Balanced Scorecard Basics: Initiatives vs. Objectives

A common area of confusion is the distinction between Initiatives and Objectives and how they each relate to a Balanced Scorecard. Here's a basic primer:

Initiatives (a.k.a. improvement projects ) have defined start and end dates (typically less than one year) and dedicated resources (people, budget, time). Examples of initiatives are "Implement customer retention program" and "Analyze cause of defect rates."

Objectives are brief verb-noun statements that describe a specific goal of your strategic plan. Objectives are more likely to span multiple years, as long as they still reflect your most recent strategic plan and SWOT Analysis (a review of your current Strengths, Weaknesses, Opportunities, and Threats). Examples are "Improve customer satisfaction" or "Reduce costs in manufacturing."

 

Many organizations that are just moving to a Balanced Scorecard or ESE framework have a plethora of initiatives (basically a long list of projects that get bubbled up from departments), plus plenty of high-level measures (sales, revenues, margins, customer satisfaction, ROE, etc.).It's the Objectives that are often lacking -- and these are the critical link to strategy. 

Though you're always going to have some bubbled up initiatives to deal with, best practice is to start with your strategy, develop the list of key objectives (no more than 10-12 on the top-level Scorecard). Then, align measures (no more than 1-3 per objective). Only then, based on how the measures are performing, assign initiatives (use the scorecard stoplights to guide you -- yellow and red measures are likely candidates).

There's more on these fundamentals of Balanced Scorecards on the ActiveStrategy website.

Comments

[Jim Bowie]

Very true. When developing a strategic approach for any organization, it is critical to discuss ongoing or planned intiatives up front with senior leadership in order to separate operational plans from the strategy formulation process. Otherwise, you will run the risk of developing an operational plan that reinforces planned intiatives rather than addressing key strategic objectives across the four perspectives. Clarifying the definitions of every term in the methodology is essential from the beginning.