Strategy Consulting

Dr. Robert Kaplan and Dr. David Norton of Harvard Business School coined the term “balanced scorecard” to describe their approach to performance management in 1994. During the Clinton administration, Vice President Al Gore popularized this term as the leader of the National Performance Review. In the 21^st century, government agencies, private companies, and non-profit organizations use the balanced scorecard to measure organizational achievement of strategic objectives. This article uses a strategy map – part of the balanced scorecard approach – to show how the Kaplan-Norton model works for managing organizational performance.

What is a Strategy Map?

A strategy map is a diagram of connected boxes and other flowchart symbols. These pictures as well as short phrases describe an organization’s approach to strategic management. The following discussion of a strategy map is based on a sample map posted on the Value Based Management website. This map shows logical relationships between organizational values, resources, and objectives using four perspectives – the Learning and Growth Perspective, the Internal Perspective, the Customer Perspective, and the Financial Perspective.

At the base of this example of a strategy map, the Learning and Growth Perspective shows how an organization uses human capital, information capital, and organization capital to achieve goals. At the second level, the Internal Perspective demonstrates how an organization strategically manages business processes such as customer management, supply chain, and research and development to build on its Learning and Growth Perspective.

At the third level of this sample map, the Customer Perspective shows how an organization creates value for customers through customer value propositions such as price, quality, and service. At the fourth level, the Financial Perspective conveys how an organization uses financial strategies – such as cost structuring and asset utilization – to produce long-term value for shareholders.

Three Types of Resources

In the same strategy map example, three types of resources help an organization operationalize its objectives – human capital, information capital, and organization capital. These three resources focus on the knowledge owned by an organization, especially technical knowledge possessed by employees and proprietary technologies and information. This focus on resources suggests managers must define strategic objectives that help employees understand what they need to learn to perform their roles. From a manager’s perspective, a strategy map is a powerful tool for communicating an organization’s culture to direct reports. For example, a strategy map shows employees how an organization is organized and managed to achieve growth.

Strategic Objectives

A strategy map also illustrates an organization’s strategic plan. Companies can download template strategy maps and other strategy mapping software programs from websites like CNET and Active Strategy. These tools offer a way to build a strategy map and include strategic objectives where appropriate. If an organization already has a strategic plan, it is feasible to adapt a strategy map tool to fit its plan.

Strategy maps help an organization to ensure everyone focuses on the methods that will produce value for customers, shareholders, and other stakeholders. A balanced scorecard approach to strategic performance management calls for senior leadership to use a strategy map and other organizational planning documents to evaluate performance (or achievement of strategic objectives).