A timeless question.... When we build a strategy and sustainability scorecard, should we start at the top (Mission/vision/strategy) build it down, or start at the bottom (what we are currently doing) and build it up?
The short answer is - they both work, but in the sustainability world we have the unique capability of building it very effectively from the bottom up and gain some insights which the top-down approach does not provide.
What we learned over our last 3,000 scorecards...
First, let's be clear - the "Top-down" or "Bottom-up" question is purely academic... neither really happens. "Top-down" could be more accurately called "Top-down & Validate Back-up" and "Bottom-up" should be called "Bottom-up. Wait. Learn. Now do Top-Down"...but there are some learnings to be applied around either approach.
We have built scorecards both ways around… "Top-down" and "Bottom-up". In terms of effort level, both are roughly the same. The big difference is in the success of the scorecard. Scorecards built with the "Bottom-up" scorecards remain in use far longer than "Top-down"
Well our research indicates that:
- 80% of strategies fail – not because they are wrong, but because they are not implemented. As such, there is an 80% chance that the organization does not even know if their current strategy is correct or not…so why come up with a new one? Let’s just measure how well we are performing under our current strategy for a while and then see if we need a new strategy…or just focus on implementing the one we have.
- Starting off with current operations allows us to immediately engage a broad cross-section of the organization…quickly building understanding, ownership and the detailed metrics knowledge that only job-performers have. Scorecards that are widely owned by people in the organization survive WAY longer than those built by external experts and imposed on the organization by leadership.
- Employees need to understand their purpose in the organization…and they have a better understanding of their current purpose then the uncertainty of their purpose within a new strategy…therefore they can build and own the current scorecard faster because it addresses their intrinsic needs.
Now, with the "Bottom-up. Wait. Learn. Now do Top-Down" approach, we then use the learnings from building and using the scorecard to run an informative strategy-setting program. Imagine that? A conversation on strategy based on facts and data!
"Top-down" requires a significant up-front investment from leadership, and can only move forward with the addition of their time and investment. There is no benefit until an agreement has been made and something implemented…. As such they are harder engagements to sell, harder to keep moving and almost impossible to succeed.
Now, that is a normal scorecard…What about the Sustainability Scorecard?
We believe (but need to validate through the pilots) that everything is the same except:
- We do not have complete freedom in setting Sustainability Goals… the goals that we set MUST cover all areas of your chosen sustainability framework (B-Corp, UN-SDG, <IR>, GRI, F2B2, etc.). (Now you may zero-weight some metrics, but to avoid greenwashing, you still need to measure them all.)
- For sustainability target setting, we also do not need to start at the top. Best practice around target-setting for sustainability is to set the LONG term goal - true sustainability, or what Future-Fit calls the actual “Business Breakeven” by which your organization does no harm. Now, it might take the business 50 years to get there, but since these targets are for pre-defined areas (based on your framework) and have nothing to do with your current performance, a "top-down" approach has no role to play in setting these long-term goals.
The Natural Step has developed an award-winning process for setting up those long-term goals and back-casting (as opposed to forecasting)
This is different from our traditional approaches.
So, we hypothesize that we will need to do a combination approach for the Sustainability Scorecard…Capture the current strategy (Top-down), add in your preferred sustainability framework goals, and the do a bit of “Strategy First” in setting the Business Breakeven Targets.
…but (again), it is the pilots that will allow us to validate the approach.