t h e s t r a t e g y e x e c u t i o n s o u r c eBalanced Scorecard Report

september–october 2010 : vol 12 no 5

Dealing with Dilemmas: Redefining StrategyBy Frank Buytendijk, Vice President and Fellow, Oracle

Corporation, and author, Dealing with Dilemmas (Wiley, 2010)

For most organizations, strategy involves multiple dilemmas.

Focus on customer value at the expense of profits. Aim for long-term

financial performance and you impair short-term performance.

Organizations view these big (and risky) strategic choices as being

inevitable. Not so, says the author. Eschew choice; seek, not

compromise, but synthesis. A portfolio of strategic options gives

organizations the greatest flexibility and adaptability. And

scenario-based strategy maps can help create these options.

Strategy making is by nature fraught with dilemmas. Investments to ensure long-

term performance may impair short-term results. Economies of scale in the back

office may limit sales flexibility in the front office. Supporting one information

technology (IT) initiative may exhaust resources available to put toward another

equally worthwhile initiative.

Dilemmas can be found in any complex organization, notes Bill Fitzsimmons, chief

accounting officer of Atlanta-based Cox Communications. He has a straightforward

definition of a dilemma: a multidimensional problem, much like most issues that

reach the executive level. If it did not have multiple angles, it would not have—or

should not have—reached the C-suite. Heidi Melin, chief marketing officer at the

California telepresence company Polycom, emphasizes the difficulty of choice

presented by such a decision. A dilemma, she observes, is a problem that makes

you stop and think. A dilemma represents a fork in the road where the decision you

make will have great impact.1

Western management culture abhors dilemmas. Dilemmas put managers on the spot;

whatever choice they make, they cannot win. Dilemmas don’t fit with the Western

focus on immediate solutions, where management lives by the 80/20 rule and our

action-oriented thinking is that “any decision is better than no decision.” Moreover,

dilemmas don’t square with the universal fascination with corporate heroes. People

can’t get enough of heroic stories, of larger-than-life CEOs who make big, bold deci-

sions and single-handedly turn companies around—or who, like Apple’s Steve Jobs,

turn around entire industries. Not everyone has Jobs’s Midas touch, though. Fred

Goodwin, the former CEO of Royal Bank of Scotland, made a few too many bold choices

in his acquisition strategy. Wendelin Wiedeking, former CEO of Porsche, went from

riches back to rags trying to acquire the much larger Volkswagen Group.

also in this issue:

Building Performance Excellence

Around a Unified Management

System at USAMMA . . . . . . . . . . . . . . . . . . . . . . . . 6

Beyond the OSM: Strategy

Execution Champions Help Foster

Strategy Execution Capability . . . . . . . . . . . . 10

From Civil Service to Customer

Focus: How Public Sector

Organizations Energize Their

Workforce Around Strategy . . . . . . . . . . . . . . . 14

join us!

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also available

Check out the latest BSR Reader, Kaplan

and Norton on Strategy Management.

This eight-article collection features

analysis, historical perspectives, and essays

by Robert Kaplan and David Norton on

their strategy management philosophy, a

philosophy inspired by system dynamics.

For details and to order, visit web.hbr.org

and search “BSR Reader.”

continued on the following page

1 Comments from Bill Fitzsimmons and Heidi Melin from F. Buytendijk, Dealing with Dilemmas (Wiley, 2010), p. 4.

Strategy Is About Creating OptionsBy defining strategy as “making those

big, bold choices,” we set ourselves up

for failure. This way of thinking actually

creates the dilemmas we are trying to

prevent. The more strategic and far-

reaching these choices are, the more

they are bound to reveal conflicting

stakeholder requirements or conflicts

between the long and the short term.

Is making either-or choices really what

strategy is about?

Strategy is supposed to be a blueprint

for an organization’s future success. But

the one thing we know about the future

is that it will most likely be different

from the present. Do we really believe

that with analytical rigor we can foresee

the future? How are we supposed to

make the right choices today to affect

performance tomorrow? And is it wise

to make choices that may limit our flex-

ibility to respond to tomorrow’s needs?

The real issue at hand is how to deal

with an unknown future. Strategy has to

align itself to an inherently fluid exter-

nal environment. It must therefore be

flexible enough that it can be changed

constantly and adapted to shifting

internal, as well as external, conditions.

What happens when, instead of think-

ing of strategy as making choices and

commitments, we see it as creating

a portfolio of options? Options, as

opposed to choices, do not limit our

flexibility in the future; rather, they

create strategic flexibility. (Obviously,

these options should not be random;

they should be structured around a

company’s strategic themes, such as

growth by acquisition [or, conversely,

organic growth], creating a greener

way of working, entering [or exiting]

certain markets, or specific go-to-market

strategies.) The traditional view is that

the more uncertain (i.e., the riskier) an

investment, the more you need to tem-

per its expected return. But if instead

of focusing on making bet-the-farm

choices, you focus on creating manage-

rial flexibility, risk actually becomes an

instrument of value creation.

Uncertainty, when seen this way, does

not depress the value of any single

investment but may, in fact, amplify

the value of investments in general.

Strategy, with its focus on the future, is

characterized by uncertainty. The more

uncertain the future, the more valuable

flexibility and adaptiveness are as core

strategic competencies.

The idea is not as esoteric as it sounds.

In fact, it is already practiced in a

number of areas, particularly in product

strategy. For instance, financial institu-

tions are following the automotive

industry and moving from a strategy of

standardized, off-the-shelf products to

one of product components and partial

products. Based on the customer risk

profile or specific customer require-

ments, product components can be

combined into a uniquely tailored

product, such as customized financing

for a mortgage.

Jack de Kreij, CFO and member of the

board of Vopak, the global warehousing

and transshipment company, empha-

sizes portfolio thinking. His company

changed its strategy drastically in

2003. Instead of pursuing value chain

integration, offering full services for

certain chemicals and oils, it decided to

focus on warehousing and transship-

ment for a wider range of products and

industries. The investments needed to

achieve this goal would lead to many

more reuse options than investments

in separate steps in the value chain.

Almost paradoxically, it is Vopak’s less-

industry-specific focus that enables the

company to create the most—and the

best—options for growth.2

The notion that strategy should create

options does not at all conflict with

established definitions of strategy. This

idea supports the definition of strategy

as a plan of action designed to achieve a

particular goal. The goal stays the same;

the plan of action just becomes clearer

over time because, from the start,

you’ve built flexibility into the plan. The

details will unfold while you are on the

road, allowing you to avoid unexpected

roadblocks and discover previously

unknown shortcuts.

This does not mean that you do not

need a strategy or that you must jump

on every opportunity that arises. Creat-

ing options does not equal opportu-

nistic behavior. The strategic goals still

need to be clear. You need to ensure you

make it to your goal and that you do so

in an efficient manner. Some options

help us reach the goal; others divert us

from that focus. What is different is the

way the strategy formulation process

is structured and how the strategy is

2 b a l a n c e d s c o r e c a r d r e p o r t

FIGURE 1: SIX STRATEGY DILEMMAS

If we contrast, rather than link, the four BSC perspectives, we see six fundamental strategy dilemmas that are common to all organizations.

2 Ibid., p. 19.

Value vs. profit Financial/Customer Customer value or profit maximization?

Top down vs. bottom up Financial/Process Zero-based or resource-based view of the firm?

Optimize vs. innovate Learning & Growth/ Also known as exploitation Process vs. exploration

Listen vs. lead Customer/ Innovate through listening to Learning & Growth customer requirements or by creating new demand?

Inside out vs. outside in Customer/Process Who leads? Back office or front office?

Long term vs. short term Learning & Growth/ Long-term business performance Financial or short-term financial results?

dilemma bsc perspectives description

3s e p t e m b e r – o c t o b e r 2 0 1 0 : v o l u m e 1 2 , n u m b e r 5

described. Instead of the traditional

clear separation between strategy

formulation, strategy execution, and

performance measurement, the process

needs to be based on continuous feed-

back, testing, and learning. In that way,

choices do not turn into dilemmas.

The former prime minister of Bavaria,

Edmund Stoiber, emphasized the

importance of a sound strategic decision-

making process. Dilemmas, he noted,

can also arise through bad decision

making. Dilemmas can be the conse-

quences of decisions that are not well

thought through. When far-reaching

decisions are made, the consequences

for all stakeholders should be clear; if

not, irreversible damage may be done.3

A Practical ApproachThe idea of using options-based strate-

gies as a means of creating greater

strategic agility is not new, but it has

yet to be placed into a practical frame-

work. The strategic dilemmas that

businesses confront have been

researched individually, not holistically.

To my knowledge, no study thus far

has linked the reconciliation of dilem-

mas in general to strategic decision

making in a practical way.

Applying the Balanced Scorecard and

strategy maps in a new way can help

improve not only strategy measurement

and management but also strategy for-

mulation. The original 1992 conception

of the Balanced Scorecard showed the

four perspectives surrounding the

strategic vision and objectives. Later,

Robert Kaplan and David Norton mor-

phed this into a strategy map in which

the perspectives were linked in cause-

and-effect relationships.

However, if instead of linking the four

perspectives, we contrast them, six

fundamental dilemmas common to all

organizations unfold. (See Figure 1.) There

is a dilemma between the customer

and the financial perspectives: the

choice of value versus profit. A focus

on customer value may be at odds with

profit maximization. Another dilemma

exists between the customer and

process perspectives: inside out versus

outside in. This dilemma represents the

classic battle between the back office

and the front office that many organiza-

tions know all too well. Between the

learning and growth and financial per-

spectives we have the long-term versus

short-term dilemma, where investing in

future growth doesn’t usually pay back

in the current or following quarter.

After researching these six dilemmas

by conducting an extensive literature

study and a global survey, as well as

producing high-profile case studies, I’ve

found that all these dilemmas can be

fundamentally reconciled, leading to

real business improvements. When a

fundamental contradiction is elimi-

nated, the business model jumps to a

new level and, if executed well, yields

competitive advantage.

Figure 2 shows how organizations

worldwide are coping with the six di-

lemmas, based on a global survey of 580

respondents from multiple industries.4

The six dilemmas are listed from top to

bottom, showing, from left to right, the

different “states” an organization can

be in: stuck, neutral, bias (left or right),

or stretch. Stuck means the organiza-

tion scores low on both sides of the

dilemma. This is the worst situation; you

can neither optimize nor innovate, nor

can you control for the short term or

the long term. Respondents scored the

worst in these two dilemmas. Neutral

means organizations do OK, but lack

competitive differentiation.

A bias one way or the other (to the

left-hand or the right-hand side of the

dilemma) means that the organization

scores relatively high on one side but

low on the other. There is a natural

preference for inside-out thinking, for

example, or for profit maximization, and

the other side of the dilemma is often

an afterthought. Indeed, the inside-out

stuck

0% 20% 40% 60% 80% 100%

neutral bias left bias right stretch

Value/Profit

Top down/Bottom up

Optimization/Innovation

Listen/Lead

Inside out/Outside in

Long term/Short term

FIGURE 2: HOW ORGANIZATIONS DEAL WITH THEIR DILEMMAS IN PRACTICE

From left to right, the five strategic states an organization can be in when dealing with a dilemma: stuck, neutral, biased (to the left side of the dilemma), biased (to the right side of the dilemma), and strategic stretch. The bars represent the percentage of organizations reporting to be in any given state, by dilemma.

3 Ibid., p. 5.

4 Global “Dealing with Dilemmas” Survey from F. Buytendijk, Dealing with Dilemmas (Wiley, 2010).

By defining strategy as “making those big, bold choices,” we set

ourselves up for failure. This way of thinking actually creates the

dilemmas we are trying to prevent.

4 b a l a n c e d s c o r e c a r d r e p o r t

approach and a profit focus are the

two most common biases. The goal is

to achieve strategic stretch, where the

organization has found a way to do

both, such as listening to its customers

while leading them at the same time. It’s

neither a balance nor a compromise, but

instead a true reconciliation—in other

words, a synthesis.

The ability to achieve strategic stretch

on any given dilemma is no trivial mat-

ter. Deeper analysis of the data revealed

that only 20% of respondents said

they achieve strategic stretch on one

dilemma, and fewer than 5% are able

to achieve stretch on three dilemmas.

Companies that are stuck or neutral in

four or five of the dilemmas are much

more likely to have a bias toward value,

leading customers, and preferring an

outside-in approach. These three biases

are connected to the customer perspec-

tive of the BSC. This shows that “putting

the customer first” is not automatically

the right thing to do. The key to success

is to reconcile the customer focus with

a focus on your company’s strategic

objectives.

Organizations that had average scores

and that were either neutral or stuck

in three or four dilemmas tend to have

a bias for inside-out thinking and lead-

ing the customer, as well as a profit

orientation. These are the companies

that are driven from the inside, with

a focus on their own objectives. They

change when necessary but do not

really drive change. The biases existing

in the top one-third of companies—

which scored stuck or neutral in two or

fewer dilemmas—seem to be toward

innovation, a long-term view, and an

outside-in approach. These biases are

largely connected with the learning and

growth perspective—worrying about

tomorrow’s performance.

Balancing long-term business perfor-

mance and short-term financial results

seems to be key to sustainable success.

The logic is obvious. An organization

needs to be successful in the short term

in order to invest in the long term. At

the same time, however, this is one of

the hardest dilemmas organizations

face. Almost 40% of respondents were

strategically stuck here. We can achieve

synthesis when faced with this dilemma

through the use of existing methodolo-

gies, in this case strategy maps—but we

need to apply them in a new way.

Scenario-Based Strategy MapsOne way to create a more thorough

and adaptive strategy is to combine

scenario analysis with strategy manage-

ment techniques—namely, the strategy

map.5 Strategy maps are intended to

be predictive—to show how decisions

made in the present could impact future

results. This is done by linking leading

and lagging indicators. Empirical data

and statistical techniques are used to

discover and test these relationships.

However, the strategy map’s causal

model does not reflect the evolution of

strategy over time. For one thing, sta-

tistical techniques are valid only when

sufficient data are available. Moreover,

data, by definition, describe results

from the past. Given that all we can

truly predict about the future is that it

will most likely be different from the

present, it’s reasonable to question the

predictive value of correlations found in

data describing the past. Put in stronger

terms, one could even argue that vali-

dating a strategy map with the use of

past data, by definition, invalidates it.

But using scenario planning and strat-

egy mapping in tandem represents a

substantial step forward in creating

more “future proof” strategies. Specifi-

cally, you create a strategy map for each

scenario based on its unique assump-

tions and details. Strategic objectives

that are common across all or most

scenarios can be considered strategic

imperatives. Those that are not common

but that are still essential to progress

can be called strategic options. Let’s see

how this works in practice.

Case Example: Tier 1 TalentTier 1 Talent (T1T) is a hypothetical

temp agency and recruitment firm that

specializes in IT staff. The company

structured its strategic objectives using

a strategy map and created three sce-

narios to support its customer intimacy

strategy. “Steady as she goes” predicts

a market in which things stay as they

are, with modest but stable growth.

“Networked world” assumes that many

IT professionals become self-employed

and move from project to project. “Cost,

cost, cost,” the third scenario, foresees

a downturn in which job mobility de-

creases and IT outsourcing grows. T1T’s

strategic objectives must be compared

across all scenarios to distinguish its

strategic imperatives from its strategic

options.

5 Over time, the Balanced Scorecard and strategy maps have grown from a strategy measurement system to a strategy management system, and now to a strategy execution system. Adding scenario analysis takes strategy maps back “upstream,” giving them an additional application as a strategy formulation system.

The ability to achieve strategic stretch on any given dilemma is

no trivial matter. Deeper analysis of the data revealed that only

20% of respondents said they achieve strategic stretch on one

dilemma, and fewer than 5% are able to achieve stretch on three

dilemmas.

5s e p t e m b e r – o c t o b e r 2 0 1 0 : v o l u m e 1 2 , n u m b e r 5

• One of T1T’s internal process objec-

tives is to invest heavily in a “matching

system” that pairs job descriptions

and résumés. This objective appears

in scenario 1 (“Steady as she goes”)

and is even more important in the

growth scenario (“Networked world”).

In scenario 3, the downturn scenario,

the matching system is important for

differentiating the company from its

competitors. Thus, the strategic objec-

tive to invest further in the system and

its process is a strategic imperative.

• A new idea that might emerge from

T1T’s scenario exercise is investing in

university relationships. When busi-

ness is booming, such relationships are

an ideal source of new candidates for

junior-level positions. If the downturn

scenario becomes a reality, building

such supplier relations is equally im-

portant in distinguishing the company

from its competition with better (and

less costly) personnel. Although not

originally part of its strategy, building

university relationships is an objective

that qualifies as a strategic imperative.

• Besides its staffing business, T1T also

has a small and profitable consulting

division. If business is booming, that

business should be closed so the com-

pany can focus on recruitment. But

if business goes south, the company

will need all the profit it can get. In

that case, expanding the consulting

business becomes a strategic option.

It doesn’t hurt to keep the consultancy

going while it is profitable. But, if

necessary, it can be discontinued.

• The company recently launched an

innovation initiative to develop new

services, an undertaking that seems

worthwhile in any circumstances.

However, in the “Networked world”

scenario, management’s attention and

resources must go toward fulfilling

demand. And in the “Cost, cost, cost”

scenario, there is no money for innova-

tion. As counterintuitive as it sounds,

T1T decides to moderate its invest-

ments in the innovation program.

These are just a few of the strategic objec-

tives across the four perspectives of T1T’s

Balanced Scorecard. However, positioning

them in terms of scenarios and options

leads to an entirely different—and more

future proof—Balanced Scorecard.

Does the idea of keeping your options

open sound too much like “postponing

decision making,” going with the flow,

and being reactive, rather than being

proactive in the face of change? On the

contrary; I would say it involves much

more thought than traditional strategy

formulation, because it requires

uncovering the deeper truth of what

Drucker called the “theory of the

business.” The theory of the business is

a strategic framework, and an organiza-

tion’s strategic framework describes its

assumptions about its environment

(e.g., society, the market, the customer,

and technology), assumptions about

its unique mission (how it achieves

meaningful results and makes a

difference), and assumptions about its

core competencies (where the organiza-

tion must excel to achieve and maintain

leadership). To the layman’s ears, the

word “theory” may sound static, but it

means nothing other than “the best

possible understanding of reality that

we have.” And in business, that is a

highly dynamic process.

Continue the dialogueSee a video in which Frank describes Dealing

with Dilemmas at

www.thepalladiumgroup.com/buytendijk

Reprint #B1009A

Frank Buytendijk, a VP and

fellow at Oracle Corp., is also

a visiting fellow at Cranfield

University School of Manage-

ment and a former Gartner

Research VP. His research and

publications focus on strategy,

organizational behavior, and

performance management.

His latest book, Dealing with

Dilemmas (Wiley, 2010), argues

that traditional management

practices actually cause many

of the dilemmas executives

face and offers practical advice

on how to fundamentally

resolve business dilemmas.

For more information, visit

www.frankbuytendijk.com.

To learn moreBSC cocreator David Norton wrote about

how strategy maps in conjunction with a

management system are the key to achieving

agility and strategic adaptability in changing

economic times. See “How a Management

System Helps You Cope with a Recession,”

BSR May–June 2009 (Reprint #B0905A).

6 b a l a n c e d s c o r e c a r d r e p o r t

1 Centrally managed programs are pre-positioned in strategic locations worldwide (on land and on board ship), ready for immediate deployment if a new conflict erupts.

2 AMEDD first created a scorecard in late 2000/early 2001. See “To learn more,” p. 9, for further information about AMEDD’s BSC. Also, in 2004 the Army won entry into the Palladium BSC Hall of Fame.

CASE

The care that U.S. Army soldiers receive

is not just due to top-quality medical

professionals and the latest technology.

It’s as much due to an integrated, well-

oiled management system that merges

medical training, new technologies, and

evolving techniques with a formidable

medical infrastructure and an advanced

supply chain of materiel. Behind the

scenes, commanders and their direct

reports oversee the management of

people, processes, and other resources,

as well as the strategy management

and operational improvement efforts

that steadily raise performance to

higher levels of excellence.

The U.S. Army Medical Materiel Agency

(USAMMA) is a relatively small (and “tier

3”) organization within the “tier 1” U.S.

Army Medical Command (USAMEDCOM).

With a procurement budget of half a

billion dollars and a workforce of 400

military, civilian, and defense con-

tractor personnel, USAMMA provides

military forces with medical logistics

support and solutions for war prepara-

tion, combat deployment, and home-

land defense. Its support ranges from

emergency medical care to preventive

care, and from combat stress control to

veterinary care for the military’s canine

and equine members.

Headquartered at Fort Detrick in

Frederick, Md., under the control of

the tier 2 U.S. Army Medical Research

and Materiel Command (USAMRMC),

USAMMA acquires, equips, and sustains

medical sets and equipment and over-

sees centrally managed programs.1 It

has three medical maintenance depots

and storage operations in the U.S. as

well as storage operations throughout

Asia and Europe. Medical sets (kits) in-

clude everything from medics’ aid bags

and chemical-biological-agent detec-

tion tools to mobile combat support

hospitals.

To support its mission and future

plans—and ensure continuous improve-

ment in management and operations—

USAMMA’s leaders implemented a

program of performance excellence,

with the Balanced Scorecard (BSC) and

strategy map at its heart. The program

employs such elements as Lean Six

Sigma, ISO 9000, Baldrige, and other

quality methodologies. Organizational

excellence means more than the

effective use of taxpayer dollars; it’s a

matter of saving lives (and limbs).

The BSC in the U.S. Army

The BSC is not new to the U.S. Army;

it was adopted at the topmost level

around 2000. USAMMA began experi-

menting with it in 2001, at about the

time parent AMEDD adopted it.2 At that

time, though, its use at tier 3 subordi-

nate levels was not strictly mandated.

Users’ scorecards and strategy maps

were not aligned to the high-level Army

Medicine scorecard, and emphasis on

the BSC program fluctuated throughout

the rotation of AMEDD’s subsequent

commanding generals. The effort was

revived in 2007, when Lt. Gen. Eric

Schoomaker, a BSC advocate, assumed

command of USAMEDCOM (and was

also appointed the Army Surgeon

General). USAMMA had its first practical

strategy map in 2007, and by the time

of its first strategy review meeting

in early 2008, a real-time, technology-

automated BSC. It is currently refining

its third-generation BSC.

USAMMA’s recent drive for organiza-

tional excellence is in large part the

work of its Deputy Commander for

Support, John Lapham, a USAMMA pro-

fessional since 1991 and a retired army

officer of 21 years. Lapham, who holds a

PhD in organizational leadership, is the

Building Performance Excellence Around a Unified Management System at USAMMABy Michael Brazukas, Managing Director, Palladium Group, Inc.

Change doesn’t happen easily in organizations, particularly public

sector institutions. Size, bureaucracy, regulation, and the lack of

competition favor inertia. In military organizations, cyclic leader-

ship changes make it hard for management systems to get traction.

Yet at the U.S. Army Medical Materiel Agency (USAMMA), one of 80

subordinate command organizations within the U.S. Army Medical

Department [AMEDD]), traction is happening. The agency’s pursuit

of operational excellence is a model of rigor and continuous,

institutionalized improvement. At its heart: a governance frame-

work that includes one of the most disciplined approaches to the

strategy review meeting you’ll find anywhere.

With the renewed dedication to the BSC came the recognition

that the BSC system could integrate strategy management with

USAMMA’s quality programs for optimal effect.

7s e p t e m b e r – o c t o b e r 2 0 1 0 : v o l u m e 1 2 , n u m b e r 5

de facto chief management officer and

chief learning officer for the agency.

Among the many areas he oversees are

finance, strategy and quality, informa-

tion technology (IT), contracts manage-

ment, organizational learning, and

compliance.

Establishing a System of Strategic Governance

Quality management and process im-

provement were practiced well before

USAMMA adopted the BSC. In fact, the

army has mandated the use of Lean Six

Sigma since 2004 and has encouraged

other continuous improvement efforts

such as ISO certification and the Army

Performance Improvement Criteria

(a Baldrige-modeled program). But with

the renewed dedication to the BSC came

the recognition that the BSC system

could integrate strategy management

with USAMMA’s quality programs for

optimal effect. “We realized if we’re

going to do a Lean Six Sigma or other

process initiative,” says Lapham,

“it should be based on some gap or

opportunity we identified in strategic

planning.”

By June 2008, USAMMA’s leadership

team—the commander, the deputy

commander for operations, and the

deputy commander for support—

decided to build a strategic governance

model based on the nine Office of

Strategy Management (OSM) roles.

Under Lapham, three to four near-full-

time personnel run the agency’s OSM

(called “OSM-Q”; the “Q” is for “quality

programs”), preparing agendas and

coordinating data collection, initia-

tive reporting, and analysis to support

strategy review and refresh activities.

They orchestrate the strategy review

meetings (SRMs), provide feedback, and

coordinate and issue strategic commu-

nications, as well as provide technical

expertise and counsel for quality man-

agement endeavors. In

addition, the OSM-Q supports USAM-

MA’s participation in external manage-

ment forums and efforts within the

army and the military.

Leaders adapted the SRM calendar to

the existing command structure to

create a more efficient, more powerful

program of strategy reviews, each with

its own specific areas of focus. (See

Figure 1.)

• Once a month, directors, project man-

agers, and division chiefs (principal

managers) review strategic objectives,

measures and targets, and initiatives

• Every six weeks, the principal manag-

ers report to their bosses (the deputy

commanders) on strategic objective

performance and supporting activities.

• Once every quarter, the commander

and deputy commanders (i.e., the

governance council) hold their SRM,

in which they assess overall perfor-

mance. Separately, the USAMMA com-

mander reports on his agency’s perfor-

mance to the USAMRMC commander

and key staff; and at yet another SRM,

the USAMMA commander and select

agency members report to the Army

Medical Logistics Enterprise, a matrix

group spanning key Army Medicine

logistics entities.

Sustaining Meeting Rigor Through “Rules of Engagement”

USAMMA’s leaders created guidelines

called “Rules of Engagement” to extract

the most value from SRMs. These

guidelines urge careful preparation for

the meetings and describe the purpose

of the discussions, delineating which

items should be discussed (e.g., the

performance of objectives, not of indi-

vidual measures).

The Rules of Engagement stipulate

that meetings follow a prescribed

schedule—to the quarter hour—to

ensure that over the three or four

hours, participants adhere to strategic

priorities. Following an initial update

on key objectives, participants provide

status reports (exception reporting,

to use time efficiently). The meeting

room, with its large U-shaped table,

is designed to promote interaction

and open discussion. Everyone faces a

large screen that displays a live view of

the automated BSC, and participants

navigate through the BSC, analyzing

performance area by area and mak-

ing recommendations. Over time, the

focus of discussions has shifted from

strategic direction and measurements

to strategic initiatives (“Are we focusing

on the right ones? Are we making the

FIGURE 1: USAMMA’S NEW STRATEGIC GOVERNANCE FRAMEWORK

This schematic shows the frequency and type of meetings, by level of command, along with their focus. DCO = deputy commander of operations; DCS = deputy commander of support (Lapham); and DfA = deputy for acquisition.

right resource allocation decisions?”).

At the agency’s recent strategy re-

newal meeting, leaders decided to add

changes to the strategy map and BSC to

SRM agendas.

Process Mapping and Management

In the late 1990s, USAMMA’s leaders

realized that formalizing process

management would be important for

dealing with an increasingly complex

work environment that demanded

greater accountability. In fact, USAMMA

considers process management, map-

ping, and improvement to be part of

strategy management implementation.

“If you don’t process map,” says Lapham,

“you don’t get to the core of how to

measure the right things, design new

ones, or fix what’s broken. Just docu-

menting them isn’t enough.” USAMMA’s

ISO 9000 activities established process

mapping for maintenance operations,

and the move to Lean Six Sigma requires

even more rigor. Teams have spent an

average of three months developing

the process maps of individual sup-

port functions. This effort, still under

way, will expand process mapping and

management to all key processes; its

completion is expected by late 2010 or

early 2011.

USAMMA’s process maps are “essential-

ly flow charts at different levels,”

according to Lapham. “They indicate

how you get from point A to point B,

and who does what in what order.” For

example, an equipment maintenance

process map would describe how to

inspect equipment, how to turn it in if

something is malfunctioning, and how

to procure replacement equipment.

A process map can be as specific or as

broad as is needed, but putting into

place upstream process metrics (early

warning systems) as well as results

measures is essential. Once you’ve iden-

tified metrics that control for time, cost,

and quality, says Lapham, you align

them to the higher-level BSC measures

to create dashboards, which in turn

allows you to manage the strategically

important operational-level processes.

b a l a n c e d s c o r e c a r d r e p o r t8

Another example of making change happen (fast) in a government organizationAccelerating the Execution Premium Process at the Department of the Interior’s Office of Inspector General

The U.S. Department of the Interior (DOI) protects America’s natural resources

and cultural heritage and supplies energy to the country. Within its oversight are

the National Park Service, the U.S. Fish & Wildlife Service, the Bureau of Indian

Affairs, the Bureau of Land Management, the Minerals Management Service, and

the U.S. Geological Survey. The department’s Office of Inspector General (OIG), an

independent oversight body, audits, investigates, and evaluates DOI programs

and activities.

DOI’s OIG, like other OIGs, historically has uncovered fraud and mismanagement

most often after it has been committed. The office’s new leadership team, which

took control in 2009, wanted to be more proactive and prevent fraud before it took

place. To achieve this goal, leaders sought a more transparent and collaborative

approach to management. Acting Inspector General Mary Kendall also wanted the

OIG to be better able to identify high-risk, high-impact programs, thus enabling it to

apply its limited resources (a $49 million budget and staff of 285) more effectively.

The Kaplan-Norton management system and Execution Premium Process (XPP)

seemed to be the answer for facilitating this proactive, strategy-focused, and

balanced approach.

Rather than allow the Deepwater Horizon oil rig accident

to derail the new strategy management program, OIG

leaders reinforced the importance of completing the

strategy implementation.

In February, Kendall and Chief of Staff Steve Hardgrove began implementing the

XPP. Within five months, the OIG had developed a change agenda, strategy map,

and BSC. In June, it held its first quarterly strategy review meeting (SRM). A Strategy

Management Office is already in place.

How did OIG do all this so quickly? Motivation was a big factor. Besides that, five

teams worked in parallel: the leadership team; a core team; a development team,

which hammered out the strategy map; a validation team, which obtained bottom-

up feedback and buy in; and a measurement team. The teams achieved a major

implementation milestone nearly every week, with one team creating output and

another reviewing and editing it.

Following the April 22 Deepwater Horizon oil rig accident, the Department of

Justice requested that the OIG lead a multiagency investigation; at the same time,

DOI Secretary Salazar requested an in-depth internal review. Rather than allow

the catastrophe and the requested work to derail the new strategy management

program, OIG leaders reinforced the importance of completing the strategy

implementation. “All the elements on our strategy map came together on the local

and regional level,” says Hardgrove, emphasizing that cross-functionality and

communication “were a requirement for [a proper response to] this accident.” The

incident “forced a total blend” of OIG’s audit and investigation sides. “Because

senior staff was thinking more strategically in planning, when the spill occurred,”

OIG was able to devote its regional resources to it. “Now, more than ever,” he adds,

“we need to remain disciplined and focused on our core strategy.”

9s e p t e m b e r – o c t o b e r 2 0 1 0 : v o l u m e 1 2 , n u m b e r 5

Integrating and Improving Financial

Planning

One of USAMMA’s major process im-

provement initiatives—and strategic

priorities—is redesigning its portion of

the Planning, Programming, Budgeting,

and Execution (PPBE) process. The PPBE

is the Department of Defense process

for linking strategy and budgeting. Plan-

ning, done at the highest level, involves

multiyear forecasts. In Programming,

leaders develop the financial require-

ments to support the major endeavors

(programs or sets of projects) identi-

fied in the Planning phase. Budgeting

is where reality enters—where the

ideal goals must be reconciled with the

realities of fiscal constraints, including

allocation changes that occur year to

year.

Such a long time horizon, during which

fiscal realities are subject to change,

makes initiative planning a tremendous

challenge for subordinate agencies.

Five or more years is longer than the

average military person’s tenure at

USAMMA, and the long-range Planning,

Programming, Budgeting efforts occur

as previously planned projects are be-

ing executed. A further complication:

money is allocated to various accounts

intended for certain categories, and

special appropriations sometimes fall

outside the current requirements or

priorities. So funding inputs do not

necessarily match USAMMA’s actual

operational needs.

Besides its “mission dollars” (the fund-

ing USAMMA receives to conduct its

core activities), USAMMA has discretion-

ary funds—its “management money”—

that it uses to execute its performance

excellence program. Until recently,

USAMMA lacked systematic procedures

for maximizing its discretionary dollars.

Lapham knew that applying discretion-

ary dollars to performance excellence

initiatives would enable USAMMA to op-

timize its mission dollars and improve

organizational quality.

Today, the agency’s automated BSC

and strategy map help leaders see

the ramifications of how they apply

discretionary money—for example, in

initiative portfolio management. The

automated system also helps manage

contract vendors. “Instead of constantly

changing underperforming suppliers,

which we can’t always do, for policy or

regulatory reasons, we can manage that

relationship better—or bring the sup-

plier into the fold,” explains Lapham.

USAMMA’s PPBE approach and best use

of discretionary dollars will also help

it optimize its IT budget. Although IT

is funded through core dollars, those

funds don’t fully cover the internal

systems USAMMA must design for itself

for future needs.

Benchmarking with Baldrige

To gauge how well the organization is

performing—and to identify important

performance gaps—USAMMA decided

in late 2009 to conduct its first internal

assessment using the Malcolm Baldrige

National Quality Award criteria. To

ensure the assessment was performed

objectively and to exact standards,

USAMMA relied on a third-party adviser

to create an organizational profile and

an in-depth assessment for every aspect

of its operations, based on the seven

Baldrige categories.

The exercise revealed three perfor-

mance gaps: customer focus and infor-

mation sharing processes, process maps

and measurements (that is, having man-

agement control systems that make

use of the maps and measures), and

management of product data and in-

formation. None, according to Lapham,

was surprising; the meticulous exami-

nation offered “a detailed confirmation

of what we believed we knew.” These

assessment and feedback processes are

now part of USAMMA’s process improve-

ment strategy. The baseline from this

initial assessment provided important

input into USAMMA’s recent annual

strategy refresh.

Extending the View, Embedding the Approach

USAMMA’s performance management

system is, Lapham notes, a work in

progress. As operational processes are

modeled and improved, the agency is

establishing operational dashboards to

monitor performance and results,

including continuous improvements.

The organization is at a pivotal point in

its integrated strategy implementation

path, moving from “project” to “way

of life.” To institutionalize strategy

management and its governance

system—and to safeguard it from the

vagaries of recurring leadership change

every two years—USAMMA is focusing

intently on bolstering the processes,

technologies, and cultural commitment

that will firmly establish this perfor-

mance system for future longevity.

Reprint #B1009B

Michael Brazukas, a managing

director, is based in Palladium’s

Washington, D.C., office. He

is responsible for Palladium’s

government, military, and

mission-based organization

business.

Continue the dialogueMichael Brazukas is leading discussions online

in the private executive forums of XPC. Visit

www.thepalladiumgroup.com/bsr/brazukas.

To learn moreBSR has published several articles on the

BSC and strategy implementation at military

organizations worldwide; consult the BSR

Index, available free via download at web.hbr.

org/se/index.php. Articles on implementa-

tions within the U.S. Army include

“It’s in the Army Now: The U.S. Army’s

Scorecard-Based Transformation,” BSR

September–October 2003 (Reprint #B0309B);

and “Mobilizing for Well-Being: The Army

Medical Department’s BSC Transformation,

BSR May–June 2003 (Reprint #B0305C).

Lapham knew that applying discretionary dollars to performance

excellence initiatives would enable USAMMA to optimize its

mission dollars and improve organizational quality.

In these times of global economic turbu-

lence and constant change, the ability

to implement and execute strategy—

and, most important, sustain it—takes

on new significance.

As Robert Kaplan and David Norton

have written extensively, the Office of

Strategy Management (OSM) is a key

mechanism for implementing strategy—

not merely through its architect/process

custodian/integrator role but also in a

larger sense by helping organizations

adapt strategy to environmental chang-

es, shifting customer requirements, and

evolving organizational capabilities.

However, the OSM cannot fulfill these

roles by itself. Even large, well-staffed

OSMs lack the ability to penetrate and

execute in each business area and SBU.

The most daunting organizational chal-

lenges require human intervention and

action at every level. We believe that

organizations need a network of people

who can act as the “arms” of the OSM,

endowing each area or SBU with the

ability to unlock execution capacity and

ensure the strategy’s sustainability.

Our solution: strategy execution

champions (SECs). A network of SECs

augments the OSM’s ability to support

every aspect of strategy management.

These individuals are, in effect, the

engine within each business area that

generates the energy needed to fulfill

business goals.

Strategy execution champions are

drawn from throughout the organiza-

tion—from key functional areas such

as strategic planning, finance, and IT,

as well as from business lines. Some

SECs are subject matter experts; others,

group heads, are expert in or account-

able for the operations, performance,

and business management of their

given area. Along with the OSM, they

offer long-term guidance and support,

and create a shared vision of success.

By overseeing the appropriate imple-

mentation of the strategy within their

own areas (and, as a network, collec-

tively across the enterprise), they help

the OSM fulfill its role. And by contribut-

ing to making the strategy sustainable

within their own areas, they contribute

to making it sustainable at the organi-

zational level.

In some companies, the role of SEC is

already being performed by someone

in each area. But it is usually not a

formalized role, one with established

processes and procedures necessary to

support the OSM. At Grupo Modelo, we

instituted an SEC team to help us moni-

tor strategy execution at all levels of the

38,000-person company. Without it, the

task would have been virtually impos-

sible. Today, we are building networks

of SECs for several clients.

Implementing an SEC network provides

multiple benefits for an organization.

Boosts execution capability. Most

OSMs are staffed by a handful of

individuals, many of whom juggle this

responsibility with a “day job.” As a

separate group, the OSM has a limited

ability to engage actively in the imple-

mentation and management of strategy

throughout all areas of the enterprise.

Assigning an SEC to each area or SBU ex-

tends the reach of the OSM. As “locals,”

such individuals have greater autonomy

and freedom of movement within their

business areas than outsiders have.

They are also knowledgeable about

their areas’ needs, so they are better

equipped to identify strategic issues

and raise them credibly with the execu-

tive committee for resolution.

Ensures the sustainability of the

strategy. Formalizing the strategy

management process throughout the

organization helps mitigate the risk

of employees viewing strategy as yet

another project or merely the subject of

an annual meeting. The SEC approach

engages more people, involving them

in specific strategy-related activities

throughout the year that integrate and

synchronize with other key processes.

Improves communication and coop-

eration among business areas and

SBUs. A network of SECs ensures that

the organization’s functional areas

get the representation they need. This

helps uncover critical issues in a timely

manner, improving decision making

and enabling the organization to be

Beyond the OSM: Strategy Execution Champions Help Foster Strategy Execution Capability By Marina Mier y Terán Cuevas, Partner and Director of

Knowledge Management, and Maria José Ortega Moncada,

Partner and Director of Marketing, Ilimite Consulting (Mexico City)

As architect, process custodian, and integrator, the Office of Strat-

egy Management (OSM) plays an instrumental role in enterprise

strategy management. But it can’t do the job alone. And while

cross-functional theme teams perform many on-the-ground

aspects of the strategy management function, there’s yet another

important set of players in strategy management: strategy execu-

tion champions. These individuals, drawn from every key operating

area and SBU across the enterprise, serve as the “arms” of the OSM,

helping execute and sustain the strategy. The authors, former

strategy professionals at 2008 Palladium BSC Hall of Fame winner

Grupo Modelo, discuss this approach—one they are now helping

organizations throughout Latin America implement.

STRATEGY MANAGEMENT OFFICER

b a l a n c e d s c o r e c a r d r e p o r t10

more agile and flexible amid a changing

environment.

Promotes accountability. The presence

of an SEC network reflects the organiza-

tion’s commitment to achieving its stra-

tegic goals. Each SEC assumes responsi-

bility for the Balanced Scorecard within

his or her area and pushes objective and

initiative owners to develop ideas for

constant improvement.

What Do Strategy Execution Champions Do?

In some organizations the OSM is

charged with integrating (in a timely,

sequenced manner) the various business

and operational processes and functions

in order to align operations to strategy.

This is a tremendous responsibility for

what is usually a modestly staffed group.

SECs can provide significant support, in

particular by

• Managing and communicating the

strategy in their respective areas

• Overseeing their respective areas’

strategy-related activities and com-

municating constantly with the local

leadership team about issues related to

strategy management

• Serving as a liaison between the OSM

and their respective areas

• Conducting strategy analysis meetings

• Uncovering strategic challenges, such

as aligning SBU goals with corporate’s

or jump-starting a stalled initiative

Let’s look at SECs’ responsibilities within

specific strategy management processes.

Aiding in the Design of the

Strategy Cycle

Every year, the OSM incorporates any

missing processes into the strategy plan-

ning cycle to improve the alignment of

operations with strategy. SECs support

the OSM in this task by identifying any

such key processes in their respective

areas that may affect the strategy cycle.

Once the cycle is updated, they help

integrate these processes in an orderly

manner and monitor them (and their de-

liverables) throughout the year. Consider,

for example, the individual employee

performance evaluation process; it can

begin only after strategic goals have

have been defined (otherwise employ-

ees’ performance will not be aligned to

the strategy).

Contributing to Strategy Development

Most companies have a department or

area that is responsible for strategic

planning or strategy development. In

some cases, it is the OSM itself. SECs can

enrich the strategic planning process

through their knowledge of their own

areas. Information they provide can help

substantiate the various analyses, inter-

nal and external, used in the planning

process that help validate and define the

organizational strategy.

SECs also play a feedback role, dis-

seminating and promoting the mission,

vision, and values that are the founda-

tion of the new strategy within their

respective areas of the company.

Contributing to Strategic Planning

Once the strategy has been developed

(or updated), the OSM is responsible for

overseeing its translation into opera-

tional terms through the BSC. However,

before the enterprise BSC is finalized,

SECs should point out any concerns

or problems—for example, a missing

objective or misaligned goal—that, if

remedied up front, could help improve

the articulation of strategic objectives

or sharpen key performance indicators.

Such input advances the organization’s

strategy management maturity.

Aligning the Organization

Here’s where SECs play their most active

role—a role we consider a critical suc-

cess factor for strategic alignment.

Once the enterprise BSC is updated, SECs

begin cascading the strategy to their

respective areas. Among their respon-

sibilities is identifying objectives and

indicators that could be shared by two or

more areas. They hold interdepartmental

or inter-unit meetings to validate the

11s e p t e m b e r – o c t o b e r 2 0 1 0 : v o l u m e 1 2 , n u m b e r 5

Strategic Theme Teams vs. Strategy Execution Champions:What’s the Differ-ence?

A strategic theme team is by nature

cross functional; it is responsible

for achieving the goals of a given

strategic theme from the enterprise

strategy map. A strategy execution

champion is responsible for moni-

toring strategy execution within a

given business or functional area or

SBU. Theme teams and SECs work to-

gether to create synergies and close

operational gaps. In that respect,

they complement each other. And we

believe that both roles are necessary.

So how do they differ?

Strategic theme teams view strategy

in terms of theme “blocks.” Gener-

ally, a senior executive is appointed

“owner” of the theme to establish

accountability. A value gap is set for

each strategic theme. Theme teams

develop synergies among multiple

functional areas and SBUs and

conduct cross-functional activities to

accomplish their goals. They organize

their efforts by cascading strategic

themes throughout the organiza-

tion’s strategy maps.

Strategy execution champions view

strategy by functional area. Each SEC

supports his or her area’s director by

monitoring strategy execution at the

local level. SECs are expert in their

areas, which means they can better

understand and manage strategy.

As a result, they are also better

equipped to uncover any stumbling

blocks or other problems related to

strategy execution in their areas.

Finally, having an SEC network

ensures that functional areas are

represented in the OSM.

value proposition of the support areas

and SBUs as well as define how each

area contributes to enterprise strategy.

SECs also use the strategy map to com-

municate everyone’s contribution to the

strategy, thus helping align the indi-

viduals’ performance to the business’s

goals. Although the individual employee

performance evaluation process is gen-

erally managed by human resources, the

OSM and the SECs are both responsible

for ensuring the alignment of individual

employees to the strategy. Specifically,

SECs should

• Put in place mechanisms that promote

the alignment of individual employees’

performance to strategic objectives;

for example, a performance matrix that

matches strategic objectives and initia-

tives with strategic job positions

• Ensure that the goals listed on individ-

ual employee performance evaluations

conform to the company’s established

goals

• Ensure that incentives are based on

performance

Without well-defined, aligned, and

approved strategic goals, it is difficult

to begin implementing projects and

therefore to measure performance and

progress toward the strategy.

SECs also play an important role in the

goal-setting process. They help

• Ensure that financial strategic goals are

aligned to the budget

• Define targets for all indicators, both

financial and nonfinancial

• Ensure that the goals identified for

their respective areas help advance

enterprise goals

• Define targets for all indicators, both

financial and nonfinancial

• Make sure that goals are appropriately

ambitious and yet achievable

• See that goals do not change constant-

ly so that the organization can gain

stability in its strategy management

process. When adjustments are made,

SECs ensure they are communicated

in advance to the OSM, to maintain

alignment.

Finally, SECs complement the work of

the project management office by ensur-

ing that projects are in fact contributing

to the strategy. They do so by measuring

the projects’ performance against key

performance metrics at strategy review

meetings (SRMs).

Supporting Strategy Review Meetings

At many companies, the OSM is respon-

sible for coordinating the SRMs. This

means that considerable time is taken

up with preparation activities, often at

the expense of performance analysis.

The result: SRMs can end up merely as

performance reporting meetings instead

of forums where new ideas—ones that

might advance performance or the

strategy—can flow freely.

Each SEC should be responsible for

developing and moderating the SRM in

his or her area. In that way, the executive

team can focus exclusively on strategy.

Because SECs promote the sharing of

strategy management best practices

across their areas, we recommend that

the network hold meetings throughout

the year in addition to the calendar-

related, strategy cycle meetings. For

example, every January the organization

may be preparing for individual employ-

ee performance evaluations as well as

getting ready to update the BSC and set

the strategy management cycle calendar

for the year. To ensure that all SECs are

aligned and coordinated in these efforts,

they should convene for a briefing by the

OSM and to coordinate among them-

selves. (See Figure 1.)

Selecting Strategy Execution Champions

What competencies must SECs possess?

Besides having extensive knowledge of

their individual department or area, they

must first and foremost have strategic

vision and leadership and must be

proactive. They should also be results

oriented, persuasive, and adaptable

to change. They should value and

demonstrate teamwork, have strong

interpersonal relationships, show

planning acumen, and possess good

oral and written communication skills.

SECs should be selected by the directors

of each area or SBU and confirmed by

the CEO. In addition to having the appro-

priate knowledge and skills, SECs need

to have authority. Their authority is not

b a l a n c e d s c o r e c a r d r e p o r t12

FIGURE 1: A RECOMMENDED CALENDAR OF MEETINGS FOR STRATEGY EXECUTION CHAMPIONS

Besides participating in strategy review meetings, SECs should hold separate meetings to share information and best practices related to strategy manage-ment events that occur throughout the year.

January meeting • Preparing for employee performance evaluation process • Updating BSCs and shared objectives among areas and units • Setting the new strategy management cycle

March meeting • Developing the annual strategy communication plan

May meeting • Making any necessary adjustments to the individual performance evaluation process

July meeting • Preparing for annual strategy offsite

September meeting • Preparing for budget process

November meeting • Getting ready for workshops to update unit and departmental BSCs • Defining and finalizing strategic goals • Defining and prioritizing strategic initiatives

sample topics for strategy execution champion meetings

13s e p t e m b e r – o c t o b e r 2 0 1 0 : v o l u m e 1 2 , n u m b e r 5

necessarily dependent on their senior-

ity; it’s a matter of their competence—

that they are respected and therefore

credible and influential.

In some companies, some candidates

have the requisite knowledge and

skills but lack the necessary authority.

The result is that operational activi-

ties get done, but decisions are made

slowly. Elsewhere, the SEC may have the

requisite authority (so decisions aren’t

dragged out) but lack the hands-on

skills that allow operational activities

to be carried out promptly.

Because it’s not always possible to

get the right mix of authority and

competencies in every SEC candidate,

it’s a good idea to strengthen the SEC

network by adding one or more people

who can support operational or admin-

istrative activities, such as scheduling

strategy analysis meetings and updat-

ing scorecard data.

How many SECs will you need? That

depends on the nature of your organiza-

tion and on the needs of each area. In

an organization where production is the

core business, there might be three SECs

in the production area and only one

in each other area. In our experience,

though, every area or SBU should have

at least one SEC as well as someone

from her own team who helps the SEC

perform the administrative work.

Before they delve into their new role,

it is important to explain to SECs the

purpose and functions of the SEC

network and their new responsibilities.

Explain the benefits of SEC service, not

only to the company but also to each

of them personally and professionally:

having an integral vision of the orga-

nization and its goals, learning to be

a change agent, getting exposure and

being visible to management, facilitat-

ing decision making, and learning a new

methodology (the BSC).

Address what is generally their biggest

concern: how much of their time this

new role might take. There are several

processes throughout the year during

which they’ll need to support the OSM,

but the main event is SRM development

and follow-up. (See Figure 2.)

A training session is a valuable first

step. Here, you can also address their

questions and concerns and present

them with the tools they will need

to fulfill their new roles, such as the

Balanced Scorecard methodology,

the software used for SRMs, and the

elements of the individual employee

performance process. The CEO should

kick off the program to reflect the high-

est level of support for and sponsorship

of this new role.

With a network of strategy execution

champions to complement your OSM,

you can bolster your organization’s

execution capacity and make strategy

management the critical process it

needs to be.

Continue the dialogueWhat do you think of the concept of strategy

execution champions? Share your thoughts

with other strategy professionals—and your

questions with the authors—at

www.thepalladiumgroup.com/bsr/cuevas.

Reprint #B1009C

Marina Mier y Terán Cuevas

cofounded Ilimite in the fall of

2009. Ilimite’s clients include

Roche Pharma, Hipotecaria

Total, Infonavit, Sociedad Hipo-

tecaria Federal, and Conagua.

She is a former senior manager

of strategy management at

Grupo Modelo, a 2008 Palla-

dium BSC Hall of Fame winner.

To learn moreTwo related articles we recommend: “Building

the Theme Team: A Step-by-Step Guide,” BSR

May–June 2010 (Reprint #B1005D); and “The

Office of Strategy Management: Emerging

Roles and Responsibilities,” BSR July–August

2008 (Reprint #B0807A).

You can also read about Grupo Modelo’s

strategy management program in the Balanced

Scorecard 2009 Hall of Fame Report, available

at web.hbr.org/se/hall-of-fame.php.

13

FIGURE 2: AN INTEGRATED CALENDAR OF SEC MEETINGS

This timeline indicates where the SEC network’s meetings would fall within SRMs and overall strategy management events.

Supporting: Communication Plan | Performance of the Strategic Initiatives

Designing theStrategic Cycle

Aligning theOrganization

Aligning theOrganization

Validating the Strategic

Goals

Updating the area’s BSC

Developingthe Strategy

Planningthe Strategy

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Maria José Ortega Moncada,

Ilimite’s marketing director,

was formerly strategic

management coordinator

at Grupo Modelo.

14

It’s no secret that many public sector

employees feel a sense of entitlement

when it comes to their jobs. And why

shouldn’t they? Their employers seldom

go out of business, and job security

tends to be greater than in the private

sector. Yet many public sector employ-

ees also nurture a genuine desire to

serve society. But unleashing that pas-

sion to serve can prove challenging in

organizations characterized by complex

bureaucratic structures and compla-

cency in some of the ranks.

Nevertheless, some public agencies

have managed to overcome these

challenges. Using the Balanced Score-

card as the central mechanism, they

implement practices that transform the

stereotypical civil service mind-set to a

laser-sharp focus on the customer.

Energized around the strategy, employ-

ees identify with the organization, rath-

er than with their own jobs or areas.

And they make a measurable, positive

difference for their constituents.

Consider the following examples from

organizations that include Palladium

Balanced Scorecard Hall of Fame

members.

Hold All Employees Accountable for Satisfying Customers

All employees—not just higher-ups—

must be accountable for satisfying

customers. Atlanta-based Fulton County

School System (a 2003 Hall of Fame

winner) is an apt example. The organi-

zation faced big challenges, including

increasing racial, ethnic, and economic

diversity in its student body, as well as

size (83 schools, 9,500 employees, 73,000

students, and a $600 million budget).

Previously, Fulton County had used a

bottom-up management approach,

aggregating individual schools’ priori-

ties to determine systemwide goals. Yet

many of these goals weren’t measur-

able. The school system then adopted

a management approach based on the

Malcolm Balridge Award criteria, but

failed to link it to clearly defined perfor-

mance improvements.

When executives decided to adopt the

BSC, they made some valuable changes,

including clearly defining goals. But

the one that may have helped most to

focus the workforce on its “customers”

was the adoption of top-to-bottom

accountability. Fulton County decided

to hold everyone, and not only teach-

ers, accountable for promoting student

achievement. It began evaluating all

staff—teachers, principals, cafeteria

managers, school bus drivers—against

scorecard measures centering on

everything from strengthening students’

critical thinking skills to ensuring that

they were well nourished and arrived at

school on time and safely. The collective

effort paid off. As just one example, in

five years, students’ SAT scores went

from meeting the national average to

exceeding it by 23 points.

Another way to hold all employees

accountable for satisfying custom-

ers is to provide rigorous training and

developmental experiences, along with

no-holds-barred feedback on strategic

performance. Florida’s Miami-Dade

County government is a case in point.

After interest in measuring perfor-

mance within public sector organiza-

tions intensified during the late 1990s,

the county assembled a blue ribbon

panel to develop a strategic plan—its

first. The panel gathered community

leaders’ input on the plan, which re-

sulted in a heavy emphasis on resident

satisfaction.

After launching a BSC program to

execute the new plan, the county began

providing all new employees—and

not just customer-facing ones—with

online customer-service training to

help foster a customer-service mind-set

throughout the entire organization. In

addition, it encouraged departments to

design their own leadership develop-

ment opportunities for managers. For

instance, the Solid Waste department

began rotating who conducts each of

its strategy review meetings. These

experiences encouraged people to feel

a sense of ownership of their scorecard

and to see themselves as leaders.

To generate performance feedback for

employees, Miami-Dade also began

conducting county resident satisfaction

surveys every two to three years and

launched an initiative akin to a secret-

shopper program. “Shoppers” phone

a county department, ask questions,

and evaluate the quality of the services

they’ve received. Findings are cycled

back to employees so they can address

any problems.

These efforts have led to concrete

improvements in service quality and

resident satisfaction. For example, in

three years, 13% more residents ex-

pressed satisfaction with the quality

of road signs, and the number of

complaints regarding trash removal

fell dramatically. Customer perceptions

From Civil Service to Customer Focus: How Public Sector Organizations Energize Their Workforce Around StrategyBy Lauren Keller Johnson, Contributing Writer

In the best public sector organizations, “good enough for govern-

ment work” doesn’t cut it anymore. These high-performing entities

know how to unleash employees’ passion to serve—replacing

the traditional sense of entitlement with a sharp focus on the

customer. Private sector organizations, take note.

b a l a n c e d s c o r e c a r d r e p o r t

15s e p t e m b e r – o c t o b e r 2 0 1 0 : v o l u m e 1 2 , n u m b e r 5

of employees as courteous and profes-

sional also improved.

Provide the Right Incentives

Incentives also play a key role in focus-

ing employees’ attention on customers.

Take Busan Metropolitan City (BMC),

a 2008 Hall of Fame inductee. South

Korea’s second largest city, BMC had

become a semiautonomous municipal

government, funded in part by the

federal government and in part by city

tax revenues. This change brought

new challenges. For instance, height-

ened media coverage raised citizens’

awareness of government activities

and policy, which in turn raised their

service expectations. Yet a tradition of

guaranteed lifetime employment and

a seniority-based reward system had

left the workforce uninterested in

mustering the effort needed to meet

those challenges.

After the Korean central government

adopted the BSC and introduced it to

municipal governments, BMC volun-

teered to be Korea’s first city user of the

methodology. The municipality defined

new goals centered on improving the

quality of life in Busan through more

transparent, citizen-oriented manage-

ment and customer-service excellence.

It then introduced incentives to ensure

achievement of those goals. For in-

stance, it established “job performance

contracts” linked to specific scorecard

objectives and updated the contracts

annually. Bonuses and promotional

opportunities for department heads

and team members were tied to targets,

and performance against key objectives

constituted 25% of the overall perfor-

mance evaluation of managers at or

below the assistant manager level.

Such initiatives translated into

enhanced quality of life in Busan. For

example, over three years, customer

satisfaction rose, as did the number

of jobs created for the elderly and the

financial benefits per citizen (revenues

divided by number of citizens).

Leverage Information Technology

Performance management technol-

ogy has further enabled savvy public

agencies to rivet employees’ attention

on customer service. Busan excelled

in this area as well. The city put in

place a strategy information system it

called Danuri (“embrace everything” in

Korean). Danuri integrated its cus-

tomer relationship management (CRM),

business process management, and

knowledge management systems, and

was accessible to all citizens. Indeed,

citizen panels began regularly using

Danuri to evaluate BMC’s performance.

The city also started commissioning

yearly customer satisfaction surveys

of employees. Citizens who visited City

Hall with a public service purpose and

who received city services provided

their input, along with some who were

selected randomly. BMC fed the data

into Danuri’s CRM component and

counted evaluations from citizen panels

and survey results in employee perfor-

mance assessments.

Link the Budget to Customer- Related Strategic Initiatives

By linking the budgeting process to

strategic initiatives related to customer

service, public sector organizations

stand an even greater chance of foster-

ing a customer focus among employees.

The Barcelona City Council (a 2010 Hall of

Fame winner) offers a good illustration.

Barcelona consists of 10 sectors (such

as social services, economic develop-

ment, and education and culture) plus

10 geographic districts; employs 13,000

people; and manages a budget of €2.7

million. It adopted the BSC to surmount

such challenges as heightened demand

for more convenient services from resi-

dents, increased demographic diversity

thanks to the open borders that came

with membership in the European

Union, and the need to sustain tourism

(a key revenue source) in the face of the

global recession.

Balanced Scorecard Report

A joint publication of Palladium

Group, Inc., and Harvard Business

Publishing

Editorial Advisers

Robert S. Kaplan

Professor, Harvard Business School

David P. Norton

Director and Founder,

Palladium Group, Inc.

Publishers

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Managing Director,

Palladium Group, Inc.

Joshua Macht

Group Publisher

Harvard Business Review Group

Executive Editor

Randall H. Russell

VP/Director of Research,

Palladium Group, Inc.

Editor

Janice Koch

Palladium Group, Inc.

Copyright © 2010 by Harvard Business

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Material may not be reproduced in whole

or in part in any form whatsoever without

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As part of its scorecard program, the

city began linking its budgeting process

to its strategic initiatives. These initia-

tives were developed specifically to

meet the political mandates of the

municipal government in power, which

changes through elections every four

years. Beforehand, managers had sim-

ply referred to the previous year’s bud-

get to create the current budget. But

now they had to show how the funds

they wanted would support execution

of specific strategic initiatives. And they

had to answer questions about how

effectively they were using those funds.

To enhance citizen satisfaction, Barce-

lona launched initiatives related to im-

proving street cleanliness and assigned

funds to the projects. If satisfaction with

street cleanliness declined, the manager

responsible for that initiative and that

part of the budget faced questions,

such as, “Are you spending all of the

funds allocated for this initiative?” and,

“Are you under budget?” If customer

satisfaction met or exceeded targeted

performance and the manager had not

used all the allocated funds, discussion

centered on how unused funds could be

channeled into initiatives that weren’t

performing as well.

Thanks to such changes, Barcelona’s

senior managers—who previously dem-

onstrated lukewarm motivation—now

take a keen interest in improving their

performance. If results on a particular

strategic objective (such as customer

satisfaction with speed of service)

are disappointing, district and sector

leaders demand detailed performance

data, as well as assistance in analyzing

potential causes of the problem.

Engage Customers in Performance Improvement

Some exemplary public entities have

actively engaged customers in their

performance management efforts. Take

Iloilo City in the Philippines (a 2009 Hall

of Fame inductee). The city adopted the

BSC with the help of the Institute for

Solidarity in Asia, a nonprofit organi-

zation promoting good governance

throughout East Asia’s public and

private sectors. Iloilo’s goals included

addressing problems such as inefficien-

cy in public services, citizen perceptions

of government workers as incompetent,

and employee resistance to improve-

ment initiatives.

From the start, the city involved its

constituents in its performance

improvement drive. It established a

72-member multisectoral coalition to

develop Iloilo’s charter statement, strat-

egy maps, and scorecards. This coalition

also began administering execution

of the strategy, in part by formulating

and monitoring strategic initiatives. Its

members hailed from a diverse array of

customers, ranging from youth groups,

nongovernmental agencies, business

clubs, and the Chamber of Commerce

to media, village governments, environ-

mental groups, and civic clubs.

Involving constituents has paid off

handsomely. One example is an initiative

centered on automating the business-

permit application and approval process

to improve efficiencies and make the

city more business friendly. The effort

reduced permit-processing time by 43%

and lowered administrative costs by

63%. The number of business permits

renewed rose 53%, and revenues gath-

ered from the process increased 57%.

Transforming a civil service mind-set

into a laser-sharp focus on the customer

isn’t easy in a public sector organization.

But it is possible—with the application

of a few powerful practices—to put the

“serve” back in “civil service.”

Getting Customer Focused

Hold all employees accountable for

satisfying customers.

• Identify how employees at each level

of your organization can help meet

key customer-related needs.

• Establish performance metrics, and

help employees track progress on

them.

Provide the right incentives.

• Link job performance goals to specific

scorecard measures.

• Tie bonuses and other incentives

to performance on the identified

measures.

Leverage IT.

• Provide an online picture of perfor-

mance and feed data into the system

in real time, if possible.

• Give employees and customers

access to the system.

Link the budget to customer-

related initiatives.

• Require managers to show how

the funds they’re requesting will

support achievement of strategic

initiatives designed to improve

customer service.

• Challenge managers to justify how

they’re using those funds.

Engage customers in performance

improvement.

• Involve constituents in defining your

organization’s strategy, objectives,

and measures.

• Make constituents active partners in

executing strategy by involving them

in defining and managing customer-

related strategic initiatives.

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To learn moreEach BSC Hall of Fame organization cited here

is profiled in the Hall of Fame report published

in the calendar year following its induction.

Visit web.hbr.org/se/hall-of-fame.php.