The Hindu Business Line : Rowing lessons from Kaplan

Mobilise, translate, align, motivate and govern. These were the five key words in the principles that Robert S. Kaplan and David P. Norton had mentioned in their first book. Now out is their fourth book, Alignment, from Harvard Business School Press (www.HBSPress.org) . It is about aligning organisational units to the strategy; or, as the sub-title puts it, `using Balanced Scorecard to create corporate synergies.'

Organisational alignment is "much like the synchronism achieved by a high-performance rowing crew," explain the authors. Such an alignment creates value at the enterprise level, rather than at the business unit level. Since today's companies are made of `portfolios of business units and shared-service units', aligning all these is needed for creating synergy, argues the book. "When the enterprise aligns the activities of its disparate business units and its support units, it creates additional sources of value, which we call enterprise-derived value," state Kaplan and Norton.

They mention Tata and Siam Cement as examples of business groups that require their operating companies to live up to contracts "to earn a reputation as a good company to do business with." Tata finds mention again in a chapter on `aligning process and learning growth strategies.'

A local failure or incident can affect the entire corporation, warn the authors. "A product liability problem, a company bribery incident, a dismal environmental reputation, or frequent employee safety and health concerns in any single operating company can produce highly unfavourable publicity that affects the financial resources and viability of the entire corporation."

Kinnarps, a Swedish furniture manufacturer, has an internal training group to map employees' competency and compare the same with required competencies. GE uses its `popcorn stands' around the world to train its young managers; these `stands' are "small businesses whose success or failure would not affect any of the first three digits of GE's annual operating income."

One of units profiled among `support functions' is finance. It should be heartening to accountants that a recent study has described the CFO's new role as `chief performance adviser'. The book also cites a study by Booz Allen Hamilton, which found that "CFOs are viewed by their CEO as their primary aides in driving company-wide transformation efforts." Align also boards and investors, advise the authors. "35 per cent of a company's valuation is attributable to non-financial information," is a finding of Ernst & Young, mentioned in the book. Companies such as Wendy's, the leading quick-service restaurant, and Ingersoll-Rand use BSC indicators when communicating with analysts.

Educative.

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