There’s no doubt that strategic planning is a discipline that every organization in all business sectors, including the public and non-profit sectors, should adopt. Years of experience have demonstrated that organizations that take a formal approach to strategy formulation and leverage tools such as the strategy map and the Balanced Scorecard to operationalize their strategy (i.e. translate their strategy into operational terms) achieve greater success in achieving their goals and delivering against their value proposition, vision, and mission.
Why is this the case?
Because taking an organized approach to strategy formulation, execution, and management, and leveraging proven strategy tools, helps make their “business” strategy actionable and more understandable to their employees. This allows all employees to maximize their contribution, through their work efforts and decision-making, to organizational success. Successful organizations have found that taking additional steps to align the entire organization (e.g. tools, training, resources, and budget dollars) with strategy and making strategy a continuous process translates into strategy execution excellence and the achievement of business performance goals.
Interestingly, private, public, and non-profit organizations can all leverage the same approach to strategic planning.
Typical activities every organization must complete include: identifying their stakeholders, determining and validating the needs and expectations of each stakeholder/stakeholder group, and evaluating current organizational performance in meeting those stakeholder needs and expectations; assessing both the current and future trends in the external operating environment and current internal performance levels (culminating in a SWOT analysis); defining their purpose/mission, core values, and customer or stakeholder value proposition (the big “promise” they make that attracts and satisfies either their target customer or primary stakeholder); determining their vision statement (i.e. where they want to be from a performance perspective at some defined point in the future); defining and prioritizing the value creating strategy (in the form of a strategy map) that supports their primary value proposition; assessing current organizational alignment with, and support of, their value creating strategy; defining gap closing projects (with accountabilities, resource plans, and timelines); and defining a strategy focused indicator set or Balanced Scorecard (including strategy governance processes) that will enable strategy management and strategy execution success.
In addition, organizations in all sectors can take an approach that broadens the scope of direct engagement with the strategic planning process to include senior executives, middle management, front line employees, the Board, and key stakeholders. Finally, powerful tools such as stakeholder engagement activities, strategy maps, and the Balanced Scorecard can be used by organizations in all sectors to enable the two-way conversations that support strategy formulation, execution, and management excellence.
It is important, however, for public and non-profit organizations who want to use the strategy map and the Balanced Scorecard in their strategy formulation and execution journey to realize that some critical changes are required to the structure of these tools to help them better apply to their organization’s situation and needs. More specifically, these changes are required to better suit the nature of the work, mandate, and purpose of public and non-profit organizations versus private sector organizations (where tools such as the strategy map and the Balanced Scorecard first originated).
Let’s take a closer look.
The first modification that is often required is in the naming of the strategy map/Balanced Scorecard perspectives. In the private sector, the four strategy map/Balanced Scorecard perspectives are typically Financial, Customer, Internal Process, and Learning and Growth. Recently, there has been a move to change the name of the Learning and Growth perspective to Enablers or Organizational Capabilities simply to more accurately reflect the nature of the strategic objectives placed there. In some cases where organizational success is dependent on service delivery by suppliers and partners, companies have added a fifth strategy map/Balanced Scorecard perspective called Suppliers/Partners.
In public and non-profit organizations, it is usual to adjust perspective names. Typical revisions include Stakeholders or Clients (a substitute for Customers), Organizational Capabilities/Enablers (a substitute for Learning and Growth), and Financial or Resource Management (a substitute for Financial). The Internal Process perspective is usually maintained in these sectors. It isn’t unusual to see public and non-profit organizations include the Suppliers/Partners perspective when organizational success is dependent on service delivery by suppliers and partners.
The important thing to note here is that the naming of strategy map/Balanced Scorecard perspectives is flexible to the unique needs of each organization. The best advice is to begin with the naming convention traditionally used for your sector and then modify those names as required to better fit with the culture, purpose, and nature of your business. This way, you ensure that your strategy, strategy map, and Balanced Scorecard will resonate with your stakeholders (key to ensuring its adoption and utilization) and better reflect the work of your organization.
Once your organization has determined the names of your strategy map/Balanced Scorecard perspectives, the next modification typically seen in the public and non-profit sector strategy map/Balanced Scorecard is in the orientation of the perspectives themselves. In the private sector, where the ultimate focus is on achieving profits and delivering shareholder value, the strategy map/Balanced Scorecard perspectives are typically arranged from top to bottom in this way: Financial, Customer, Internal Process, and Learning and Growth (or Enablers/Organizational Capabilities). When organizations include a Suppliers/Partners perspective, it often sits beside the Internal Process perspective in the strategy map/Balanced Scorecard hierarchy.
However, non-profit and public sector organizations are different. Their ultimate purpose or goal typically isn’t to make money, it’s to achieve their mission (that being said, in some cases, non-profit and public sector organizations do want to raise considerable amounts of money but only in service of achieving their mission). The interesting thing is that with non-profit and public sector organizations, the placement of the Financial/Resource Management perspective in the strategy map/Balanced Scorecard perspective “hierarchy” is variable and the ultimate choice in placement is highly dependent on the role of financial and non-financial resources in successful mission achievement.
For example, organizations that operate solely based on a budget provided to them by a funding source typically place the Financial/Resource Management perspective at the base (e.g. a Federal Government Department) or near the base (e.g. a Hospital) of their strategy map (see examples below).
Organizations that operate using a budget but also have fund raising as a primary activity often place the Financial/Resource Management perspective near the top (e.g. a Hospital Foundation) or at the top (e.g. a Lottery Corporation) of their strategy map (see examples below).
The bottom line is that the organization of the perspectives on the strategy map of a public or non-profit sector organization must properly reflect the “flow” of the organization in producing the value creating results it is striving to achieve.
Processes such as strategic planning and strategy management, and their associated tools, have a key role to play in business performance management in all organizations, regardless of sector. The key, however, is to realize that organizations in the public and non-profit sectors have specific business needs that require appropriate changes in the orientation and use of tools such as strategy maps and the Balanced Scorecard so that the organizations using them can maximize their power in enabling desired outcomes for their stakeholders and, more importantly, in service of their mission.
Hi,
I have read some of your articles and they are interesting indeed.
I will like to specifically comment on Making BSC work in public sector and non-profit organizations. I believe that there is a danger of putting Financial/Financial Mgt somewhere at the bottom of a public sector/non-profit strategy map, rather than map it as a 'Result' perspective. And the danger is that organizations may then believe that what they basically need do is throw money at any problem and pronto, the problem is resolved.
We encourage mapping Financial/Resource Mgt as a Result above Internal Process with Stakeholder/Customer as the final result. For the public sector organization, the key financial consideration is how effectively are financial resources being managed? And this is equally driven from below by the Oganizational Capacity and Internal Process perspectives.
The main interest of providers of financial resources for these types of organizations, be they donors or the parliament, is ensuring that those resources are being judiciously managed and ensuring that the use to which they are put deliver the desired strategic outcomes. Therefore at the organizational capacity level the key value drivers seem to me to be people, tools and technology, leadership, governance, culture and these apply to both private and public sectors.
Posted by: Kayode Sufianu | 04/29/2013 at 01:14 PM