Q&A with: Robert S. Kaplan Published: February 2, 2004 Author: Martha Lagace
Since the 1990s, the Balanced Scorecard system has cut a path in business as a more
rigorous way to measure performance by quantifying what had been considered intangible assets, such as human capital, information, and culture. The system draws strength from four perspectives: 1)financial measures; 2) customers; 3) internal processes; and 4) learning and growth. Developed by HBS professor Robert S. Kaplan, chairman of the Balanced Scorecard Collaborative, and David P. Norton, co-founder with Kaplan and president of the Balanced Scorecard Collaborative, the system has led to three books that take the ideas further, starting with The Balanced Scorecard: Translating Strategyinto Action (1996) and The Strategy-Focused Organization: How Balanced Scorecard Companies Thrive in the New Business Environment (2000). Most recently, Kaplan and Norton have built on the original, four-perspective model of the Balanced Scorecard, and they link it with the time-based dynamics of strategy in their latest book, Strategy Maps: Converting Intangible Assets into Tangible Outcomes(Harvard Business School Press, 2004). In this e-mail interview, Kaplan discusses Strategy Maps' practical lessons for business leaders. Martha Lagace: Why should companies learn more about the benefits of strategy maps? What could companies be doing better than they are now? Robert S. Kaplan: A strategy map provides a visual representation of the organization's strategy. This is truly an example of howone picture is more powerful than 1,000 words (or even twenty-five ad hoc performance measures). The financial and customer objectives describe the outcomes the organization wants to achieve; objectives in the internal and learning and growth perspectives describe how the organization intends to achieve these outcomes. The discipline of creating the strategy map of linked objectives in the fourperspectives engages the executive team, and often promotes much greater clarity and commitment to the strategy. Once created, the strategy map is a powerful communication tool that enables all employees to understand the strategy, and translate it into actions they can take to help the organization succeed. Here is a picture of two employees of the Royal Canadian Mounted Police (RCMP) with theirstrategy map helping them do their job in the ice fields above the Arctic Circle. A strategy map also provides the structure for meetings where managers can quickly see which aspects of their strategy are succeeding and where they are falling short. The causal relationships enable managers to test whether the theory of their strategy is valid.
Q: Does it matter what size a company is before itcan consider creating a strategy map? At a company, who ideally should be the steward of the strategy map? And, how often can or should the map evolve at a single organization? A: We have seen strategy maps work extremely effectively in organizations with as few as twenty-five employees, as described in the Boston Lyric Opera case in our new book. And it clearly helps to align the multiple businessunits and the thousands and tens of thousands of employees in large organizations, as we see in the Thompson Corporation, the U.S. Army, and Ingersoll Rand examples in the book. Most organizations identify a single person to be the steward or organizer of the strategy map. This person ensures that data are continually fed into the map and Balanced Scorecard to keep them refreshed, organizes themonthly report distribution—usually electronically— and sets the agenda for the monthly management meeting to discuss performance against the strategy. Some organizations call this person the "Chief of Staff." In large organizations, the process is run by a new organization called the Office of Strategy Management—which reports directly to the CEO or COO. This office manages the process of...