Peter Drucker once said, "Plans are only good intentions unless they immediately degenerate into hard work." There is an often-cited statistic that approximately 70% of strategic plans fail for one reason or another. All too often, strategic plans end up being only good intentions due to lack of execution. One of the primary keys to successfully turning a strategic plan into reality is a good strategic management system.
The 5 Steps of a Strategic Management System
Strategic management systems come in all different shapes and sizes, but they generally break down into a similar closed loop process that features the following steps.
1. Develop strategy by defining the core purpose of the business, the vision of where you want to take the business, and the underlying core values that provide the basis for decision-making.
2. Gain clarity and understanding of the strategy and vision among leadership and then translate the strategy into specific strategic objectives that can be communicated to everyone involved with executing the strategy (all of your employees).
3. Develop operational plans to achieve these strategic objectives by developing initiatives, setting goals, and allocating resources.
4. Monitor progress towards the achievement of the strategic objectives and overall strategy.
5. Learn from your monitoring and feedback and adjust your strategy as necessary. This then leads you back to step 1.
Using the Balanced Scorecard
The Balanced Scorecard is a management tool that accomplishes all of the above. Better yet, it provides a holistic view of a business's strategy by looking beyond traditional financial indicators of success. Financial indicators are typically lagging indicators which often lack the ability to track progress towards future strategic goals. The Balanced Scorecard introduces additional perspectives from which to view your strategy that often serve as leading indicators of future strategic success. Those four perspectives are as follows:
1. How must the business learn and grow to achieve its vision?
2. What internal processes must the business be great at to achieve its vision?
3. How should the business appear to its customers to achieve its vision?
4. What does financial success look like to shareholders when the vision is achieved?
The Balanced Scorecard as a Strategic Management System
We currently use the Balanced Scorecard as a strategic management system. Once our overall strategy was translated into strategic objectives for these four perspectives, we communicated this to all employees with an explanation of how these objectives drive future success. Measurements were then developed to track progress towards those strategic objectives, and they currently serve as the basis for a strategic report card that is provided to all employees on a regular basis. This allows everyone to understand and engage in our plan – greatly increasing our chances of successfully executing our strategy and enabling our clients to succeed.
A strategic management system is the key to successful execution of strategy. The Balanced Scorecard allows strategy to be managed through a holistic set of perspectives that not only measure success, but help predict it as well. By providing this framework to communicate and monitor strategy, our Balanced Scorecard helps ensure we will not join this 70% and that our strategic plan will become reality.