Strategy Execution and The Balanced Scorecard

Harvard Business School Working Knowledge offers up this interview with HBS professor Robert S. Kaplan, one of the original creators of the Balanced Scorecard in 1992.

Key take-aways from their latest research:

• Companies often manage strategy in fits and starts.
• Though executives may formulate an excellent strategy, it easily fades from memory as the organization tackles day-to-day operations issues, or what most think of as "fighting fires."
• Strategy forumulation needs to be a continual process - not an annual event.
• Senior management teams needs to have regular, probably monthly, meetings that focus only on strategy.
• Companies need a formal process for using strategic objectives to set priorities for where operational improvements can have the largest impact on strategy execution.
• A complete strategy execution system schedules strategy review meetings at a different time from operational review meetings, so that each meeting has its own frequency, agenda, information system, and participation.
• Creating a strategy map and scorecard for that strategy is the logical and proven next step for putting the strategy into action.

Kaplan also reveals the "six strategy execution stages":

1. Stage 1: The CEO leads the change agenda and drives it from the top to reinforce the mission, values and vision. Leadership sets the ambitious vision and stretch targets.
2. Stage 2: The executive leader validates the strategy map as an expression of the strategy articulated in Stage 1 and challenges the organization with stretch targets that take all employees outside their comfort zones.
3. Stage 3: Leadership drives alignment of organizational units and is essential for communicating vision, values, and strategy to all employees.
4. Stage 4: Leadership supports the cross-organizational unit process improvements.
5. Stage 5: the leader's openness and skill in running the strategy management review meeting determines its effectiveness for fine-tuning the strategy throughout the year.
6. Stage 6: The leader must allow even a well-formulated and executed strategy to be challenged in light of new external circumstances, data collected about the performance of the existing strategy, and new suggestions from employees throughout the organization. Being willing to welcome and subject existing business strategies to fact-based challenges is one of the hallmarks of effective leadership.