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Business Strategy Advice

The following are the most popular expert advice articles on business strategy:

Business Strategy Advice 1

The Meaning and Importance of Corporate Strategy

Corporate strategy is supposed to be the means by which an organization achieves and sustains success. Yet, it rarely rises to that level, despite an abundance of corporate strategy theory and significant research from many organizations over the past few decades. The changes over the years are considered in the form of small, theoretical refinements, rather than large and significant steps required for further management transition

What explains the relative failure of most organizations to create effective strategy? Part of the problem is that corporations and their managers have great difficulty clearly and consistently defining what corporate strategy is, and much of that struggle can be traced to their interpretation of the word strategy itself.

The original meaning of the word strategy derives from the Geek strategia, which is used in the military terms and represents the ability to employ available resources to win a war. This interpretation has generated problems when such concept is used in a business context because it implies the existence, even the necessity, of opponents. As a result, most managers believed that a corporate strategy implies a strong focus on competition, since competition takes place almost exclusively at the offering level, most organizations concentrate their strategic efforts on constantly improving the goods and services they offer. This overemphasis on the temporary success, however, can often obscure the kind of thinking and emphasis that would lead to sustained success, even a continuous repetition of temporary successes doesn't equate to sustainable strategy. In an effort to increase the value of single offerings, the organization may be distracted from larger questions of structure, mission and objective

In war, objectives can often be clearly defined, and so strategy is thought of as a means to a specific end. This view has persisted in the corporate world where strategies are conceived as plans to accomplish specific goals. Although corporate strategy can be very goal-oriented, especially in the early stages of a company's development, the very nature of goals implies temporary success. By contrast, sustainable success is not, and cannot be an end unto itself or a goal to achieve. Therefore, goal orientation becomes arguably inappropriate when success has to be indefinitely sustained.

Despite this, an overwhelming number of top executives and researchers make extensive use of objectives in their quest of lasting corporate success. Certainly, a number of factors contribute to this: the need of leaders with limited tenure to point to achievements, the tyranny of meeting the expectations of the financial markets and most management teams extensively rely on forecasting and planning. Still, the idea held by most managers that strategy itself is all about goal achievement only exacerbates the situation. Therefore, it is important for strategists to remember that the more specific an objective, the further away it may potentially lead the organization from its optimal big picture.

So how strategy should be redefined? Clearly it cannot rely too strongly on objectives nor can it focus too heavily on competition. A more fundamental concept is needed to guide an organization in seeing its big picture, and such concept should be customer. To create sustainable, long-term success, an organization must first and fundamentally understand and relate to its customers. It is the ongoing encouragement of this understanding, based on neither specific competitors nor temporal objectives, which must be at the heart of any real strategy. And it is that from which all objectives should naturally flow.

Author: Verena Veneeva
(Papers4you.com, 2006)

Reference

Hosskisson, R.E., Hitt, M.A. Wan, W.P. and Yiu, D. (1999). "Theory and Research in Strategic Management: Swings of a Pendulum". Journal of Management, Vol.25, Iss.3, pp.417-457.

Johnson, G. and Scholes, K. (2002). Exploring Corporate Strategy: Text and Cases. 6th ed. Prentice Hall: Harlow.

Porter, M.E. (2001). "Now is the time to rediscover strategy". The Wall Street Journal, November.


Business Strategy Advice 2

Strategy Cycle

The strategy cycle is a simple tool that will help you to achieve the goals of your organization. Consisting of four main phases, the cycle is an iterative process that you can use to build and improve your business year after year.

Research

Successful business relies on informed decision making. Managers with access to information on the market, competitors and their own business will be better placed to set goals and devise strategies, than those who are less well informed.

Larger organizations often have business intelligence units, specifically tasked with the collection and analysis of data, but there is nothing to stop managers from smaller businesses from spending a couple of hours each month collecting their own business intelligence.

Often a manager's personal knowledge and experience of the market can be just as effective as expensive research studies and decisions are made through 'market sensing' as opposed to 'market research'.

As the strategy cycle is an iterative process, the results of previous strategies should feed into the business intelligence, along with any important experiences or key learning's gained.

Planning

After analysing the business intelligence to identify the most important internal and external factors affecting the organization, managers can begin to formulate appropriate strategies for meeting their goals.

Organizational goals are the aspirations that the business seeks to achieve. These generally revolve around growing the business and increasing profitability, but can also be industry specific, such as a technology company wanting to become the leading innovator.

To make these goals possible, managers set objectives which provide a more tangible destination for the business to move towards.

For example, a business seeking market leadership would probably set objectives around increasing sales and reducing costs. It would then be up to the heads of finance, marketing, HR, R&D and production to develop strategies to achieve these objectives.

A strategy can be described as a collection of activities that will enable the organization to reach it's objective. A cost reduction strategy may involve staff redundancies, renegotiation of contractual terms with suppliers and the development of more efficient supply chains.

Throughout the planning process, managers should constantly consult with other heads of department and with employees further down the line who will be responsible for implementing the strategy activities.

Without suitable levels of communication, the different parts of the business will not be able to take an integrated approach towards the objectives, often resulting in duplication of effort or inability to deliver to customers.

A good example of this would be the marketing department implementing a campaign to increase sales, without informing the production department, who will not have had enough time to prepare for the increased level of demand.

Other important factors to consider during the planning process include:

-- Determining how the success of the strategy will be measured
-- Outlining the key milestones and stating when these will be achieved
-- Financial planning to agree appropriate budgets for each activity within the strategy
-- Undertaking a risk assessment and identifying ways to mitigate major risks
-- Establishing an approval and sign-off process for each activity

Implementation

Strategy implementation involves the delivery of a number of inter-related activities to an agreed standard and schedule. This is often referred to as project management.

To successfully deliver projects, managers need to have good communication, financial and time management skills, so that they can liaise with staff, contractors and customers (both internal and external), whilst ensuring the project remains on schedule and within budget.

In larger organizations there may be a number of inter-related projects taking place in order to meet an objective. This is often referred to as programme management, with a programme board regularly monitoring each project to ensure it is delivering.

As each milestone activity in the strategy is completed, it should be reviewed and signed-off by designated managers. Activities that are not delivered to time or quality should be reviewed to understand why and corrective action undertaken to try and get the delivery of the strategy back on track.

Measurement

Once implementation of the strategy is complete, it is important to assess the degree to which it enabled the objective to be achieved. Without proper measurement it will be difficult to accurately understand what worked and what improvements might be needed for future strategies.

The method of measuring the strategy should be closely related to the objective that was set. Therefore an organization whose objective was to increase sales turnover, would use the increase (or decrease) in actual sales as one of its measurements.

On some occasions it will not always be possible to use internal data to measure strategy success, especially for less tangible factors such as brand awareness. In these cases it will be necessary to seek external data in the form of market research surveys and opinion polls.

Author: David Sharpe

 


Business Strategy Advice 3

Management 101

The following is an excerpt from my new book, "MORPHING INTO THE REAL WORLD - A Handbook for Entering the Work Force" which is a survival guide for young people as they transition into adult life. The book offers considerable advice regarding how to manage our personal and professional lives. As a part of this, I found it necessary to discuss some basic management concepts and philosophies.

Management 101

In order to effectively work within a company, it is necessary to understand some basic management principles so employees understand what is going on in the minds of their superiors. The better the employee understands the manager, and vice versa, the better they will be able to work together in harmony. This broadcast, therefore, covers basic management concepts you will undoubtedly come across in business. If you comprehend these principles and are able to assimilate them in your work effort, this will have also served as a primer for your advancement.

INTRODUCTION

There is an old joke whereby a new manager had been hired by a company to take over an operation. As the new manager was moving into his office he happened to bump into his predecessor who was preparing to leave. The new manager asked if there was any advice the former manager could offer on assuming his duties. The former manager said he had written down advice for his successor and placed them in three envelopes in the desk marked "1," "2," and "3", and they should only be opened in the event of an emergency. The new manager laughed, shrugged it off, and went about his business thinking nothing about the envelopes.

The manager's reign started off fine but inevitably ran into a problem for which he had no solution. Desperate, he happened to remember the three envelopes and opened Number 1 which offered the following advice: "Blame your predecessor." The manager thought this was a clever way to get himself off the hook and used it to good effect.

Time went by until the manager was faced with another seemingly impossible hurdle. Not knowing what to do, he turned to envelope Number 2 containing a note that read simply: "Reorganize." The manager thought this was a sound idea and set about reorganizing his operation. Organization charts were redrawn, job descriptions modified, and new office furniture and equipment obtained.

The reorganization overcame the manager's problem but he eventually ran into a crisis taxing his abilities as a manager. At a total loss as to what to do, the manager turned in desperation to envelope Number 3 which included a note that read simply, "Prepare three envelopes."

Laugh as we might to this anecdote, there is a bit of truth in it. Too often people rise above their level of competency to take on the job of manager. Being a manager is substantially different than the duties and responsibilities of the worker. Some people have the fortitude for it, others do not. While I have personally seen some very good managers who have excelled in their jobs, I have also seen people become physically ill from being elevated to a position of management. Being a manager, most assuredly, is not for everyone.

Management is not about numbers or technology, it is about getting people to perform specific work in the most productive means possible. Monitoring numbers and implementing technology to assist in our work effort is important, but we should never lose sight of the fact that projects and work assignments are performed by human beings who possess emotions and different levels of intelligence and interests. As such, the human dynamics of management is much more challenging than most people realize. There is a countless number of books on the subject of management alone. But for our purposes, perhaps the best way to think of "management" is simply, "Getting people to do what you want, when you want it, and how you want it."

The Three Prime Duties of a Manager

A manager has three primary duties to perform: Provide Leadership, Establish the proper work Environment, and Produce/Deliver products or services.

1. Leadership

As the field general for his department, the manager should be able to articulate the objectives of his area, and the strategy for conquering them. In other words, he has to have a vision and be able to effectively communicate it to his subordinates in order to instill confidence and provide a sense of direction. People like to know where they are going and appreciate some direction in their lives. As social creatures, we take comfort in knowing we are working in a concerted manner towards common objectives we deem important. As such, not only does a manager need a vision, he must be able to convince his workers of its necessity. If the workers believe in the manager's vision and are confident in his ability to lead them, they will gladly follow him.

Following this, the manager must be able to develop practical project plans for the staff to follow. These project plans should be explained to the staff along with their rationale. By doing so, workers cannot claim they didn't know the plan or what their role was in it. Think of the game of football where plays are called for the eleven players on the field; all are given assignments to perform towards a common objective. If any one player doesn't know the plan, in all likelihood he will make a wrong move and cause the team to lose yardage. As my football coach was fond of saying, "A team is as strong as its weakest player." Planning requires communications which ultimately leads to teamwork and harmony. To this end, managers should keep their project plans and calendars up-to-date and visible to everyone in the department.

In order for the manager to instill a sense of confidence in the staff, he must not only be able to demonstrate he knows what he is talking about, he must also express a high level of moral conduct. The manager's word should be considered his bond. If he is caught in a lie, cheating, defrauding, back stabbing, or some other misconduct, this will be noticed by the staff who will no longer trust him. A true manager is a person of integrity.

Finally, beware of "reactionary" managers whereby they simply go from one problem to another as they occur. Under this scenario, the manager is not in control of his department's destiny and has to dance to the tune of someone else's fiddle. Some reactionary management will inevitably be necessary, but managers should take control over their environment and practice more "proactive" management as opposed to "reactive" management. Too often people are lulled into a reactive mode of operation or as I refer to it, a "fire fighting mode" of operating. As a manager, you are cautioned to beware of your chief firefighters, they are probably your chief arsonists as well. Also remember the old adage, "If you do not make the decision, the decision will be made for you."

2. Environment

The astute manager will appreciate the need for cultivating the proper work environment. If a worker feels comfortable in his environment, he will feel amenable to working and will take a more positive view of his job. But if a "sweat shop" environment is provided, the worker will dread coming to work and put forth minimal effort to accomplish his assignments.

There are two dimensions for creating a work environment: logical and physical. The physical aspect is somewhat easier to explain and involves the facilities and equipment used in the business, both of which impact morale and attitudes towards work. How people behave in a clean and contemporary facility is noticeably different than those working under dingy and antiquated conditions. Whereas the former supports a professional attitude, the latter promotes a lackadaisical attitude. Basically, a clean and contemporary work place is saying to the employees, "I care about you and am willing to invest in you." However, the economic reality may be the manager cannot afford the latest "state-of-the-art" facilities or equipment. Nonetheless, the manager should make an effort to keep the physical surroundings as clean and up-to-date as possible.

Whereas the physical aspects of the work environment are tangible and easy to assimilate, the logical aspects are intangible and perhaps harder to manipulate for it involves dealing with human perceptions, attitudes and emotions. Along these lines, there are three considerations:

A. The Corporate Culture.
B. Management Style - micromanagement versus worker empowerment.
C. Continuous Improvement - to constantly seek new and improved ways for producing superior work products.

3. Produce/Deliver

Equal to Leadership and creating the proper Environment, is the manager's duty of being able to produce the products or services he is charged to deliver. Even if you have the best plans and environment, if you fail to deliver your products or services, you have failed as a manager. To illustrate, one of President Lincoln's first commanders of the Army of the Potomac during the American Civil War was General George B. McClellan, an extraordinary engineer and organizer, but a complete failure at execution. If you as a manager are convinced of a specific course of action, do not procrastinate, act. An opportunity rarely presents itself twice.

Author: Tim Bryce


Business Strategy Advice 4

Business Strategy - Conquering A Culture Of Indecision

The job of the CEO, everyone knows, is to make decisions. And most of them do - countless times in the course of their tenures. But if those decisions are to have an impact, the organization must also, as a whole, decide to carry them out. Companies that don't, suffer from a culture of indecision.

In his 2001 article, Ram Charan, one of the world's preeminent counselors to CEOs, addresses the problem of how organizations that routinely refrain from acting on their CEOs' decisions can break free from institutionalized indecision. Usually, ambivalence or outright resistance arises because of a lack of dialogue with the people charged with implementing the decision in question. Charan calls such conversations "decisive dialogues," and he says they have four components: First, they must involve a sincere search for answers. Second, they must tolerate unpleasant truths. Third, they must invite a full range of views, spontaneously offered. And fourth, they must point the way to a course of action.

In organizations that have successfully shed a culture of indecision, discussion is always safe. Underperformance, however, is not.

Does this sound familiar? You're sitting in the quarterly business review as a colleague plows through a two-inch-thick proposal for a big investment in a new product. When he finishes, the room falls quiet. People look left, right, or down, waiting for someone else to open the discussion. No one wants to comment - at least not until the boss shows which way he's leaning.

Finally, the CEO breaks the loud silence. He asks a few mildly skeptical questions to show he's done his due diligence. But it's clear that he has made up his mind to back the project. Before long, the other meeting attendees are chiming in dutifully, careful to keep their comments positive. Judging from the remarks, it appears that everyone in the room supports the project.

But appearances can be deceiving. The head of a related division worries that the new product will take resources away from his operation. The vice president of manufacturing thinks that the first-year sales forecasts are wildly optimistic and will leave him with a warehouse full of unsold goods. Others in the room are lukewarm because they don't see how they stand to gain from the project. But they keep their reservations to themselves, and the meeting breaks up inconclusively. Over the next few months, the project is slowly strangled to death in a series of strategy, budget, and operational reviews. It's not clear who's responsible for the killing, but it's plain that the true sentiment in the room was the opposite of the apparent consensus.

In my career as an advisor to large organizations and their leaders, I have witnessed many occasions even at the highest levels when silent lies and a lack of closure lead to false decisions. They are "false" because they eventually get undone by unspoken factors and inaction.

Author: Melih Oztalay


Business Strategy Advice 5

Business, Strategy, Planning

Exposure to strategy concepts alters the way one looks at businesses. Strategic thinking involves a comprehensive analysis of a business in relation to its industry, its competitors and the business environment in both the short and the long term.

Ultimately, strategy is a company's plan to achieve its goals.

Corporate managements often do not know clearly what they want or how they'll get there. For example, if the question posed is which way do I go from here and the answer is it depends on where you want to go, then if the resulting answer is I don't really care then the ultimate conversation finisher could be then it does not matter which way you go.

Corporations need carefully thought-out plans strategic plans or inevitably they will become victims of the market-place as opposed to the victors who shape it.

Strategic plans cannot be formed in a vacuum; they must fit organizations just as marketing plans must be suited to products.

Strategic planning is essentially characterized by two separate stages -- formation and implementation.

This is the optimum point at which to introduce the seven S model:

Structure
Systems
Skills
Staff
Strategy
Statement of Mission

An organization's ability to change can be measured and each of the "S" factors should be able to complement each of the others in a perfect organization.

This is essentially no different from a marketing plan, which should be internally consistent and mutually supportive.

The seven "S" models is a helpful tool to organize one's thoughts in order to define and effectively attack complicated problems.

Structure

A corporation's structure affects its strategic planning and its ability to change.
A company's structure may have a customer or a geographic focus. For example. if a company decides to alter its strategy to become more responsive to its customers it may need to adopt a customer structure, which will channel all the skills of a company to meet customer's specific needs.

Systems

The procedures, both formal and informal, by which a company operates, are known as the systems of a company.
When a company confronts a major challenge in the market place, management must have detailed data about its operations, customers, and competition to determine the gravity of the situation. Market research and sales tracking systems give information about the customers while competitive intelligence systems give an insight into what other companies are up to.

Skills

The skills imparted by the employees into the business have to be judged by the employer at the point of the interview so that the necessary improvements can be made to the business.

Staff

With no people, there's no company .The human resources system, which includes appraisals, training, wages, and intangibles such as employee motivation, morale and attitude. With a motivated workforce, companies are able to adapt and compete. This is an essential factor however, because without employee co-operation a company will not have the ability to succeed.

Strategy

This refers to the actions that a company plans in response to or in anticipation of changes in its external environment, its customers and its competitors.

Style

Culture or style is the aggregate of behaviors, thoughts, beliefs and symbols that are conveyed to people throughout an organization over time.

Mission Statements

These are often mentioned when companies speak about their goals. A mission statement should be a short and concise statement of goals and priorities and not long, bland and tedious documents.

In summary, properly followed the seven "S" formulae could mean the difference between a business being successful or not. Use this as a checklist from time to time to keep the business on a true path.

Author: Naz Daud


Business Strategy Advice 6

Strategy Execution

It is one thing to develop a top business strategy and quite another to see that strategy effectively executed. Simply view this glaring figure from Fortune Magazine, which recently stated that "less than 10% of strategies effectively formulated are effectively executed."

As this statistic easily shows, organizations too often fall within the majority rather than the minority when it comes to strategy execution. Many strategic plans are doomed during the initial stages of development because they lack foresight or fail to incorporate all areas of operations. And even if a strategic business plan is well-developed, seeing it out requires at least as much or even more dedication.

Like anything in the business world, strategy execution requires persistence, patience, and flexibility among many other things. With the everyday demands that come with running a business and performing ongoing work tasks, it is quite easy for strategy execution to fall by the wayside. Yet studies (and common sense) indicate that organizations able to execute mediocre strategies far outperform those with brilliant, yet poorly implemented strategies.

If strategy execution has proven itself to be so difficult, what can management teams do to better ensure success? They can focus on "Enterprise Strategy Execution," a proven, ongoing process that encompasses a series of stages, steps, and methodologies, which together help organizations evolve toward a more performance-focused, strategically-aligned, results-driven culture.

So what exactly is Enterprise Strategy Execution? Basically, Enterprise Strategy Execution (ESE) empowers every employee toward a common strategy by focusing on a continual process of prioritization, improvement, and control.
In other words, ESE solidifies your workforce towards contributing to the development and implementation of a successful strategy via these three important parameters. Your organization plans and deploys strategic objectives during prioritization, while employees and management continually fix performance gaps in the most critical areas throughout improvement, and subsequently lock-in on improvement gains during control.

Each of these three major areas contains sub-sets or specific focus areas that help an organization progress:

PRIORITIZATION
Exposure and Epiphany where a critical organizational need creates an impetus for change (an "ah-ha" moment occurs within the leadership team)

Executive Buy-in & Support where additional leadership approval is gained to continue the focus on Strategy Execution (this typically occurs among the executives charged with developing strategies and/or carrying out operational tactics to achieve them)

Strategic Planning & Mapping during this phase, a strategic plan is developed to lay out the short- and long-term direction for the organization, and a "strategy map" is created, which distills the often-unwieldy strategic plan into a simple, visual depiction of this year's plan. The strategy map is an important step in encouraging the organization to focus on the critical few priorities.

Top-Level Balanced Scorecard this tool takes the prioritization of the strategy map one step further, making the organization's top objectives both visible and actionable by identifying ways to measure progress of the objectives against agreed-upon targets. This begins to take the Strategic Planning Process from what can be an academic into a tactical plan for achievement.

Cascading Balanced Scorecards where your organization builds a more comprehensive framework upon the foundation of the Top-Level Balanced Scorecard by creating layers of linked, related, but not identical versions of the Balanced Scorecard, down and across the organizational hierarchy. This results in organizational linkages and alignment to strategy, as well as a means for achieving cross-functional strategic goals.

IMPROVEMENT
Performance Improvement during this stage, your organization learns to systematically identify the root causes of critical performance gaps (made obvious through the cascaded Balanced Scorecard framework) and then execute improvement initiatives to permanently remove the root causes. By focusing improvement efforts on the priorities identified in the Balanced Scorecard framework, rather than on bubbled-up fire-drill issues, your organization learns to apply its valuable resources to the highest impact needs.

Scorecard Business Reviews where an organization's business reviews transform from superficial examinations of stale reports into productive, real-time, scorecard-based reviews that allow executives and managers to drill down from high-level problem areas, across and through contributing factors to ensure root causes have corrective actions in place.

CONTROL
Process Management where leading, causal measures are identified, performance or process improvements are locked-in, and all information needed to manage the business process successfully and predictably are identified.

Employee Goal and Compensation Alignment where employees work with their supervisors to develop personal-level goals, such as training and development objectives that will contribute to departmental and organizational needs and strategy, rather than the typical employee development goals, which too often focus on an employee's unrelated interests. Ideally these should be tied into incentive compensation programs, further emphasizing how an individual's contribution impacts the organization's top- and bottom-line performance.

Budget Integration where Strategy Execution is truly integrated with the day-to-day business operations and their financial foundations. This stage ensures that performance and process improvement projects deemed necessary for executing the current year's strategy have the appropriate resources allocated.

As you can see, organizations cannot flip a switch and achieve Enterprise Strategy Execution overnight. Rather, it is much more of an evolutionary process, which must be approached in steps. Trying to tackle all of these areas at once is not feasible and rather counterproductive, since strategy execution requires the continual development of new skills and behaviors. But the good news is that each of these steps comes with incremental benefits. And an ongoing dedication to Enterprise Strategy Execution gives organizations the absolute best odds for long-term results.

Learn more about the specific tools, steps, and even history of strategy execution with the articles below, and visit ActiveStrategy.com for all of your strategy execution needs. No matter where you are on your own Strategy Execution evolution, we can help you improve your results faster.

Author: Ferguson


Business Strategy Advice 7

The Balanced Scorecard

The Divide between Strategy Formulation & Strategy Execution
The vast majority of the world's businesses fail to fully execute what they claim to be their most important strategic objectives. It's not for lack of planning most spend large amounts of time developing new strategies, tweaking mission statements, and crafting top-level goals. The challenges emerge when these organizations attempt to enact these strategies, particularly when they must be executed across diverse business units, with the cooperation of cross-functional areas, and with the participation of geographically-dispersed personnel.

With the development and implementation of a comprehensive Balanced Scorecard framework, effective execution of strategic goals becomes much more attainable.

Balanced Scorecards Can Address the Divide
Need proof? Recent research suggests that world-class companies are 159% more likely to have Balanced Scorecards in place.

So what exactly is a Balanced Scorecard? It's a framework that helps organizations first clarify their strategy and then make it actionable to create measurable results. It can be implemented across organizations of any size, whether they are Fortune 100 companies, not-for-profit organizations, health systems, governmental organizations, or start-ups.

Perspectives Promote Balance
As the name suggests, the Balanced Scorecard provides a more holistic view of performance by helping organizations develop and review strategic objectives within a balanced set of key focus areas. These focus areas called perspectives often include Financial, Customers, Internal Processes, and Learning and Growth. These four perspectives should be adjusted if they do not present a balanced view of your organization's key stakeholders. For example, healthcare organizations building a Balanced Scorecard often feel that including a perspective called Patient Care or Clinical Outcomes better represents their organization and strategy.

In contrast to the broad view provided by the Balanced Scorecard with its range of perspectives, most organizations that rely on more traditional reports to manage performance tend to focus too heavily on just one area, most often Financial. This hinders them from seeing the impact that other areas, such as Customer Retention, have in driving the most important outcomes, such as Financial Health.

y linking the causes to the effects, Balanced Scorecards have proven to be revealing tools, which can help all employees see how their work impacts strategy and ultimately align your organization's different operating areas in pursuit of the most critical goals.

Focus on What's Critical, Rather Than What's Easy
Another benefit of a well-crafted Balanced Scorecard is focus. Scorecards with no more than 9-12 objectives are the ones that drive results. Objectives are brief, verb-noun statements, such as "improve customer satisfaction," pulled directly from the strategic plan and grouped under the appropriate Balanced Scorecard perspective. Without a Balanced Scorecard forcing this type of focus on the critical few objectives, most organizations try to do too much, so efforts become fragmented and ineffective. When given too many areas of emphasis, employees work only on the "low hanging fruit" or the easiest projects, rather than digging into areas that are more tightly aligned to the strategic goals or have the largest performance gaps.

Ready to Build a Balanced Scorecard?
With the above fundamental principles understood, many organizations wonder how to move from strategy to a deployed Balanced Scorecard. Before such action can take place, organizations must understand what Balanced Scorecards are not.

Too often, a Balanced Scorecard is seen as just another static report only reviewed by executives, when it can actually become a powerful ongoing management framework, capable of both aligning everyone in the organization to the top-level strategy and providing the ideal review mechanism for achievement of this strategy.

Balanced Scorecards are also not generic tools that fit all organizations the same way. In other words, Balanced Scorecards should be unique to each organization, its strategy, and market position. Balanced Scorecards within an organization should also be quite different; they should be "cascaded" or translated, so that the specific objectives and measurements or metrics are appropriate for each organizational area.

As with many other tools, a Balanced Scorecard should not be viewed as an end-all, be-all solution. Rather, they are just a part of a broader focus of Enterprise Strategy Execution, which should also include such areas as strategy mapping, structured business reviews, aligned performance improvement, process management, and employee goal alignment. Tackling all of these areas simultaneously, however, is a recipe for failure. Starting with a solid strategic plan and a well-developed Balanced Scorecard is the ideal foundation upon which to build a more comprehensive performance management and Strategy Execution focus.

First, Ensure Alignment to Strategy
So how should an organization begin building this strategically-aligned Balanced Scorecard foundation? First, conduct a thorough SWOT Analysis, which helps identify key Strengths, Weaknesses, Opportunities and Threats. The high-level organizational SWOT Analysis should incorporate departmental, business unit, and functional area SWOT Analyses. It should also build upon other strategic planning inputs, such as market analyses, customer needs analyses, and performance gap analyses. Doing so will allow your organization to discover where it stands in relation to competition, market conditions, and other factors, and should identify the key candidates for your top-level Strategy Map a simple, visual depiction of the key components of your strategic plan, which places a high emphasis on the cause and effect relationships of objectives.

To build your Strategy Map, place your organization's perspective names down the left side of a page, with the most important outcome area at the top. Then below it, place the perspective representing the most important driver or contributing area for the top-level outcome, and so on down to the last perspective. For example, for-profit companies typically place the Financial perspective at the top of the map, with the Customer Perspective underneath (because customers drive financial success), then Internal Processes (those ways that you provide products and services to customers), and finally Learning and Growth (which represents the skills of your employees and their ability to keep the processes working).

Next, within the perspectives, place the most critical strategic objectives derived from the SWOT Analysis, which will most likely come from the Weaknesses, Opportunities, and Threats. You'll need to narrow them down to the critical strategic few (no more than 9-12 objectives) to ensure focus. In addition to grouping objectives within the appropriate perspectives, it is helpful to draw arrows between the objectives to further emphasize the causal relationships and show how each contributes toward the strategic outcomes at the top.

Next, Build Your Top-Level Balanced Scorecard
Once created, the Strategy Map becomes the foundational piece for building a top-level Balanced Scorecard. Begin building your Scorecard by copying the perspectives and objectives from the Strategy Map. From here, your organization should identify measures (also known as Key Performance Indicators/KPIs or metrics) to determine if you are on track to achieve each objective. No more than three measures should be developed as indicators of achievement for each Scorecard objective. Targets or goals for each measure should also be determined and placed on the Scorecard to gauge performance of each measure. Most scorecards also include a red, yellow, or green "stoplight indicator" next to each measure or objective, which provides an at-a-glance view of its performance compared to target.

Finally, you should begin to identify improvement initiatives, which are time-bound projects that will address critical areas where performance is falling short of target. These initiatives should be aligned to the underperforming scorecard measure and reviewed to ensure that progress is indeed improving the metric.

Now, On to Cascading
Aligning improvement initiatives is the final step in building a top-level Balanced Scorecard. But this single scorecard is really just the first step in building an actionable management framework. To make the tool really drive the results you desire and help you execute your strategy, you need to cascade the objectives and metrics down and across the organization, creating linked, aligned, and related but not identical Scorecards for each strategically-important area. This leverages the cause and effect nature of the Balanced Scorecard tool by tying the lower-level and cross-functional drivers of performance to the top-level outcomes that ultimately determine your success. By reviewing and improving these lower-level measures, which will now have a "line of sight" view of their relationship to top-level measures, you drive real, predictable results that can be sustained for long-term Strategy Execution.

Whew! Now take a deep breath. As you can see, building Balanced Scorecards requires hard-work, patience, and often some consultative help to get you moving in the right direction.

Five Tips for Scorecarding Success:

  1. Don't expect to build a complete framework overnight.
  2. Instead, focus on building a solid top-level Scorecard. It doesn't have to be perfect aim for 80% and start cascading, assuming you'll improve Scorecards as you work with them.
  3. Cascade Scorecards to one or two strategically-critical organizational areas first, focusing on building the cause and effect relationships between the high-level objectives and their key drivers.
  4. Begin reviewing these Scorecards right away! When an organization actively reviews Balanced Scorecards, focuses on areas with performance gaps (measures with red or yellow stoplight indicators), and follows up on the aligned improvement initiatives, performance improves.
  5. Once you have about 3-5 Scorecards, it's time to think about Balanced Scorecard Software. These applications greatly improve visibility into the causal relationships of the scorecards, help drive timely action, ensure that everyone is reviewing the same information (by providing a "single version of the truth" that spreadsheets and paper reports simply can't), and facilitate better Scorecard business reviews.

Author: Jack Steele


Business Strategy Advice 8

Transforming the BSC Into a Strategy Execution System

Many corporate managers have been introduced to a corporate management system called the Balanced Scorecard. Developed at the Harvard Business School by David Norton and Robert Kaplan in the early 1990s, the Balanced Scorecard (BSC) represents the newest and most prolific performance measurement system since Total Quality Management (TQM) and Management by Objectives (MBO). A growing number of organizations are achieving great financial success through the BSC framework, thereby solidifying the BSC as "here to stay" rather than just another passing fad.

According to studies, the BSC is being implemented in nearly two-thirds of North American corporations. Indicative of the system's growth, many of these implementations are less than six months old. Thus, as a manager, if the system has not yet been encountered, it most likely will be in the near future.

What does this mean to managers?

FIRST, recognize the Balanced Scorecard for what it really represents. Essentially, the BSC is a measurement framework through which organizations define strategic goals at every level in an organization with measures attached to each goal - thus enabling managers to review past and predict future performance and to take corrective improvement action. The BSC is significantly different than other management systems in that it forces organizations to measure only the top few strategic goals and to align every employee behind their interpretation of these goals. Ultimately, the BSC is a proven methodology to execute an enterprise strategy.

SECOND, embrace the power of the Balanced Scorecard. If managers can deftly create their divisional, departmental or team goals, identify useful measurements, and enable those working for them to take predictive action against performance shortfalls, the BSC can truly become a value-added manager's tool.

THIRD, understand the big picture of enterprise strategy execution. Organizations that have successfully deployed a Balanced Scorecard framework and achieved notable results all followed these 10 steps:

Develop a solid strategy

A solid strategy is the keystone to business success. Without a solid strategy, success is unobtainable. Of course, without execution, a solid strategy is meaningless.

Translate the strategy into a scorecard of clear objectives

By translating a strategy into objectives (short verb-noun statements), managers and front-line employees are provided understand both what is expected and why. To achieve the best results, the scorecard should be focused on no more than ten strategic objectives.

Attach measures to each objective

After translating a strategy into objectives, managers and employees must know if and when the objectives are being achieved. Thus, each objective should be given at least one but not more than three measurements that are accurate milestones for achievement.

Cascade scorecards to the front line

Operational management and front-line employees do the actual work that makes strategies happen. Thus, organizations should ultimately develop scorecards at every level in an organization, allowing each person to see how his or her specific job duties align and contribute to the higher-level goals. By cascading scorecards, strategy then becomes "everyone's" job.

Align existing core processes to objectives

As the scorecards are being deployed, managers need to re-examine their existing core processes and determine if they are linked to the corporate strategy. If such linkages are not found, the processes should be reconsidered. Aligned processes are often the best places to find appropriate measures for lower level scorecards.

Deliver measurement-based performance feedback

Managers should accord each employee in an organization periodic feedback on how his or her individual and corporate measures have progressed. Monthly reviews of scorecard content and related improvement initiatives are an ideal format for this feedback.

Hold people accountable for performance measures

When performance measures go below or above pre-determined thresholds, organizations must hold specific individuals responsible for explaining the reason(s) behind a measurement variance.

Empower work groups to implement improvement initiatives

Managers and employees must be empowered to take corrective action when performance is suffering and to replicate best practices when goals are exceeded.

Link initiatives to the budgeting process

As an organization tracks its performance measures and reacts to shortfalls, the improvement solutions often require budget support. Hence, a formal budget submission and approval process must be integrated into a strategy execution system to ensure that countermeasures are implemented.

Reassessment of the main strategy

As the closed-loop process returns to the overall strategy, it is important to gather the organizational knowledge and progress toward strategic goals, as well as to reassess the market, competitors, and customers to determine if the high level strategy needs to be adjusted or drastically changed.

FOURTH, managers should be aware that they possess the power to execute enterprise strategies. As illustrated in the ten steps above, managers and front-line employees translate the objectives and measures into different levels within an organization. The accuracy of these measures determines the effectiveness of the organization and its ability to achieve the overall goals. On the other hand, beware of becoming a bottleneck within a strategy execution system. Just as a manager's role determines the ultimate success, his or her inaction or inattention to a system can also attract a swift and negative spotlight. Strategy systems like the Balanced Scorecard succeed only when the measures are recorded on time and accurately for each period. Thus, managers must maintain diligence in the area of system usage or risk turning the spotlight on themselves.

FIFTH, do not forget that a strategy execution system impacts all those being managed. Thus, it is the manager's challenge to empower front-line employees with the collaborative tools necessary to encourage the swift implementation of improvement initiatives and the replication of best practices.

Finally, embrace technology. The marketplace for software solutions to automate the strategy execution process is rapidly growing. According to the Balanced Scorecard Collaborative (www.bscol.com) almost 75% of companies implementing a BSC will also implement a software solution to automate the process. If managers express interest and become involved in the selection and implementation process of these software solutions, the systems can be transformed into job enhancing tools - thus making managers even more effective and efficient in achieving strategies.

Author: Activestrategy


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