Strategy Execution: Building a Balanced Scorecard

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Introduction

Strategy execution is the definitive practice for translating a great strategy into improved organizational performance. In strategy execution, cascading corporate goals and measures helps align the entire firm towards the selected strategic direction (Hoque et al. 529).

In the present article, the author’s purpose is to explain the latest techniques for designing an integrated strategy cascade tool – the balanced scorecard or BSC – that supports the realization of performance targets and indicators based on past research (Simons 1). The idea of connecting financial and non-financial measures/indicators to strategy through the BSC has been the focus of empirical studies over the past 20 years (Hoque 5). The article’s contributions to this field relate to the alignment of the BSC with “financial, customer, internal business process, and learning and growth” measures for performance tracking (Simons 17). The author is a distinguished Harvard Business School professor who teaches strategy execution to the MBA class.

Intended Audience

The article is a module reading for a business program. The intended audience is students undertaking programs such as MBA or executive business courses. It illustrates the techniques for building a strategy map and a BSC for effective monitoring of financial and nonfinancial targets – customer, internal process, and learning/growth goals – by future business managers (Simons 17). As the author explains, the teaching module (module 9) presented in this article is a part of a fifteen-module course on strategy execution. He cites “Module 2: Building a Successful Strategy” that focused on the deployment of intangible assets in the strategy execution framework when introducing the concept of the balanced scorecard (Simons 3). The BSC techniques for tracking strategy execution are developed in this module. The aim is to equip the learners with strategy execution skills as well as communication and assignment of accountability to managers.

The Author’s Purpose

As stated, the author’s purpose is to explicate how to build a strategy map and the BSC model through a synthesis of past research and case studies. His arguments build on the past research and the BSC framework by Kaplan and Norton and involve a consideration of previous modules. The aim is not to refute another author’s argument, but rather to survey research and firms that have implemented the BSC model to explicate the best practices in the choice of strategic goals and measures. To accomplish this objective, the author reviews multiple cases, including ABB Industrie AG, Barclay’s Bank, Boston Retail Company, and Blue Cross Shield.

Definition of Important Terms

The author gives the definitions of the terms used in previous modules and appearing in the article. The respective modules where each term first appeared are referenced in parenthesis. The author defines 27 important terms used in the article for the reader. The definitions express the concepts relevant to the design and deployment of BSC, as used in the article. They also help distinguish between related terms, such as accountability and accountability systems (Simons 18). All the terms defined are those used in modules 1-8. An example is the term ‘cash wheel,’ which is defined as “a model of the operating cash flow through a business” (Simons 18).

Fact or Opinion

It is clear from the article that the author is reporting on the facts. While the balanced scorecard is a common concept in literature, the author provides an integrated analysis of the model with illustrative examples and cases. The author supports his arguments with an impressive array of facts drawn from literature and case studies. However, the study relies only on a few past studies/articles to support the arguments.

In the background of the analysis, the author skillfully ties strategy execution to the accomplishment of business goals and targets. He begins by saying that an effective strategy execution supports the translation of a strategy into measurable goals/targets and the alignment of the entire firm with these goals (Simons 1). The concept of the balanced scorecard and the steps involved in building the BSC are adapted from Kaplan and Norton’s model.

The article contains verifiable information related to the implementation of the BSC. The four steps of this model, i.e., defining the business strategy, building a strategy map, selecting measures for tracking key initiatives, and assigning accountability to managers,” are well supported in the literature (Dechow 514). To support his claims, the author uses reports of real-life cases of companies implementing the BSC in press releases, financial journals, and previous modules. For example, the author uses the Boston Retail case reported introduced in module 1 to illustrate the four perspectives of a strategy map – financial, customer, internal business, and learning and growth – and related measures/goals (Simons 4). Thus, the author’s arguments are grounded in factual concepts and real-world cases.

Central Arguments/Conclusions

It is clear from the article that the central arguments relate to the utilization of the strategy map and the BSC as important frameworks for translating strategy into superior performance. As such, the author gives a detailed explanation of how to create a strategy map, a subset of the BSC, to track an organization’s performance goals and measures. The four perspectives give a cause-and-effect logic for harnessing organizational resources and staff skills to produce economic value for the firm (Simons 3). The author uses illustrations to elucidate cause-and-effect linkages (strategy maps) between the measures and goals of the four perspectives.

In addition, the article uses four case studies to illustrate the key components of the strategy selection process, including goals/measures alignment and best practices in BSC implementation. An example is the BSC implementation approach adopted by the Blue Cross Blue Shield of Alabama that made the healthcare organization to receive a four-star quality rating (Simons 13). Thus, the article’s arguments and conclusions are clearly supported by evidence and analysis. To such a complex concept, the author sums up the module by reiterating the four perspectives involved in developing a strategy map to align the organizational strategy to specified performance goals and measures.

Experiment or Study

Although the article does not report an experiment or study, it gives an in-depth analysis of the methodology followed by companies in developing a strategy map and BSC. Since it does not involve an empirical investigation, a study methodology and expected results are not given. Rather a theoretical analysis of previous studies and cases is given. An example is the Boston Retail’s strategy map. In this case, Boston Retail’s executives set the financial goal of raising its revenues by “150 percent over the next five years” (Simons 10). To achieve this goal, the firm expanded its store network and improved its supply chain efficiencies. The article further explains the approach followed by the company to develop customer goals. Boston Retail’s initial value proposition focused on female students through affordable fashion.

With regard to the internal perspective, Boston Retail reviewed its operations management processes, resulting in improved warehouse efficiencies (Simons 11). In setting up the learning and growth goals, the firm focused on employee training to bolster their capacity to offer quality customer experience. The article offers a clear methodology of how Boston Retail developed the goals for its strategy map.

Expected Information or Augmentation

The article gives detailed information on how to build a balanced scorecard as would be expected in any work on this topic. Cheng and Humphreys have also analyzed the balanced scorecard framework and the linkages between strategic goals and performance measures as a way of determining the suitability of a firm’s strategy (899). As would be expected, the article follows the four key steps of developing a BSC.

Additionally, the article creates linkages between goals and measures in all the four perspectives of a strategy map. The goal-measure linkages support the visualization of the performance of each unit or employee (Chen 68). The BSC developed in this article is based on Kaplan and Norton’s earlier formulation, which also contains the four core steps. Therefore, the article gives the expected augmentation of the key concepts of strategy execution and the balanced scorecard.

Organization of the Article

The article is organized in a logical manner. It begins with a brief background to the concept of strategy execution followed by a definition of the balanced scorecard and an explanation of an earlier BSC model by Kaplan and Norton. This academic style is particularly important since the target audience includes students. A brief list of the four key steps followed when implementing the balanced scorecard is given and later explained in detail in subsequent sections.

Embedded within the article are relevant case studies that illuminate valid concepts touching on strategy mapping and execution. The objective of any analysis is to improve clarity in the meaning of the concepts/ideas utilized in the BSC framework. The article not only explains the key concepts of the BSC model, but it also develops them with examples and real-world cases. The presentation of the concepts is systematic and easy to follow.

The Writer’s Style

As already stated, the author begins with a stilted brief background to the concept of the balanced scorecard before delving into the steps involved in building a strategy map, which is the basis for the BSC. It is obvious that his presentation style is formal and academic, hence, well suited for the target audience – MBA students. It does not involve a concise report or an executive summary for corporate use. Further, the author’s use of case studies gives the article an academic flair.

He states the expected learning outcomes for students, a key characteristic of MBA courses. The learning outcomes stated include “how to develop a strategy map, how to select and use strategy measures, and how to assign accountability to individual managers” (Simons 1). Further, the author suggests further case studies to help the learner gain more insights into the strategy execution process.

The Author’s Language

The author gives a balanced analysis of the concepts related to strategy execution through the balanced scorecard. A high level of objectivity is achieved with verbatim statements from managers of the case companies and citations from other studies. For example, when analyzing Barclay’s balanced scorecard, the author quotes its CEO, Andy Jenkins, who exudes confidence regarding better financial prospects for the bank (Simons 6). Inferences on the best practices in building the BSC are made based on the executives’ statements and reports.

The case studies also lend the article credence as an objective synthesis of strategy execution in an increasingly competitive environment. It includes exemplars of the actions taken by executives of the firms to realize financial, customer, or internal process goals. For example, CMO of the Boston Retail was able to “identify measures and targets for each objective” using the strategy map (Simons 14). Further, the article focuses on the views of executives of the case companies as opposed to the author’s own views or experiences. However, bias is seen in the choice of sources/references. The author relies heavily on past modules as the source of information for the article. The definitions of the terms used in the article all relate to concepts already used in past modules, i.e., Modules 1-8.

Illustrations or Charts

The article involved extensive use of charts to illustrate the strategy implementation steps. First, the author provides a chart showing the interrelationships among the four perspectives of a strategy map (Simons 4). The strategy map gives an effective visual representation of the goals and measures related to each perspective. He also explains the cause-and-effect relationships among the perspectives through a chart. A detailed strategy map for Boston is also given, showing the retailer’s approach to strategy execution. It effectively ties the measures to the targets to show how the company tracks performance.

Conclusion

Without a proper strategy execution approach, corporate strategies are nothing more than superfluous. This paper reviewed an article examining the balanced scorecard and its efficacy as a performance measurement tool. Overall, the author gives a clear and elaborate analysis of the BSC implementation process. He masterfully interprets the strategic concepts relevant to the balanced scorecard approach and supports his analysis with real-world examples. The findings suggest that measures, including non-financial ones, could be tied to a firm’s strategic vision using the BSC. Therefore, the BSC tool can be used to augment traditional performance tracking models that are grounded in financial measures alone.

Works Cited

Chen, Clara. “Discussion of: Testing Strategy with Multiple Performance Measures: Evidence from a Balanced Scorecard at Store 24.” Journal of Management Accounting Research, vol. 27, no. 2, 2015, pp. 67-73.

Cheng, Mandy, and Kerry A. Humphreys. “The Differential Improvement Effects of the Strategy Map and Scorecard Perspectives on Managers’ Strategic Judgments.” The Accounting Review, vol. 87, no. 3, 2012, pp. 899-924.

Dechow, Niels. “The Balanced Scorecard: Subjects, Concepts and Objects – a Commentary.” Journal of Accounting & Organizational Change, vol. 8, no. 4, 2012, pp. 511–527.

Hoque, Zahirul. “20 Years of Studies on the Balanced Scorecard: Trends, Accomplishments, Gaps and Opportunities for Future Research. The British Accounting Review, vol. 30, no. 1, 2014, pp. 1-27.

Hoque, Zahirul, et al. “The Causal Relationships Between Performance Drivers and Outcomes: Reinforcing Balanced Scorecards’ Implementation Through System Dynamics Models.” Journal of Accounting & Organizational Change, vol. 8, no. 4, 2012, pp. 528–538.

Simons, Robert. “Strategy Execution Module 9: Building a Balanced Scorecard.” Harvard Business School Module Note 117-109, 2016, pp. 1-20.

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