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AN ANALYSIS OF STRATEGIC ALIGNMENT TOOLS
Johan Hough*, Konrad Liebig**
Abstract
This article analyses strategic alignment and the tools that companies can utilise to create business or
organizational alignment. We follow a theoretical approach to identify the alignment processes,
establish various levels and tools of strategic alignment and point out the reasons for misalignment.
The results show that strategic alignment is a process and that different levels of business alignment
exist in organizations. Recommendations for businesses include awareness of misalignment and the
interaction between the strategy process, tools that can be used and the benefits of using Balanced
Scorecards on Corporate, Business Unit and Staff levels to create a more aligned organization. This will
ensure line-of-sight or alignment on all levels of the business.
Keywords: Strategic Alignment, Levels of Business Alignment, Balanced Scorecard, Strategy Map
*U niv er sity of Ste llen bos ch, So uth A fr ic a
E mai l: jh o ug h@ s u n. ac .z a
** Unive rsity o f St ellen bo sch , S outh Af rica
1. INTRODUCTION AND OBJECTIVES
There are three major objectives of this article.
Firstly, it will diagnose the strategic alignment
domain. Secondly, various levels of strategic
alignment (SA) and “killers” of SA will be identified.
Thirdly, the tools of SA will be discussed. And
finally, recommendations will be suggested on how to
integrate these tools for overall business or
organizational alignment.
2. STRATEGIC ALIGNMENT
6
(SA) AND
PROCESSES
Defining SA
Strategic alignment is the process in which the
formerly developed strategy is executed and cascaded
throughout the organization. It includes the calibration
of the organization’s culture, staff, structure and
governance with the strategy. In the end every
member of the organization should know and see his
or her contribution to the organization’s strategy
(Kaplan & Norton 2006). Alignment is a necessary
condition for organizational effectiveness. In a well
aligned organization there is a common agreement
about goals and means. Through that, all parts,
members and functions of the organization work
towards the same purpose (Fonvielle & Carr 2001).
Organizational alignment is part of strategic
alignment in which the organizational structure gets
aligned (Kaplan & Norton 2001b).
6
Strategic alignment and alignment will be used
interchangeably in this article.
Levels of alignment
This article uses a distinction between Vertical and
Horizontal Alignment. Vertical Alignment means the
transfer of the company’s vision and mission with
specific strategic goals down the organizational
hierarchy. Hence, the corporate strategy has to be
transformed into performance plans for each SBU and
department. Even further down these performance
plans have to be split into performance contracts for
each member of the staff. Like that a Line-of-Sight
from the lowest organizational level to the top and
vice versa is created, shown in figure 1.
In contrast, Horizontal Alignment means the
harmonization of strategic goals and performance
measures used in the different business units. They
have to be comparable to provide the corporate
management with sufficient information as a basis for
strategic decision-making. Furthermore, assessing and
reviewing the performances of the business units
combined with steady exchange of information
between them can boost individual performances
through the sharing of best practices. Thus, Horizontal
Alignment is strongly related to the principles of
benchmarking.
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Figure 1. Line-of-Sight
Individual
Business Unit
Organization
Line of Sight
Line of Sight
Source: See Hough et al. 2011
Gap between high and under-performing
companies
Unfortunately this challenge is not easy to master.
Kaplan and Norton (2001b) identified five areas in
which a company has to implement and establish its
strategy to reach Strategic Alignment and become a
so called “Strategy Focused Organization”. In a later
study (see Kaplan & Norton 2006) they established a
SFO benchmark and concluded that there are big gaps
between highest performers (“Hall of Fame”) and two
other reference groups (high-benefit and low-benefit
users) using their instrument Balanced Scorecard
(BSC) to implement their strategies.
Figure 2. Gap in Organizational Alignment
Source: Kaplan & Norton 2006
Understanding the reasons for these gaps is a
crucial task for all under-performing companies and
their top management teams. Having that in mind it is
not surprising that Powell (1992) identified the
organizational alignment skills of a company as a
source for competitive advantage. Thus, a company
can not only differentiate itself from its competitors
by following a unique or superior strategy but also by
making the whole organization really serve the
purpose of the strategy.
In a recent research by Hough (2012) he found
that management in South Africa and Botswana lags
the global trend in terms of alignment. Figure 3
indicates the difference between the gaps found by
Kaplan & Norton and the South African one.
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Figure 3. Gap in Organizational Alignment
Source: Adapted from Kaplan & Norton 2006 and Hough (2012)
3. SILENT KILLERS OF STRATEGIC
ALIGNMENT
The creation of Strategic alignment in an organization
is facing a lot of barriers. These barriers have to be
overcome to successfully implement a strategy in an
organization. The problem is that many barriers are
lying under the surface. They are rarely publicly
acknowledged or explicitly addressed. That is the
reason why Beer and Eisenstat (2000) identified some
barriers as the “Silent Killers” of strategy
implementation:
• Unclear strategy with conflicting priorities
• A lack of effectiveness in the top management
team
• An inappropriate leadership style (too top-down
or too laissez-faire)
• Poor coordination between the different business
divisions, functions and/or geographic regions
• A lack of leadership skills
• Poor vertical communication
Beer and Eisenstat (2000) see the poor vertical
communication as the most difficult one of the “Silent
Killers” because it prevents the organization not only
from the strategy alignment but also from the
discussion and abolishment of the other barriers.
Thus, a lack of communication leverages the effects
of the other barriers and needs to be addressed by the
management immediately.
The fact that these barriers are connected to each
other can boost the difficulties to fight them even
more (Beer et al. 2005). Those dynamics that can
make the barriers self-sealing are shown in Figure 4.
An ineffective top team, an unclear strategy with
conflicting priorities and a management style that is
too controlling or too disengaged are all interacting
and preventing the top management to clearly
communicate a strategy to the organization. That
leads to a situation in which the top team is not able to
overcome the natural differentiation of interests in a
multifunctional organization and finally to a poor
coordination between the different businesses and
functions. Finally, an inadequate leadership style in
the top team cannot foster leadership skills down the
line in the organization.
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Figure 4. Dynamics of an unfit Organization
Source: Beer et al. 2005
Misalignment
The denial or neglect of Strategic Alignment issues
can lead to massive problems within an organization.
The outcome of such behaviour can be various but in
general it leads to a situation in which the reality of
each employee’s work is not related to the formerly
planned strategy of the top management team. Thus,
the implementation of the strategy failed and we talk
about “misalignment”. According to Fonvielle and
Carr (2001) this state can have several forms:
• Individuals have different goals or they share the
same goals but disagree how to reach them.
• There are “Warring camps” within the
organization which hinder the commitment to
shared goals
• Group members are not convinced of the need for
proposed action
• People do not know the organization´s goals
Misalignment leads to a situation in which
people work towards different goals with cross
purposes. The actions then become less effective and
the organization´s needs are predominated by
functional or individual objectives. Morale and
productivity suffer in those settings and the
organization becomes vulnerable to competitors and
market forces (Fonvielle/Carr 2001).
4. TOOLS OF STRATEGIC ALIGNMENT
One of the major goals of this article is the provision
of proper instruments to achieve and ensure Strategic
Alignment and, thus, to overcome the previously
discussed problems. Hence, this section takes a closer
look at the literature related to management tools and
strategic management processes that are particularly
designed in regard to Strategic Alignment problems or
are closely related to it.
Aligning processes
A number of researchers concentrated on the
development of management processes respectively
of the adaptation of strategic planning processes with
the aim to ensure a satisfactory regard of Strategic
Alignment. In this chapter two of such step-by-step
processes are introduced, the first one by Fonvielle
and Carr (2001) and the second one by Beer et al.
(2005).
Fonvielle and Carr (2001) identified Alignment
as a key factor for organizational effectiveness and
see a big danger for a company’s success in
Misalignment. To overcome such a situation they
developed a six step process to achieve Strategic
Alignment. In their eyes measurement plays a key
role in this process because it is the main tool to
communicate goals and to see the contributions to
these goals. Their six steps are as follows:
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1 Articulation of the key strategic drivers of the
business and the main areas of focus for the
organization’s success.
2 Definition of critical strategic goals.
3 Development of performance measures for each
of these goals.
4 Communicate the measures and make sure
everyone understands the measures and their
linkage to the strategic goals.
5 Linkage of each measure to a formal feedback
and recognition system and communication of the
results.
6 Formally reviewing the goals´ performance and
developing corrective actions.
Beyond this strategy alignment process there are
two additional important considerations
(Fonvielle/Carr 2001). The first one is internal
communication. It is a precondition for successful
alignment because it represents the linkage between
planning and practice. The internal communication
process has to make sure that the entire workforce
fully understands its role and the expectations to them
in achieving the strategic goals.
The second one is a system of reward and
recognition (Fonvielle/Carr 2001). Compensation is
traditionally seen as a major driver of employee
behaviour even if the role of intrinsic motives should
not be underestimated. Rewards are crucial to
overcome personal subjective goals of individuals and
functions to make them serve the overarching goals of
the whole organization.
Beer et al. (2005) developed another step-by-
step process to implement a strategy. They called it
Strategic Fitness Process (SFP). It was developed due
to the realization that even excellently developed
strategies are blocked by organizational and
management problems. According to Beer et al.
(2005) the SFP process consists of the following six
steps:
1 Developing a precise strategy and articulate it in
a ‘Statement of Strategic and Organizational
Direction’.
2 Collecting data about the barriers and strengths in
implementing the strategy in the organization by
interviewing key people (about 100 from all parts
of the organization). The interviews are done by a
cross-functional Fitness Task Force.
3 They develop a list of these barriers and
strengths. The Task Force provides feedback to
the top management team. Development of an
integrated plan for change. First the top
management develops a systemic diagnosis of the
organization.
4 This plan is then criticized by the Task Force
before the two teams change the plan
collaboratively.
5 The plan is introduced to the 100 key people who
were interviewed before. Here the process of
implementation begins.
6 The process is redone every year and becomes
part of the strategic planning process.
However, Beer et al. (2005) have also found
three major limitations respectively conditions needed
to ensure the success of the SFP process. First, the
company’s leaders have to recognize the gap between
strategy development and its execution. Second, they
must be willing to confront conflict in the process of
implementation. Third, the SFP is much less
challenging when the corporate culture itself is
participative and open to changes.
Obviously these Aligning processes are just
basic frameworks which have to be adjusted to each
individual organization and they do not take any
possible area of problems into consideration like one
can see from the differences between the two
processes. The first one by Fonvielle and Carr (2001)
is much more concerned about measurement issues
while Beer et al. (2005) put their focus on
communicational and motivational problems.
However, they show how difficult it can be to start an
Alignment process and how different first steps into
Alignment can look like.
THE BALANCED SCORECARD
Basically the Balanced Scorecard (BSC) is a
management tool to measure a company´s or business
unit´s performance with regard to the strategic
objectives of the company. It was developed to handle
shortcomings of traditional performance measures,
typically financial ones focussing on costs, profits and
returns on investments. Those are often insufficient
guides for decision making in today´s rapidly
changing and highly competitive business
environment because they are not able to measure
intangible assets, include a time lag in outcome
measurement and are too short-term focused
(Cobbold et al. 2004), Lawrie/Cobbold 2004,
Malina/Selto 2001.
The BSC converts an organization´s vision and
mission into a set of performance and action measures
(Kaplan/Norton 1996b). Doing so, it goes far beyond
conventional accounting by introducing a more
holistic point of view (Voelker/Rakich/French 2001).
The BSC is considered balanced because it combines
measures of several (typically four) different
perspectives.
The BSC allows the incorporation of both
quantitative and abstract measures of significant
importance to the organization. Every selected
measure should be part of interconnected cause-and-
effect relationships leading to the achievement of the
long-run strategic objectives, in profit organizations
typically financial performance (Kaplan/Norton
1996c). The other measures should link these
objectives to a sequence of actions which have to be
done to satisfy the goals. So the BSC is supposed to
provide a comprehensive view of organizational
performance (Kaplan/Norton 1996a). Anyway it is
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crucial to identify the few critical parameters that
represent the organization´s strategy for long-term
value creation (Kaplan/Norton 2004).
Another important application of the BSC is the
translation and communication of strategic objectives
into operational terms in business units and functions
further down the organizational hierarchy (Joseph
2009). The process of transforming the original
strategic objectives into tactical plans for business
units and finally performance goals for individual
employees is called Cascading (Niven 2002) and is
explained in detail in the section “The Cascading
Process”.
Weaknesses of Financial Measures
Financial measures are, of course, important. The
main purpose of any profit-seeking enterprise is
financial and can just be assessed financially, e.g.
through Returns on Investment (ROI). However, they
are often inadequate in measuring the performance of
strategy and, therefore, as a basis for strategic
decision-making (Kaplan/Norton 1992). These
limitations have been recognized for a long time
already (e.g. Dearden 1969). There are several reasons
for this that are discussed in the following.
Financial measures are just able to measure
physical assets and cannot reflect the value of
intangible assets even though intangible assets are
seen as much more important for an even bigger part
of many today´s company´s market value
(Kaplan/Norton 2004). Tangible assets can for
example hardly explain the market values of
companies like Google, Apple or Facebook. So, the
value of staff competence or brand image cannot be
reflected by conventional financial measures even if
these assets imply a big competitive advantage which
could be crucial for the organization´s long term
success.
Another disadvantage of most financial
measures is the time lag with which outcomes are
counted due to the fact that financial measures are
retrospective (Schneiderman 1999). They only show
failures or false perceptions after it could actually be
too late to fix something. But company leaders and
decision makers need real time visibility of
operational facts and processes to adequately manage
their business and ensure future financial success
(Kaplan/Norton 2004b).
Furthermore, a management team that is just
regarding financial measures for its decision making
tends to focus too much on short-term outcomes.
Then it seems easy to increase these outcomes by
cutting costs in long-term investments like employee
development or investments in customer relations.
The company would most likely suffer from such a
policy later on (Kaplan/Norton 2004b).
Criticisms and Evolution of the BSC
The Balanced Scorecard (BSC) was first developed
by Kaplan and Norton in 1992. Regarding the
mentioned problems of pure financial measures in
decision-making processes they realized the need for
a new way of measuring the “strategic performance”
of organizations. Because no single measure can
provide attention to every critical area of the
organization Kaplan and Norton suggested a balanced
set of financial and operational measures to meet
these requirements.
Kaplan and Norton did not provide a clear
definition of the BSC, even not in later publications
(Lawrie/Cobbold 2004). Instead they considered
certain attributes to the BSC that are described in the
following:
• A set of financial and operational measures with
a limited number of measures (Kaplan/Norton
1992, 1993, 1996a,b,c)
• The measures are grouped to the four
perspectives: Financial, Customer, Business
Processes and Learning and Growth
(Kaplan/Norton 1992, 1993, 1996a,b,c)
• Measures should reflect the strategic goals of the
organization to reach its vision (Kaplan/Norton
1992, 1993, 1996a,c)
• Measures should be linked through causality as
far as possible (Kaplan/Norton 1992, 1996a)
BSCs which fit into these attributes are
considered as first-generation BSCs (Lawrie/Cobbold
2004). The problems within this first approach of the
BSC lie in its initial design. The selection of the
measures used and their clustering into the four
perspectives is crucial for the success of the BSC.
This leads to severe design problems for today´s
companies because they have access to a huge amount
of information and possible measures (Schneiderman
1999, Butler et al. 1997). Furthermore, a poor
selection of measures can lead to adverse effects on
the usefulness of a BSC and even on the company´s
strategic performance (Malina/Selto 2001,
Schneiderman 1999).
In the late 1990s the concept of BSC was further
improved by Kaplan and Norton but also by other
authors (Lawrie/Cobbold 2004). The improvements
aimed to make the design of a BSC more easy and
contained of two major suggestions. First, instead of
using measures in the BSC the management team
should choose 15 to 20 strategic objectives for the
BSC and group them into the four perspectives
(Kaplan/Norton 2000). Afterwards they should try to
find measures for these objectives, one or two for
each. Second, the strategic objectives should be
connected in cause-effect relationships and these
relationships should then be visualized in a strategic
link model or a so called “Strategy Map”. A standard
strategic link model shows the causality flow across
the four perspectives starting at Learning and Growth
over Business Processes and Customers to the
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Financial objectives. BSCs containing these two
innovations are referred to as BSCs of the second
generation (Lawrie/Cobbold 2004).
Further development showed the usefulness of
the definition of a “destination statement” at the
beginning of the design process of the BSC. Such
statements shall show the impacts the achievements of
the strategic objectives would have on the
organisation and its operational terms, e.g. the
increase of sales or increase of customer satisfaction,
within a specific time interval. They were usually
used at the end of the design process to identify
inconsistencies in the set of the chosen strategic
objectives (Lawrie/Cobbold 2004). It was found that a
clear statement about what the organisation expects to
achieve can be very helpful for the selection of
strategic objectives and the identification of
causalities between them (Lawrie/Cobbold 2004).
BSCs designed by using destination statements as a
starting point are referred to as third generation BSCs.
As well as the design of BSCs has evolved over
time the purpose of its use has evolved too. Kaplan
and Norton (1992) introduced the BSC as a
performance control tool. Accordingly, especially first
generation BSCs were widely used as management
control tools even if Kaplan and Norton had a much
more strategic view in mind. With the development of
the second generation BSC its use shifted more
towards these strategic control issues for which it was
originally meant (Lawrie/Cobbold 2004). Finally the
third generation BSCs showed another possible
application, the use of the BSC as a communication
tool to provide the organisation´s staff with
information about the strategy and the contributions
of each organizational unit down to the single
employees in the achievement of strategic goals
(Lawrie/Cobbold 2004, Melina/Selto 2001).
The Four Perspectives
Typically the BSC consists of four different
perspectives which are supposed to reflect the
organization´s success in reaching its strategic goals.
These perspectives are originally the Financial
Perspective, the Customer Perspective, the Internal
Process Perspective and the Learning and Growth
Perspective (Kaplan/Norton 1996a). These
perspectives are interconnected, see figure 5, and
linked in a reverse way. The question to be answered
is: How to equip the organization´s people with
knowledge, skills and tools to build up specific
internal processes and strategic capabilities to satisfy
the customers´ unique needs to finally reach financial
success and the realization of the organization´s
vision?
Figure 5. Four perspectives of the BSC
Source: Kaplan/Norton 1996c
Obviously financial measures are an important
success factor for any profit seeking organization and,
hence, an important component of the BSC. Anyway,
the selection of the specific measures used in the BSC
should be a direct translation of the organization´s
vision and strategy (Kaplan/Norton 1996a). The
measures chosen in this field usually refer to the areas
of growth, profitability, value creation, share price,
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risk management and market valuation (Hough et al.
2011). Going down in the organizational structure it
can be useful to apply different financial measures for
different business units because they most certainly
differ in their previous performance and their stage of
the business life cycle (Kaplan/Norton 1996a).
The measures selected for the customer
perspective should reflect how the organization
proposes to create value for its customers (Hough et
al. 2011). It also enables the organization to identify
and choose the market segments in which the
organization wants to compete in (Kaplan/Norton
1996a). Common customer outcome measures are
customer satisfaction, loyalty, market share,
profitability and acquisition. Anyway the targets
should be specific and realistic. An “everything for
everyone” policy will most certainly not lead to
success and the BSC provides a chance to translate
the company´s mission and strategy into specific
customer objectives (Kaplan/Norton 1996a).
In the internal process perspective managers
should identify the key processes to satisfy the
customer and shareholder objectives. Typically the
internal process measures are developed after the
completion of the financial and customer measures. It
is recommended that managers define a complete
internal-process value chain for the BSC instead of
just improving existing operating processes
(Kaplan/Norton 1996a). A typical value chain starts
with the innovation process in which customer needs
are identified and solutions for those needs are
developed. The value chain continues in operating
processes in which the existing products are delivered
to the existing customers and ends in the postsale
service process which offers value adding services to
the customers after the actual purchase.
The measures of the Learning and Growth
perspective should finally ensure that the organization
is able to reach the objectives identified earlier. To
reach that it is important to build up the capacities to
achieve satisfying results for internal processes and
through that for the customer and financial
perspective. Hence, these measures should make sure
that sustainable investments in the organization´s
people and systems are made (Kaplan/Norton 1996a).
Developing objectives, measures, targets
and initiatives
Each of the four perspectives has to be interpreted by
defining objectives, measures, targets and initiatives
(Kaplan/Norton 1992). Objectives are statements that
specify the important issues for each perspective.
These issues must be performed well to finally reach a
satisfying strategy implementation. Measures are
developed afterwards with regard to the formerly
identified objectives to track the progress that was
made or not made in reaching the specific objectives.
Targets are specified performance levels that the
organization wants to reach for each performance
measure of each objective. Finally, initiatives must be
designed to specify how the organization expects to
reach the defined targets. This includes all actions,
activities, projects and programs that are aiming to
ensure the achievement of the performance targets
(Kaplan/Norton 1996a).
The Cascading Process
The BSC is the most important tool to align the
individual and business unit objectives with the
overall business objectives. It can be used to provide
links between the vision and strategy of the
organization and the people working in it
(Kaplan/Norton 1996a). This takes place on three
different levels like figure 6 shows: the Organisation
level, the Business Unit level and the Individual level.
The Cascading Process can be defined as the
process whereby the performance objectives of the
entire organization are split into business plans for
each business unit which are then split into
performance contracts for each individual. Thus, it is
ensured that each individual and business unit directly
add to the organization´s success in the way it was
supposed by the strategy (Hough et al. 2011).
The Cascading process is the most important
component of the performance management within a
company (Kaplan/Norton 2006). Its intention is to
provide accountability for the performance in
strategically important goals on business unit and
individual level. At the end of the process each
business unit should have a detailed tactical plan with
clearly defined objectives and measures for these
objectives.
Further down the line each individual should be
provided with a clear role profile defining his or her
position and the expectations to this position. Next to
that a performance contract for each individual is
needed in which the individuals accountability for his
or her output results as well as for his or her
development of competencies is clarified (Hough et
al. 2011). Another important element of the
performance management is the continual review of
the developed measures and the results leading to
their adaption if required. Such a review should be
done annually.
The BSC as a communication tool
Recently the BSC is becoming more and more
popular among top management teams. The reasons
for this development do not only rely on the
application of the BSC as a revolutionary tool for
performance measurement of a company´s strategy. It
also relies on the usefulness of the BSC as a
communication tool (Malina/Selto 2001). It is
possible to articulate a company´s vision and mission
in much more easily understandable terms by using
the BSC. These terms then become the guiding lines
for the behaviour of employees down the line. Since
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the ability of effectively communicating may itself be
a competitive advantage (Tucker et al. 1996) the BSC as a tool to do so can be a source for competitive
advantage as well (Malina/Selto 2001).
Figure 6. Cascading Process
Source: The Balanced Scorecard Institute of South Africa
(www.balancedscorecardsa.co.za)
The BSC can be used to help communicate and
educate the organization about the strategy
(Malina/Selto 2001). However, some critics complain
that communicating strategy to the entire organization
could lead to the leakage of valuable information and
it would not be necessary for each employee to
understand the strategy of the whole company.
Kaplan and Norton (2001b) respond that the
information about the strategy is useless as long the
competitors do not have the ability to execute the
same strategy in their companies. It also increases the
motivation and thus the effectiveness of each
employee if he or she sees a higher purpose to which
he or she contributes with his or her own work.
An effective organizational communication
relies on three important issues: the processes and
messages, the support of the organizational culture
and the creation and exchange of knowledge. The
BSC can improve the effectiveness and the value of
the communication in all of these areas (Malina/Selto
2001).
Individuals see communication as usefulness and
reliable when its processes and messages are
perceived as understandable and trustworthy
(Malina/Selto 2001). Characteristics of
communication that support this perception are
routineness, predictability, reliability, trustworthiness
and completeness (Barker/Camarata 1998). The BSC
can help to align measures for performance and
success throughout the organization which increases
all of the previously mentioned characteristics.
Traditionally effective communication is seen as
a supporting factor for organizational culture. It
enhances and reinforces desired patterns of behaviour,
shared values and beliefs. To do so the internal
communication should encourage behaviour that is
consistent with the organizational goals for example
by rewarding it (Tucker et al. 1996). The BSC
translates the organization´s vision and mission in
operational terms which are more likely to be
understood. This clarifies the situation for employees
because they get clear guidelines for their behaviour
and about the expectations the organization has to
them (Malina/Selto 2001).
Finally, effective communication is supposed to
foster the creation and exchange of knowledge within
the organization. Here the communication is first of
all meant for objective (observable) knowledge that
can be spread throughout the organization so that all
key individuals are aware of the current status of the
organization. The problem that has to be faced is the
transformation of tacit knowledge into objective
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knowledge. The BSC can help to encourage people to
share their tacit knowledge and offer it within the
organization so that it becomes objective
(Malina/Selto 2001). On the other hand the sharing of
tacit knowledge is crucial for the development of a
proper BSC.
THE STRATEGY MAP
Another management tool regarding the strategy is
closely linked to the BSC, the Strategy Map(figure 7).
It simplifies and visualizes the ways in which the
organization intends to reach its vision
(Kaplan/Norton 2000). The strategy map is based on
the strategic objectives that were identified for the
four perspectives. Its purpose is to show the cause-
effect relationships between the different objectives
across the four perspectives. Thus, the Strategy Map
links all objectives to test target orientation to finally
reach the organization´s ision (Kaplan/Norton 2004a).
Figure 7. Conceptual Strategy Map
Source: Kaplan/Norton 2004a
This “Strategic Linkage Model” allows the
organization to visualize its strategy. It provides an
opportunity to show the generic architecture of the
company´s strategy. Figure 7 shows the basic concept
of such an architecture. So it is possible to
communicate down the line where specific strategic
objectives fit into the organization´s overall strategy
(Malina/Selto 2001). This makes it much easier to
communicate the strategy because it shows the
contribution of functions and business units to the
company´s approach to reach its vision. Furthermore,
the identified objectives can be tested through their
linkages whether they have the wanted effect or not
(Kaplan/Norton 2004a).
The Strategy Map gives a good overview over
the architecture of the strategy and can even be used
as a helpful tool for the creation of a Balanced
Scorecard which then is used to build up a new
strategic management system (Kaplan/Norton 2000).
In contrast to traditional financial measurement
systems strategy maps and BSCs are able to
incorporate the importance of intangible assets for the
organization.
The strategy map shows through cause-and-
effect relationships how intangible assets contribute to
tangible (financial) outcomes. This is so important
because intangible assets have in contrast to tangible
assets just little or no stand-alone value. Their value
only arises from their embedded position within the
company’s strategic activities. Through the strategy
map and the BSC the value-creating process can be
described and measured. At the end the strategy map
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and the BSC provide an understandable point of
reference for all business units and individuals within
the organization (Kaplan/Norton 2001b).
BENCHMARKING
The purpose of benchmarking is the identification of a
“best practice” which means the best possible way to
do or create something. It can be defined as the
process of continuous searching for the best practices
of other companies or within a company that lead to
above-average performance when applied in a
company (Coers et al. 2001). It can be used for both
products and processes. Searching for the “best
practice” can take place within an organization, within
an industry or even across industries (Coers et al.
2001).
The key goal of benchmarking is to gain
business information. This information can then be
used to evaluate and understand the current position
of a business or organisation unit in comparison to the
“best practice”. Afterwards the identification of areas
for performance improvements can follow (Prasnikar
et al. 2005). Finally it allows the company to make
better business decisions and through that to improve
the company´s performance among its competitors.
The successful implementation of benchmarking
benefits a company in a number of ways. The use of
benchmarking can help an organization to achieve the
following goals (Coers et al. 2001):
• Improving profits, productivity and effectiveness,
• Accelerating and managing change,
• Setting and stretching performance goals,
• Achieving breakthroughs and innovations,
• Creating a sense of urgency,
• Overcoming arrogance and seeing “outside the
box”.
Therefore, benchmarking should be a part of the
management process. It should become a continuous
activity that refers to all areas and aspects of
management. Because benchmarking improves
decision-making and the long-term survival of the
company Prasnikar et al. (2005) suggest to add
benchmarking systematically into the strategic
management process.
The Integration of Benchmarking in the
Strategic Management Process
Benchmarking can become an important tool in the
strategic management process if it is integrated
correctly. Benchmarking should include all categories
of activities to achieve the highest possible level of
usefulness. The benefits are highly dependable on the
appropriate implementation of benchmarking. In
general, four basic phases of benchmarking can be
identified (Prasnikar et al. 2005, Coers et al. 2001):
1 Planning Phase
2 Collecting Phase
3 Analyzing Phase
4 Adaptation Phase
In the planning phase the processes that should
be assessed are identified. A benchmarking team must
be chosen and the scope of the study must be clearly
defined. The support of the management should be
secured. Finally, criteria for the selection of potential
benchmarking partners, best practice companies,
departments or business units, should be studied. The
accurate definition of the goal and purpose of the
benchmarking process is crucial in this phase to
enable the effective gathering of the business
information that is needed (Prasnikar et al. 2005). The
same is true for the selection of clear measures to
keep any information comparable.
In the collection phase, the benchmarking
partners must be selected and their support must be
secured. The necessary data is then collected by
surveys and interviews. The development of a
database for the responses can be helpful here. It
should be assured that all collected information is
relevant and comparable. Otherwise quality
knowledge cannot be created. Weak or incorrect
knowledge could moreover lead to false business
decisions. It should also be ensured that the source of
the information, no matter if it is gathered from direct
contact to another company or from secondary data,
used accurate treatment and selection process
(Prasnikar et al. 2005).
During the analyzing phase the best practice
processes are identified and compared to the
organization´s own performance to find its
performance gap. It should also be examined how the
best practice can be reached. These results are then
reported to the responsible parties. In this phase the
actual new business knowledge is developed. The
methodology to create this knowledge is highly
dependable on the purpose of benchmarking and the
kind of information gathered. However, it should be
stressed that this phase is not just about comparing the
data. It is much more about understanding the reasons
for the differences between the companies or business
units. Just the understanding of cause-effect
relationships can create new and beneficial business
knowledge (Prasnikar et al. 2005).
In the last phase the processes have to be
adapted according to the results from the earlier
stages. To do so short- and long-term improvement
goals are established and an action plan is formulated.
Then the changes can be adapted and results included
in the measurement process. This whole
benchmarking process should be recycled on a regular
basis. The whole value of the benchmarking process
depends on the adaption of its findings. That is why
reporting is so important. The gained knowledge has
to reach the people responsible for decision-making
and those people have to be willing to adapt this
knowledge (Prasnikar et al. 2005).
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Benchmarking and Alignment
Benchmarking in the context of strategic alignment is
especially important regarding the horizontal
alignment of the Strategic Business Units (SBUs). So
it can be assured that all SBUs collect the same
information using the same measures to keep all
information comparable. If a Balanced Scorecard is
used to evaluate the performance of the SBUs it
should include comparable measures for all aspects
that are the same or similar in each SBU. The
development of a Balanced Scorecard on the SBU
level must therefore be a collective task for all SBUs.
Moreover, benchmarking between organizations
can be used to compare the level of strategic
alignment that is reached by different companies also
in the vertical direction. It could then allow the
identification of best practices to reach a high level of
strategic alignment. For the benchmarking of vertical
strategic alignment it would not even be necessary to
include direct competitors into the benchmarking
survey because every company has to face the task of
strategic alignment. Best practice instruments should
be usable for most companies but often induce a high
level of customization which makes a proper
analyzing phase crucial and the adaptation phase more
difficult.
5. DISCUSSION OF RESULTS AND
RECOMMENDATIONS
Managerial implications for enterprises
The most important insight for a manager should be
the awareness of Strategic Alignment and the
problems connected to it. It is extremely difficult to
reach and maintain high levels of SA in every part of
an organization. And, of course, the costs for reaching
it can be high. However, the benefits of successful SA
are also extraordinary because it increases the
effectiveness of every single task and process within
the organization. Thus, successful Strategic
Alignment can represent an invaluable intangible
asset for a company.
Managers can identify the actual level of
Strategic Alignment and find reasons for possibly
missing SA. The results showed that missing SA is
mainly a consequence of a lack of communication and
understanding in strategic issues.
The wider use of a BSC and the introduction of a
Strategy Map are aimed to increase transparency,
understanding and measurability. Furthermore, a
redesign of the strategic planning process is suggested
to increase participation and to differentiate it from
budget planning issues. At last some reconsiderations
regarding general communication within the
organization in horizontal as well as vertical direction
are advised.
The recognition of some of these problems can
help any manager to increase the level of SA in his or
her own organization even if not everything is
applicable for any organization. A manager could also
use the shown research framework within his or her
own company to evaluate the organization’s level of
Strategic Alignment.
6. CONCLUSIONS
This article defined Strategic Alignment as a process
in which all different parts of an organization get
aligned towards the same purpose which is the
fulfilment of the company’s strategic vision. In a next
step the Strategy Focused Organization was identified
as an organization which has reached the highest
possible degree of Strategic Alignment. Different
reasons for failing alignment efforts and problems
occurring for misaligned organizations were also
discussed. Furthermore, the article focussed on
identifying different tools and instruments that are
useful for managers to gain higher degrees of SA,
most importantly the Balanced Scorecard and the
Strategy Map.
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