Page 40 - Performance Leadership

Chapter 2 Traditional Performance Management • 29

sees earnings growth as the main metric to being the leading retailer
in a particular market segment.
Strategy maps have significant strengths. In many organizations the
real problem is not a shortage of reports, but an abundance of overlap-
ping and contradictory reports. A strategy map helps determine which
performance indicators and which reports are truly needed. If there are
reports and metrics that do not fit in the strategy map, the metric most
probably does not represent one of the business drivers. In that case the
metric is not a key performance indicator. It also works the other way
around. When creating a strategy map, most likely there will be places
where, in order to make a connection, a leap of faith is needed, such as
“innovation leads to revenue growth.” Obviously something is missing in
the middle, and one or more additional performance indicators, proba-
bly involving the customer perspective, need to be added, such as “adop-
tion of new products by the market.” Another strength of strategy maps is
that they help create leading indicators instead of lagging indicators. At
first thought, the term “leading indicator” may look strange, as you can
only measure something once it has happened. But it is when perform-
ance indicators are linked together in a cause-and-effect relationship that
they become predictive. For instance, if a customer process indicator such
as speed of delivery shows there is a problem, the impact on the customer
relationship indicators, such as customer satisfaction, will be affected
later, which ultimately impacts on the financial bottom line of the organ-
ization. In this example speed of delivery is a leading indicator for cus-
tomer satisfaction. Strategy maps also visualize how different parts of the
organization contribute to the organization’s overall performance. Not all
activities of an organization are directly revenue driving. Many activities
have a certain revenue distance and are rather intangible, such as brand
marketing and large portions of supporting functions such as HR, finance,
or IT. Strategy maps align these activities with the bottom line and show
their contribution to the overall performance of the organization.
As with any methodology, strategy maps have limitations too. A strat-
egy map is an abstraction from reality. Various researchers have criti-
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cized the cause-and-effect relationships in particular. The strategy map
suggests a one-way linear approach, starting with the learning/growth
perspective and culminating in financial results. However, it is equally
easy to link relationships between the perspectives in the opposite