My previous company used the slogan ‘aligning execution with strategy’ to emphasize that often what companies do (their execution) often doesn’t match what they say they want to do (their strategy). The phrase became so common among employees, partners, and customers that we would sometimes slip up and say ‘aligning strategy with execution.’ When that happened, I would often chide the speaker: execution should change to match strategy, not vice versa. It seemed like cooking the books to set objectives and metrics after the fact.

Five years later I think I may have been too rigid in my thinking. While it’s true that no one should be able to choose targets after the actual values for KPIs have been measured, execution should in fact influence strategy. Said another way, strategy shouldn’t be static.

Too often, organizations treat strategy development as a once-per-year exercise. They extend extraordinary amount of energy coming up with strategic objectives and associated key performance indicators, they codify it in a strategy map and detail it in a strategic plan. But after rolling it out to the company, they don’t revisit it again until the following year.

This static view fails to take into account that the real world changes strategy. The most obvious ones are the changes in KPI target values or the addition/deletion of a strategic objection. But sometimes, the entire mission needs to be updated.

In ‘How Wawa became a success’, Anthony Wood provides an interesting example of how Wawa transformed itself from a Delaware County milk-delivery business to the third largest convenience store chain in the Northeast. According to the article, coffee became the company’s signature product by accident. Vic Russo, currently a regional manager and 35 years ago the general manager of the second Wawa store, brought in a percolator to make coffee for the staff. After customers started asking to buy coffee, Vic’s incremental sales had a big enough impact on the cash register that headquarters noticed. Soon, all Wawas were selling coffee; a clear case of execution influencing strategy.

Selling coffee may not seem like a fundamental change in strategy but it led the way to other prepared foods, accelerating the transformation into what we now call convenience stores. While the original Wawa stores focused on grocery store staples and had butcher counters, the Wawa convenience stores which emphasized prepared foods were exempt from the old Pennsylvania blue laws that prevented most businesses from operating on Sunday. As a result, Wawa stores became more than just time-savers but shopping destinations.

Strategy clearly dictates execution. Execution can influence strategy. This two-way street is why I have adjusted the phrase to “closing the gap between strategy and execution.”

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In a short, but insightful, piece called ‘What’s Missing from Your Scorecard?’ Mark Graham Brown suggests eight categories of metrics which should be better represented on a balanced scorecard:

• Customer aggravation
• External factors
• Employee satisfaction
• Brand image
• Customer attractiveness and relationships
• Communication effectiveness
• Employee health and safety
• Ethics

Mark’s issue with employee satisfaction is most companies measure it annually which provides little opportunity to take action on the findings.  While I agree, I also worry about organizations that use proxy measures of satisfaction like average length of service or retention. To make matters worse, as I discovered in my own career, many employee satisfaction surveys suffer from the Coke vs Pepsi problem.

I also like Mark’s suggestion on brand image. Instead of the traditional brand surveys (which are also measured annually), use a sentiment analysis tool to listen to the voice of the customer. This can provide an early warning radar for topics or regions might have pending issues.

From my point of view, the other thing missing from most balanced scorecards is focus. Too many scorecards are littered with metrics with little strategic value that appear largely because they are easy to measure, rather than because they provide insight into an organization’s performance. As I frequently remind people, “not everything that counts can be counted and not everything that can be counted, counts.”

There may be metrics missing from your scorecard, but you don’t want too many of them. My advice: twenty is plenty.

(Note: Mark’s article provides a great example of measurement missteps at a fried chicken franchise. By focusing on an efficiency metric at the expense of customer satisfaction, one store owner came out looking like a turkey.)

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For many years, I’ve argued that performance management is not just limited to finance but instead has many flavors, including workforce, operational, and IT performance management. Most people now seem to agree and there’s even talk of pervasive performance management.  However, a critical analysis of the current situation suggests that marketing organizations are still early on in their adoption cycle of performance management.  As a recent Gartner report commented,

Marketing may be one of the largest budgetary items in most organizations, but it is still viewed as a cost center. Developing a marketing performance management framework can improve measurability, make marketing more accountable and align its activities with corporate objectives.

I’m not talking about marketing metrics – there are plenty of those – but rather explicit definitions of strategy and objectives.  Nowhere is the disconnect between metrics and strategy more obvious than for the Web site.  We are awash with solutions that measure Web site performance but very few that connect these measurements to Web strategy.  We need Web channel performance management.

Admittedly, this isn’t a new idea for me. In my previous job, we built a product that applied the Balanced Scorecard methodology to Web site strategy. Rather than exclusively focus on Web site traffic metrics, we provided libraries of objectives for typical Web channel business models, including brand/awareness building, lead generation, and customer support.  This is what a typical strategy map might look like:

It was a good idea and a solid product but ahead of its time. Despite favorable reviews, the product never really took off.

Fast forward four years.  Imagine my surprise when I discovered that someone calling him/herself Webscorecard had started a blog that describes how to apply the Balanced Scorecard methodology to Web site strategy.  One of the early posts provides the following advice on how to build a Web scorecard:

1. Define your Mission and Vision
2. Define your business strategy for the internet
3. Define your limits (your values, what you think is important)
4. Define your stakeholder goals (what is the ultimate direct measure for success?)
5. Define you view on what your customers want from you on the internet
6. Define the processes you need to have do deliver to these customers
7. Define what you need for continued success in the future.

It’s good advice: focus on strategy before metrics.  When you do get around to monitoring your Web objectives, it might look something like this:

Webscorecard: These are the visuals I promised you.  Good luck pursuing Web channel performance management.  I hope you’re more successful than I was.

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Last month Ingrid Koehler (re)started an interesting discussion on whether citizens should be considered customers. While the debate isn’t necessarily new, it might be back in vogue with a majority of U.S. voters clamoring for change but the nation in a difficult financial situation. In a comment, Kari Manovitch suggests one size doesn’t fit all and that community, customer or citizen are all appropriate terms – depending on what you are trying to accomplish. To that list, Minneapolis Mayor R.T. Rybak might add the word partner. It’s no surprise I like the notion that the outcome should dictate the terminology.

The customer vs. citizen debate influences how you design a strategy map using the Balanced Scorecard methodology. In the traditional depiction, the four perspectives are stacked on top of each other with learning & growth at the bottom and financial at the top. However, financial objectives aren’t the primary outcomes for public sector organizations; in fact, many people claim that finances (i.e. budget) are the primary input to the organization’s strategy. This thinking is reflected in the Fulton County School System Strategy Map which has financial performance at the base and customer/stakeholder at the top.

Fulton County might be a Balanced Scorecard Hall of Fame award winner but I’m not sure I agree with putting the financial perspective at the bottom nor with grouping customer and citizen into one perspective. Apparently, I’m not the only one. The Economic Development Agency of the US Dept. of Commerce decided to create two distinct perspectives: customers and stakeholders. From their point of view, customers include the community, investment partners, and others in the private sector. The stakeholders are those that they are accountable to: taxpayers, the White House, and Congress.

While I prefer the second representation, I should remember my own mantra that one size doesn’t fit all and recognize there are valid reasons for other representations. In my classes on the Balanced Scorecard methodology, I address this issue by using the following generic diagram:

Rather than placing one specific perspective on top, I emphasize the relationship between the perspectives.  For many of the agencies I’ve worked with, it’s a good compromise.

Do you think government organizations should treat citizens as customers?

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As Balanced Scorecard practitioners know, Kaplan and Norton recommend five principles for strategy focused organizations:

• translate the strategy to operational terms;
• align the organization to the strategy;
• make strategy everyone’s everyday job;
• make strategy a continual process; and
• mobilize leadership for change.

The City of Charlotte, NC applied these principles to become a Balanced Scorecard Hall of Fame winner.

I’m struck by the fact the words ‘metrics,’ ‘measures,’ and ‘indicators’ are nowhere to be found in the recommendation. As I’ve argued before,

The term scorecard has encouraged practitioners to think that the most important part of a balanced scorecard deployment is metrics (or KPIs) — i.e. the things that keep score. Unfortunately, metrics by themselves are unlikely to increase the performance of an organization.

Instead, I’ve encouraged organizations to go beyond keeping score to ensure everyone has a common understanding of both what they are trying to accomplish (goals and objectives) and how they intend to accomplish them (programs and initiatives). Organizations that align goals, initiatives, and metrics increase internal and external transparency, become more productive, and can respond to performance issues and market changes more quickly. They become alignment focused organizations.

In a related vein, Ganga Harvey reacts to the confusion between human capital management and strategy management by coining the phrase performance-focused organization. In her words, a performance-focused organization is “one that ensures a structured, coherent focus on Performance at all levels as an integral part of the way in which they do their day to day business.” She encourages us to consider performance management at workforce, process, and organizational level. Although she doesn’t use the word, I think she’s talking about cascading.

There are strategy focused, alignment focused, and performance focused organizations. Whichever you choose, be sure you focus.

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Bernard Marr must be a believer in my theory that catchy headlines promote increased readership.  How else to explain that the long-time performance management guru resorted to the titillating title “Performance Anxiety” for an otherwise solid article on the potential perils of poorly implemented performance systems?

Bernard observes that “performance management initiatives were often so mechanistic and number-focused that it prevented organisations from achieving the desired improvements. It could even lead to unintended behaviour.” Indeed. Remember the story of the hospital that kept patients in ambulances outside the emergency room so that they could improve their ‘waiting time limit’ KPI?

As I’ve frequently observed, the problem with the phrase “what gets measures, gets done” is that people invariably measure the wrong thing.  They measure what’s easy to collect or mandated by others.  Bernard’s survey finds that 92% of the respondents admitted that many of their KPIs were neither relevant nor meaningful. Cue my favorite line: “not everything that can be counted, counts, and not everything that counts can be counted.”

It gets worse. The survey also reports that more than 70% participants admitted that people in their organizations occasionally fabricated their performance data. Talk about a lack of trusted information! I suppose I should feel better that they only occasionally fabricated data but I have a sneaky suspicion that they weren’t turning green KPIs to red.

Bernard does cite some organizations who are using performance management properly and even suggests some best practices. I’ve seen similar exemplary deployments but, sadly, they seem to be the exception, rather than the rule.

That really does give me anxiety.

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There hasn’t been enough debate on this blog recently so I’m hoping this post will stir things up a bit.

Over at the other guys, Frank wrote a post titled EPM and Strategy Management that I had to read four or five times to understand. Even now, I’m not completely sure what he’s getting at. My confusion starts with the very first sentence:

Enterprise Performance Management is usually seen as a tool for strategy management.

Huh? Most people would say that strategy management is a tool for enterprise performance management. EPM also includes planning/budgeting, financial consolidation, and profitability management. Choose your favorite analyst: IDC, Gartner, Forrester.

He then goes on to say:

Strategy formulation and strategy management are seen as two separated disciplines.

In reading the rest of the blog, I think he’s trying to distinguish between developing the strategy and tracking the strategy. But the latter is an incomplete view of strategy management. True strategy management emphasizes strategy articulation and answers the question that most employees have: what does this strategy mean to me?  Cascading blurs the line between strategy formulation, strategy articulation, and strategy execution. Strategy management can’t exist without cascading.

Since I’m so confused, I could be misinterpreting this sentence:

A more modern view on strategy formulation is to see this as a continuous process, based on “grow as you go.” […] unlike the old way of working the way how to go there is only sketched in broader terms.

Certainly strategy shouldn’t be static; real-life execution should incrementally impact our objectives. Isn’t that why we’ve been talking about closing the gap between strategy and execution for 5+ years? But I’m troubled by the second sentence. Organizations need clear decisions on which freeway they are going to drive on to get to their destination.They just need the flexibility to change their minds when they hit a traffic jam.

In the end, I think this one sentence sums up why Frank and I can agree to disagree:

A balanced scorecard strategy map becomes a living document.

Why would it ever be dead? A true strategy map is live, interactive and constantly changing. That’s the whole point as to why it’s not a document on the shelf.

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How’s your blog doing?

That’s a question I get frequently and I fumble for a good answer. Normally I mention that my readership seems to increase every month and leave it at that.

But the question – and my fumbled answer – are a constant reminder I’ve never established any objectives for this blog. As such, I can’t really monitor progress and there’s no way of knowing whether the number of page views is a useful metric or not.

On a recent transcontinental flight, I decided to take a dose of my own medicine and apply performance management principles to this blog. Using my jumpstart methodology, I started by choosing a mission statement; the overall goal I’m trying to achieve. It turns out this was the key to the entire exercise. While many blogs only provide commentary on things the author reads, I want to provide original content as well.

Mission: To provide a trusted source of performance management information and an interactive discussion of recent developments.

Seems simple, right? But I struggled with several words. Originally, I used the word ‘recommendations’ rather than ‘information’ because I wanted to acknowledge that my views are intrinsically biased, even though I rarely provide vendor-specific content. I went with information as a reminder to stay balanced; there are other valid opinions out there.

I also added the word ‘interactive’ after the first draft. Most blogs are communication devices and have little collaboration. I would like this blog to be more interactive but so far comments are limited to a few people and entries. I didn’t add ‘interactive’ at first because I’m not sure how to make it happen. Of course, that’s completely the wrong reason. I sense a red KPI coming and the need for a specific initiative.

Even with those tweaks, something felt missing. Shouldn’t I add some words that reinforced that lots of people would be reading the blog? I don’t want to be the proverbial tree falling in the forest. After thinking about it for a long time, I decided that number of views isn’t a critical characteristic for me. Views is an ego metric. I value quality over quantity.

From here, the next step is to define strategic objectives that support this mission. Rather than jumping to that step, I decided to test the mission on my customers… you, the reader. Let me know what you think in the comments.

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Balanced scorecards should sometimes be imbalanced.

Over in the PMA Forum, Alan Meeks suggests the word balance is counterproductive, as it’s impractical to assign equal weight to each of the four perspectives. He argues for a ‘genuinely systemic scorecard’ – not nearly as catchy, is it?

As I replied, the original intent of the term balance was to remind people not to focus exclusively on financial objectives and metrics. As in, balance out your thinking. It’s hard to argue with this idea – motherhood and apple pie, as Alan might say. 

The problem is most Balanced Scorecard practitioners have interpreted this idea to mean that all perspectives, all objectives, and all metrics should have equal weight. This is a literally interpretation of the word balance but I think it’s flawed thinking. Sometimes it may be better to have an imbalanced scorecard. 

As an example, imagine an early stage company that already has seed funding and an early product but does not yet have their first customer. This company might want to emphasize the customer and employee objectives more than the financial and process ones. It’s not that financial matters aren’t critical and we don’t want repeatable processes. It’s just that – for the time being – we want more of the company’s collective energy on customers. This creates an imbalanced scorecard.

Of course, this is my recommendation on what to do in a specific situation. You may have different priorities. This difference in opinion reinforces my point. Create an imbalanced scorecard by weighting those things that are important to you. 

While I’m railing on the word balance, I might as well also complain about the other word in balanced scorecard. The word scorecard has encouraged practitioners to think the most important part of a balanced scorecard deployment is metrics (or KPIs) — i.e. the things that keep score. Unfortunately, metrics by themselves are unlikely to improve the performance of an organization.

As long as you’re making your scorecard imbalanced, be sure to balance the time you spend on objectives and initiatives with the time you spend on metrics.

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This week at ASMI’s Balanced Scorecard Masters Conference I gave a talk entitled “Performance Alignment: Cascading Enterprise Strategy Throughout the Organization.” For those of you who may not be familiar with the concept of cascading, it’s a formal method for achieving alignment throughout an organization.  Cascading isn’t the only possibility: all employee phone calls, status meetings, off-sites, and executive mandates are all used to improve alignment. What makes cascading different is that it explicitly attempts to connect strategy to operations to tactics. Said another way, cascading tries to formalize the concept of middle management.

I used the metaphor of a honeycomb to describe a connected and aligned organization. Every group and individual creates connections to the people above them, below them, and at the same level as they are. Like a honeycomb, the connections don’t have to start from the top but rather grow organically from the middle out. The key is to find the appropriate “queen bee” with the visibility, clout, and evangelism to seed the process.

An individual has four options when creating a formal link to an objective or a measure.  They can be identical, contributory, shared, or unique.  As a simple example, a sales organization is likely to cascade identical objectives and measures to the Western, Eastern, and Central regions.  The Western region, in turn, would cascade identically to Northern CA, WA/OR, and Southern CA.  The objectives and measure definitions might be the same but the target values are likely different – the Eastern region might have a $200M target while the Western region only needs to sell $150M.

On the other hand, consider an organization with a corporate objective based on service level agreements that uses a key performance indicator such as “% time meet delivery promise”.  This objective and measure might be cascaded identically to the distribution organization but, when applied to the call center, the objective could be changed to reduce wait time and the KPI changed to average hold time.  The call center contributes to the corporate objective but doesn’t use identical goals or measures.

In a later post, I’ll provide a more detailed example of how this works for an anonymous manufacturer. Cascading strategy to increase alignment isn’t always easy but the results are as sweet as honey.

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