Thursday, 29 March 2012

How to measure success against strategic vision and objectives

In an ideal world, once the strategy is in place and the execution plans have been laid, the organisation leaps into action to deliver it and reap the benefits.

In practice, of course, things are never that straight forward. As the old maxim goes "If you can't measure it you can't manage it", and if you can't manage it you can't make sure it gets done. That is why Measuring Success Against the Vision and Objectives is the 4th stage of the Strategic Learning cycle.

Conventional measurement techniques employed by organisations tend to be inadequate for measuring what is really strategically important in organisations. This often causes people to (erroneously) claim that the aforementioned maxim is incorrect. However, what it really means is that we need better measurement methodologies.

The most common methodology for measuring (and therefore managing) strategy implementation is the balanced scorecard. It looks at the organisation's strategy from four perspectives, and puts measures around each. The four perspectives are:
  1. Financial: How do we look to shareholders? How do we fund ourselves? What financial arrangements do we have have with other stakeholders or participants in our value chain?
  2. Customers: How do customers see us? How can we attract new customers and strengthen our relationships with existing customers?
  3. Internal process: What must we excel at? What mus we continue to improve at? How do our internal process differentiate us in the market?
  4. Innovation and Learning: Can we continue to improve and create value (both within the organisation and by reaching beyond its boundaries)?
In this video, Robert Kaplan, one of the two original developers of the Balanced Scorecard methodology, talks about its importance.


As a final word of caution, before passing your strategic measures straight through into your incentivisation and reward programme, consider the impact on reward on performance as outlined in Incentivisation may harm performance.

Here is another video which explains the Balanced Scorecard in simple steps: