For any organization, the overriding objective is a term that refers to the “raison d’être”, the main reason that the organization even exists. It is critical that the entire senior management team be in consensus on what this is. And while that may sound obvious, the fact is, most senior managers tend to have different interpretations of what the overriding objective is.
In the private sector, the overriding objective must be (either directly or indirectly) tied to return on investment. Michael Porter, the famous strategist, said it himself: “Start with the right goal: superior long term return on investment.” When asked why they exist, many senior managers in private sector companies claim it’s about “employees”, “customers”, “quality”, or something else that sounds much more noble than profits. It is simply not true. While we can all agree that employees and customers must be treated well, we are talking about the overriding objective here, which is always return on investment. This sets the table for establishing a strong financial perspective in both the strategy map and the balanced scorecard.
In the public and not-for-profit sectors, the overriding objective deals with something other than profits. Not to suggest money isn’t important; as the saying goes, “No cash flow, no vision”. Money and profits may certainly be critical; however, they are not the raise on that for these industries. Some social contribution is. It is important that the overriding objective be framed to discuss what that social contribution is, perhaps what the ideal outcomes might be. In this way, the customer perspective (sometimes called the stakeholder perspective) can be focused and understood.
Choosing an overriding objective is the first step in strategy mapping, which technically makes it the first step in building a balanced scorecard. Getting it right, and gaining consensus on it, is a critical early step. Whether or not an organization uses strategy maps, it’s strategic planning should place early emphasis on this important step. With a great beginning and a sharpened focus, strategy execution and achievement of strategic objectives (including alignment) become much more likely.
This short video quickly walks you through all of the steps involved in building a strategy map.
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