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Strategy Cascading – What it is and How to Do It

You may have heard of this term before. In fact, you may even have seen some dialogue in BSC and strategy management forums debating whether we should shift from a “cascading” concept. So, as we usually must when it comes to strategy management concepts, let’s define what we mean by “strategy cascading”.

When I use the term, I use it to describe the process of creating organizational alignment with strategy. Basically, strategy cascading refers to ensuring that the strategy pervades the organization at all levels so that the organization, and its efforts, are fully and appropriately aligned with the strategy.

Now – you may be wondering what strategy any given part of an organization is meant to be aligned with. While the high level answer is the organization’s overall/corporate strategy, the reality is that what alignment looks like and how it works depends on where you/your team or department is located within your organization. Often it’s easier to focus your alignment activities on getting in sync with the strategic priorities and efforts of the organizational entity (department and/or manager) that sits above you on your organization’s org chart.

However, it’s worth noting that strategy cascading (and therefore organizational alignment with strategy) also refers to ensuring that resource and asset allocation, employee skills development activities, budgets, etc. appropriately support successful strategy execution. As a result, strategy cascading must involve all elements in the business or organization.

Essentially, strategy cascading is a necessary process for optimizing organizational alignment with strategy. And, as we know, strong organizational alignment with strategy is the nirvana state smart organizations work to achieve because the greater the degree of organizational alignment with strategy, the more efficient and reliable an organization can become in executing its strategy. The result of alignment is the faster achievement of desired strategic results – even when there’s a course correction in the strategy you started with.

I’ll admit that I actually don’t mind using the term strategy cascading but I completely understand why it bothers some people. The word cascading could imply a wholly one directional process when, in fact, strategy creation, when done correctly, is quite a bit more dynamic. Ideally, an organization sets the strategy for the overall organization/corporation through an interactive process that includes people and perspectives from all corners of the organization. The result is a well-informed strategy that everyone contributed to and can get behind.

However, it’s important to realize that strategy rarely gets executed at the corporate level alone. Strategy is usually put into action through the contributions of business units, departments, teams, regional offices, etc. For the groups in the org structure then, strategy cascading involves each area of the business (1) determining their part in/contribution to the realization of the company’s strategy, and (2) translating the corporate strategy, where required, into terms, objectives, and activities that reflect and enable the business area to make that contribution.

Depending on where a business area resides in the organization, the nature of their contribution to, and impact on, the realization of the corporate strategy can be different. That is, in some cases, the contribution can be very direct while in others, the contribution is more indirect in nature. Sometimes, the contribution is mixed (often the case for HR that has accountabilities for implementing corporate strategy AND supporting a business unit’s people objectives). As a general rule of thumb, the closer a business area is to the top in the org chart, the more direct the contribution. When the contribution to the overall corporate strategy is direct in nature, it makes sense for the supporting business unit to align with/determine their contribution to the corporate strategy. However, when a business unit sits several levels away from the top on the org structure, their contribution to the corporate strategy is often realized through their contribution to their parent business area.

However, proximity to the corporate strategy is just one of many considerations when determining the way you actually “do” strategy cascading within your organization.

In my experience, there are essentially two mechanisms for strategy cascading available to an organization, however, both begin with the strategy map. One method for strategy cascading is through the strategy map (and associated Balanced Scorecard) while the other can be achieved predominately through the Balanced Scorecard alone.

Let’s take a look at each of these approaches.

 

Strategy Cascading via the Scorecard

Can your business unit essentially adopt the corporate (or top level) strategy map without making changes to the strategic objectives AND their definitions? When this is the case, it naturally follows that the Balanced Scorecard indicators associated with the corporate strategy will apply to the business unit as well (same strategic objectives = same indicators). In this scenario, the business unit wants to be able to see their performance results for these indicators in addition to the corporate results.

Often, in these cases, the corporate results for any given indicator are simply a roll up of the results achieved by each of the contributing business units. What you need to do is determine which business units can adopt the corporate strategic objectives “as is” and contribute to the results roll up (e.g. Revenue (overall company) = Revenue (BU1) + Revenue (BU2) + Revenue (BU3)) – these business units are members of a scorecard’s/ indicator’s “breakdown structure”.

In my experience, business units can usually adopt the corporate strategic objectives in “as is” form when they are mini-me’s (mirror images) of the corporation in their purpose and strategy to achieve it (Kaplan and Norton refer to this as a Franchise scenario). For example, when I was in the group insurance business we were organized into customer-based business units and each business unit simply executed the strategy (strategic objectives and strategic imperatives) depicted on the corporate strategy map with their target customer group. This meant that all of the indicators on the scorecard were relevant to the corporation AND each business unit – we just needed to be able to show each business unit their slice of performance on each BSC indicator (i.e. that business unit’s Balanced Scorecard).

Taking this approach to strategy cascading allows you to work with one strategy map and scorecard to cascade strategy and provide meaningful performance feedback to participating business units. Having the luxury of this approach to strategy cascading can make strategy management much easier to administer.

 

Strategy Cascading via the Strategy Map (and Balanced Scorecard)

Does your business unit contribute to some but not all strategic objectives on the corporate strategy map? For the ones that you do contribute to, would it make the strategy more relatable and relevant to change them a bit (i.e. strategic objective names AND/OR their definitions) to better capture the uniqueness of your contribution? And, would your strategy map be incomplete if it didn’t include some additional, functionally specific strategic objectives?

When this is the case, it makes sense to leverage the strategy map of the closest organizational group to the business unit in question (i.e. its “parent”) and then edit it as necessary to create a new but related strategy map. The beauty of this approach is that modifying the parent strategy map helps ensure appropriate alignment while also capturing important unique strategic objective essentials on the business unit’s individual strategy map.

New, “custom” strategic objectives on a strategy map usually require indicators that are different from the ones used by the parent business area on the business unit Balanced Scorecard. While some indicators may be common between the two scorecards, strategy cascading via the strategy map usually produces a unique indicator set that applies just to the business unit in question.

I don’t need to tell you that taking this approach to strategy cascading has the potential to produce numerous strategy maps, scorecards, and indicators. Organizations taking this approach to strategy cascading should consider using a strategy management application to help make administration easier and more efficient.

 

In my experience, having these two approaches to strategy cascading available provides organizations with the means to walk the line between maximizing organizational alignment while minimizing the risk of unnecessary strategy map and scorecard proliferation. And while working towards this goal allows organizations to optimize strategy management outcomes without undue administrative burden, it’s important to focus on what’s most important – ensuring that the strategy cascading approach used by your organization produces a set of strategic objectives/strategy map that is relevant and meaningful to each individual business unit and their contribution to strategy and business success.

If you follow the guidelines and questions I have offered here, you should be able to make good strategy cascading choices. However, remember that there are always unique situations and exceptions to the rule. And don’t be surprised to discover that a mixed/hybrid approach to strategy cascading might offer the right balance for your organization.

My advice? When in doubt, use the strategy cascading approach that makes the most sense at the time – you can always change your approach if necessary as your organization learns and matures on its strategy management journey!

 

1 Comment

  1. Mihai Ionescu
    Aug 21, 2015

    Entry-level BSC manual:
    (1). IDENTICAL OBJECTIVES = Replicated from the top-parent Objective to all the SBUs without any significant of the Objective or of its KPIs
    (2). CONTRIBUTORY OBJECTIVES = Child units extract from their parent Objective only that part to which they can contribute, so that the parent Objective is achieved as the child-Objectives are cumulatively achieved
    (3). NEW OBJECTIVES = Objectives that exist in a child SBU Strategy Map, but not in its parent’s

    Following the Alignment process, any child SBU can have in their Strategy Maps a combination of (1), (2) and (3). Neither of them is good or bad or ‘recommendable’.
    .