Summary: Alignment

Review and Analysis of Kaplan and Norton's Book

BusinessNews Publishing

• Editorial: Must Read Summaries
• Año: 2016
• ISBN:
  9782511017456
• Categoría: Business
• Categoría: Management

The must-read summary of Robert S. Kaplan and David P. Norton's book: `Alignment: Using the Balanced Scorecard to Create Corporate Synergies`.

This complete summary of the ideas from Robert S. Kaplan and David P. Norton's book `Alignment` shows that most organisations consist of multiple departments and operating units which are run by highly trained individuals. Whilst each unit operates consistently and efficiently, the collaboration between units is not always aligned. Kaplan and Norton’s scorecard system allows you to create an “enterprise-level strategy map”, which will help you maximise the potential value in your business by aligning all internal operations and services. The result is not only more profitable, but also very cost effective as there is less misalignment, duplication and waste.

Added-value of this summary:
• Save time
• Understand key concepts
• Expand your knowledge

To learn more, read `Alignment` and discover the benefits that using a Balanced Scorecard can bring for your company.

Summary of Alignment (Robert S. Kaplan and David P. Norton)

Foundation: Strategy Maps and Balanced Scorecards

A Balanced Scorecard uses four perspectives – financial, customer, internal process and learning – to describe how a business aspires to create shareholder value. A Strategy Map takes the four perspectives of the Balanced Scorecard and shows all the relevant cause-and-effect relationships.

In essence a Balanced Scorecard describes how a business creates added value through enhanced customer relationships driven by excellence in internal processes. As these internal processes become better aligned, more value is created. The Balanced Scorecard uses four different perspectives:

1. Financial – What are our shareholder expectations for financial performance?
2. Customer – To reach those financial objectives, how do we actually create value for our customers?
3. Internal – Which processes must we excel at in order to create satisfied customers and shareholders?
4. Learning and Growth – How can we align our intangible assets – such as our people, our systems and our culture – in such a way that doing this will improve the critical processes?

Each of these perspectives are linked in cause-and-effect relationships which the Balanced Scorecard is designed to capture and represent. For example, if you were to introduce a training program which improved the skills of your employees (something in the learning and growth perspective), then you would naturally expect this training to lead to improved customer service (the internal perspective). This enhancement in customer service should then translate into greater customer satisfaction and increased loyalty (the customer perspective) which, in turn, will logically result in increased revenues, repeat sales and hopefully greater margins of profit (all measures in the financial perspective). The four perspectives of the Balanced Scorecard captures the answers to these questions in greater detail and with the relationships clearly identified and shown so good management decisions can be made.

A Strategy Map is a visual representation of the relationships captured by the Balanced Scorecard. In business, you can’t manage what you cannot measure, nor is it possible to measure what you cannot describe. Strategy Maps show how the tangible and intangible assets of the business combine to create added value for the organization. Strategy Maps provide a framework by which important management decisions can be made in such a way the organization moves forward consistently and productively towards its specified objectives.

Alongside an organization’s Strategy Map and Balanced Scorecard. It is then possible to place:

• Action Plans – which detail the different initiatives taken in each part of the business, along with their respective budgetary allocations.
• Strategic Plans – which can be used to guide management decision making about areas of future investment.
• Other frameworks and metrics which measure and reflect the organization’s ongoing progress.

“Corporations must continually search for ways to make the whole more valuable than the sum of its parts. Alignment is critical if enterprises are to achieve synergies throughout their business and support units. A new measurement and management system, based on Strategy Maps and Balanced Scorecards, helps corporations define and capture the benefits of organizational alignment.”

– Robert Kaplan and David Norton

“Most enterprises consist of multiple business and support units. Corporations operate diverse units under a single corporate umbrella to capture economies of scale and scope. But to achieve these benefits, the corporate headquarters needs a tool to articulate a theory for how to operate the multiple units within the corporate structure to create value beyond what the individual units could achieve on their own, without central guidance and intervention. After all, a corporate headquarters may subtract more than it adds. The value creation that offsets those headquarters costs must arise from aligning decentralized units to create a new source of value.”

– Robert Kaplan and David Norton

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