When following the vertical business driven approach, the mission, strategies and goals of an organization are leading (top-down). This approach is based on the fact that the most elementary information needs and KPIs come to surface – and can actually be defined – when we take a few steps down and ‘descend’ to the operational level of the business processes:
Mission, strategy and goals
the mission of an organization translates into one or more strategies that in turn can be translated into short term and long-term goals (see figure below). A mission statement normally does not change over the years because it describes the primary function and added value of the organization in general terms. The mission does not specify ‘how’ but it answers the question “Why do we exist and for whom?” The strategy specifies how an organization wants to achieve its mission and the goal indicates more specifically, what an organization wishes to achieve. When a certain goal is achieved, an organization can employ other strategies to keep on pursuing its mission. It is thus a cycle of strategy and pursuing goals that maintain the mission: every goal reached becomes a means to setting new goals and achieving a higher level of ambition.
Figure: The relationship between mission, strategy and goals.
Key success factors (strategies that derive from the mission)
They represent those business processes that are crucial for the realization of the added value of an organization – what an organization is good at and heavily relies upon. If errors occur, even in just one of those key processes, this will have direct and major impact on the functioning of the entire organization. The critical (or key) processes differ per organization, even if they sell the same products and services. One particular wholesaler may, for example, rely heavily on its purchasing function whilst other wholesalers within the same industry rely on a flawless logistic function or on an excellent sales force to realize their margin. Key success factors show what it is that eventually makes (or will make) an organization unique and they describe the processes that are decisive for the success or failure of an organization.
Defining measuring points
On the aforementioned key processes, we need to define measuring points – so-called (key) performance indicators – in terms of input, output and outcome. In this way, risks and opportunities become measurable and comprehensible. (Read more about the horizontal business-driven approach here.) Next, we do need to remember that that key processes in turn are often fed by other key processes or factors. For example, when the purchasing function is critical in order to get the cheapest possible product to the market, the purchasers need to possess a set of essential skills (e.g. negotiating) and have access to an extensive network as well as market information.
A useful tool for creating a good and coherent overview of key processes, strategies and goals is the so-called Strategy Map. Strategy maps are an excellent means for effectively visualizing and communicating the business strategy or policy and corresponding management. A strategy map may also be deployed for scenario planning, organizational developments and investment decisions.
A strategy map
A strategy map consists of a number of components. To start with, there is the organization’s mission, which should as precisely as possible reflect what the organization wants to be, for whom and where. A mission statement is in fact a short piece of writing that captures the essence and meaning of an organization.
The strategy map is most powerful when it visually balances all different dimensions of the organization’s strategy in such a way that it appeals to people. The text boxes (shapes) form the second component of the strategy map and they contain the most critical processes that contribute towards achieving the objectives of the Intelligent Organization.
Naturally, there should also be coherence between the key success factors and the strategic goals. That is what the arrows (the third component) are for: they show the interlinkages. At the highest level, the shapes (boxes) are mostly abstract. It is therefore important to try to ensure that these abstract cubes are recognizable and that they appeal to people.
Figure: an example of a strategy map of a high-end mental healthcare organization.
Although a strategy map can be a very useful structuring method, it is important to also set up a Plan Do Check Act (PDCA) cycle for each box (or per group of cubes) and to secure that cycle within the standard management process. This website further elaborates this cycle because it is highly critical to both the success of Business Intelligence and performance management.
To learn how to grow is to develop – an example
A well known mental health care company has the following mission: to be the best high-end health care institution that helps children, adolescents and adults with complex development disorders to develop themselves to full potency. The organization believes to achieve this mission through (among other things) ensuring that treatments are as highly effective as possible.
To achieve this, the contextual preconditions first need to be in order. If they are not, this may hinder the treatment. The purpose is to organize care around the child and to support both child and parent(s) using competent multidisciplinary teams of specialists who can provide warmth, security and a healing environment.
One very important requirement here is for caregivers to share their knowledge with each other. In addition, besides education and training, a development led culture is important as well as an “expert” system containing national and international research findings that can easily be accessed. All this is financed by a maximum return on production. An optimal planning process is therefore a major requirement.
Once the key processes are defined, we can begin to think about how to measure the performance. This is done through defining a set of indicators that include some sharp definitions.