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The Strategy-Focused Organization: How Balanced Scorecard Companies Thrive in the New Business Environment Hardcover – September, 2000
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In their previous book, The Balanced Scorecard, Robert Kaplan and David Norton unveiled an innovative "performance management system" that any company could use to focus and align their executive teams, business units, human resources, information technology, and financial resources on a unified overall strategy--much as businesses have traditionally employed financial management systems to track and guide their general fiscal direction. In The Strategy-Focused Organization, Kaplan and Norton explain how companies like Mobil, CIGNA, and Chemical Retail Bank have effectively used this approach for nearly a decade, and in the process present a step-by-step implementation outline that other organizations could use to attain similar results. Their book is divided into five sections that guide readers through development of a completely individualized plan that is created with "strategy maps" (graphical representations designed to clearly communicate desired outcomes and how they are to be achieved), then infused throughout the enterprise and made an integral part of its future. In several chapters devoted to the latter, for example, the authors show how their models have linked long-term strategy with day-to-day operational and budgetary management, and detail the "double loop" process for doing so, monitoring progress, and initiating corrective actions if necessary. --Howard Rothman
" . . . Kaplan and Norton show they know how to follow a good opening act [The Balanced Scorecard] without losing their own balance." -- American Way, December 2000
In this fast-moving economy of big ideas and trendy business strategies, one can sometimes lose track of what's in and what's out. If the last round of big ideas (disruptive technologies and chasm-crossings) was about finding the right product and market, this year's model is about getting it done. As companies turn again to profitability and leveraging existing resources and assets, managers are gravitating toward ideas that help them execute their strategies.
The Strategy-Focused Organization, then, comes at an auspicious moment. In a follow-up to their influential and popular 1996 book The Balanced Scorecard, Harvard Business School professor Robert Kaplan and consultant David Norton take their popular ideas about measuring success and show how to build an organization that puts those ideas to use.
Kaplan and Norton have rolled out their balanced scorecard model in hundreds of companies, including such marquee clients as Cigna, Mobil and UPS. They have built a successful consulting practice based on it and are now seeing other books crop up about using their tool.
Like many consequential management devices, the balanced scorecard is fairly straightforward. The authors argue that companies all too often focus on the wrong numbers. Managers obsess over outcomes or lagging indicators instead of harder-to-measure factors such as cycle time, customer satisfaction and levels of innovation. The solution is a more balanced scorecard, and in the first book Kaplan and Norton go into great detail on how to build one.
The underlying principles here are not new. The authors build on a tradition of process-focused quality initiatives stretching from Six Sigma and Total Quality Management all the way back to Frederick Taylor's scientific management. Kaplan and Norton, however, move the notion forward somewhat by more explicitly linking their measures to successful outcomes. Employees more easily see how increasing cycle time or reducing defects, for example, can affect financial performance and customer satisfaction.
The scorecard describes and tracks a company's given goals. Kaplan and Norton argue in their new book, though, that their approach can also help managers execute those goals by acting as a sort of corporate superego. "Measurement creates focus for the future because the measures chosen by managers communicate to the organization what is important," they write, somewhat grandly claiming that at many companies their scorecard system "replaced the budget as the center for management processes. In effect, the balanced scorecard became the operating system for a new management process."
Kaplan and Norton deliver on the subtitle's promise of showing how companies use the balanced scorecard. While at times the book reads a bit like a Harvard Business School case writ large no surprise, given that many of the examples cited were subjects of HBS case studies by the authors the book presents a wealth of finer points and stories about the tool in practice.
While the balanced scorecard promises great reward, it also calls for a large commitment. The authors suggest, for example, that every employee construct personalized balanced scorecards. They advocate regular, detailed communication of the numbers. Such practices can, if pursued too vigorously, channel an inordinate amount of time and energy to the process of "excellence" rather than the business of getting things done. Several quality-obsessed companies of the '90s fell prey to such habits.
Still, most companies could do far worse than overemphasize doing the right things. At a time when companies increasingly need to deliver on strategy rather than come up with the next big idea, Kaplan and Norton help pull together meaningful measures for a knowledge-based economy. A fairly simple idea, but as the authors argue, execution is everything.
Tom Ehrenfeld writes the Just Managing column for TheStandard.com. -- From The Industry Standard
Top customer reviews
After reading it i realize that this can ultimately be apiled to small/med size companies. Companies with revenue of less than 500K USD/year revenue can reap similar benefit compare to the fortune 500 companies by implementing it.
The samples shown in the book make it easier for the reader to copy and adapt for their own organisation. Most samples are derived from the big-companies (typical harvar business book ;-))), but we can adapt it to our (small company) needs.
Focus on chapter 3, about STRATEGY MAP. this is most important. And the GENERIC STRATEGY MAP can be appleid to most organisation with minimum of ajustments. COPY and ADAPT. we can not afford to hire the expensive consultants, so we have to be our own consultant. And this book is a good guide.
Most small companies do not even have VISION, MISSION etc statements. But the balance scorecard helps us focus on strategy, objectives, measures, target and INITIATIVES that are measurable, in a more descreptive ways. This is in a sense a HOW-TO book about strategy, and about measurements.
I've decided to use the sytem for our company sam-design.com which now has 58 people, and sell the intangibles (designs). We won Andersen Consulting (Accenture now) award of ENTERPRISE-50 (awards for most promising small and medium size companies in Indonesia) last November. We think that the strategy describe in the book will boost our company's growth despite the slowdown of the internet.
I started to read the book with much skeptism but ended up recommending it to many friends, write a review about it for local magazine and promoting the idea of strategy based on balance scorecard. ( I did read the original balance scorecard book which was published in 96, interested in the idea for a while but did not implement any of it).
So for the small companies out there, go and get the book, this is not only for the big-boys....
The examples felt a little old but still you could somewhat relate to them.
Building on their Balanced Scorecard approach, Kaplan and Norton have developed an impressive framework in The Strategy-Focused Organization for the implementation of strategy. They have found that 90% of strategic initiatives fail due not to formulation but to implementation difficulties. Successful implementation of strategy requires all parts of an organizations to be aligned and linked to the strategy, while strategy itself must become a continual process in which everyone is involved. The Balanced Scorecard, originally seen by the authors as a measurement tool, is now presented as a means for implementing strategy by creating alignment and focus.
Financial measures report on lagging financial indicators. The Balanced Scorecard aims to report on the drivers of future value creation. The book shows in detail how this is done from four perspectives: Financial, customer, internal business perspective, and learning and growth (these are outlined on p.77). These four perspectives produce a highly detailed framework when combined with the five principles of a strategy-focused organization: 1: Translate the strategy to operational terms. 2: Align the organization to the strategy. 3: Make strategy everyone's everyday job. 4: Make strategy a continual process. 5: Mobilize change through executive leadership.
Absorbing every detail of this book will require many hours. The sheer detail of this complex system requires considerable attention, perhaps more than some readers can muster, but clearly distinguishes this work from many books full of business fluff. The style tends to be turgid and pedantic while being admirably complete. Readers can grasp the essence of the book's central points by reading only Chapter 1 (Creating the Strategy-Focused Organization), Chapter 3 (Building Strategy Maps), and Chapter 8 (Creating Strategic Awareness). Skip quickly through the chapters in Part Two: Aligning the Organization to Create Synergies. This section is the least engaging of the five. The balanced scorecard approach to strategy will appeal to those with a systematizing frame of mind. The book is filled with complex diagrams of corporate processes consisting of interrelated boxes and forces.
This approach is extremely detailed and complex. It requires a major commitment and effort. Though the authors claim it can be implemented by smaller organizations, this will be more challenging than for large companies who can commit a team full time to working out the details.
Much of the value of the approach may lie not so much in following through on completely working out the balanced scorecard but on absorbing the lessons regarding organizational integration across silos and the importance of clarity about mission, strategy, and goals. The balanced scorecard is one way to achieve and implement this clarity but not the only way. Another would be continual reiteration of these (as in Confessions of An Extraordinary Executive). Some companies may benefit from strict use of this system, including finding units of measurement for its implementation. Others will gain much from applying the insights without such a formal and complete implementation.
Some many books reference the work of Kaplan and Norton but do such a poor job representing the depth of the content. I'm so glad I bought this book.
Most recent customer reviews
It gives a complete picture of business strategy and its focus.