottom or vice versa. It is recommended to get as many employees involved in discussion of and development of strategy maps as possible. Moreover, these people should represent different managerial levels, departments and business units of the company.
- One of the functions for strategy maps is that a complete strategy maps may be used to share information on strategy and company strategic logic. This is the answer to the question “Why we think will succeed?” Strategy maps will work only if they have a simple format. Ordinary company employees will ignore complex terminology and general statements. They need to understand WHY they should use strategy maps and HOW strategy maps will benefit the company. At the same time they should understand how they can contribute to implementation of strategic goals. Of course, there is no ideal strategy map, but perfectionism will be very helpful here. It is important to set strategic goals and do everything possible to implement them.
- A strategy map is a set of cause and effect ties. “If-then” statements are hypotheses in relation to the way strategy will be put into action. Some of them may be based on facts and experience, while others will be in strategic assumptions in regard to customer needs, internal business processes etc.
- Strategy modeling can be considered a primitive form of system dynamics, and such models can be viewed as auxiliary tools. In most cases discussions themselves play a greater role as compared to their accuracy.
- Strategic themes may be helpful for designing of various routes on the strategy maps, and informing of personnel on major strategic decisions.
- Strategic goals displayed on the strategy maps should be translated into indicators and action plans. It is vital important that indicators should be well balanced and cover the most important issues in the strategy maps. Both leading and lagging indicators must be used.
It is interesting that simplification of cause and effect ties in strategy maps is one of the key success factors for an effective use of Balanced Scorecard. This is like translation of a poem written in a foreign language into the language that everybody understands. Even if you know this foreign language you are unlikely to make a good English translation. You’ll certainly need help of a poet with excellent English. This poet may have poor knowledge of the foreign language but he will provide you with an excellent English text.
This example explains why companies willing to implement Balanced Scorecard are recommended to use services of external advisors and consultants. Such advisors know the language of Balanced Scorecard while company employees know everything about the company, markets they operate in, their customers etc. Only in such a way it is possible to create a well balanced strategy map that will surely become company philosophy.
One of the most common mistakes in development of strategy maps is complexity. A sales manager may not understand how his job influences company success if he will be presented 40-page report. But having a look at the strategy map he will clearly see that for example “number of business contacts with customers” will help reach financial results. This is like a road map which tells users what to do.
At the same time it is important use strategy maps and Balanced Scorecard in a proper way. Very often companies stop working on strategy maps once they have developed them. It all ends with a presentation of a strategy map to the company personnel, and that’s it! Company management hopes that it will work out somehow. Well, it will not!
This is only beginning of work. Of course, development of strategy maps and the first presentation/discussion is one of the most important stages. But it is only initial stage. The bulk of the work needs to be done in future.
As already said above, it is very important to find the right people who will form a working group that will develop and discuss strategy maps. Experience of external advisors is really priceless. But there is danger that they will simply use standard strategy maps models and refer to their prior experience. Of something that is good for one company may be harmful for another. Every business is individual and requires individual BSC approaches.
At the same time, there some common and general principles as well as studies and researches that can be used by working group in charge of Balanced Scorecard implementation. However, such theoretical knowledge must be properly used in practice.
One of the most common problems is that companies are not ready for changes of while Balanced Scorecard implies a great amount of changes. Managerial approaches, organization structure, communication and feedback systems will surely be amended if necessary. Moreover, company management and employees will have to learn to live with Balanced Scorecard. If use of strategy maps is restricted to meetings and presentations held once a year, Balanced Scorecard will give no benefits for such an organization. It will only irritate personnel, as employees will consider Balanced Scorecard just another tool to control them and prevent them from fulfilling their duties.
Never expect immediate results. Of course, it is possible to find balance between short term goals and long-term strategies. But Balanced Scorecard will show its great power only in several years. Making an effective use of Balanced Scorecard is like driving a car with GPS navigator, and analyzing routes and own mistakes on the way. So, be an excellent driver.
