Strategy Mapping for Learning Organizations

Building Agility into Your Balanced Scorecard

Phil Jones

• Publisher: Routledge
• Year: 2016
• ISBN:
  9781317049265
• Edition: 1
• Topic: Business
• Subtopic: Business Strategy
• Index: Business

How can we ensure our strategy will succeed, especially in changing and uncertain times? The answer, as explained in Strategy Mapping for Learning Organizations, is to become a more responsive organization - one that captures its strategy in strategy maps, learns from that strategy and can adapt to deliver results. For anyone involved in managing strategy and performance, applying the powerful strategy mapping techniques will move your balanced scorecard from an operational tool to one of strategy and change. It will help you capture, communicate and manage your strategy more effectively. However, strategy can no longer be simply a top down, annual process. It needs to be more iterative, emergent and involving. Many agile organizations have adopted rolling plans and budgets. To bring greater agility into the wider strategy and performance management processes requires the tools and techniques described in Strategy Mapping for Learning Organizations. Phil Jones provides a detailed guide to developing, rolling out and managing with modern strategy maps and scorecards, building in agility and learning. His book incorporates the latest strategic thinking and models. It places the balanced scorecard in a wider governance context that includes the management of risk and environmental and social responsibility. Fully illustrated with examples from many different organizations, this book will help you deliver your strategy better.

PART I
Strategy and Strategy Management

Part I sets the context for strategy maps: strategy formulation, governance and strategic management.

Chapter 1 explains the potential benefits, useful for anyone making the case for well implemented strategy maps, strategy mapping and strategic balanced scorecards.

No strategy map or balanced scorecard works in isolation. They operate in an overall organisational context. Chapter 2 raises the discussion to overall organizational governance and the overall strategy management process. Understanding the governance model helps you avoid problems with existing governance systems. The strategic learning model considers how managers learn when they execute strategy and manage performance. Putting strategy maps and scorecards in this context brings the approach up to date, supporting emergent strategy and rolling plans and budgets. It allows executives flexibility over their approach to managing and executing strategy, especially in complex, changing environments.

Chapter 3 explains how strategy maps can capture the many different aspects of organizational strategy. It looks at strategy from a variety of perspectives and explains how the multiple aspects of strategy maps capture them. Once you have captured your strategy fully and richly, you will make it much easier to communicate your strategy and engage your people in it.

CHAPTER 1
The Benefits and Principles of Strategy Mapping

As I looked around the management team, I was both puzzled and curious. We had only been working with this management team for three weeks and this was the first facilitated workshop. This was a team who had worked together for a long time. They had much well developed market analysis, detailed strategy documents and various plans they were implementing. They knew their business well, many having worked in it for a long while. It was a FTSE 100 company, so we were not dealing with anything small. Ostensibly all we were doing was playing back to them the strategy that they had written about and told us about. Yet, in this workshop, we had hit a critical moment.

The workshop had only been going for a short while and yet we were uncovering contrary views and beliefs amongst the team. Admittedly there was a clue to potential difficulties in the first meeting with the chief executive, when he said, ‘They don’t get the strategy’. The most critical issue was that some of the team believed their objective for total shareholder return (TSR)¹ was sacrosanct: they had to achieve it. However, two of the team were questioning it and did not believe that the total shareholder return target was achievable. As the topic was discussed, the tension in the room seemed to rise. Eventually we asked, ‘So, who believes in this target?’

The seven executives on the left, including the chief executive, put their hands up. The two on the right did not. ‘So, who does not believe in this financial target?’ The remaining two members of the team raised their hands. One was the relatively new human resources director, who had been promoted to his position nine months before. The other was the finance director.

It felt as if a curtain had fallen across the room dividing those who believed in the target from the two who did not. The tension rose further. The facilitator turned to the chief executive and said, ‘Tell us what you believe’. He replied simply and clearly, ‘It is not in question. It is what we have to achieve. It is what our bonuses are based on’. The facilitator turned to the finance director and asked him the same question. He replied, ‘It is completely unrealistic, unachievable and outside our control’.

At this point some of you might ask what we were doing there. I was tempted to ask it myself at the time. We had been invited to help them to develop a balanced scorecard to support their strategy. We read through their strategy documents and interviewed them. We were presenting them with their collective view of the strategy in the form of a view of the future five years hence and a draft of a strategy map. All we had were the story that had been told to us and the figures they gave us. The future view showed how they thought the future would develop for them, how their offering would evolve, how it would lead to achieving the shareholder value target. The strategy showed the same story, but from the view of what they had to do to be successful. Yet, somehow, we had helped them uncover a massive issue. An issue that lay undiscussed in the management team. An issue that seemed to say the chief executive had a financial target, TSR, that the finance director believed was unrealistic.² That was the big first of several issues that we uncovered during our meetings.

This team did resolve this issue, and several other similar issues, to become better at discussing their strategy amongst themselves and with their staff. After some discussion they refined the strategy map and developed a scorecard that reflected their strategy, both of which were rolled out through the organization. Over the next two to three years their share price performance was around ten per cent better than the average for their sector. Whether this balanced scorecard work was a significant contributing factor to that improvement in their relative share price is hard to tell, especially as the circumstances are not repeatable. Some might claim it was responsible, but I am too realistic to make such a claim, taking into consideration the many other factors that might affect an organization’s overall performance and its share price. What I am more confident about is the effect the approach had on the team we were working with, and the subsequent teams to whom the strategy map and balanced scorecard were later rolled out. Their success was more likely given the clarity of their strategy and the improvements in the quality of conversation that they held.

I was curious as I left that workshop. What were we doing with these tools that brought about the richer discussion and realization? What principles were we applying? Bear in mind that we had not even started to look at the measures, targets or the detail of the scorecard. We were only mapping their strategy and creating a simple view of the future at this stage. The simple strategy map we used is shown in Figure 1.1. Yet there was something about how we had captured and presented this strategy that changed the way they thought and worked. What were we doing that improved the quality of conversation amongst that team?

Figure 1.1 A retailer’s corporate strategy map

The Superficial Tools

That meeting was back in 1999 and the strategy map shown reflects the approach from that time. Since then these techniques have been tested, developed and enhanced. This book presents fifteen years’ experience of using such techniques and adapting them in a variety of organizations, teams and strategies.

This organization wanted a balanced scorecard that would support them over the next five years, a balanced scorecard they could cascade to all their retail outlets and departments that would help them to track and manage their strategy better. Superficially we were only using two basic tools to model the strategy: a picture of the future and a strategy map. The picture of the future described how they saw the organization in five years’ time. The relatively simple technique used then has since evolved into a far richer tool which is now called a ‘tangible future’. This describes the landscape through which the organization is heading with its strategy, uncertainties, risks and decisions, and how the organization is expected to change over the same timeframe. How the organization will change is described with the strategy map.

In turn, the strategy map frames its balanced scorecard to support the strategy. This avoids an operational scorecard. Careful design of the strategy map makes sure that the scorecard you develop from it will actually address the strategy. The process of strategy map design, the ways in which strategy maps capture strategies and the principles embedded within the approach are the subject of this book. This book also explains how you can use them to manage your strategy better, learn from your strategy and become a more agile and responsive organization.

The Underlying Thinking, Principles And Techniques

Even though this meeting was a long time ago, it has remained with me ever since. I realized that the deeper things that we were doing were having a much more fundamental effect on how this team met, discussed the strategy and would operate: deeper than the mere superficial techniques would suggest. This realization started me on a journey, a journey that has included understanding the various forms of strategy and the ways strategy is discussed, described and expressed; understanding how models of change and models of learning are embedded in the approach; how to create a high quality of conversation amongst the team; how performance management influences behaviour and brings about change in an organization; and, ultimately, how strategy is implemented and managed. I have continued to work with management teams in many different organizations on their strategy, its communication, implementation and subsequent management. I have continued to explore and pursue the underlying thinking, capabilities, skills, language and patterns of behaviour that make some balanced scorecards strategic and successful, whilst others fail. Much of this is deeply embedded in the principles, thinking and deeper processes of the strategy mapping and the balanced scorecard approach, and often not explicit.

This thinking can easily get lost or ignored. When the thinking is lost, so too are the benefits. The underlying thinking raises questions that are essentially simple, yet extremely powerful. For example, one question is about focus in your strategy. If the question is omitted you can easily end up with a hundred measures on your scorecard. Ask the question correctly and you will have a manageable number that work as a set and focus attention on what matters most. Questions like this require managers to think hard about the answers and the consequences, to discuss the answers in a way that leads to clarity and consensus within the team. If these questions are avoided, not thought through or not answered carefully, you will not capture your strategy. The resulting balanced scorecard will omit the strategy and degenerate into an operational view. The strategy map will not represent your strategy. Implementation of your balanced scorecard may even have a deleterious and ultimately costly effect on how you manage your strategy’s implementation.

This book is about the underlying thinking, behaviour, assumptions and values that make a balanced scorecard a useful strategic performance management approach, and the role of strategy mapping in that process. They are the ‘difference that makes the difference’ between a ‘strategy-focused’ balanced scorecard and an operational one. They make the difference between a culture of performance that encourages the right behaviours and a culture of measurement and target setting that can create dysfunctional behaviour. They make the difference between an organization that learns about and from its strategy, and one that formulates its strategy and then concentrates mainly on the operational implementation. They are the capabilities that both management and the organization as a whole need to learn, grow and develop to move towards strategic performance management. Strategy mapping is central to this. Understanding and applying the principles of strategy mapping in this book will help you to avoid potential problems, so that you have an effective tool of strategy implementation, execution and management.

The Executive Perspective On Strategy Mapping

How might strategy mapping help you and your organization? Let me assume that you are an executive in a management team working on your strategy.³ You may well have carried out some market research, looked at the state of the organization at the moment, considered various options and, together with your team, chosen your strategy from amongst the options available. You have prepared some outline planning, thought through some of the resource allocation implications and have a good idea where change is required and the extent of that change. The organization has anticipated that a new strategy is coming. Like most clients I meet, you are an experienced management team who know your market and your organization. You have a good idea of your strategy and what you want to achieve.

You want to make sure that the strategy is successful. You need your staff to understand where you are, the pressures for change and where you are going. You want to ensure they understand the imperative for change, the rate of change and how that change will happen. You want them to take on the strategy and be a part of shaping it and implementing it.

You want to make sure that, as you implement your strategy, you can tell whether it is having an effect, can see progress and can show people progress. You know that what you have created is good, but is probably not perfect. You know that the strategy will need refinement as you progress and learn more about the environment, the market, customers’ reactions and the responses of competitors. This is where your strategy map will help.

You may already have a balanced scorecard that you use. You certainly have some form of performance management that you use. It will be an early generation of balanced scorecard that does not use strategy maps and is therefore more operationally focused. It probably provides good information on financial performance and operational performance. It may serve you well, but it is time for improvement. The balanced scorecard approach has moved forward since the early versions and a more modern approach might help you deliver your strategy better.

Why might a strategy map help you? Many performance management approaches concentrate on measuring and monitoring operational performance. In contrast, a strategy map-based balanced scorecard concentrates on how the strategy will improve the organization’s performance. The emphasis is on how strategy drives change and improvement. It captures operational detail as a part of the approach, but focuses the attention of the organization on the management and implementation of the strategy. Some of the potential benefits for strategy formulation and planning, operational performance management and strategic learning are shown in Figure 1.2 as a strategy map. When these benefits are being delivered you are moving towards a strategy focused organization. How do strategy maps help you with specific aspects of managing strategy performance and learning as an organization?

Figure 1.2 The benefits of strategy mapping expressed as a strategy map

STRATEGY MAPS CAPTURE YOUR STRATEGY AND SET THE AGENDA

Strategy maps do not map the whole operation of an organization, otherwise they would be called operational maps. As their name suggests, strategy maps are about the strategy. They are explicitly designed to capture a management team’s strategic thinking and intent. They therefore ask questions about the strategy to capture the management team’s thinking, choices and intentions. A well designed strategy map explains, on a single page, what these choices are, how the strategy will bring about change and how you will deliver your strategy. Strategy maps focus on the few things that will make the biggest difference to the organization.

Strategy maps describe the organization’s strategy from the perspective of the management team for which they were designed. Your team’s strategy map should describe your strategy. If you are the top executive team in an organization then you describe the organization’s strategy from your perspective. The teams that support you will have their own strategy maps for their own part of the strategy. Each strategy map sets the strategic agenda for each team and how they implement their part of the strategy.

STRATEGY MAPS DESCRIBE HOW CHANGE WILL HAPPEN

Strategy is about change. Your strategy needs to describe what will bring about that change and what the changes will be. Strategy maps help by describing the changes you wish to bring about and, just as importantly, the mechanisms that you will use to ensure those changes happen.

Strategy maps explain what will be different and how the organization will change from various perspectives. Most importantly they explain the underlying drivers of change. A failure to explain these drivers of change is what I call ‘strategy by hope and magic’. The strategy map helps you to avoid strategy by hope and magic. It makes the underlying drivers explicit and helps you manage them explicitly.

Strategy maps contain a simple but powerful cause and effect model. The structure o...