In Strategic Planning Framework – Part 1 we discussed:
- Strategic Plan – structure
- Frameworks for Strategic Plans – 8 useful examples
- SWOT Analysis in detail
In this article, we are discussing Strategic Map and Balanced Scorecard
What is a Strategy Map?
A strategy map is a diagram that is used to document the primary strategic goals being pursued by an organisation or management team. It is an element of the documentation associated with the Balanced Scorecard, and in particular, is characteristic of the second generation of Balanced Scorecard designs that first appeared during the mid-1990s. The first diagrams of this type appeared in the early 1990s, and the idea of using this type of diagram to help document Balanced Scorecard was discussed in a paper by Drs. Robert S. Kaplan and David P. Norton in 1996.[1] Strategy map – Wikipedia
How to Create a Strategic Map
Step 1. Define Mission, Vision, Values
That’s the direction to the drawn for your organisation. When you face uncertainty, these three will help you to make the best decisions.
Step 2. Define Four Perspectives
Finance, Customers, Internal, Innovations. You can confirm by testing that your organisation needs exactly these four.
Step 3. Strategic Priorities
This is where you become focused. Strategic priorities are the top-level goals; for example, these are improving product or service provided, serving clients better, improving the efficiency of operations.
Step 4. Define Business Goals
Business Goals needs to be a cause-and-effect connection between the goals.
Step 5. Describe Rationale
The rationale is a set of reasons why you decided to pick this specific goal. Thinking about what outcomes you wish to achieve and that will determine the rationale.
Step 6. Define Leading and Lagging Metrics
Your business goal becomes much clearer when you define the metrics that are the leading indicators and the lagging indicators. Firstly the lagging indicators – that is the measure of the result you want ie increased revenue. The leading indicators are the measure of what you need to do to achieve the results you want, ie call new prospects.
Step 7. Define Initiatives
Initiatives are the high-level action plans that collectively that explain how the strategy will be executed.
Step 8. Cascade
There should only be one top-level strategy of the organisation. However, business units need to focus on different parts of that strategy. Create local versions of the strategy maps with more specific goals and indicators for the business. Each business unit needs to build its local version.
Balanced Scorecard
What is a Balanced Scorecard?
A balanced scorecard is a strategy performance management tool – a well-structured report, that can be used by managers to keep track of the execution of activities by the staff within their control and to monitor the consequences arising from these actions.[1] Balanced scorecard – Wikipedia
How to Build a Balanced Scorecard
The four perspectives of a Balanced Scorecard
Financial
The financial perspective in a balanced scorecard is potentially the most traditional of the four. You’ll want to look at return on investment, growth, fixed costs, profit, and so on.
Learning and Growth Perspective
This area examines the company’s health in terms of training employees on rapidly changing technologies, mentoring employees in a way that helps them grow and contribute, and employing the latest tools and systems to foster innovation. Responds to change is important, for example: how long it takes a team to develop a new product and bring it to market.
Business Process Perspective
It’s also important to examine a company’s internal processes to look for areas ripe for improvement by removing inefficiencies and identifying error-prone activities. Would it help the company’s strategic goal if some processes were faster or cost less?
Customer Perspective
You will want to examine your company’s activities from your customers’ or stakeholders’ perspectives. How do your customers view your activities? What are the reviews and feedback? Do you have an objective measure of customer satisfaction from surveys or other sources?
Build Your Balanced Scorecard
Balanced scorecards are easiest to create using a template (we can provide a template if you wish). Start with a space for all four perspectives and just add what specifically applies to your organisation.
- Add your vision. The company’s main vision belongs in the centre of a balanced scorecard. Whichever part of your company you look at, you should always keep this goal or vision in mind.
- Add perspectives. To create a traditional balanced scorecard, place the four perspectives in a ring around the central vision.
- Add objectives and measures. Within each perspective define specific objectives, measures, targets, and initiatives.
- Connect each piece. Link each perspective to the others using arrows to indicate that they’re all interconnected when it comes to achieving the company’s vision.
- Share and communicate. Use the balanced scorecard to demonstrate how different initiatives and short-term actions are contributing to the long-term strategic objectives of the company.
A Balanced Scorecard is a valuable tool that needs to be up to date and shared with all involved parties.
Future articles will cover the other aspects of your Strategic Framework:
- SWOT Analysis
- Strategy Mapping
- Issues based strategic planning
- Balanced Scorecard
- Objective and Key Results
- Porter’s five forces
- Gap Analysis
- PEST analysis
At https://balanced-business-growth.com/ we provide the expertise to work with you to build your Strategic Plan. Once the Strategic Plan is built we then assist you to deliver the identified benefits.