Balanced Scorecard in Budget Formulation

Sound Budgeting: a Must for Any Successful Strategy
Midas Sekgabo, Member
For any strategy to see the light of the day and bring benefits to the shareholders, it must be accompanied by a competitive budget. Translating the strategy into operational terms, cascading, is useful in that it identifies the necessary activities/initiatives to move the company to the expected vision. These activities/initiatives are then costed to come up with an estimate budget of the strategy (plan). One may want to go further an even cost the monitoring of the strategy including but not limited to data collection and analysis - studies, and monitoring software. At the end of the day, a good strategy should be within reasonable budget of a company. One may need to do some trade-offs to get that pocket-sensitive, competitive strategy.

BSC in Budget Formulation
Michelle Goffe, Member
Driver Based Budgeting has had some success in the area that you are asking about. The objective is to build your budget around the achievement of the leading indicators/drivers of your scorecard. Once the initiatives (programs & projects etc.) that support the key performance indicators (KPI's) have been established focus the budget on the cost of implementation and monitoring the progress of these initiatives.

BSC in Budget Formulation
Paul Maguire, Member
I’ve also used an initiative mapping process that is useful at the corporate as well as at the cascaded level:
- Step 1. Getting your current initiatives. This can be an eye-opener. List your objectives on the side and your initiatives, projects, or activities across the top.
- Step 2. Place an “x” for each objective served by an initiative (can serve multiple objectives). The result: this identifies conditions for action:
1) Non-strategic inititatives: initiatives (and projects or activities) that don’t support any strategic objectives. Get rid of them (freeing up resources to fund other projects);
2) Redundant initiatives serving the same objective. Rationalize these and free up more resources;
3) Gaps – objectives witch are not being served by any initiative. These become candidates for new initiatives.
- Step 3. Priority setting against budget. Once this matrix has been developed, you can then use it for priority setting against budget. Initiatives serving multiple objectives are prioritized ahead of those that don’t (more on prioritization and funding but out of room).