Initiatives

 

Initiatives are projects with a finite start and end date, that are meant to put the organizational strategy into action. (Niven, 2002).

 

At any given time organizations have dozens of initiatives or projects running. However not all of them are aligned to the organizational strategy. More than that, most of the time, only those people who are working on the project, or those who are close to it, know what the project is all about. Thus, it becomes hard to create any synergies between different initiatives. In this context, Balanced Scorecard provides with an organized framework in which initiatives can be evaluated in the context of strategic significance. (Niven, 2002).

 

Identifying and setting up initiatives

Identifying and setting up initiatives is an important step of the Balanced Scorecard implementation process. Initiatives are the engine that put the strategy into action, and address the identified gaps between the stretched targets set for scorecard measures and the current performance of those measures (Kaplan and Norton, 1996).  In their seminal book, The Balanced Scorecard, Kaplan and Norton (1996), identified 4 important steps for using the scorecard in an integrated long range strategic plan and operational budgeting process:

  • Set stretch targets
  • Identify and rationalize strategic initiatives
  • Identify cross business initiatives
  • Link to annual resource allocation and budgets

 

Importance of defining initiatives

When the Balanced Scorecard is used as a cornerstone of a company’s management system, the portfolio of initiatives or projects are focused on achieving organizational objectives, measures and targets.

 

The importance of strategic initiatives in the context of the Balanced Scorecard implementation methodology is acknowledged also by Lawrie and Cobbold (2002, 2004). They described the third generation Balanced Scorecard as comprising: a Destination Statement, a Strategic linkage model, a list of measures and targets and a portfolio of initiatives.

 

As stated above, at any given time an organization has a myriad of initiatives underway. Many of them, however, are not linked to target improvement. Setting a Balanced Scorecard helps to assess the current portfolio of initiatives, and prioritize among them.

 

Working with initiatives

When evaluating the portfolio of initiatives two situations usually appear; there are too many or too few initiatives. When too many initiatives are underway, usually with different sponsors and competing against each other for scarce resources, the ones most significant for achieving the Scorecard objectives and targets must be prioritized. If necessary they should also be reviewed for a better strategic alignment. When too few initiatives are underway, new initiatives must be established.

 

Such a situation is described by Kaplan and Norton (1996). From their experience with Balanced Scorecard implementation they discovered that for approximately 20% of the measures in the newly built scorecards data are not available. Thus, a new project or initiative needs to be set up in place to allow data collection and to validate the strategic objectives for which initial measures and targets were set.

 

Every time when new initiatives are needed to fill the void space created by new performance objectives or measures, one must assure that are built on solid foundations (Niven, 2002). This means that a new executive willing to sponsor the initiative must be found, an accurate and realistic project plan must be set in place, supported by a legitimate budget and necessary resource commitment.

 

According with Niven (2002), effective initiatives will allow closing existing gaps that exist between current and desired performance, which in turn will drive the desired outcomes aimed, as long as a few conditions are followed.

  • Any initiative, no matter how extensive or narrow is defined, needs to have the necessary resources allocated
  • Each initiative should clearly document which objective they support
  • Dependencies with other initiatives must be clearly established  and  all key milestones identified
  • All initiatives must be updated on a constant base and reflected in the budgeting process

 

Reference

  • Cobbold, I., Lawrie, G. & Issa, K. (2004), Designing a strategic management system using the third-generation balanced scorecard, International Journal of Productivity and Performance Management, Vol. 53, Iss. 7, pp. 624-633.
  • Cobbold, I. & Lawrie, G. (2002), The development of the Balanced Scorecard as a strategic management tool, 2GC Active Management.
  • Kaplan, R. & Norton, D. (1996), The Balanced Scorecard – translating strategy into action, Harvard Business School Press, Boston, MA.
  • Niven, P. (2002), Balanced Scorecard step by step: Maximizing Performance and Maintaining results, Wiley, New York, NY.

BSC concept : Components

 

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