Aligning Business Units

Hi Akio,

There is a lot of evidence to support the view that 'there is a better' way.

Balanced Scorecards are primarily performance management devices - the Balanced Scorecard if it works well should encourage managers to make better decisions about how to ensure the team / organisation they lead delivers against the expectations set for it. This involves identifying two sets of measures - one set that gives information about whether the team / unit are doing the necessary things, and another to give information about whether these actions are actually realising the required expected outcomes. By having this pair of data points, managers can more easily diagnose where they need to intervene to get performance on track. But for this diagnostic ability to work - measures each management team look at have to relate directly to the actions and expected outcomes associated with their team. As a result it is almost by definition, each team needs a Balanced Scorecard that is unique to their role in the organisation.

The process of identifying the linked Balanced Scorecards such as these is often called "Cascading" and there are a wealth of information documents about how to go about Balanced Scorecard cascading on the 2GC web site, in the Performance Management Resources area. But to get you started, you might want to download the management briefing "Cascading Balanced Scorecards" from the FAQs section. If you look in the Case Studies section, you will also find a number of case studies about cascading in practice.

Hope this helps. If you have any questions please let me know.

Akio, I think it is a challenge to ensure both vertical and horizontal alignment in your organization. What I mean by veritcal is making sure that your business units appropriately support your enterprise scorecard. For effective alignment here, you want to ensure that the child scorecard objectives link, either directly or indirectly to the parent scorecard. The objectives can be shared or contributory to the parent scorecard.

For horizontal alignment, it means that you have to look at whether you business units are working as a unit or at cross purposes to each other. Sometimes this is best observed from the top. What I mean is that you can look at an enterprise scorecard and then see how the objectives from all of the business units align to that. Does the enterprise have appropriate coverage for its objectives? For the horizontal alignment, you should look at specific objectives and see how each of the business units supports these objectives. Here you can see if the strategies are the same. Be sure to look at objectives, measures, and initiatives of your business units. That will ensure that all activities and behaviors are headed in the right direction. ClearPoint Strategy software is able to demonstrate the links I'm referring to pretty nicely.

If you have this repeatable approach, it will allow you to move the entire organization pretty quickly when the strategy changes.