18 June 2009 • 12:24 pm

Cascading Conundrums – Part I

Cascading is a term that has been used in the balanced scorecard (BSC) community to describe the process of propagating the BSC across an organization. Although the term implies a downward movement (through the organization’s hierarchy), propagation in any direction has come to be referred to as ‘cascading.’ Some people mistakenly apply the term to the strategy communication process; after all, they reason, communication of strategy also cascades through the organization, and is certainly related to BSC propagation. But I believe that cascading and communication are two separate processes, especially since communication is absolutely essential to the change process, while cascading is not always necessary or beneficial. And poorly-planned cascading can derail the change program.

Many cascades follow a basic pattern: a BSC (consisting of a strategy map and associated measures) is developed for the organization as a whole, then subordinate maps and / or measures are developed for each subordinate business unit and support organization (such as Information Technology and Human Resources). But the predictable pattern quickly disappears. Subordinate organizations may be required or allowed to choose to replicate or adapt the higher level strategy map and measures, or given the freedom to create an entirely new BSC. Unfortunately, there is often too little time and energy invested in understanding and making good decisions about cascading, and there are no well-established rules. The objective of this post is to outline the key questions that should be considered when planning to cascade BSCs in any organization.

Ask the ‘When’ Question First

Before considering any of the other questions, leaders should consider the timing of cascading. In their enthusiasm to leverage a newly-hatched strategy map, they may mandate that business unit cascades be completed quickly; unsurprisingly, rapid cascading is the default recommendation of outside consultants (mea culpa). But rapid cascading has its drawbacks. The enterprise-level strategy map may lose relevance in the shadow of those created for business units. That outcome is probably okay if the enterprise is operating as a holding company, but more often than not, the enterprise seeks to leverage strategic objectives across business and operating units. When this is the case, there is a large benefit in broadly socializing the enterprise-level change agenda across the entire organization before enabling the subordinate units to participate in the cascade. Not only does this enhance the credibility of the change program, but it avoids the risk of forcing a subordinate organization to cascade before its leaders are ready.

But the best reason to manage the timing of the cascade is to enable leaders to understand and carefully consider their approach to cascading, and make informed decisions. But it is easy for leaders to assume they instinctively know the best way to cascade, and to want to sustain the momentum of their initial work.

Of course, the vary real risk in not rapidly cascading is to lose executive level buy-in for the change program. Leaders should be encouraged to publicly commit to a cascading process, but avoid releasing details of the cascading approach. Public commitment reduces (but does not eliminate) the risk of losing support, and buys the critical time and flexibility necessary for leaders to make those informed decisions.

Reach Agreement on the ‘Why’ Question

Leaders who have agreed to undertake a change program using the BSC will easily agree that cascading is a good idea. But challenging them to describe their expectations of cascading will probably yield different answers and valuable insights into each leader’s management style. Why cascade? The easy answer comes from Kaplan and Norton’s Strategy-Focused Organization: to align the organization to the strategy. But what does alignment mean? To some, it means instituting a control and feedback regime that entails populating the measures on the enterprise scorecard. To others, it means enabling and empowering subordinate units to escape from bland and imprecise objectives at the enterprise level, and to “get it right” for the subordinate organization. Others may only see the cascaded BSC as an emblem of organizational status, and are most likely to volunteer their subordinate organization to ‘go first’ in leading the cascading effort. Some may confuse or conflate the optional cascading process with the necessary change communication program, as mentioned above.

While there is some merit to each of these expectations, it is vital that leaders express and agree to their expectations for the cascading process. A shared answer to the ‘Why’ question informs the remaining decisions on cascading, and enables executives’ expectations to be realized.

Next: The ‘Where’ Question

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