Chronic Misalignment
Why leadership’s calls for better organizational alignment don’t work, and how a simple ‘value language’ can remove common barriers

By Gregory Dickinson and Michael Puleo
Illustration By Josh Cochran

To avoid the political-agenda pitfall, it is crucial that the creation of the value map is overseen by the right senior executive — usually the CEO or his or her designee. It is also vital that there be a single, impartial architect whose job is to work with the company’s functional specialists and make the map as factually correct, logically consistent and defensible to shareholders and market analysts as possible. There is almost always more than one right way to design the map: the job of the architect is to pick one of them, then be true to it throughout the design of the map.

Another effective technique to help maintain both quality and objectivity is to start with an existing, tested value map template and modify it only as needed. To this end, we have developed an industry-generic Enterprise Value Map that is available free of charge on Deloitte.com.

If you choose to develop your own map, or substantially alter the generic Enterprise Value Map, the five steps outlined in the sidebar provide an overview of principles that will help you in your efforts to develop an objective, durable version.

Most importantly, remember that the litmus test for the map will be whether it makes sense to the company’s current and potential owners. If the map doesn’t make sense to these people, it will be very unlikely to instill the owner-like thinking essential to the ultimate profitability of the business.

Putting the value map to work
When we first started talking about value maps with executives and other managers, one of the first things that struck us was the speed and creativity with which they started using the maps to tackle their companies’ and divisions’ business problems. As is the case when using any map, people tend to focus on different things depending on their needs and their roles. Some focus on the cities and landmarks, some on the terrain, and some on the roadways and distances.

Not surprisingly, senior executives tend to approach the map top down, spending most of their time focused on the destinations and terrain — the red boxes and large white boxes. As we went deeper within organizations, people typically started to approach the map bottom up — locating the operational processes and improvement projects over which they have responsibility, and tracking upward to intended business impacts.

From our experience working with leaders across organizational functions and levels, four broad uses of the value map have emerged: understand, focus, align and execute.

Understand relates to the idea that companies take different approaches to creating value for shareholders, competing in the marketplace and organizing their business operations — and that it is important for an organization’s people to understand what choices have been made and what the implications are for the various parts of the organization. Senior executives frequently customize value maps to fit their own company’s industry and culture, and then use those maps as a backdrop for discussing strategies and performance with company leaders, external analysts and other key stakeholders.

Focus relates to the principle that not all parts of the value map are equally important — and that effort and attention should be concentrated on the parts of the business that are most important to the achievement of chosen strategies at a point in time. Using value maps as a guiding framework, leaders assess the relative impact of financial drivers (the second row on the Enterprise Value Map) on the creation of shareholder value — for example, do small changes to some drivers create more impact than large changes to others? For the most important of these financial drivers, they also typically assess the relative impact of operational performance factors on financial performance in those areas — for example, does one of the operational drivers have a disproportionate impact on the financial driver it supports? Finally, leaders typically evaluate current performance in key operational areas to assess where improvement efforts should be focused.

Align refers to the principle that the company’s resources should be put to work in ways that are consistent with the company’s most pressing needs and priorities. One popular alignment exercise is simply to overlay the company’s key metrics (or its balanced scorecard) onto the value map and see whether they seem to be focused on the right things. Ideally, the metrics will be aligned with the key financial and operational areas highlighted in the focusing exercises explained above.

The most prevalent alignment exercise revolves around assessing the alignment of the company’s (or the division’s) project portfolio with the company’s strategies and priorities. The simplest approach is qualitative. This involves overlaying programs and projects onto a large copy of the value map and checking whether the distribution of effort makes sense. Ideally, the projects will be largely focused on key operational areas where improvement is required.

Execute relates to the principle that the organization must deliver targeted results within the key operational areas of the business, and that projects must deliver their intended business results — not just be completed on time and on budget. To better understand performance in key operational areas, companies frequently use the lowest levels of the value map to help them identify what needs to be measured at detailed process levels. To increase the likelihood that projects will deliver their intended business results, companies use the value map as a business case framework and require project sponsors to consider and articulate the multiple paths by which their initiatives can and will create value.

While using any of these techniques in isolation can help companies better link the activities to business results, using them in concert will likely have a higher impact.

Not rocket science
The effectiveness of value maps comes foremost from the power inherent in a shared purpose and a consistent understanding across groups of people. When leaders provide motivated, talented people with information that explains where the company is and where it is headed, they can more effectively help position them to make full use of their abilities in helping the leaders execute their plans.

There is no rocket science here. Some who look at value maps will say, “So what? We already knew this.” On the other hand, a substantially larger number of people who haven’t thought this way before (or at least haven’t in a long time) will likely start to develop a much better understanding of how their daily activities and decisions ultimately create value for the company and its shareholders. This understanding is a crucial step on the path to strong shareholder value performance, and it is vital to the effectiveness of approaches like Six Sigma, Balanced Scorecards and Hoshin Planning. Value maps can be one of the most straightforward tools for getting the process started.

The value map is not the point 
We have learned from our work in helping our clients use value maps that there is no such thing as a silver bullet. While formulating and distributing a value map can catalyze learning, conversations and better-directed activity, our experience has shown that this step alone is not sufficient to generate longer-term, systemic changes in behavior.

It’s crucial to keep in mind that the value map is not the point. Getting people with diverse backgrounds and experience working together toward shared goals is the point, and the shared language and perspective established by value maps is just one piece of what is required to make this happen. In the end, value maps are only as effective as the people guiding their use. Consequently, the most effective use of value maps has been driven by company executives who are able not only to establish value maps as a common language, but also to integrate maps into the way the company:

• Talks about its bottom-line performance (internally and externally)
• Evaluates potential investments
• Measures the performance of groups and individuals

As is the case with most improvement efforts, you will only get out of it what you put into it. As a standalone step, formulating and distributing value maps can get the attention of people throughout the organization and provide them with an overview of how operational activities ultimately drive financial results. But without further steps to embed this thinking in managerial approaches, the maps will likely have spot use in particular business groups and be seen by others simply as nice reference-oriented posters.

Worth the effort 
At the beginning of this article, we asked you to consider five important questions about your organization and how deep you had to go within your organization before the ability to answer these questions began to deteriorate.

Our experience and research show that organizations that have been effective in establishing this understanding deep within operational groups tend to be better at getting their resources aligned with strategies and priorities than those who are not. Consequently, we believe that organizations with leaders who have a deep business understanding not only do a better job of getting people focused on the right things, but also tend to reduce the amount of effort focused on wrong things. This typically results in more effective execution against key priorities and better investment efficiency overall.

Moreover, organizations that do a good job of educating and including their people in bottom-line business thinking are more likely to inspire, utilize and retain their most ambitious and well-intentioned people. As one client executive said: “If we could push this type of understanding just two or three levels deeper within our company, we could make much better use of the talent and insight we have across our functional areas.”

While value maps alone do not provide a silver bullet for addressing these challenges, the shared understanding, perspective and language they establish can lay the necessary groundwork for broader organizational efforts to align operational activity with strategic priorities. DR

Gregory Dickinson is a director with Deloitte Services LP. He is a leader of Deloitte Consulting’s Value Initiative and specializes in providing business performance management services.

Michael Puleo, a director with Deloitte Consulting LLP, is a member of Deloitte Consulting’s Performance Improvement service line

Endnotes

1 Robert S. Kaplan and David P. Norton, (1992) “The balanced scorecard: measures that drive performance," Harvard Business Review, Jan – Feb, pages 71-80.

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