This article is about how to use strategic goals in balanced scorecards. It was prompted by a Strategy Manager, asking on LinkedIn how use a ‘strategic goal’ in a Norton & Kaplan Balanced Scorecard framework. In this article I explain how you do start with a strategic goal and how to use it to develop parts of your strategy map and balanced scorecard.
First a reaction to one of the respondents.
One respondent used a good deal of words explaining that the balanced scorecard approach does not use the phrase strategic goals, and so it was meaningless in the approach. That the Strategy Manager should use other language, more suited to the Norton & Kaplan approach. Of course, that is a silly answer – and quite wrong.
Just think for a moment. Most organisations have strategic goals. So, why would the Norton & Kaplan Balanced Scorecard not work on the basis they exist in organisations and use those strategic goals in their strategic balanced scorecards? Why would they force the organisation to change their strategic goals to something else in their balanced scorecards. It seems a bizarre approach to take. Remember, that quite often the language of an organisation is deeply embedded.
Clearly, that respondent was not thinking, or did not know what they were talking about. Having started many strategic balanced scorecards with the clients “Strategic goals” let me explain how you do use and start with them.
Of course you can use strategic goals in balanced scorecards
My clients often have 3 to 4 big strategic goals in their balanced scorecards and on their strategy maps. (There is nothing wrong with the phrase). The trick is to work out how these strategic goals cross the perspectives of the strategy map, and therefore manifest themselves in the scorecard itself.
One way is simply to start by treating these strategic goals as strategic themes (in strategy map and balanced scorecard language). Notice you do not change the name from a strategic goal. Rather, you simply use them in a richer way, as the basis for a strategic theme. The assumption is that these strategic goals must have some sort of ambition or driver for change. Moreover, the management team have thought through this cause and effect model.
So, inside that strategic theme (labelled with the strategic Goal) you would expect a set of linked objectives (financial, customer, process and learning and growth) with associated measures (KPIs). The linked set would tell the story of how that strategic goal will be achieved. What you are doing is unpacking the strategic goal to understand how the Executive team think this strategic goal will be achieved. Unpacking it using the cause and effect model of the core balanced scorecard approach.
Notice here I am talking about an approach that would make sense in a second, third or fourth generation balanced scorecard, which has clear drivers of change.
An example of a “strategic goal” in a strategy map or balanced scorecard
In the original questioner’s example, (which was about the strategic goal of lowering churn rates in a telecoms company) the story is very easy: Lowering customer churn requires a change to how you operate (process) and possibly your capabilities & skills and knowledge (L&G). This will change how customers see you (Customer perspective) and therefore improve your finances (in this case customer retention and acquisition costs). It’s a simple strategic themes that crosses the perspectives. For each perspective you develop the objectives and later work out the best way to measure it. Then make sure you have projects to implement any changes and someone owns the problem. Simple and easy.
This is a perfectly valid aspect of your strategy (easily represented on your strategy map and scorecard). It is a straight forward strategic goal I have seen in many insurance, telecoms, and other service industries. Just work out what the “strategic goal” means in each perspective of the strategic balanced scorecard.
Obviously you don’t want 12 strategic goals like this or your strategy map will be 12 different strategic themes. However having a clear view of the few main strategic themes (or strategic goals) in important in any strategy exercise and important when the strategy is captured in your strategy map in a meaningful way.
Getting hung up on the balanced scorecard approach
The original answer a good example of someone getting hung up on the words and method (not methodology), without relating them to how the client thinks and what they want to achieve. Of course organisations use phrases like Strategic goals, ‘Critical success factors, Ambition or strategic objectives. A good consultant will help you make the alignment with what the client has in their head and the approach as captured in the strategy and strategy maps. Frankly you can call them all bananas, as long as people understand the same thing by them.
The original responder suggested the questioner attend a week-long course. Useful, but not necessary. Have a read of my book “Strategy Mapping for Learning Organizations‘ Norton wrote the foreword. It might be cheaper than a course. It provides a clear method and explains the underlying thinking and principles. It explains all this in various chapters.