Although an organization can only have one predominant strategy, there are five different approaches that managers can take when reviewing a strategy and its subsequent effectiveness:
- Valuation Integration Compensation Comparison. (Benchmarking) Evaluation
Understanding these approaches (their implications and instrumentation) will substantially simplify the development and use of your Dashboard and give additional value to each stakeholder group.
About the different approaches of a strategy
An important concept that many organizations stumble upon is that there should only be ONE strategy in one organization. The problem is that different officials and managers may have a completely different idea about such a strategy. It is common to find that the members of an organization have different ideas about the same organization (company or state agency).
In reality, all stakeholders need to see different aspects of the same organizational strategy; for example, investors need to know whether the strategy adopted will achieve good objectives with respect to the "valuation" of assets; while internal managers need a "navigation" view.
Based on our experience, here is a summary of the five most important approaches to a strategy:
1. Valuation
There is a need to describe "in money" what the organization does in such a way that the financial world understands it. All activities need to be valued monetarily such as tangible assets, for example, buildings and stocks, and intangible assets, such as brand equity and customer loyalty. There are many tools that help to respond to this need, for example the EVA (Economic Added Value), the ABC (Activity Based Cost), etc.
The challenge lies in the fact that more than 80% of the value comes from intangible assets; however, traditional accounting systems fail to efficiently reflect these intangible assets. The Dashboard has proven to be a very useful tool for making intangible assets visible and possible to value.
The information in this area should:
- Focus on products or services, Be closely related to existing valuation mechanisms, Be consistent, repeatable and reliable.
2. Integration
Often, managers must make decisions based on reliable information and that are consistent and integrated with medium and long-term strategies. The strategy, through the Command Board, will dictate both what should be done and how important it is.
This creates some alignment of the organization's objectives in all functional and regional areas, and consistency over time.
The information in this area should:
- Respond quickly to changes in activities Be based on processes Be related to overall efficiency
3. Compensation
The Dashboard is provided to reward employees for their contribution to the success of the organization. Compensation-based approaches differ from the first two in that only a small portion of employee activities is closely related to organization valuation and often the developing information used for integration it is not results-oriented enough to achieve effective compensation models.
The information in this area should:
- Be related to the value that the group can control and create. Be related to production, service provision and results. Be able to be accurately measured in different locations and over time.
4. Comparison (Benchmarking)
The only way to determine if your organization is progressing is to compare it to other "things" ("comparators"). There are many comparators: competitors, the best of its kind, world-class. In a true sense, even the target, the forecast, and the modified forecast are also comparative elements. The challenge with parameters is that the information is vague and "dirty."
Typically, comparators do not offer sufficient degree of detail by providing operational elements of understanding to diagnose identified issues, nor do they cover the full spectrum of their strategy. By suggesting that parameter data may be misrepresented, I mean that organizations often start to measure a process and end up measuring it in different places.
In general, the definition of parameters / comparators are very important elements, although they should be analyzed by a specialist in the field.
The information in this area should:
- Be available from other sources, Be understandable and relatively comparable, Be strategically related to your organization.
5. Evaluation
There is often a need to obtain an accurate measurement of the organization's performance. Sometimes, say, once a year, the organization must carry out activities such as customer surveys, employee surveys, supplier evaluations, etc.
These activities are very expensive and time consuming so that they can be carried out as many times as necessary to make them useful for navigation, although they can be used to reinforce the selection and validation of navigation indicators, support compensation models and report on performance to external stakeholders.
The information in this area should:
- Be based on surveys, Be complete and rigorous, Be closely related to general tasks
In summary
Most organizations should consider operating according to two or more of the visions mentioned above. For example, we recently worked with a shared service IT department that was to assess and measure their contribution to the organization's overall pricing, provide monthly navigation information for project managers (and SLAs for clients), and develop a package. compensation to be used internationally. They also had to be compared with the quality parameters and functional points of the industry.
Most organizations only need two or three of these visions. It should be noted that in many organizations it is possible to merge all these visions into a smaller number and, over time, into one. However, it can be difficult to start with just one, as the various stakeholders, in principle, need the Dashboard model to inspire some assurance that it describes their vision for the organization. Consider building the various views as a strategy to speed up the instrumentation of your pilot Dashboard.
The easiest way to do this is to maintain a strategy map, taking care to link the various indicators with it for each of the views.
Although this may seem a bit cumbersome, just think of, for example, a car. Surely you would expect other kinds of information to rate it, instead of driving it, compensating a person for driving it, comparing it to other cars and assessing it annually.
