The Strategy-Focused Organization: Robert S. Kaplan and David P. Norton

The Strategy-Focused Organization: Robert S. Kaplan and David P. Norton
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  Book review The Strategy-Focused Organization by Robert S. Kaplan and David P. Norton,Harvard Business School Press, Boston,2001, 400 pages, US$29.95 Originally formulated as a more comprehensive measure-ment system this book introduces the Balanced Scorecard asan effective tool to implement strategy. In fact, Robert Kaplan and David Norton propose their performance man-agement tool as a solution to a number of the most widelydiscussed managerial problems. In different chapters of the book the authors aim to show that the Balanced Scorecardis, among other things I may have overlooked, an appro- priate tool  to manage intangible assets.  to align functions, SBUs, and geographically dis- persed units.  to communicate within and educate the organization.  to foster change.  to enhance organizational learning.  to allow effective budgeting processes.  to design compensation schemes.  to align all employees (also the ones at the frontline)to organizational objectives.Admirably enough, the authors deliver on these prom-ises. After some 10 years of experience with the BalancedScorecard in dozens of different organizational settings, theauthors are able to substantiate their claims with a vast number of highly illustrative and diverse examples howthe adoption of a Balanced Scorecard approach helpedcompanies thrive. By not adopting the normative tonecommon in many popular business books and by empha-sizing the contingent nature of their claims Kaplan and Norton succeed in making a strong case for the value of adopting a Balanced Scorecard mindset and in avoidingexemplary-based targets for criticism (see Peters andWaterman, 1982). Nothing the book presents is entirely new nor extremelychallenging to general belief. Rather, its appeal lies in the presentation of the currently most comprehensive frame-work to identify and nurture sources of value creation.Instead of focusing on the measurement of results for deriving necessary organizational actions the BalancedScorecard approach takes the financial outcomes of organ-izational action as what they are: results. Hence, closelyfollowing these results — as many measurement systems do — is pointless: ‘‘Improving organizational performance bymonitoring financial performance is as useless as trying toimprove a sports team’s performance by only reporting thescores of its games’’ (Atkinson et al., 1997, p. 35). Insteadorganizations need to focus on strategy and also measure it.Such behavior renders an organization  strategy-focused  ,causing a ‘‘performance based culture (linking) everyoneand every unit to the unique features of the strategy’’ (p. 25).By aligning performance measures with strategy instead of financial outcomes the key requirement of effectively imple-menting strategy is met.Kaplan and Norton introduce five principles of thestrategy-focused organization: translate the strategy tooperational terms, align the organization to the strategy,make strategy everyone’s everyday job, make strategy acontinual process, mobilize change through executiveleadership. The ideas behind these principles have beendiscussed in literally hundreds of articles and books onstrategy as have been the challenges of effectively carry-ing them out. This is the major strength of the concept: Asingle tool may allow for moving a strategy from con-ceptualization to implementation. But do not be fooled bythis statement: Adhering to all suggestions and runningthrough all the steps outlined in the book requiresenormous organizational commitment and resources.Without strong belief into the benefits possibly to bereaped a leader may be quite reluctant to walk through allthe details outlined and commit the necessary resources.In addition, the rather analytical nature of the approachwill be more attractive to the systematic mind than theintuitive one. I assume that the more intuitive type of manager might question the appropriateness of the Bal-anced Scorecard because of its strong emphasis ondetailed analysis of processes. While the authors claimthat the approach is helpful for the effective emergence of strategies (Mintzberg, 1987) by providing strong align-ment to organizational objectives one might also arguethat such processes are suppressed because of this veryalignment. I therefore believe that every organization hasto individually determine the ‘‘right’’ degree of detail inits attempts to reap the benefits from the BalancedScorecard and that the detail given in the book mayoverburden many organizations. The same may apply tothe reader of   The Strategy-Focused Organization  and onemay well skip most of the — though highly interesting — examples given to grasp the book’s essence. 0148-2963/02/$ – see front matter   D  2002 Elsevier Science Inc. All rights reserved.PII: S0148-2963(01)00268-5Journal of Business Research 55 (2002) 531–532  I like the book because it is one of the few books not to only re-repeat the necessity to move from functional to process-oriented organizations, from a focus on budgets tocontinual controlling, from a purely shareholder-value-driven mindset to effective management of intangibleassets, but also shows ways to respond to these demands.Taking a different perspective, this book may be consid-ered the first book on how to effectively implement thestakeholder management idea. In line with the instrumen-tal version of stakeholder theory — in contrast to thenormative or descriptive one (see Donaldson and Preston,1995, for this distinction) — the Balanced Scorecard is aneffective approach to study the sources of value creationin an organization’s environment and thinking about the possible effects of responsiveness to different constituen-cies on organizational performance. Kaplan and Nortonare right that their measurement tool is more than astakeholder scorecard (p.102) that only focuses on stake-holders’ objectives, not on ways to reach these objectives.When carried out properly, the Balanced Scorecard needsto take into account the expectations of all relevant stakeholders and forces the organization to craft strategiesto meet these expectations — at least to an extent wherethe concerned groups will not withdraw their support.Advocates of the stakeholder idea will question theappropriateness of maximizing shareholder value as theonly organizational goal (which the authors do throughout the entire book), but one may either alter the strategy mapand choose a different organizational goal (which isequally questionable) or establish certain minimum (andeven maximum) levels on all measures corresponding tothe expectations of the different stakeholder groups. Bytreating shareholder value as the primary measure and putting it on top of the strategy map Kaplan and Nortondo not fully adhere to the stakeholder concept but the process of (more or less explicitly) taking into account stakeholders in identifying and nurturing all sources of value creation turns the Balanced Scorecard into a wide-spread and convincing tool to apply this concept — something the stakeholder idea strongly needs to establishitself as a useful business orientation.In the classroom, this book may be used in a number of different fields. The core ideas brought forward are worth-while discussion topics for strategy, marketing, controlling,or human resources courses. The examples given canillustrate concepts ranging from strategy formation, imple-mentation, positioning, branding, budgeting, organizationallearning, or organizational change. However, none of theseideas is presented in enough depth to make the book suitableas the core book for a course specializing in any of theabove fields. But in order to contrast established wisdomand to focus discussion on implementation issues certain parts of the book may be very useful for either area. Another application may be as a reading complement or source of class discussion (some examples really go in-depth) in boundary-spanning MBA capstone or case-oriented courses.The book lacks the academic rigor necessary for doctoralcourses but the core thoughts presented are relevant toalmost any business academic and practitioner who believesthat identification and pursuit of growth opportunities is amore effective road to high performance than eliminatingthe last bit of organizational slack left. References Atkinson AA, Waterhouse JH, Wells RP. A stakeholder approach to strategic performance measurement. Sloan Manage Rev. 1997;38(3):25–37.Donaldson T, Preston LE. The stakeholder theory of the corporation: con-cepts, evidence and implications. Acade Manage Rev 1995;20(1):65–91.Mintzberg H. Crafting strategy. Harv Bus Rev. 1987;65(4):66–75 (July/ August).Peters TJ, Waterman RH. In search of excellence: lessons form America’s best run companies. New York: Harper & Row, 1982. Oliver Koll  Marketing Group, Faculty of Social SciencesUniversity of Innsbruck, Universita¨tsstr. 156020 Innsbruck, Austria Email address:   Book review/Journal of Business Research 55 (2002) 531–532 532
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