(I write of Haiti and U.S. politics together only to illustrate a point, and not to imply any comparison between these events. I hope that you will join me and millions of others who have already contributed to one of the many organizations leading Haiti’s earthquake relief efforts.)

In my experience, organizational preparedness for major, unexpected changes varies widely. Most organizations pay lip service, with little more than rueful acknowledgement of the possibility of disruption. Some develop ‘business continuity’ plans, which are targeted at sustaining key assets and processes, like computer systems and networks, in the event of catastrophe. Far fewer have a comprehensive, robust capability to weather the literal and figurative storms of unknown and unexpected events. The most effective organizations prepare not for specific disasters, but with a well-tested process for making effective strategic and tactical decisions in the face of sudden, significant, unexpected change.

Every organization’s strategy is the result of its mission, its internal capabilities, and its external environment. Over time, mission and capability are likely to evolve to reflect the changing realities of the external environment. The normal strategic planning process, when properly executed, entails continuous monitoring of environment and management of capability and strategy itself. Sudden change in the external environment requires rapid and confident recalibration of the strategy. The decision making process is the same, only the time scale is different.

The difficulty with which most organizations mange and execute strategy means that they are ill-equipped to handle the inevitable lurches. Fingers are pointed, emotions flare, poor decisions are made, and must be made again, efforts are wasted, and chaos reigns. By contrast, healthy organizations quickly pick themselves up, look around to understand the new realities, quickly make well-informed decisions, and get on with the urgent tasks at hand.

How will your organization handle the next lurch?

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I recently came across an article about earthquake aftershocks:  Earthquakes Actually 19th Century Aftershocks.  I’m fascinated by all things earth science and started to read.

“Aftershocks happen after a big earthquake because the movement on the fault changed the forces in the earth that act on the fault itself and nearby. Aftershocks go on until the fault recovers.”

In other words, after a large shift, aftershocks are felt as everything around it rearranges itself to accommodate the new state.

What a great analogy for change in organizations!

Here’s one image that comes up:  after making the push for a large change, you have to wait and see what else is disrupted as the organization and the people in it try to rearrange to accommodate the switch.  In that case the aftershocks are the fixes we come up with the handle the unexpected impact of the change.

It turns out that the slower an earthquake fault moves, the longer it takes to dampen the effects of a large earthquake.  While aftershocks on the San Andreas subside after 10 years, aftershocks along the New Madrid fault are still occurring 200 years after its last big quake.

It seems to me that a fast-moving fault like the San Andreas is basically leaving aftershocks behind.  The aftershocks don’t happen later because the fault has already moved again.  It doesn’t have to accommodate to the old-new state because there is a new-new state.  It would be like upgrading to a new IT system before everyone was trained on the old one.  You wouldn’t keep training people on the old system just because you hadn’t trained everyone yet.

It’s not that fast-moving fault lines are particularly resilient and bouncing back to normal quickly; instead their rate of change is just too fast to keep up with.

An interesting phenomenon, one you’d want to avoid with organization change.

How is this playing out in your organization?

(Editor’s note: This post first appeared in the Change Starts Here blog at Enclaria.com)

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read this book

Most popular ideas in the domain of organizational management have a limited shelf-life. Those that gain widespread attention usually do so on the strength of a published work. My bookshelves are filled with titles that in their time, were purported to be the next ‘big idea’ in management, but have since faded into relative obscurity. This pattern is as much a function of the audience for the ideas as the ideas themselves; executives and managers crave the easy answers and magical insights that are promised by these works. So when an idea remains relevant and applicable for more than a few years, it stands out. 

Of course, balanced scorecard has been an exceptionally durable concept. The idea of a scorecard (a collection of measures) as a tool for management has been around for decades, and is thought to have originated at General Electric during the 1950s. Kaplan and Norton elaborated the idea of a scorecard as a tool for strategic management beginning with their first Harvard Business Review articles on the topic in 1992 and 1993, and their book The Balanced Scorecard in 1996. The BSC articles and original book were extremely popular, and remain so today.But I never recommend Kaplan and Norton’s first BSC book to anyone embarking on a journey of strategic management.

skip this book

As elegant and appealing as the BSC idea was, the early literature focused far more on what the BSC is than how organizations should actually use it. Combined with the initial popularity of the BSC, this gap in the literature led to many failed BSC implementations among early adopters in the late 1990s. There simply wasn’t enough documented experience to understand how to successfully implement the BSC, and trial and error is an especially inefficient way to learn.

Reports of widespread failure of BSC implementations led Kaplan and Norton to write their second book on BSC in 2000, The Strategy-Focused Organization. This is a far better place to start than the first book.

The SFO concept (as it came to be known in the BSC practitioner community) was based on observations of the many organizations failing with the BSC implementations, and the far smaller number that were successful. It identifies five key behaviors in those organizations that were successful. Failing to model any of these is a powerful predictor of failure; adopting all five improves the likelihood but does not guarantee success. The SFO behaviors have influenced the work of every serious BSC practitioner I’ve ever met.

1. Mobilize and engage executive leaders with the necessity for organizational change and the strategic management process. It is not sufficient to get the senior executive to agree to implement BSC. He or she, along with all members of the organization’s leadership team must commit to no less than changing the way they manage the organization, and must understand that the implementation process happens of the course of years, not weeks or months. A senior executive looking to BSC as a quick fix is a certain predictor of a failed effort.
2. Translate the strategy into language that everyone can understand, a strategy map. Remarkably, many organizations implement their BSCs without developing a strategy map; this outcome is the result of a lack of centrality of the strategy map in Kaplan and Norton’s early writing. Bluntly, if you don’t have a strategy map as the basis for your measures, you don’t have a balanced scorecard.
3. Align the parts of the organization with the overall strategy. Except in the very smallest of organizations, it is necessary to interpret the enterprise strategy for each part of the organization; business units and support organizations, such as information technology and human capital. This usually means subordinate strategy maps and BSCs that are cascaded from the overall strategy map.
4. Ensure that each member of the organization understands his or her role in executing strategy. The natural inclination for executives to play their strategy close to the vest inhibits this vital behavior. Broadly communicating the content of the strategy and an unvarnished accounting of the organization’s actual performance are table stakes; embedding the language of the strategy in each employee’s performance management process is the first realization of this behavior.
5. Embed the process of strategic management in business processes. Because BSC-enabled strategic management is unfamiliar and can make leaders a bit uncomfortable, the reflexive tendency is to quarantine the BSC from everyday management process. Successful organizations recognize that strategic management is an ongoing process, not simply a once-a-year event.

Needless to say, there is much more to say on the five SFO behaviors. Remember that skipping any of these will almost certainly mean your change program will fail.

How is your organization doing at each of these?

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However, not all surveys will improve the situation.  The following are four warning signs that conducting a survey may do more harm than good.

1.  The leaders don’t really want to know what people think.

The people who hold the top spots in an organization are usually out of the feedback loop.  As they move up the ladder, they are increasingly unaware of the pulse of the organization.  When the intent to conduct an employee survey is proposed, leaders who understand this phenomenon will jump at the chance to collect information that they have gradually been phased out of.  These leaders will want more details about what will be asked, and might even propose other questions that they would like to ask.

On the flip side of the coin are leaders who think they already know, or worse, don’t really care what the employees think or how they feel.  If you propose an employee survey and receive a resounding, “Sure, go ahead” without any curiosity or concerns, beware.  They probably don’t really want to know what people think.

2.  The leaders won’t believe the results.

Sometimes leaders will dismiss the results of the survey, even if it seems they wanted to know.  I once conducted an employee satisfaction survey that I created in-house due to lack of funds for the project.  Once I presented the results, the leaders wanted benchmarks to compare against to see if the results were “normal.”  Of course, having created the survey in-house, there was no other data to compare them against.

Before conducting a survey, watch for signs that the leaders commonly deflect accountability by picking apart the validity of numbers in other settings.  One way to combat this scenario ahead of time is to discuss the output that will be generated from the survey.  Discuss hypothetical results with the leadership team to determine up front what else they will want to know, so you can build it into your analysis.

3.  The leaders won’t do anything about it.

Even leaders who want to know and believe the results still may not do anything about it.  If employees give their opinion and then nothing is done, the integrity of the leaders and you as the surveyor drops, and future surveys will not be taken as seriously.

When discussing hypothetical results, gauge the interest of leaders in taking action.  For example, if the survey says that people don’t know the direction the company is going, are the leaders willing to share strategic information?  If the answer is no, then don’t bother asking.

To combat the first three reasons not to conduct an employee survey, make sure leaders know the questions you are asking and what you are actually measuring with the questions.  Discuss ahead of time what the implications and actions might be based on hypothetical responses you think they might have trouble absorbing.

4.  You don’t want to say what you already know.

The fourth reason not to conduct an employee survey, instead of being directed at the leadership team, is directed at the surveyor.  Are you conducting the survey because you don’t know the answers, or are you conducting the survey because you don’t want to say what you already know?  Is fear getting in the way of you speaking up and sharing the problems you see in the organization?  Is the survey actually a cop-out?

If any of that rings true, here’s an idea for you:  Include your point of view in the proposal for the survey.  State your hypothesis – what you believe to be true – and say you would like to conduct a survey to test it.  Share the implications and the action plan for improving the situation if you are right.  Then offer the option to skip the survey if they agree – they just might.  If they don’t agree with your hypothesis, then you will still conduct the survey.  Not only will you get more involvement from people who disagree with you, it will also be more scientific and objective than if you were just using the to communicate for you.

Yes, surveys can be very useful tools to help direct a change initiative.  That is, of course, if the leaders want to know what employees think, will believe the results, and will do something with the opportunities that are revealed.

(Editor’s note: This post first appeared in the Change Starts Here blog at Enclaria.com)

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Amazon is shaking up retailers, both big rivals and small independent stores, as it speeds its way beyond books toward its goal of becoming a Web-sized general store. Jim Wilson/The New York Times

Try to imagine the largest bookstore in the world. Aisle after aisle, floor after floor of books, maps, audio books, music, video, you name it (if you’ve ever had the unique and wonderful experience of visiting Powell’s Bookstore in Portland, Oregon, you’ve got a great visual image to begin with). But this bookstore isn’t limited by physical size, or shelf space or inventory cost; it carries nearly every title in print, and a huge back catalog of used and out-of-print books. And in the unusual case where they don’t have the book you want in stock, they can try to get it for you from other stores or the publisher. Every time you enter this store, you’re immediately recognized and greeted by name at the door, and your personal guide stands ready to recommend books and other goods you might be interested in. Of course, you don’t have to get in your car to visit this store, it is as near as your computer. Of course, the largest bookstore in the world is Amazon.com.

But as you prepare to leave your mental image of the largest bookstore in the world, you notice a door with a sign on it that says, “More inside!” And when you peek through the door, you find yourself at the entrance to an even bigger store; one that carries more goods and services than you’ve ever seen in one place. A shoppers’ paradise?

That’s the image that Amazon.com has been aiming for since its inception. And as reported yesterday in the New York Times, Amazon.com is poised to cross an important milestone later this year. Its global sales of media products will be surpassed by its online sales of non-media products. That milestone has already been reached in North America. And while Amazon.com may retain its image as a bookstore in many of our minds, it seems well on its way to becoming the Wal-Mart of the Web.

After Wal-Mart, Amazon.com may be the most carefully dissected retailer in academic and popular writing, and it would be foolish for me to try to add to that canon here. But reading the New York Times article, I was reminded of my frequently-referenced theme of value proposition evolution. Amazon’s value proposition is evolving, and so is the value proposition of many other firms.

In its simplest guise, a firm’s value proposition is simply what a customer gets in exchange for value given up. The value proposition can be both absolute (e.g. ‘the world’s largest bookstore’), and relative to a competitor (e.g. “Have it your way” at Burger King). The value proposition can be emanate deliberately from the firm’s marketing efforts, or can be simply be result of the individual perceptions of consumers and non-consumers alike. A discussion of the value proposition of, say, The New York Times would be both lively and contentious.

I contend that value proposition evolution is the necessary business of any organization (not just for-profit firms) to ensure its long-term survival. The value proposition of the FBI evolved after 9/11. Intel used to be primarily a manufacturer of memory chips, but is now known for its microprocessors (two very different kinds of businesses). And even though Intel rarely sells is products directly to its consumers, it is one of the most recognizable brands in consumer electronics. The March of Dimes fights birth defects, but was founded to combat polio. When polio was brought under control by medical advances, the March of Dimes evolved its value proposition. MTV got its start as the definitive source for music videos, but shows almost none of them today. The world changes, and each of these organizations has changed its value proposition in order to defend against threats, seize opportunity, and simply to remain relevant.

Strategy planning and execution is the deliberate process by which an organization chooses to and evolves its value proposition. Failing to plan this evolution is tantamount to planning to fail as an organization, at least in the long run. Do you have a clear understanding of your organization’s value proposition as it exists today? As it is expected to be in three years or longer?

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U.S. President Barack Obama delivers his speech on healthcare. REUTERS/Jason Reed

U.S. President Barack Obama gave his highly-anticipated speech on health care reform to a joint session of the U.S. Congress and a national TV audience yesterday evening. For those outside of the U.S., speeches to both houses of Congress are relatively rare (except for an annual ‘state of the union’ address), and this speech marked a crucial point in the intense health care reform debate that has been raging here for the past several months. I am sure that several other bloggers have already or will shortly provide their take on the speech itself, so I will spare you my own interpretation. But Obama used the ‘best practice’ term to describe a couple of U.S. regions in which per-capita health care costs are both significantly lower than average, while quality of care and outcomes are better than average (a theme in a New Yorker article I reviewed over the summer), in his desire to improve the cost and quality of health care across the country.

It was interesting to hear Obama cite the concept of ‘best practices’ that is often used in business settings, but rarely presented to the public at large. The idea of capturing and sharing of best practices across an industry or an organization is both pervasive and elusive. I’ve yet to see or hear of an organization that claims to have a best practice for capturing and sharing best practices, and as such, I am a bit skeptical of the term in general.

My reflexive check of the Wikipedia entry on best practices yielded the following tasty morsel:

“As the term (best practices) has become more popular, some organizations have begun using the term “best practices” to refer to what are in fact merely ‘rules’, causing a linguistic drift in which a new term such as “good ideas” is needed to refer to what would previously have been called “best practices.”

Amen to that. I think that comment captures much of my skepticism. It seems to me that implicit in the idea of best practices is that an organization has evolved to a point where it is doing the same thing in more than one way, and that it can be objectively determined that one way is better than the other. Best practice sharing sounds good when discussed in an executive setting, but reconciling different approaches to an esoteric task requires the participation of the very people who are using the different approaches. While sometimes it may be obvious that one practice needs to be abandoned, it is far more likely that no clear winner will be determined.

Anyone who has ever gotten or renewed a drivers’ license at their state’s motor vehicle division (DMV) knows that the process can be slow and bureaucratic. I’ve often imagined how useful it would be for an independent organization to benchmark the efficiency, effectiveness, and consumer satisfaction of each of the 50 DMVs across the U.S. and to use the results to identify and ultimately implement best practices across all of them (some overseas readers of the Tenacious Blog may wonder why the U.S. doesn’t simply have one national process – that would be a whole other topic). But it is easy to see the flaw in my idea. Each of the 50 bureaucracies would incur a high risk of having its flaws objectively quantified and compared, while the chance of being found to have a best practice would be quite low. Even if politicians agreed to the benchmark, they’d encounter considerable resistance to actually implementing any changes to the status quo.

Such is also the case in organizations. The challenge of best practices lies not in the identification of the candidate practices, but with the choice and implementation of a particular practice. Risks are high, benefits are low, subversion of the concept is easily and often accomplished.

Or perhaps I am too cynical. Does anyone reading this want to offer a description of a best practice in best practice sharing? Please comment below.

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Anderson offers an initially breezy, but eventually somewhat tedious journey through the concept of free. Even the word itself (which I swear must appear an average of ten times on each page) has to be parsed – free as in “freedom” and free as in “at no cost.” To ensure our comprehensive understanding of the phenomena of free, Anderson journeys from history into behavioral science, literature (science fiction), and pop culture.

Much, but not all of the discussion of the contemporary concept of free is rooted in technology. When companies like Google give away so much of what they do (search, maps, mail, online applications, operating systems), and yet are so profitable, it is time to reexamine the relationship between price and profit. And it is examined in detail, indeed. Over a dozen sidebars sprinkled through the book offer brief case studies of businesses built on free models, and the ample back matter includes a list of fifty business models built on free.

At the center of technology-based free is the philosophical foundation found in Stuart Brand’s famous 1984 quote (emphasis added):

On the one hand, information wants to be expensive, because it’s so valuable. The right information in the right place just changes your life. On the other hand, information wants to be free, because the cost of getting it out is getting lower and lower all the time. So you have these two fighting against each other.

Of course, all that most people remember is, “…information wants to be free.” You’ll learn more than perhaps you want in the entire chapter devoted to parsing the quote. Anderson’s contention is that with dramatic declines in the cost of three commodities (storage, bandwidth, and processing), the marginal cost of delivering information is so close to zero that it might as well be free. But there is much, much more that we learn about free; far too much for me to coherently capture here.

It is hard for me to imagine any contemporary or future strategist who won’t someday become caught up in the reality of the radical pricing models that free entails. Recorded music and newspapers are but two of many industries today that are wrestling with technology-driven pricing upheavals. And perhaps that is the greatest value of the book, the message that “free is real, and it’s here to stay” for those who may still be dismissive of the idea. But that point (at least for me) was made easily and quickly. I finished reading Free both exhausted and hungry – exhausted at having been beaten over the head with the concept and Anderson’s taxonomy of different forms of free, and hungry for a better understanding of how to approach strategy development in organizations where free is both threat and opportunity. Now that we understand that free is real, perhaps we’ll invent a better way to make pricing decisions than we do today.

Is your organization coping with free? What is the impact? What is the opportunity? How is your leadership team responding? Please comment below.

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This series of posts (in three parts) is adapted from an article of the same name that appeared in Harvard Business Publishing’s Balanced Scorecard Report in 2006.

In Part I, I asserted that perception matters very much to the strategy of an organization. Perception of external stakeholders, of customers, and of employees. Often, the change program requires measurements of customer and employee perceptions. How organizations go about gathering these perceptions is a key factor in the success of the change program. In Part II, we examined the challenges of survey design, and its impact on the effectiveness of the strategy-driven perception research. Here, we conclude with consideration of alternatives to surveys, and an examination of how to use perception data in the context of the change program.

Consider Focus Groups or Interviews

While most perception measures come from surveys, focus groups and interviews are also valuable tools. Focus groups can be a component of a survey (answering the complex question, “why are employees unhappy?”), or can simply serve as a way of capturing the perceptions of a small group when surveys would not be effective or practical. A focus group can reveal complex root causes for perceptions that may not be anticipated in a set of multiple choice responses.

Focus groups typically involve eight to twelve subjects and one or two facilitators, with generally no more than five questions. Experienced facilitators employ several techniques to elicit and structure responses from participants, which may be captured through flip charts, note taking, or audio and video recording. Because facilitators affect results, it is vital that they be experienced, neutral, and knowledgeable about the topic. Specially designed focus-group facilities feature one-way mirrors to enable skilled observers to capture participants’ body language and group dynamics without influencing them. Internet and other technologies now enable on-line focus groups, from simple discussion boards and blogs to real-time sessions assembling people from different locations to interact with text, audio, and even video.

One-on-one interviews are another valuable technique. By separately asking members of a group with similar characteristics a standard set of questions—for example, asking salespeople the same questions about follow-up calls to customers after a store visit—you get the benefits of a focus group (more detailed, qualified responses and more flexible dialogue), without the burdens of scheduling and travel.

Put Your Findings in Context

With survey data in hand, how do you best present it? It’s easy to present survey data in graph form, but graphs by themselves don’t tell a very useful story. Including all the detail in a change program progress report is usually not necessary, though the detail should be available to the leadership team so they can drill down if they want. What is necessary, however, is context. The performance advocate for the overlying strategic objective should work closely with the research designer to analyze the survey findings, considering them in the context of data from prior surveys and other measures in the report—and presenting that context in the reporting.

Focus group feedback, including carefully selected participant quotes (paraphrased when necessary to ensure anonymity), should be summarized through the facilitators’ written analysis. The research designer should attend the management discussion of the findings to answer technical questions and help shape subsequent research requests.

Because of the very real danger of simply replacing the old “comfortable fictions” with new ones, leaders should balance their reasoned judgment with a healthy skepticism when making decisions resulting from their enriched understanding of stakeholder perception.

How is perception research done in your organization? Do leaders shun surveys because of what they might learn? Do employees suffer from ‘survey fatigue?’ Please offer your comments and insights below.

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This series of posts (in three parts) is adapted from an article of the same name that appeared in Harvard Business Publishing’s Balanced Scorecard Report in 2006.

In Part I, I asserted that perception matters very much to the strategy of an organization. Perception of external stakeholders, of customers, and of employees. Often, the change program requires measurements of customer and employee perceptions. Here, we consider how organizations go about gathering these perceptions, which is a key factor in the success of the change program.

Ensuring Survey Success: Skillful Research Design is Vital

A survey program is the best way to regularly monitor stakeholder perceptions. E-mail and Web-based survey tools enable faster design, execution, and analysis, and have reduced the cost considerably. Many enterprises already have e-mail address lists from the Web sites and customer databases they maintain for direct communication and marketing purposes. Wireless telephony and text messaging enable nearly real-time data collection and analysis. Technology, however, is no substitute for good research design, and in amateur hands, such tools amplify the risk of getting unactionable results or even causing adverse consequences.

Regrettably, to save money, many firms opt for do-it-yourself research design, even when they lack the expertise to do so effectively. The principles of research design are beyond the scope of this article; suffice it to say that unless you have a professional market research staff in house, do-it-yourself research design is risky, unlikely to yield much useful information, and can actually do harm. The “Hawthorne Effect” demonstrated that the very act of studying a group of subjects changes members’ behavior. A poorly designed survey can antagonize the subjects, or, if they fear repercussions from any negative responses, discourage candor. Either way, it can taint results.

The research designer must be both unbiased about the research topic and familiar with the study environment. Unwittingly or not, do-it-yourselfers often allow their leaders’ biases to creep into the questions. But subtle changes in the way a question is phrased—even the order of the questions—can dramatically affect how people respond. Allow leaders to contribute their opinions when establishing hypotheses, but keep them a safe distance from the actual design.

Strategy-driven research begins with the cause-and- effect relationships among strategic objectives on a strategy map. Strategic objectives for customers and employees require perception measures to give a full picture of performance. While financial measures like sales volume or market share reflect the results of customer behavior, leading measures of customer perception can help executives anticipate changes in these ultimate outcome measures.

Changing people’s perceptions is often central to strategy. Well-designed research might provide leaders with insights about which perceptions need to change or help test hypotheses about how a change in perception will actually occur. A customer perception measure can validate the effect of an internal process initiative.

For example, as part of its strategy to develop more profitable relationships with its customers, a bank undertakes an initiative to have customer service agents spend more time on the telephone with customers calling for support. By equipping agents with better customer information, the bank believes they will be able to probe beyond the original scope of each call and promote additional products appropriate to the caller. A sound customer feedback program can enable the bank to validate the assumptions underlying its strategy, or to uncover negative perceptions (e.g., that calls are taking too long or agents’ questions are intrusive). Only by measuring agents’ new behavior (for example, through average call duration), along with agent and customer perceptions, can increased sales reasonably attributed to the new strategy.

While an inexperienced research designer would simply begin by writing questions, a seasoned designer would start by studying the environment and its population groups, as well as the organization’s strategy, to decide the best method (e.g., surveys, focus groups, or data mining) and frequency, and how to segment the research population. Drawing on her academic and practical understanding of human behavior, statistical analysis, and survey design, she would then develop a comprehensive research plan and plan follow-on research.

Conquer Survey Fatigue

Leaders seeking “silver bullets” for intractable problems don’t often have the patience to execute surveys repeatedly. But few surveys provide full value in one execution. Periodic sampling of a population reveals trends that are impossible to see in a single snapshot. Often the absolute value of a perception measure is meaningless; the insight comes from tracking the direction and magnitude of change in the measure over time.

“Survey fatigue” is a common reason why organizations resist using surveys. Employees in firms with Internet survey tools may be bombarded with narrow, one-off surveys from multiple sources whose timing is not coordinated and that, over time, do little more than discourage response. Such surveys may be sent to every member of a large population when a relatively small, carefully chosen representative sample would be valid—thereby reducing survey frequency and minimizing fatigue. All research requests should be funneled through a single coordinator.

Rather than surveying the entire employee population annually, the organization could send the same basic survey to a controlled random sample every quarter (25% of the employee population), polling different subgroups each time. The sample size is determined mathematically, according to population size and acceptable margin of error. A basic set of questions could be asked each time, and carefully targeted new questions could be included when needed to understand new challenges. Under this model, no employee in the target group would receive more than one survey per year. By generating quarterly findings (rather than the usual annual ones), this model is especially appropriate for strategy reporting.

Next: Alternatives to Surveys

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This series of posts (in three parts) is adapted from an article of the same name that appeared in Harvard Business Publishing’s Balanced Scorecard Report in 2006.

When helping organizations design measures for their change programs, the moment comes when I float the idea of surveying employees or customers. Invariably, there is an uncomfortable silence, followed by protests that surveys are expensive, that they don’t tell them anything new, and that a steady diet of them annoys people and thus defeat their purpose. An unspoken source of resistance is leaders’ fear that survey results will challenge the comfortable fictions they may be sustaining to support their decisions.

True, surveys can be expensive, especially for professional research design and administration. But in the past decade, technology has gone a long way in offsetting their cost and complexity.

Customer and employee expectations and perceptions all matter to a company. Understanding them is vital to predicting the behaviors of these stakeholders: whether they’ll invest in your shares or buy your products or work hard. When done properly, surveys are essential for developing a balanced portfolio of leading and lagging indicators. And when survey results inform key management decisions that involve making large investments in pursuit of even larger revenues, the value can be substantial. But in the absence of clear-cut results, surveys may raise more questions than they answer.

Perception Matters

Understanding, shaping, and fulfilling the expectations of stakeholders is central to successful strategy execution. In for-profit organizations, strategy is rooted in the need to satisfy shareholders’ expectation of a return on their investment. The decision to invest (and, by implication, the stock price) is driven by investors’ collective expectations of the firm’s future performance. Customers’ perception of the value proposition predicts his or her behavior toward the firm, namely, whether he or she buys its products. Value, like beauty, is in the eye of the beholder. While executives may envision what the value proposition should be, it is customer perception that determines what the value proposition actually is. The concept of the customer value proposition applies to the firm’s internal customers as well. In my work with IT organizations, I’ve learned that expectations and perceptions shape behaviors that influence the quality of these internal service provider-customer partnerships—and ultimately, how efficiently the resources that drive enterprise performance and strategy execution are used.

Of course, human capital is a key intangible asset necessary for creating value. A company can influence, but not control employees’ expectations and perceptions of the firm. These factors largely drive their behavior: how hard they work, how well their actions support the firm’s interests, and ultimately whether they’ll continue working for the firm.

Perception drives behavior; that’s why the behavior of these stakeholders is indeed the firm’s reality. Woe unto the firm that doesn’t understand what its investors, customers, and employees are thinking.

Next: Ensuring Survey Success

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