Alignment

The process of alignment commences when the corporate headquarters defines an enterprise value proposition. This not only elucidates the corporate priorities but also paves the way for the development of synergies. The bedrock for creating synergies through alignment is an enterprise-level Strategy Map and Balanced Scorecard.

Corporations are perpetually on the lookout for improved methods to make the collective more valuable than the sum of the organization’s individual components. If the corporate headquarters fails in this endeavor, it would be more logical to fragment the company into its individual parts and operate each independently.

In layman's terms, alignment across the enterprise is essential, otherwise, the diverse parts of the organization will diverge in different directions. The optimal way for synergy to emerge is if the enterprise value proposition is encapsulated and captured in a Strategy Map and Balanced Scorecard. This then becomes the springboard for the different business units and shared service units to create their own corresponding Strategy Maps and Balanced Scorecards.

An enterprise Strategy Map and Balanced Scorecard will elucidate corporate priorities, which can then be effectively communicated to each business and support unit, as well as to the board of directors and key customers, suppliers, and alliance partners. Corporate headquarters subsequently scrutinizes the Strategy Maps and scorecards developed by these units to monitor whether and how the enterprise’s priorities are being implemented by each one.

Armed with the enterprise scorecard, each business unit can then formulate its own Strategy Map and Balanced Scorecard that align with the enterprise-level counterparts. This approach enables each unit to assemble the necessary resources to compete effectively in their local markets while simultaneously contributing to corporate-level synergies.

The second opportunity for companies to foster synergies arises when each business unit creates its own Strategy Map and Balanced Scorecard that align with the enterprise value proposition. This alignment is always a challenge as each operating unit must balance various tasks that sometimes conflict. Business units must be able to do whatever is required to become a formidable competitor in its own markets.

In practical terms, this means each business unit must have the freedom to choose its own specific target market niches, people, systems and culture, internal operating processes, customer management processes, and innovation processes. Simultaneously, each business unit needs to tailor its operations to meet the demands of its served marketplaces, while also contributing to corporate-level synergies.

This means business units also need to incorporate corporate themes and priorities into operations, serve corporate customers, and integrate and coordinate with other business units. By aligning the business unit value proposition with the enterprise value proposition, there is a higher probability of finding synergies. This is a deliberate attempt to create synergies rather than a fragmented or uncoordinated attempt.

Subsequently, units responsible for shared services such as human resources, IT, finance, and planning, among others, embark on the creation of Strategy Maps and Balanced Scorecards. These tools are designed to align with and bolster the priorities of both the business units and the overarching enterprise. This strategic alignment repositions shared-service departments from being perceived merely as cost centers to becoming vital strategic allies. They play a crucial role in aiding operational units in realizing their ambitions and objectives.

The approach to alignment may vary, adopting either a top-down or bottom-up strategy, influenced by a variety of corporate preferences and capabilities. Typically, the contributions made by shared-service units are not easily quantifiable, encompassing a range of intangible outputs such as cost-saving expert advice, workforce motivation and training, improvements to critical business processes, and the cultivation of key partnerships. The intangible nature of these outputs presents a challenge in assessing the value and performance of support service units. Complicating matters further, these units are often staffed by highly specialized experts whose cultural norms may diverge significantly from those prevalent in operational units. This disparity can sometimes lead to a sense of isolation of the support units from their internal clientele. To foster synergy at the level of support services, a straightforward alignment methodology is essential.

When all internal operational and service units within an organization are synchronized, it opens up the possibility for further alignment through relationships with external partners such as customers, suppliers, joint venture partners, and shareholders. Utilizing Strategy Maps and Balanced Scorecards as unified and consistent sources of information can generate enhanced value through improved alignment. A shared understanding of the alliance's objectives develops, leading to increased trust and understanding, which in turn results in reduced transaction costs due to less operational misalignment and subsequent waste. External partners can be a significant source of synergy for a corporation, and the key to tapping into this resource is the alignment process, based on cascading the organization's Strategy Map and Balanced Scorecard. Significant synergies can be achieved as companies establish deeper and more effective relationships with external partners. The cascading effect of the organization's value proposition, coupled with the collaborative effort required to develop a Strategy Map and Balanced Scorecard that describes the relationship, can foster strong consensus and motivation. Increased accountability also contributes to this.

Currently, most organizations assess their external partner relationships in terms of key performance indicators that describe operational performance metrics. When an enterprise attempts to build a Balanced Scorecard and a Strategy Map with an external partner, senior managers from both entities need to agree on the objectives of the relationship. This fosters understanding and trust, often leading to lower transaction costs as any existing misalignments between the two parties are addressed. A co-developed and clearly understood Balanced Scorecard and Strategy Map between the organization and its external partners will provide a clear contract by which interorganizational performance can be quantitatively measured, allow for aspects such as timeliness, innovation, quality, and flexibility to be incorporated into the relationship, increase the level of coordination between both entities, allow for better alignment and optimization of supply chains, enhance collaborative planning between your organization and your external partners, establish a common set of measures by which all parties measure ongoing performance, provide a solid foundation for partnership governance by the respective organizations, develop good performance indicators that can be used to determine incentive compensations for all parties involved, generate a shared set of metrics everyone can use to describe any available synergies, and articulate common objectives everyone can work towards.