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ROBERT KAPLAN is a professor at the Harvard Business School. He is a co-founder of the Balanced
Scorecard Collaborative, a business consulting company. Dr. Kaplan is a business consultant, public
speaker, researcher and teacher. He has published more than 120 articles or papers and twelve books
including three other books he co-authored with Dr. Norton; The Balanced Scorecard, The Strategy-Focused
Organization and Strategy Maps. Dr. Kaplan is a graduate of M.I.T. and Cornell University.
DAVID NORTON is president of the Balanced Scorecard Collaborative, a consulting company he co-founded
with Dr. Kaplan. Dr. Norton serves as a management consultant, researcher and public speaker.
The Web site for this book is at www.bscol.com.
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Alignment - Page 1
MAIN IDEA
The whole idea of forming a corporation is to achieve synergies – the generation of more added than all the various parts of the
corporation could achieve if they were acting on their own. All too often, however, opportunities for synergies are dissipated when
business units work at cross-purposes or have conflicting goals. To correct such organizational problems, alignment is needed at the
corporate level which will then cascade down in such a way business units, support functions, investors and even external partners
are better coordinated.
The ideal mechanism for creating this degree of alignment is to develop an enterprise value proposition consisting of a Balanced
Scorecard and a Strategy Map. This enterprise value proposition can then be used as a template for business units, support functions
and external partners of the business to link and coordinate their activities. At the same time, the enterprise value proposition is also
useful in explaining corporate activities to outside investors in a consistent way.
In practical terms, the best way for a corporation to generate synergies and add value is to get everyone working together on crafting
well aligned Balanced Scorecards and Strategy Maps at the enterprise, business unit, shared-service and external partner levels.
Once all these value propositions are compatible with each other, alignment just naturally follows, and so too will synergies.
Internal Operations Customer Product Regulatory •XXXXXX •XXXXXX XX% •XXXXXX $XXX
Perspective Management Management Innovation and Social •XXXXXX •XXXXXX
X months $XXX
Total $XXX
Alignment - Page 3
Enterprise Enterprise In some ways the “Holy Grail” of a diversified business enterprise
Strategy Map Balanced Scorecard is to have shared customers – the customers of one business
unit being more inclined to do business with another business
unit on the strength of that existing relationship. When a
corporate level theme has been established by the explicit
1 Financial statement of an enterprise value proposition, the opportunities
for synergies of this type to arise are significantly increased.
2 Customer
Four Companies can create synergies in this area by creating unique
Perspectives customer solutions which leverage the products and services of
3 Internal
multiple business units. This can result in the delivery of more
4 complete customer solutions which a less diversified business
Learning & Growth
cannot match. Convenient and well integrated solutions can be
offered around a common theme established by the enterprise
Strategy Map and Balanced Scorecard. Cross-selling existing
“An enterprise Strategy Map and Balanced Scorecard will clarify customers additional products and services can also underpin
corporate priorities, which can then be clearly communicated to impressive rates of revenue growth.
each business and support unit, and also to the board of Similarly, other synergies can also be generated by the fact
directors and key customers, suppliers, and alliance partners. geographically dispersed business units provide a consistent,
Corporate headquarters subsequently examines the Strategy high-quality buying experience for customers. When the
Maps and scorecards developed by these units to monitor enterprise value proposition is used to motivate and then monitor
whether and how the enterprise’s priorities are being the delivery of products and services throughout a large number
implemented by each one. Used in this way, the enterprise of dispersed business units, customers of one part of the
Strategy Map and Balanced Scorecard provides corporate business know what to expect when they deal with another
executives with a governance framework that helps to unlock separate business unit. The consistency of that branded
previously unrealized value from corporate synergies.” experience can be a substantial competitive advantage.
– Robert Kaplan and David Norton
“A satisfied customer is a precious asset. The goodwill
“Understanding how to create alignment in organizations is a big generated by a positive customer relationship translates into the
deal, one capable of producing significant payoffs for all types of potential for repeat purchases and an extension of the
enterprises.” relationship to other company products and services.”
– Robert Kaplan and David Norton – Robert Kaplan and David Norton
Alignment - Page 4
Note the alignment process has a definite top-down bias. To sustain this alignment on an ongoing basis:
Corporate synergies are generally defined and identified at the n Never forget you can’t manage what you don’t measure – and
top but then actually realized at the business unit level. therefore you need to identify some alignment measures you
Enterprises need to communicate, educate, motivate and then can use to track how you’re going in the key areas of your
align employees with the strategy encapsulated in the enterprise business – most likely customer acquisition, customer
value proposition. Alignment is never a one-time event but will retention, new product development and employee
always require ongoing input and proactive management. competency development. Ideally, you want to develop an
In practice, there are eight alignment checkpoints where alignment measure for each of the eight alignment
synergies can be created by aligning what one part of the checkpoints. You might then aggregate these measures into
business enterprise is doing with another separate and distinct a single organizational alignment index so you can track
part. These alignment checkpoints are: progress (or lack thereof) over time.
1. When the corporation’s board of directors reviews and n Make a senior executive responsible for running the
approves the overall enterprise value proposition – which alignment process – because unless someone is
most often is developed by the CEO and senior managers. accountable, alignment will get pushed aside by more
2. When the enterprise value proposition is translated into pressing day-to-day activities. Some organizations have
corporate policies which will be administered on a day-to-day created an alignment champion at vice president level
basis by the corporate services or support units. reporting to the CEO to give this effort the visibility it requires.
This senior executive can then head up a committee which will
3. When the corporate priorities are cascaded into business
keep the alignment process moving in the right direction
unit value propositions and strategies.
n Build alignment and accountability into all the key
4. When the business units communicate with customers and
management processes undertaken throughout the year – so
attempt to sell products and services based on a consistent
this is not viewed as a one-off activity but a regular aspect of
customer value proposition.
the way business gets done. Alignment needs to be
5. When the strategic priorities of the business units are discussed regularly in light of the various changes which are
incorporated into the strategies of the shared services units. constantly taking place around the organization. Keep this as
6. When services are delivered to the operating units by the a priority by discussing alignment at every opportunity.
shared services units. n Never lose sight of the fact alignment is inherently outside the
7. When partners and other external entities become aligned normal organizational structure – because it requires the input
with the corporate strategy. and cooperation of people from different parts of the
organization. There is generally no obvious place for ideas
8. When the shared corporate priorities are reflected in the
which are executed across business units, services units,
strategies business units use to interact with the vendors and
partners, external allies and customers. More often than not,
others who make up their supply and distribution chains.
all of these units are used to operating in isolation from each
If an organization is aligned at each of these eight checkpoints, other. Something like alignment which will cross many
all its initiatives and subsequent actions will be directed towards boundaries will seem quite unnatural. Anticipate that, and do
common strategic priorities. Integration and ultimately synergies everything possible to develop an organization-wide
are created whenever units work together rather than in alignment process which is as natural as possible. The more
isolation. Many enterprises have great difficulty executing their alignment can be made part of the way an organization
preferred business strategies simply because these alignment naturally does business, the more it will occur and the greater
checkpoints are not deliberately managed or coordinated. the chances of synergies become.
1 2
Board of Directors Enterprise Value Proposition Corporate Services Units
3 4
Business Units Business Unit Value Proposition Customers
5 6
Services Units Shared Services Value Proposition Business Units
7 8
Partners and Allies Partner Value Proposition Vendors and Others
Alignment - Page 6
At the present time, most organizations evaluate their external management system. With the strategy clearly defined, all
partner relationships in terms of a collection of key performance components of the management process can be designed to
indicators which describe the operational performance metrics. create alignment.”
When an enterprise attempts to build a Balanced Scorecard and – Robert Kaplan and David Norton
a Strategy Map together with an external partner, the senior
managers from both entities need to reach a consensus about “Any interface where two disparate organizations – corporate,
the objectives of the relationship. Doing this will create business unit, support unit, or supplier – come together
understanding and trust which often leads to reduced represents a potential source of value creation through
transactional costs as any existing misalignments between the alignment. The enterprise value proposition and the cascading
two parties get addressed. process of Strategy Maps and Balanced Scorecards are the
mechanisms that unleash and capture this incremental value.”
A co-developed and clearly understood Balanced Scorecard – Robert Kaplan and David Norton
and Strategy Map between the organization and its external
partners will: “Corporations follow different paths to achieve enterprise-wide
n Provide an explicit contract by which the interorganizational alignment. Some start at the top, at the corporate level, and then
performance can be measured quantitatively. cascade sequentially down the organizational hierarchy. Others
start in the middle, at the business unit level, before building a
n Allow for items such as timeliness, innovation, quality and
corporate scorecard and map. Some launch an enterprise-wide
flexibility to be incorporated into the relationship.
initiative right at the start, and others conduct a pilot test at one or
n Increase the amount of coordination which is present two business units before extending the scope to other
between both entities. enterprise units. In our experience, there is not a single correct
n Allow supply chains to be better aligned and optimized. answer. We have seen multiple approaches used, each of which
n Enhance the amount of collaborative planning which takes ended up with successful implementation.”
place between your organization and your external partners. – Robert Kaplan and David Norton
n Establish a common set of measures by which all parties “Most organizations eventually use an iterative process, starting
measure ongoing performance. with corporate guidelines for business unit Strategy Maps and
n Provide a good foundation for governance of the partnership scorecards but using the idea emanating from the business units
by the respective organizations. to revise the corporate map and scorecard. Pushing the
scorecard down through the organization too hard and too early
n Develop good performance indicators which can be used to could lead to resentment and a backlash. Most organizations
determine incentive compensations for all the parties have found that flexibility is the key ingredient during the early
involved. stages of cascading. Once an organization is using the tool –
n Generate a shared set of metrics everyone can use to following a process of regularly reporting on and talking about
describe any available synergies. strategy – imposing corporate priorities from the top down
n Articulate common objectives everyone can work towards. becomes more acceptable.”
– Robert Kaplan and David Norton
In all, jointly developing a Balanced Scorecard and Strategy Map
is an open and transparent process which enhances “An outstanding corporate strategy is not a random collection of
communication and understanding. The finished product individual building blocks but a carefully constructed system of
provides a clear road map everyone can use to move forward interdependent parts. In a great corporate strategy, all of the
and grow the value of the relationship. Creating this high level of elements (resources, business, and organization) are aligned
alignment of interests also means more opportunities to add with one another. That alignment is driven by the nature of the
value by doing new things will become apparent. firm’s resources – its special assets, skills and capabilities.”
– D. Collis and C. Montgomery, authors
“Strategy execution is not a matter of luck. It is the result of
conscious attention, combining both leadership and “Enterprises can create organization synergies in many ways.
management processes to describe and measure the strategy, Some enterprises leverage financial synergies through effective
to align employees with the strategy through intrinsic and merger and acquisition policies and skilled management of
extrinsic motivation and targeted competency development internal capital markets. Others leverage a common brand or
programs, and, finally, to align existing management processes, customer relationship across multiple business units and retail
reports and review meetings with the execution, monitoring, and outlets. Still others gain scale economies by having multiple
adapting of the strategy.” business units share common processes and shared services,
– Robert Kaplan and David Norton or they generate economies of scope through effective
integration of units across an industry value chain. And finally,
“The Balanced Scorecard, since its introduction in 1992, has
enterprises create synergies when they develop and share
evolved into the centerpiece of a sophisticated system to
human, information and organization capital across multiple
manage the execution of strategy. The effectiveness of the
units. Corporate headquarters must be explicit about the
approach is derived from two simple capabilities: (1) the ability to
synergies it expects to create and then must implement a
clearly describe strategy (the contribution of Strategy Maps) and
management system to communicate and capture them.”
(2) the ability to link strategy to the management system (the
– Robert Kaplan and David Norton
contribution of Balanced Scorecards). The net result is the ability
to align all units, processes, and systems of an organization to its
strategy. The core idea is that strategy is at the center of the