Not long ago, we discussed about the gap between strategy and execution as well as ways to bridge the gap with the Balanced Scorecard. Technology plays an important role in facilitating strategic performance management.
A scorecard-enabled solution must support a number of management processes. The critical processes outlined by the Cranfield School of Business (2003) are:
- Clarifying and translating the vision and corporate strategy
- Communicating and linking the strategic objectives and measures
- Planning and setting targets and aligning strategic initiatives
- Enhancing strategic feedback and learning
Performing these processes requires a system that supports the enterprise-wide development of operational plans that are clearly linked to high-level organisational goals.
Clarifying and translating the vision and strategy
To support this process, a strategic performance management system should firstly support the detailed analysis of activities and results in the initial performance review, which comes before devising a strategic plan.
If a company chooses the Balanced Scorecard methodology, the system should also support the cause-and-effect linkage between different themes, KPIs, initiatives and assumptions.
Read more: The balanced scorecard and strategy management
Communicating and linking the strategic objectives and measures
Accountability should be ensured with performance target assignment depending on each department/region’s ability to contribute to the overall goal. Measures are linked to each unit, theme, objective, and key performance indicator, allowing the organisation to monitor the implementation and success of its strategic plan.
To ensure concentration, operational managers should see only their part of the strategic plan, from which they can add their own initiatives to achieve the outlined strategic goals.
Read more: Risk reporting and corporate performance management: A missing link
Setting targets and aligning strategic initiatives
This is the step where senior management reviews the entire plan, including the operational initiatives. They should be able to enter targets into the plan, which can be manually or electronically linked to other modules of a strategic performance system, such as budgeting and reporting.
In this way, the organisation can assign budgets to initiatives, verify that costs and revenues are within plan, and confirm that outcomes are aligned with corporate goals.
Enhancing strategic feedback and learning
A strategic performance management system should be able to import results directly from supporting systems such as existing transactional/data warehouses. A range of reports should then be automatically available, helping the organisation determine whether its strategic plan is working.
These reports are flexible in that they can be tailored by end users and allow measures to be reported across the Balanced Scorecard perspectives as well as by responsibility. Ideally, a strategic performance management system should be able to generate:
- Performance results report: to see the relationship between activities and outcomes
- Trend report: to see whether a particular outcome is getting better or worse compared with the last period and who is responsible for that activity
- Responsibility report: to show all of one person’s strategic responsibilities and his/her performance to the associated goals
- Unit contribution report: to see how each unit is contributing to overall scorecard performance by perspective
- Ad hoc reports
Finally, a strategic performance management system should be flexible in that it allows organisations to approach the Balanced Scorecard from a number of directions.
We have come to the end of this series. For more detailed examples of how a performance management system can help you bridge the gap between strategy and execution, download the full white paper “Addressing strategy management and the balanced scorecard”.