In Performance Alignment: Cascading Strategy, I described cascading as a formal method for achieving alignment by connecting strategy to operations to tactics. There are four options when cascading objectives or measures from one level (parent) to the next (child):
The child adopts the exact same objective or measure as its parent. This is used by groups that want to install a greater culture of discipline or for organizations going through major change.
The child modifies the objective or measure to reflect its specific role in helping to achieve its parent’s goal. Groups that have autonomy but must explicitly describe their contribution to their parents often adopt this method.
The child develops a measure or objective that can’t be explicitly tied to its parent. Organizations occasionally allow this independence when they want the child to focus on an outcome without distraction (e.g., skunk-works).
All the children at one level have a jointly-shared need that is not shared by their parent. This is used when organizations consolidate common functions (i.e. printing, call center) into shared services.
I previously provided some simple examples of cascading objectives but let’s take a look at a more detailed example of cascading measures: Imagine an organization with the corporate objective of to “increase customer satisfaction. The organization might monitor that objective using a quarterly survey of its customers to create a customer satisfaction rating measure. Now, suppose that the objective is cascaded identically from corporate to an operating division. If the operating division wants to monitor customer satisfaction, should it conduct its own survey? Probably not.
Instead, the operating division might recognize that it can show its contribution towards customer satisfaction by focusing on customer retention or lifetime value. As such, it begins tracking the percentage of customers that buy again each quarter. Presumably, satisfied customers keep buying.
If the operating division cascades the customer satisfaction objective down to the VP of Operations, she also needs to design a measure that shows how her organization contributes. Since an operations group has little direct interaction with customers, neither the survey or repeat purchases are appropriate measures. Instead, the operations group could use “% of deliveries that meet service level agreement”. Improving on-time delivery contributes to higher customer satisfaction.
The organization could continue to cascade the objective to plant managers, shift supervisors, and even individual employees by creating measures to show how they contribute to customer satisfaction. I’ve provided some examples in the following table:
Suppose the shift supervisor’s measure of “first pass yield” is cascaded identically to the employees on his shift. The shift supervisor explains that if the number of widgets that need rework goes down, customer satisfaction goes up. Afterwards, employees directly understand their contribution to corporate objectives.
That’s what I call alignment.