Mapping Strategy in Public Sector Organizations
By Ralph Smith, Vice President - Strategic Services, Orion Development Group
How much time does the senior management of your organization spend thinking about strategy?
If your answer is "not enough," consider yourself among the majority of public sector organizations. Many are relatively new to the field of strategic planning, and those that have experience with it have had varying degrees of success. Often plans are created and then dutifully ignored until its time to start planning again. Other plans take the form of hundred-page documents that are created in multiple offices and then cobbled together and called a strategy. These documents are in fact no more than a compilation of independent to-do lists, and often serve merely to attempt to strengthen each department versus strengthening the organization as a whole.
This is not an indictment of the public sector; focusing on strategy is a difficult challenge in any type of organization. There are several reasons why the public sector might find strategic focus particularly difficult. For example, reporting to elected officials can create a revolving door effect among leadership that results in frequent changes of direction. External factors often force budget constraints without regard for the impact on the mission and vision of the organization. Media interpretation and sensationalism can lead to short-term focus to solve perceived problems. These are but a few of the factors that prevent focus on strategy. Most of these problems cannot be completely solved, so the key is learning how to manage them better. This can be done effectively through the methodology known as strategy mapping.
What is a strategy map?
A strategy map is a management tool that articulates an organization's strategy through a series of cross-functional cause-and-effect relationships. Building a strategy map typically involves understanding the key strategic themes in four general perspectives: financial, customer, process, and learning and growth. These four perspectives were developed by Dr. Robert Kaplan and Dr. David Norton in the early 1990's as part of their Balanced Scorecard methodology. The theory holds for both private and public sector organizations, though the starting point is typically different. Consider the models below:
A strategy map is built from the top down, so it is important to understand the ultimate objective of the organization before identifying the supporting objectives needed to achieve it. As the diagram on the left illustrates, the ultimate object in a private sector company is typically financial. The arrows illustrate the hierarchy: acceptable financial return is driven by satisfying customers, which in turn is driven by sound process performance, which in turn is driven by development of people and support systems (called Learning and Growth).
However, the ultimate objective in a public sector organization is generally not financial. Public sector organizations typically exist to satisfy a specific set of customers / stakeholders, so the hierarchy is a bit different. As the diagram on the right illustrates, the ultimate objective is usually customer-related, and financial responsibility / sound cost management is but one means to achieve customer satisfaction. In turn, financial position is driven by efficient process performance, which is in turn driven by development of people and support systems.
Case Study: State of Michigan Department of the Treasury
The Department of the Treasury is Michigan is an excellent example of how strategy maps can be used to articulate organizational direction. In the summer of 2002 they initiated the strategic process by conducting a month-long assessment that corresponded to the four strategy map perspectives. Each office analyzed its relationship with its various customer segments and how it would change in the future. Financial analysis on incoming revenue and expense management was performed. Key processes that hinder productivity were identified, as were the key process strengths that needed to be leveraged. Employee focus groups were conducted to determine workforce strengths and weaknesses, satisfaction levels, and how well-connected employees felt to organizational strategy. Recent surveys on manager-employee relationships, customer perceptions of service, etc. were reviewed. The output of the assessment work was an excellent and comprehensive list of strengths, weaknesses, opportunities, and threats (S.W.O.T.'s) that illustrated the difference between current state and the future state articulated by the mission and vision.
The assessment was followed by a two-day session in which the executive team used the S.W.O.T.'s gathered and developed the strategy map shown in figure two. The map should be read as a series of IF-THEN statements. For example, note that the "Develop Positive Culture" objective in the Learning and Growth perspective has two arrows going into it. This should be read as "IF we Provide Customer-Friendly HR Service and Improve Internal Communication, THEN we will be able to Develop a Positive Culture." The arrows therefore articulate the cause-and-effect relationships among the objectives.
Interpretation of the strategy map should start at the top. The Treasury selected Increase Stakeholder Satisfaction as their ultimate objective. This allowed for the fact that to be a truly successful organization there were several diverse customer groups with markedly different sets of needs that must be kept happy. The taxpayers were of course a key customer segment, as were the families applying for educational financial assistance, the governor's office, the legislature, etc. After much discussion, the term 'stakeholder satisfaction' was proposed by the Treasurer to account for these various groups.
The organization felt that there were five things instrumental to achieving the number one objective. One was maintaining financial integrity. Since the Treasury's main charge was to collect taxes and fund state programs it is obviously essential to manage the money properly. Developing a positive culture was also thought to be a key driver of stakeholder satisfaction due to the widely held maxim that employees treat customers the same way the company treats the employees. Enhancing customer communication was critical because maybe process improvement efforts were directed toward making interaction with Treasury easy for customers and they needed to know about the changes to utilize them properly. Promoting a positive image gave the public confidence that their tax money was being handled properly, and improving security (the fifth connecting arrow, coming in from the right and illustrating a general connection to every objective) ensured that both tax money and confidential information was being handled in the proper manner.
The relationships across the map were developed after a great deal of productive discussion among managers from across the organization regarding "what drives what." 'Improve security' is positioned on the far right with a connection to everything because the group felt that security impacted everything they do and if it were not maintained then an effective strategy could not possibly be executed.
The development of the map was a tremendous success. As Deputy Treasurer Julie Croll said:
"Although the Department had been through a series of 'reengineering projects' and 'quality initiatives', the strategy mapping session of the Balanced Scorecard development process was the first time I had witnessed managers from all parts of the Department really understand what it meant to identify the core mission and functions of the Department. I think it made us all realize that strategic planning for the big picture isn't so scary (or impossible for Bureaucrats) once you understand that the big picture is made up of a lot of little pictures that fit together in some logical way."
Benefits of Strategy Mapping
There are several benefits to be gained from strategy mapping. Perhaps the most critical point is the focus on cross-functionality. Organizational problems of today are often too complex to be solved on a function-by-function basis. The strategy map forces the organization to think about how the various functions interact with and support each other. In the Treasury example above, instead of having an IT department focused on becoming a world-class technology organization with all the latest technological toys, the strategy map clarified precisely how IT is expected to support the business of government: by increasing electronic process capabilities in targeted areas. When the State of Michigan recently offered an early out retirement package Treasury was faced with the loss of a large percentage of its workforce. Since replacement was only to be had on a 1:4 or even 1:5 basis it was critical to determine how best to minimize the impact of the early out. One solution was to increase their electronic capabilities in targeted process areas, and the resource time of the technology personnel was then consumed by teaming with the key process personnel to develop workable solutions. In this way IT was instrumental in facilitating the switch from manual to electronic processing.
This clarity and constancy of purpose is essential to prioritization of activities and initiatives on an ongoing basis. The State of Michigan Department of Management and Budget initiated the strategy map and Balanced Scorecard concepts in the late 1990's and have been at it long enough for it to become an accepted part of their culture. According to coordinator Kathe Carter, "Our management team evaluates potential new programs / initiatives by seeing how they fit in with our strategy. In the past we would continue stacking new projects on everyone's plates, but now if it doesn't fit with our strategy we don't do it." Just as important for the DMB is that "whenever a new project or initiative is proposed, our people ask 'how does this fit in with our strategy map / scorecard?' They feel that this connection attaches a higher level of importance to the initiative." These are powerful benefits, given that so many organizations suffer from the inability to prioritize and the disjointedness and lack of follow-through that results.
Another benefit to be gained from strategy mapping is the improvement in organizational communication. A common disconnect in public sector organizations is that the employees see no connection between their job and the strategy of the organization; the map can help close this gap. A clear picture of what the ultimate objective of the organization is and how the various functions fit into achieving it goes a long way toward illustrating the "fit" of different employee groups.
Conclusions
The strategy map provides a good start to the strategic process. It will assist in taking multiple offices with multiple missions and serve to develop a common sense of purpose and direction. It also can provide the framework to determine what initiatives are critical to facilitating strategic plan execution and what measures would be best to assess strategic performance. This topic will be addressed in our next article, Building the Balanced Scorecard in the Public Sector.
Ralph Smith is Vice President - Strategic Services for Orion Development Group. He has personally supervised the performance improvement efforts in more than 100 organizations worldwide, including state, federal and county entities. He is the author of the highly rated text Business Process Management and the Balanced Scorecard.
Public sector clients Mr. Smith has served include Fairfax County (VA), Dakota County (MN), Hennepin County (MN), State of Michigan Departments of Treasury and Management & Budget, VA Medical Center, U.S. Department of Education, City of Rockwall (TX), Brown Deer School District (WI) and the MSU College of Veterinary Medicine.
Click here to see a video of Mr. Smith discussing the importance or clarifying your organization's vision.
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