Mission, Values, Vision, and Strategy
The Balanced Scorecard Translates Mission, Values, Vision, and Strategy
MISSION WHY We exist
VALUES Guiding Principles
VISION Word picture of the future
STRATEGY Differentiating Activities
A) Mission Statements
A mission statement defines the core purpose of the organization—why it exists.
David Packard captured the essence of mission very well in a 1960 speech to Hewlett-Packard employees: "A group of people get together and exist as an institution that we call a company so they are able to accomplish something collectively that they could not accomplish separately—they make a contribution to society, . . . do something which is of value.
Unlike strategies and goals that may be achieved over time, you never really fulfill your mission. It acts as a beacon for your work, constantly pursued but never quite reached. Consider your mission to be the compass by which you guide your organization.
Effective Mission Statements
Inspire change. While your mission doesn't change, it should inspire great change within your organization. Since the mission can never be fully realized, it should propel your organization forward, stimulating change and positive growth. Take, for example, the mission of 3M, which is "To solve unsolved problems innovatively." Such a simple and powerful mission is sure to lead 3M into many new and interesting fields as it attempts to solve the innumerable problems we face. Wal-Mart states its mission as "Give ordinary folks the chance to buy the same things as rich people." Retailing may look vastly different in 100 years than it does today, but you can bet that ordinary folks will still want the opportunity to acquire the same things as rich people!
Long-term in nature. Mission statements should be written to last 100 years or more. While strategies and plans will surely change during that time period, the mission should remain the bedrock of the organization, serving as the stake in the ground for all future decisions.
Easily understood and communicated. Nobody would argue that our modern organizational world is one awash in jargon.
A very effective method for developing your mission is based on a concept known as the "5 Whys" developed by Collins and Porras.
The "5 Whys" force us to abstract to different levels, thereby leaving behind the myriad specific characteristics of our organizational being, and discovering our true meaning.
Sample Mission Statements
Merck: To preserve and improve human life
American Institute of Certified Public Accountants (AICPA): To provide members with the resources, information, and leadership that enable them to provide valuable services in the highest professional manner to benefit the public as well as employees and clients
3M: To solve unsolved problems innovatively
Wal-Mart: To give ordinary folks the chance to buy the same things as rich people
Walt Disney: To make people happy
Hewlett-Packard: To make technical contributions for the advancement and welfare of humanity
Marriott: To make people away from home feel that they are among friends and are really wanted
Sony: To experience the joy of advancing and applying technology for the benefit of the public
Mary Kay: To give unlimited opportunity to women
Cargill: To improve the standard of living around the world
Why a Mission Is "Mission-Critical" to the Balanced Scorecard
The Scorecard decodes our mission, values, vision, and strategy into performance objectives and measures in each of the four Scorecard perspectives.
Translating this "DNA" of our organization with the Balanced Scorecard ensures that all employees are aligned with and working toward the mission.
A well-developed Balanced Scorecard ensures that the measures tracked are consistent with our ultimate aspirations and guides the hearts and minds of employees in making the right choices.
You can build and implement a Balanced Scorecard without a mission statement for your organization. It would still contain a mix of financial and nonfinancial measures linked together through a series of cause-and-effect relationships, but consider the tremendous value and alignment you create when developing a Scorecard that truly translates your mission.
B) Values
What Are Values?
Values are the timeless principles that guide an organization. They represent the deeply held beliefs within the organization and are demonstrated through the day-to-day behaviors of all employees. An organization's values make an open proclamation about how it expects everyone to behave.
Johnson & Johnson CEO Ralph Larsen on values: "The core values embodied in our credo might be a competitive advantage, but that is not why we have them. We have them because they define for us what we stand for, and we would hold them even if they became a competitive disadvantage in certain situations."
No universal set of right or wrong values exist; instead, each organization must determine or discover the core values that comprise its essence and hold importance to those within it. Organizations tend to have a small number of core values that truly reflect their very essence. A large number may indicate confusion between values and practices. While practices, processes, and strategies should change over time in answer to the many challenges that come our way, we expect values to remain the same, providing an enduring source of strength and wisdom.
In many organizations the core values represent the strong personal beliefs of the founder or CEO. Therefore, leaders must constantly strive to not only develop appropriate values, but more importantly they must consistently mirror the values in their words and actions.As the Swiss philosopher Henri Amiel once said, "Every man's conduct is an unspoken sermon that is forever preaching to others."
Values-Driven Organizations
The critical issue is whether these values are conscious, shared, and lived, or remain unconscious, and indiscussed. When values are not defined, the culture of the organization is subject to the vagaries of the personality of the leader.
We often associate positive values with the common good, holding certain beliefs and operating on them in the hope that our actions will result not only in economic profits but the improvement of society as well.
"Take care of Marriott people and they will take care of Marriott guests" is one of their core values.
Founder Tom Chappell says, "Your personal values can be integrated with managing for all the traditional goals of business—making money, expanded market share, increased profits, retained earnings, and sales growth. Not only can your personal beliefs be brought to work, they can work for you."
Tom's of Maine Statement of Beliefs
WE BELIEVE that human beings and nature have inherent worth and deserve our respect.
WE BELIEVE in products that are safe, effective, and made of natural ingredients.
WE BELIEVE that our company and our products are unique and worthwhile, and that we can sustain these genuine qualities with an ongoing commitment to innovation and creativity.
WE BELIEVE that we have a responsibility to cultivate the best relationships possible with our co-workers, customers, owners, agents, suppliers, and our community.
WE BEIEVE in providing employees with a safe and fulfilling work environment, and an opportunity to grow and learn.
WE BELIEVE that our company can be financially successful while behaving in a socially responsible and environmentally sensitive manner.
Establishing Values
The key to changing values and the underlying culture of an organization lies in open and honest identification of the current value systems that exist and are rewarded in the organization. Evaluate the strengths and weaknesses of existing values and culture. Organizations are able to assess the degree of alignment between personal values and existing and ideal organizational values, and identify the changes that are necessary to develop a successful and enduring value system.
Jim Collins has developed a number of questions you can use to identify the core values in your organization[11]:
What core values do you bring to work—values you hold to be so fundamental that you would hold them regardless of whether or not they were rewarded?
How would you describe to your loved ones the core values you stand for in your work and that you hope they stand for in their working lives?
If you awoke tomorrow morning with enough money to retire for the rest of your life, would you continue to hold on to these core values?
Perhaps most important, can you envision these values being as valid 100 years from now as they are today?
Would you want the organization to continue to hold these values, even if at some point one or more of them became a competitive disadvantage?
If you were to start a new organization tomorrow in a different line of work, what core values would you build into the new organization regardless of its activities?
Selected Statements of Values
General Electric
Having a passion for excellence and hating bureaucracy
Being open to ideas from anywhere and committed to working things out
Living quality and driving cost and speed for competitive advantage
Having the self-confidence to involve everyone and behaving in a boundless fashion
Creating a clear, simple, reality-based vision and communicating it to all constituencies
Having enormous energy and the ability to energize others
Stretching, setting aggressive goals, and rewarding progress, yet understanding accountability and commitment
Seeing changes as opportunity, not threat
Having global brains and building diverse and global teams
Nordstom
Service to the customer above all else
Hard work and individual productivity
Never being satisfied
Excellence in reputation; being part of something special
Walt Disney
No cynicism
Nurturing and promulgation of "wholesome American values"
Creativity, dreams, and imagination
Fanatical attention to consistency and detail
Preservation and control of the Disney magic
C) Vision
What Is a Vision Statement?
Thus far, this chapter has discussed the importance of a powerful mission to determine your core purpose as an organization, and the values that you consider essential to achieving that purpose. Based on the mission and values, we now require a statement that defines where we want to go in the future.
The vision statement does just that. The vision signifies the critical transition from the unwavering mission and core values to the spirited and dynamic world of strategy.
A vision statement provides a word picture of what the organization intends ultimately to become—which may be 5, 10, or 15 years in the future. This statement should not be abstract—it should contain as concrete a picture of the desired state as possible and also provide the basis for formulating strategies and objectives. A powerful vision provides everyone in the organization with a shared mental framework that helps give form to the often abstract future that lies before us. Vision always follows mission (purpose) and values. A vision without a mission is simply wishful thinking, not linked to anything enduring. Typical elements in a vision statement include the desired scope of business activities, how the corporation will be viewed by its stakeholders (customers, employees, suppliers, regulators, etc.), areas of leadership or distinctive competence, and strongly held values.
One of the biggest problems is that a vision statement can mean different things to different people. Deeply held values, outstanding achievement, societal bonds, exhilarating goals, motivational forces, and raisons d'etre are some of the many images conjured up by vision statements.
Vision connotes a dream or an apparition, but there is more to industry foresight than a single blinding flash of insight. Industry foresight is based on deep insights into the trends in technology, demographics, regulation, and lifestyles that can be harnessed to rewrite industry rules and create new competitive space."
Others warn of the potential for a "dysfunctional" vision statement. For example, a vision statement could simply be wrong. Targeting the wrong
opportunities or customers may create substantial corporate momentum toward the wrong future. This momentum could prove difficult to change. With many vision statements the very real danger of a lack of reality reflected in the document or an abundance of abstraction can create real problems for the organization. Additionally, so many vision statements are simply repositories for the latest buzzwords that they appear empty and shallow. Employees will greet such statements with cynicism and question the competence of the executives who drafted the document&183;
John Kotter notes three important purposes served by a vision during a change process[15]:
By clarifying the general direction for change, the vision simplifies hundreds or thousands of more detailed decisions.
The vision motivates people to take action in the right direction, even if the initial steps are personally painful.
Actions of different people throughout the organization are coordinated in a fast and efficient way based on the vision statement.
Effective Vision Statements
Let's look at some characteristics of effective vision statements:
Concise. The very best vision statements are those that grab your attention and immediately draw you in without boring you from pages of mundane rhetoric. Often, the simplest visions are the most powerful and compelling, like Starbucks refrain of "2000 stores by 2000." If everyone in your organization is expected to act and make decisions based on the vision, the least you can do is create something that is simple and memorable. Consider it your organizational campaign slogan for the future.
Appeals to all stakeholders. A vision statement that focuses on one group to the detriment of others will not win lasting support in the hearts and minds of all constituencies. The vision must appeal to everyone who has a stake in the success of the enterprise: employees, shareholders, customers, and communities, to name but a few.
Consistent with mission and values. Your vision is a further translation of your mission (why you exist) and the values of underlying importance to your organization. If your mission suggests solving problems and one of your core values is constant innovation, a reference to innovation would be expected in your vision statement. In the vision you are painting a word picture of the desired future state that will lead to the achievement of your mission and ensure the two are aligned.
Verifiable. Using the latest business jargon and buzzwords can make your vision statement very nebulous to even the most trained eye. Who within your organization will be able to determine exactly when you became "world class, leading edge, or top quality"? Write your vision statement so that you will know when you have achieved it. While mission and values will not change, the vision would be expected to change because it is written for a finite period of time.
Feasible. The vision should not be the collective dreams of senior management, but must be grounded solidly in reality. To ensure that this is the case, you must possess a clear understanding of your business, its markets, competitors, and emerging trends.
Inspirational. Your vision represents a word picture of the desired future state of the organization. Do not miss the opportunity to inspire your team to make the emotional commitment necessary to reach this destination. The vision statement should not only guide, but also arouse the collective passion of all employees. To be inspirational, the vision must first be understandable to every conceivable audience from the boardroom to the shop floor.
Throw away the thesaurus for this exercise and focus instead on your deep knowledge of the business to compose a meaningful statement for all involved.
Developing Your Vision Statement
1. The interview method.
As you might have guessed, executive interviews are the key component of this technique for developing your vision. Each of the senior executives of your organization is interviewed separately to gather their feedback on the future direction of the organization. Use an outside consultant or facilitator to run the interviews. A seasoned consultant will have been through many interviews of this nature and have the ability to put the executive at ease, ensuring that the necessary information flows freely in an environment of trust and objectivity. The interview should last about an hour and include both general and specific (industry and organization) questions, as well as a mix of past-, present-, and future-oriented queries. Typical questions may include:
Where and why have we been successful in the past?
Where have we failed in the past?
Why should we be proud of our organization?
What trends, innovations, and dynamics are currently changing our marketplace?
What do our customers expect from us? Our shareholders? Our employees?
What are our greatest attributes and competencies as an organization?
Where do you see our organization in 3 years? 5 years? 10 years?
How will our organization have changed during that time period?
How do we sustain our success?
2. Back to the future visioning.
I enjoy working with clients on this technique. The exercise can be administered either individually or with a group.
I personally like using it with groups as the initial attempt to develop a draft vision statement, but it also works well in individual settings. In
describing the method I will assume a group session. Distribute several 3" x 5" index cards to each of the participants. To begin the session, ask the group to imagine that they awaken the next morning 5, 10, or 15 years in the future (your choice of time increment). In order to record their impressions of the future, they have each been given a disposable camera to capture important images and changes they hoped might take place within their organization. At the end of each day's adventure they must create a caption for the pictures they have taken during the day. Instruct the group to use the index cards you distributed to record their captions. By the end of the trip they have catalogued the future in detail. Give the participants about 15 minutes to imagine their trip to the future and encourage them to visually capture as much as possible in their minds' eye. Ask the group: "What has happened with your
organization—are you successful?" "What markets are you serving?" "What core competencies are separating you from your competitors?" "What goals have you achieved?" Once the 15 minutes are up, you say: "Unfortunately, on the trip back to the present the reentry was a little rough and the pictures were destroyed" (more animated and comedic facilitators can have a field day with this section) "but fortunately for you the captions remain." Record the captions from the index cards on a flip chart or laptop computer and use them as the raw materials for the initial draft of a vision statement. I enjoy this approach to vision statement development because it challenges the participants to engage all of their senses in the process, not simply their cognitive abilities. Not only that, but it can be fun!
The Balanced Scorecard will provide a new, laser-like focus to your business, and as such the potential problems represented by a misguided vision are significant. We have all heard terms like "What gets measured gets done," "Measure what matters," and many others. The Scorecard is essentially a device that translates vision into reality through the articulation of vision (and strategy). A well-developed Balanced Scorecard can be expected to stimulate behavioral changes within your organization. The question is: Are they the sort of changes you want? Be certain the vision you have created for your organization is one that truly epitomizes your mission and values because the Scorecard will give you the means for traveling first class to that envisioned future!
D) Strategy
What Is Strategy?
Key principles of strategy:
Understanding. To get thousands of people in a large corporation or five people on a not-for-profit board moving in the same direction, they must all understand the strategy. How can the implementers of the strategy make sense of the thousands of choices before them if they don't have a firm grasp of the strategy? Leaders must act as teachers and evangelists.
Different activities. Strategy is about choosing a different set of activities than your rivals, the pursuit of which leads to a unique and valuable position in the market.[20] If everyone were to pursue the same activities, then differentiation would be based purely on operational effectiveness.
Trade-offs. Effective strategies demand trade-offs in competition. Strategy is more about the choice of what not to do than what to do.
Organizations cannot compete effectively by attempting to be everything to everybody. The entire organization must be aligned around what you choose to do and create value from that strategic position.[21]
Fit. The activities chosen must fit one another for sustainable success. Our assumptions about the business must fit one another to produce a valid theory of the business. Activities are the same—they must produce an integrated whole.[22]
Continuity. Although major structural changes in the industry could lead to a change in strategies, generally they should not be constantly
reinvented. The strategy crystallizes your thinking on basic issues such as how you will offer customer value and to what customers. This direction needs to be clear to both internal (employees) and external (customers) constituents.[23] Changes may bring about new opportunities that can be assimilated into the current strategy, for example, new technologies.
Various thought processes. Strategy involves conceptual as well as analytical exercises.[24] As the Mintzberg quote at the outset of this section reminds us, strategy involves not only the detailed analysis of complex data, but also broad conceptual knowledge of the company, industry, market, and so on.
Ten Schools of Strategic Thought
Design School: Proposes a model of strategy making that seeks to attain a fit between internal capabilities and external possibilities. Probably the most influential school of thought, and home of the SWOT (strengths, weaknesses, opportunities, and threats) technique.
Planning School: Formal procedure, formal training, formal analysis, and lots of numbers are the hallmark of this approach. The simple informal steps of the design school become an elaborated sequence of steps. Produce each component part as specified, assemble them according to the blueprint, and strategy will result.
Positioning School: Suggests that only a few key strategies (positions in the economic marketplace) are desirable. Much of Michael Porter's work can be mapped to this school.
Entrepreneurial School: Strategy formation results from the insights of a single leader, and stresses intuition, judgment, wisdom, experience, and insight. The "vision" of the leader supplies the guiding principles of the strategy.
Cognitive School: Strategy formation is a cognitive process that takes place in the mind of the strategist. Strategies emerge as the strategist filters the maps, concepts, and schemas shaping their thinking.
Learning School: Strategies emerge as people (acting individually or collectively) come to learn about a situation as well as their organization's capability of dealing with it.
Power School: This school stresses strategy formation as an overt process of influence, emphasizing the use of power and politics to negotiate strategies favorable to particular interests.
Cultural School: Social interaction, based on the beliefs and understandings shared by the members of an organization lead to the development of strategy.
Environmental School: Presenting itself to the organization as a set of general forces, the environment is the central actor in the strategy making process. The organization must respond to the factors or be "selected out."
Configuration School: Strategies arise from periods when an organization adopts a structure to match to a particular context that give rise to certain
behaviors.
Strategy and the Balanced Scorecard—A Critical Link
The Balanced Scorecard provides the framework for an organization to move from deciding to live their strategy to doing it. The Scorecard describes the strategy, breaking it down into its component parts through the objectives and measures chosen in each of the four perspectives. The Balanced Scorecard is ideally created through a shared understanding and translation of the organization's strategy into objectives, measures, targets, and initiatives in each of the four Scorecard perspectives. The translation of vision and strategy forces the executive team to specifically determine what is meant by sometimes
imprecise terms contained in the strategy, for example, world class, top-tier service, and targeted customers. Through the process of developing the Scorecard an executive group may determine that world class translates to zero manufacturing defects. All employees can now focus their energies and day-to-day activities toward the crystal clear goal of zero defects rather than wondering about and debating the definition of world class. Using the Balanced Scorecard as a framework for translating the strategy, these organizations create a new language of measurement that serves to guide all employees' actions toward the achievement of the stated direction.
A key attribute of strategy formation is performing a different set of activities than your rivals. By choosing a distinct set of related activities you have the opportunity to create unique value propositions for your customers and thus separate yourself from competitors. These activities must be reflected in the Balanced Scorecard, which should parallel the strategy. In other words, if you wish to distinguish yourself by engaging in a series of activities aimed at creating customer intimacy, then your Balanced Scorecard should reflect this strategic direction. We would expect to see linked measures through the four perspectives that when taken together, will drive this strategy. Measures related to service of targeted customers should appear prominently in the Customer perspective, linked to relationship management metrics in the Internal perspective, and customer knowledge measures in the Learning and Growth perspective. This chain of linked measures, which mirrors your chosen activities, is hypothesized to drive revenue growth in the Financial perspective.
Again, the Balanced Scorecard provides the means to describe and articulate the activities separating you from your competition.
It is possible to develop a Scorecard-like system without a clear and concise strategy, and many organizations do just that. However, this mix of financial and nonfinancial measures is better termed a key performance indicator Scorecard or key stakeholder Scorecard rather than a Balanced Scorecard. The problem with this approach is that you simply cannot harness the true power of the Balanced Scorecard without a strategy driving its construction. Key performance indicator or constituent Scorecards lack the ability to align an entire organization around a set of complementary themes that drive the organization toward its overall vision and mission. Instead, they often reflect a number of good ideas that lack a coherent story or direction. The Balanced Scorecard and strategy truly go hand in hand. Kaplan and Norton sum up this subject very well: "The formulation of strategy is an art. The description of strategy, however, should not be an art. If we can describe strategy in a more disciplined way, we increase the likelihood of successful implementation. With a Balanced Scorecard that tells the story of the strategy, we now have a reliable foundation."
Summary
A mission defines the core purpose of the organization—why it exists. The mission captures the contribution and value an organization wishes to deliver to mankind, and provides a star to steer by in our turbulent world. An effective mission may be developed using the "5 Whys" technique, and should inspire change, be easily understood and communicated, and be long term in nature. The Balanced Scorecard allows an organization to translate its mission into concrete objectives that align all employees. The measures on a Balanced Scorecard must reflect the aspirations denoted in the mission statement to provide effective direction.
Values represent the deeply held beliefs within the organization, and the timeless principles it uses to guide decision making. Values are often reflective of the personal beliefs emanating from a strong CEO or leader. We often associate positive values with the common good—doing good for others while achieving organizational goals. Several organizations such as Disney, Marriott, and Tom's of Maine have proven that profits and societal contributions are not in conflict and use their values to derive a competitive advantage. Changing an organization's value systems represents a great challenge but may be accomplished by first openly and honestly identifying current values and providing the mechanisms that facilitate a transition to more appropriate values.
The Balanced Scorecard provides organizations with a means of evaluating the alignment of values throughout the organization. The Scorecard may also be used to track the extent to which an organization is living its stated values.
The vision signifies our transition from the timeless mission and values to the dynamic and often messy world of strategy. The vision provides a word picture of what the organization ultimately intends to become. Although the need for a vision statement has been questioned, most organizations agree that it provides a critical enabler by clarifying direction, motivating action, and coordinating efforts. Effective visions appeal to all stakeholders, align with mission and values, and are concise, verifiable, feasible, and inspirational. Vision statements may be created through interviewing of senior executives, or by leading group "visioning" exercises designed to enlist the full involvement of your team. The vision statement balances the interest of multiple stakeholders in describing how the organization will create future value. The role of the Scorecard is to capture the correct mix of competencies, processes, and customer value propositions that lead to our desired financial future.
The study of business strategy has rapidly evolved over the past four decades, with numerous schools of thought emerging to proclaim the power of their insights. Effective strategy making involves combining a different set of activities than your rivals to produce value for customers. Devising strategy calls for the strategy maker to draw on both analytical and broad conceptual skills. Developing a strategy is one thing; successfully implementing it is another matter. Using the Balanced Scorecard, organizations have a great opportunity to beat the odds by translating their strategy into its component parts throughout the four perspectives. Strategy is then demystified as employees from across the organization are able to focus on the strategic elements they influence.
For more Information
* Balanced ScoreCard. Measuring What Matters, Performance Dashboards, Six Sigma Business Scorecard, The Workforce Scorecard *
The Balanced Scorecard Translates Mission, Values, Vision, and Strategy
MISSION WHY We exist
VALUES Guiding Principles
VISION Word picture of the future
STRATEGY Differentiating Activities
A) Mission Statements
A mission statement defines the core purpose of the organization—why it exists.
David Packard captured the essence of mission very well in a 1960 speech to Hewlett-Packard employees: "A group of people get together and exist as an institution that we call a company so they are able to accomplish something collectively that they could not accomplish separately—they make a contribution to society, . . . do something which is of value.
Unlike strategies and goals that may be achieved over time, you never really fulfill your mission. It acts as a beacon for your work, constantly pursued but never quite reached. Consider your mission to be the compass by which you guide your organization.
Effective Mission Statements
Inspire change. While your mission doesn't change, it should inspire great change within your organization. Since the mission can never be fully realized, it should propel your organization forward, stimulating change and positive growth. Take, for example, the mission of 3M, which is "To solve unsolved problems innovatively." Such a simple and powerful mission is sure to lead 3M into many new and interesting fields as it attempts to solve the innumerable problems we face. Wal-Mart states its mission as "Give ordinary folks the chance to buy the same things as rich people." Retailing may look vastly different in 100 years than it does today, but you can bet that ordinary folks will still want the opportunity to acquire the same things as rich people!
Long-term in nature. Mission statements should be written to last 100 years or more. While strategies and plans will surely change during that time period, the mission should remain the bedrock of the organization, serving as the stake in the ground for all future decisions.
Easily understood and communicated. Nobody would argue that our modern organizational world is one awash in jargon.
A very effective method for developing your mission is based on a concept known as the "5 Whys" developed by Collins and Porras.
The "5 Whys" force us to abstract to different levels, thereby leaving behind the myriad specific characteristics of our organizational being, and discovering our true meaning.
Sample Mission Statements
Merck: To preserve and improve human life
American Institute of Certified Public Accountants (AICPA): To provide members with the resources, information, and leadership that enable them to provide valuable services in the highest professional manner to benefit the public as well as employees and clients
3M: To solve unsolved problems innovatively
Wal-Mart: To give ordinary folks the chance to buy the same things as rich people
Walt Disney: To make people happy
Hewlett-Packard: To make technical contributions for the advancement and welfare of humanity
Marriott: To make people away from home feel that they are among friends and are really wanted
Sony: To experience the joy of advancing and applying technology for the benefit of the public
Mary Kay: To give unlimited opportunity to women
Cargill: To improve the standard of living around the world
Why a Mission Is "Mission-Critical" to the Balanced Scorecard
The Scorecard decodes our mission, values, vision, and strategy into performance objectives and measures in each of the four Scorecard perspectives.
Translating this "DNA" of our organization with the Balanced Scorecard ensures that all employees are aligned with and working toward the mission.
A well-developed Balanced Scorecard ensures that the measures tracked are consistent with our ultimate aspirations and guides the hearts and minds of employees in making the right choices.
You can build and implement a Balanced Scorecard without a mission statement for your organization. It would still contain a mix of financial and nonfinancial measures linked together through a series of cause-and-effect relationships, but consider the tremendous value and alignment you create when developing a Scorecard that truly translates your mission.
B) Values
What Are Values?
Values are the timeless principles that guide an organization. They represent the deeply held beliefs within the organization and are demonstrated through the day-to-day behaviors of all employees. An organization's values make an open proclamation about how it expects everyone to behave.
Johnson & Johnson CEO Ralph Larsen on values: "The core values embodied in our credo might be a competitive advantage, but that is not why we have them. We have them because they define for us what we stand for, and we would hold them even if they became a competitive disadvantage in certain situations."
No universal set of right or wrong values exist; instead, each organization must determine or discover the core values that comprise its essence and hold importance to those within it. Organizations tend to have a small number of core values that truly reflect their very essence. A large number may indicate confusion between values and practices. While practices, processes, and strategies should change over time in answer to the many challenges that come our way, we expect values to remain the same, providing an enduring source of strength and wisdom.
In many organizations the core values represent the strong personal beliefs of the founder or CEO. Therefore, leaders must constantly strive to not only develop appropriate values, but more importantly they must consistently mirror the values in their words and actions.As the Swiss philosopher Henri Amiel once said, "Every man's conduct is an unspoken sermon that is forever preaching to others."
Values-Driven Organizations
The critical issue is whether these values are conscious, shared, and lived, or remain unconscious, and indiscussed. When values are not defined, the culture of the organization is subject to the vagaries of the personality of the leader.
We often associate positive values with the common good, holding certain beliefs and operating on them in the hope that our actions will result not only in economic profits but the improvement of society as well.
"Take care of Marriott people and they will take care of Marriott guests" is one of their core values.
Founder Tom Chappell says, "Your personal values can be integrated with managing for all the traditional goals of business—making money, expanded market share, increased profits, retained earnings, and sales growth. Not only can your personal beliefs be brought to work, they can work for you."
Tom's of Maine Statement of Beliefs
WE BELIEVE that human beings and nature have inherent worth and deserve our respect.
WE BELIEVE in products that are safe, effective, and made of natural ingredients.
WE BELIEVE that our company and our products are unique and worthwhile, and that we can sustain these genuine qualities with an ongoing commitment to innovation and creativity.
WE BELIEVE that we have a responsibility to cultivate the best relationships possible with our co-workers, customers, owners, agents, suppliers, and our community.
WE BEIEVE in providing employees with a safe and fulfilling work environment, and an opportunity to grow and learn.
WE BELIEVE that our company can be financially successful while behaving in a socially responsible and environmentally sensitive manner.
Establishing Values
The key to changing values and the underlying culture of an organization lies in open and honest identification of the current value systems that exist and are rewarded in the organization. Evaluate the strengths and weaknesses of existing values and culture. Organizations are able to assess the degree of alignment between personal values and existing and ideal organizational values, and identify the changes that are necessary to develop a successful and enduring value system.
Jim Collins has developed a number of questions you can use to identify the core values in your organization[11]:
What core values do you bring to work—values you hold to be so fundamental that you would hold them regardless of whether or not they were rewarded?
How would you describe to your loved ones the core values you stand for in your work and that you hope they stand for in their working lives?
If you awoke tomorrow morning with enough money to retire for the rest of your life, would you continue to hold on to these core values?
Perhaps most important, can you envision these values being as valid 100 years from now as they are today?
Would you want the organization to continue to hold these values, even if at some point one or more of them became a competitive disadvantage?
If you were to start a new organization tomorrow in a different line of work, what core values would you build into the new organization regardless of its activities?
Selected Statements of Values
General Electric
Having a passion for excellence and hating bureaucracy
Being open to ideas from anywhere and committed to working things out
Living quality and driving cost and speed for competitive advantage
Having the self-confidence to involve everyone and behaving in a boundless fashion
Creating a clear, simple, reality-based vision and communicating it to all constituencies
Having enormous energy and the ability to energize others
Stretching, setting aggressive goals, and rewarding progress, yet understanding accountability and commitment
Seeing changes as opportunity, not threat
Having global brains and building diverse and global teams
Nordstom
Service to the customer above all else
Hard work and individual productivity
Never being satisfied
Excellence in reputation; being part of something special
Walt Disney
No cynicism
Nurturing and promulgation of "wholesome American values"
Creativity, dreams, and imagination
Fanatical attention to consistency and detail
Preservation and control of the Disney magic
C) Vision
What Is a Vision Statement?
Thus far, this chapter has discussed the importance of a powerful mission to determine your core purpose as an organization, and the values that you consider essential to achieving that purpose. Based on the mission and values, we now require a statement that defines where we want to go in the future.
The vision statement does just that. The vision signifies the critical transition from the unwavering mission and core values to the spirited and dynamic world of strategy.
A vision statement provides a word picture of what the organization intends ultimately to become—which may be 5, 10, or 15 years in the future. This statement should not be abstract—it should contain as concrete a picture of the desired state as possible and also provide the basis for formulating strategies and objectives. A powerful vision provides everyone in the organization with a shared mental framework that helps give form to the often abstract future that lies before us. Vision always follows mission (purpose) and values. A vision without a mission is simply wishful thinking, not linked to anything enduring. Typical elements in a vision statement include the desired scope of business activities, how the corporation will be viewed by its stakeholders (customers, employees, suppliers, regulators, etc.), areas of leadership or distinctive competence, and strongly held values.
One of the biggest problems is that a vision statement can mean different things to different people. Deeply held values, outstanding achievement, societal bonds, exhilarating goals, motivational forces, and raisons d'etre are some of the many images conjured up by vision statements.
Vision connotes a dream or an apparition, but there is more to industry foresight than a single blinding flash of insight. Industry foresight is based on deep insights into the trends in technology, demographics, regulation, and lifestyles that can be harnessed to rewrite industry rules and create new competitive space."
Others warn of the potential for a "dysfunctional" vision statement. For example, a vision statement could simply be wrong. Targeting the wrong
opportunities or customers may create substantial corporate momentum toward the wrong future. This momentum could prove difficult to change. With many vision statements the very real danger of a lack of reality reflected in the document or an abundance of abstraction can create real problems for the organization. Additionally, so many vision statements are simply repositories for the latest buzzwords that they appear empty and shallow. Employees will greet such statements with cynicism and question the competence of the executives who drafted the document&183;
John Kotter notes three important purposes served by a vision during a change process[15]:
By clarifying the general direction for change, the vision simplifies hundreds or thousands of more detailed decisions.
The vision motivates people to take action in the right direction, even if the initial steps are personally painful.
Actions of different people throughout the organization are coordinated in a fast and efficient way based on the vision statement.
Effective Vision Statements
Let's look at some characteristics of effective vision statements:
Concise. The very best vision statements are those that grab your attention and immediately draw you in without boring you from pages of mundane rhetoric. Often, the simplest visions are the most powerful and compelling, like Starbucks refrain of "2000 stores by 2000." If everyone in your organization is expected to act and make decisions based on the vision, the least you can do is create something that is simple and memorable. Consider it your organizational campaign slogan for the future.
Appeals to all stakeholders. A vision statement that focuses on one group to the detriment of others will not win lasting support in the hearts and minds of all constituencies. The vision must appeal to everyone who has a stake in the success of the enterprise: employees, shareholders, customers, and communities, to name but a few.
Consistent with mission and values. Your vision is a further translation of your mission (why you exist) and the values of underlying importance to your organization. If your mission suggests solving problems and one of your core values is constant innovation, a reference to innovation would be expected in your vision statement. In the vision you are painting a word picture of the desired future state that will lead to the achievement of your mission and ensure the two are aligned.
Verifiable. Using the latest business jargon and buzzwords can make your vision statement very nebulous to even the most trained eye. Who within your organization will be able to determine exactly when you became "world class, leading edge, or top quality"? Write your vision statement so that you will know when you have achieved it. While mission and values will not change, the vision would be expected to change because it is written for a finite period of time.
Feasible. The vision should not be the collective dreams of senior management, but must be grounded solidly in reality. To ensure that this is the case, you must possess a clear understanding of your business, its markets, competitors, and emerging trends.
Inspirational. Your vision represents a word picture of the desired future state of the organization. Do not miss the opportunity to inspire your team to make the emotional commitment necessary to reach this destination. The vision statement should not only guide, but also arouse the collective passion of all employees. To be inspirational, the vision must first be understandable to every conceivable audience from the boardroom to the shop floor.
Throw away the thesaurus for this exercise and focus instead on your deep knowledge of the business to compose a meaningful statement for all involved.
Developing Your Vision Statement
1. The interview method.
As you might have guessed, executive interviews are the key component of this technique for developing your vision. Each of the senior executives of your organization is interviewed separately to gather their feedback on the future direction of the organization. Use an outside consultant or facilitator to run the interviews. A seasoned consultant will have been through many interviews of this nature and have the ability to put the executive at ease, ensuring that the necessary information flows freely in an environment of trust and objectivity. The interview should last about an hour and include both general and specific (industry and organization) questions, as well as a mix of past-, present-, and future-oriented queries. Typical questions may include:
Where and why have we been successful in the past?
Where have we failed in the past?
Why should we be proud of our organization?
What trends, innovations, and dynamics are currently changing our marketplace?
What do our customers expect from us? Our shareholders? Our employees?
What are our greatest attributes and competencies as an organization?
Where do you see our organization in 3 years? 5 years? 10 years?
How will our organization have changed during that time period?
How do we sustain our success?
2. Back to the future visioning.
I enjoy working with clients on this technique. The exercise can be administered either individually or with a group.
I personally like using it with groups as the initial attempt to develop a draft vision statement, but it also works well in individual settings. In
describing the method I will assume a group session. Distribute several 3" x 5" index cards to each of the participants. To begin the session, ask the group to imagine that they awaken the next morning 5, 10, or 15 years in the future (your choice of time increment). In order to record their impressions of the future, they have each been given a disposable camera to capture important images and changes they hoped might take place within their organization. At the end of each day's adventure they must create a caption for the pictures they have taken during the day. Instruct the group to use the index cards you distributed to record their captions. By the end of the trip they have catalogued the future in detail. Give the participants about 15 minutes to imagine their trip to the future and encourage them to visually capture as much as possible in their minds' eye. Ask the group: "What has happened with your
organization—are you successful?" "What markets are you serving?" "What core competencies are separating you from your competitors?" "What goals have you achieved?" Once the 15 minutes are up, you say: "Unfortunately, on the trip back to the present the reentry was a little rough and the pictures were destroyed" (more animated and comedic facilitators can have a field day with this section) "but fortunately for you the captions remain." Record the captions from the index cards on a flip chart or laptop computer and use them as the raw materials for the initial draft of a vision statement. I enjoy this approach to vision statement development because it challenges the participants to engage all of their senses in the process, not simply their cognitive abilities. Not only that, but it can be fun!
The Balanced Scorecard will provide a new, laser-like focus to your business, and as such the potential problems represented by a misguided vision are significant. We have all heard terms like "What gets measured gets done," "Measure what matters," and many others. The Scorecard is essentially a device that translates vision into reality through the articulation of vision (and strategy). A well-developed Balanced Scorecard can be expected to stimulate behavioral changes within your organization. The question is: Are they the sort of changes you want? Be certain the vision you have created for your organization is one that truly epitomizes your mission and values because the Scorecard will give you the means for traveling first class to that envisioned future!
D) Strategy
What Is Strategy?
Key principles of strategy:
Understanding. To get thousands of people in a large corporation or five people on a not-for-profit board moving in the same direction, they must all understand the strategy. How can the implementers of the strategy make sense of the thousands of choices before them if they don't have a firm grasp of the strategy? Leaders must act as teachers and evangelists.
Different activities. Strategy is about choosing a different set of activities than your rivals, the pursuit of which leads to a unique and valuable position in the market.[20] If everyone were to pursue the same activities, then differentiation would be based purely on operational effectiveness.
Trade-offs. Effective strategies demand trade-offs in competition. Strategy is more about the choice of what not to do than what to do.
Organizations cannot compete effectively by attempting to be everything to everybody. The entire organization must be aligned around what you choose to do and create value from that strategic position.[21]
Fit. The activities chosen must fit one another for sustainable success. Our assumptions about the business must fit one another to produce a valid theory of the business. Activities are the same—they must produce an integrated whole.[22]
Continuity. Although major structural changes in the industry could lead to a change in strategies, generally they should not be constantly
reinvented. The strategy crystallizes your thinking on basic issues such as how you will offer customer value and to what customers. This direction needs to be clear to both internal (employees) and external (customers) constituents.[23] Changes may bring about new opportunities that can be assimilated into the current strategy, for example, new technologies.
Various thought processes. Strategy involves conceptual as well as analytical exercises.[24] As the Mintzberg quote at the outset of this section reminds us, strategy involves not only the detailed analysis of complex data, but also broad conceptual knowledge of the company, industry, market, and so on.
Ten Schools of Strategic Thought
Design School: Proposes a model of strategy making that seeks to attain a fit between internal capabilities and external possibilities. Probably the most influential school of thought, and home of the SWOT (strengths, weaknesses, opportunities, and threats) technique.
Planning School: Formal procedure, formal training, formal analysis, and lots of numbers are the hallmark of this approach. The simple informal steps of the design school become an elaborated sequence of steps. Produce each component part as specified, assemble them according to the blueprint, and strategy will result.
Positioning School: Suggests that only a few key strategies (positions in the economic marketplace) are desirable. Much of Michael Porter's work can be mapped to this school.
Entrepreneurial School: Strategy formation results from the insights of a single leader, and stresses intuition, judgment, wisdom, experience, and insight. The "vision" of the leader supplies the guiding principles of the strategy.
Cognitive School: Strategy formation is a cognitive process that takes place in the mind of the strategist. Strategies emerge as the strategist filters the maps, concepts, and schemas shaping their thinking.
Learning School: Strategies emerge as people (acting individually or collectively) come to learn about a situation as well as their organization's capability of dealing with it.
Power School: This school stresses strategy formation as an overt process of influence, emphasizing the use of power and politics to negotiate strategies favorable to particular interests.
Cultural School: Social interaction, based on the beliefs and understandings shared by the members of an organization lead to the development of strategy.
Environmental School: Presenting itself to the organization as a set of general forces, the environment is the central actor in the strategy making process. The organization must respond to the factors or be "selected out."
Configuration School: Strategies arise from periods when an organization adopts a structure to match to a particular context that give rise to certain
behaviors.
Strategy and the Balanced Scorecard—A Critical Link
The Balanced Scorecard provides the framework for an organization to move from deciding to live their strategy to doing it. The Scorecard describes the strategy, breaking it down into its component parts through the objectives and measures chosen in each of the four perspectives. The Balanced Scorecard is ideally created through a shared understanding and translation of the organization's strategy into objectives, measures, targets, and initiatives in each of the four Scorecard perspectives. The translation of vision and strategy forces the executive team to specifically determine what is meant by sometimes
imprecise terms contained in the strategy, for example, world class, top-tier service, and targeted customers. Through the process of developing the Scorecard an executive group may determine that world class translates to zero manufacturing defects. All employees can now focus their energies and day-to-day activities toward the crystal clear goal of zero defects rather than wondering about and debating the definition of world class. Using the Balanced Scorecard as a framework for translating the strategy, these organizations create a new language of measurement that serves to guide all employees' actions toward the achievement of the stated direction.
A key attribute of strategy formation is performing a different set of activities than your rivals. By choosing a distinct set of related activities you have the opportunity to create unique value propositions for your customers and thus separate yourself from competitors. These activities must be reflected in the Balanced Scorecard, which should parallel the strategy. In other words, if you wish to distinguish yourself by engaging in a series of activities aimed at creating customer intimacy, then your Balanced Scorecard should reflect this strategic direction. We would expect to see linked measures through the four perspectives that when taken together, will drive this strategy. Measures related to service of targeted customers should appear prominently in the Customer perspective, linked to relationship management metrics in the Internal perspective, and customer knowledge measures in the Learning and Growth perspective. This chain of linked measures, which mirrors your chosen activities, is hypothesized to drive revenue growth in the Financial perspective.
Again, the Balanced Scorecard provides the means to describe and articulate the activities separating you from your competition.
It is possible to develop a Scorecard-like system without a clear and concise strategy, and many organizations do just that. However, this mix of financial and nonfinancial measures is better termed a key performance indicator Scorecard or key stakeholder Scorecard rather than a Balanced Scorecard. The problem with this approach is that you simply cannot harness the true power of the Balanced Scorecard without a strategy driving its construction. Key performance indicator or constituent Scorecards lack the ability to align an entire organization around a set of complementary themes that drive the organization toward its overall vision and mission. Instead, they often reflect a number of good ideas that lack a coherent story or direction. The Balanced Scorecard and strategy truly go hand in hand. Kaplan and Norton sum up this subject very well: "The formulation of strategy is an art. The description of strategy, however, should not be an art. If we can describe strategy in a more disciplined way, we increase the likelihood of successful implementation. With a Balanced Scorecard that tells the story of the strategy, we now have a reliable foundation."
Summary
A mission defines the core purpose of the organization—why it exists. The mission captures the contribution and value an organization wishes to deliver to mankind, and provides a star to steer by in our turbulent world. An effective mission may be developed using the "5 Whys" technique, and should inspire change, be easily understood and communicated, and be long term in nature. The Balanced Scorecard allows an organization to translate its mission into concrete objectives that align all employees. The measures on a Balanced Scorecard must reflect the aspirations denoted in the mission statement to provide effective direction.
Values represent the deeply held beliefs within the organization, and the timeless principles it uses to guide decision making. Values are often reflective of the personal beliefs emanating from a strong CEO or leader. We often associate positive values with the common good—doing good for others while achieving organizational goals. Several organizations such as Disney, Marriott, and Tom's of Maine have proven that profits and societal contributions are not in conflict and use their values to derive a competitive advantage. Changing an organization's value systems represents a great challenge but may be accomplished by first openly and honestly identifying current values and providing the mechanisms that facilitate a transition to more appropriate values.
The Balanced Scorecard provides organizations with a means of evaluating the alignment of values throughout the organization. The Scorecard may also be used to track the extent to which an organization is living its stated values.
The vision signifies our transition from the timeless mission and values to the dynamic and often messy world of strategy. The vision provides a word picture of what the organization ultimately intends to become. Although the need for a vision statement has been questioned, most organizations agree that it provides a critical enabler by clarifying direction, motivating action, and coordinating efforts. Effective visions appeal to all stakeholders, align with mission and values, and are concise, verifiable, feasible, and inspirational. Vision statements may be created through interviewing of senior executives, or by leading group "visioning" exercises designed to enlist the full involvement of your team. The vision statement balances the interest of multiple stakeholders in describing how the organization will create future value. The role of the Scorecard is to capture the correct mix of competencies, processes, and customer value propositions that lead to our desired financial future.
The study of business strategy has rapidly evolved over the past four decades, with numerous schools of thought emerging to proclaim the power of their insights. Effective strategy making involves combining a different set of activities than your rivals to produce value for customers. Devising strategy calls for the strategy maker to draw on both analytical and broad conceptual skills. Developing a strategy is one thing; successfully implementing it is another matter. Using the Balanced Scorecard, organizations have a great opportunity to beat the odds by translating their strategy into its component parts throughout the four perspectives. Strategy is then demystified as employees from across the organization are able to focus on the strategic elements they influence.
For more Information
* Balanced ScoreCard. Measuring What Matters, Performance Dashboards, Six Sigma Business Scorecard, The Workforce Scorecard *
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