Friday, September 9, 2011

Kaplan on strategy

Robert Kaplan and David Norton are best known for inventing the balanced scorecard (and, to some degree, inventing the cottage industry that goes around it and sustains it some 19 years after the original paper in the Harvard Business Review in 1992).

If you're looking for a way to organize a business scorecard, this tool is as good as any.

But of course it also links to strategy.  In an interview, Kaplan said this:
Strategy is a hypothesis. It’s your belief that if you do some things, then some expected results will happen. But it’s only a hypothesis!

And, Kaplan (and Norton) posit five principles for working strategy:
  1. Accept that strategy is the job of senior executives. It’s their job to mobilize the organization. They need to understand that managing strategy is managing change and they may need to be the change agent.
  2. Translate the strategy so that it can be understood. Translating strategy into objectives and, most importantly, into measures is important because measures now become the common language of your strategy.
  3. Align the organization. This is the most important part of what we do. Here, we create a description of the strategy, convert it to maps and measures and then align every part of the organization to that strategy.
  4. Make strategy everyone’s job. The strategy is formulated at the top and executed at the bottom, and if people at the bottom don’t understand the strategy, they’re not going to be able to execute it.
  5. Embed the strategy into what you manage, essentially into your governance, so that your budgeting, human resource, training programs, goals, and incentives are all tied to the strategy.
Frankly, I like the last one best.  It has the best chance of over optimization at the local level if the goals and incentives are pointed to the right objectives.  The four points are good, to be sure, but they smack of a 'chief strategy officer' that is off enforcing strategy everywhere. It's my experience that such activity only lasts as long as the CSO energy level can be maintained waging strategy on everyone.  And, that's not forever, so the best success will come if strategy is part of everyone's management objectives. 

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