Many people have tried to unlock value throughout most of modern business history, by matching their structures to their strategies. A few decades later a competing model emerged when companies diversified services and expanded into new regions. Management teams such as Volkswagen and Siemens have been developed organized around goods and geographic markets. Any economies of size were lost by the smaller company groups which were more versatile and adaptable to the local circumstances.
All business models – unified by purpose versus decentralized by product and region – have proven resilient, mainly due to somewhat slow business organization development. In reality, for fifty or more years, the product division remained a strong model. But as rivalry intensified in the last quarter of the 20th century, flaws in both designs became evident and corporations tried to find new ways to organize themselves to get corporate worth.
With the assumption that they will maintain both the advantages of scale of consolidated operations and the versatility of their product-line and regional operating divisions, many multinationals have embraced a matrix structure. But it was difficult to coordinate matrix organizations. The corporate re – engineering revolution of the 1990s implemented another paradigm in which the organization clustered around the different processes in lieu of the conventional organizational, commodity, and regional borders. But there were still some process-focused groups having trouble organizing and trying to align their actions.
The ongoing quest for innovative modes of organization is motivated by profound shifts in the essence of trade and the environment. The possibilities and threats offered by globalization force businesses to rethink certain ideas regarding maintaining and handling both their real and intangible properties.
Given the costs and complexities inherent in seeking systemic forms of extracting profitability, the debate is fair: Is structural reform the best solution for the job?
We usually believe the answer to this is no. The message we’ve learned from our research on strategy maps and balanced scorecards for hundreds of companies is that businesses need not find the perfect framework for their plan. A much more successful solution, which we can explain in the following sections, is to select an operational framework that operates without significant disagreements and to develop a tailored management method to match the framework with the plan.
What kind of system does that require you?
You may describe a category design as the collection of processes and practices used to organize and govern an enterprise. Category design provides strategic and operational planning procedures, capital and operating budgets, performance measurement and compensation, and progress monitoring and meetings. It is fair to say that, traditionally, for these different processes and practices, most businesses relied entirely on financial systems — usually focused on the budget. Yet focusing on the budget as the main accounting framework allowed short-term budgetary pressures to overshadow strategic priorities in the longer term. Category design collaborate with the marketing departments to help them identify, create and eventually conquer a specific company category.
In our experience, the easiest approach to balance policy and process is a management program focused on the equilibrated scorecard design. Managers at all levels of the organization, from national sales managers to business CEOs, may use the Structure resources to improve the success of their unit. Strategy maps allow managers to identify and convey the cause-and – effect interactions that provide a value proposition for their team, and the scorecard is a valuable tool for implementing and tracking the strategy of the unit. Consequently, a structured scorecard-based system provides both a prototype and a common language for the assembly and distribution of value creation knowledge.
Motivating business groups around common principles, of course, isn’t the best way to do this — nor should it be the only effective approach for other businesses. But there’s no question that the vertical connections of a strategic theme through balanced scorecard targets, policies, and programs provide an extraordinarily powerful mechanism to discover potential for value creation, convey corporate priorities to local units, and encourage analysis of resource allocation, policy, and effectiveness of management. When organizations are looking for ways to implement strategies at the corporate level, they have a new tool to explore today.