Project Prioritization Through Balanced Scorecard and Six Sigma

The achievement of an organization’s strategy using the Balanced Scorecard is through the identification and execution of select strategic initiatives. Most Balanced Scorecard methodologies do not have a well-defined process for prioritizing and selecting from amongst the possible strategic initiatives and also do not have a well-define methodology for managing those initiatives. Lean Six Sigma can provide both through its project prioritization and selection process and its process improvement and design methodologies.

While a previous posting stated the need for the Balanced Scorecard and Lean Six Sigma to remain in different parts of the organization in terms of how they are managed, project and initiative prioritization and selection is one of the key areas where they must come together.

The execution priorities for an organization’s strategy are expressed through the identification of gaps to performance as expressed in the measures contained with the balanced scorecard. When the collected data for a measure indicate that performance is falling short of the desired level, this is what is called a gap to performance. These gaps are closed through strategic initiatives which are, essentially, performance improvement projects.

When you consider that the bulk of the strategic initiatives are contained with thin the Internal Processes perspective of the BSC, a good many of these strategic initiatives could be chartered as Lean Six Sigma projects.

Occasionally, the gaps cannot be closed through the improvement of existing processes and there must be a process redesign or a new process created altogether. This occurs more often than you might initially suspect. After all, a primary aspect of an organization’s strategy is what it is going to do to differentiate itself from its peers. The first few years that an organization focuses on this aspect, it is to be expected that new processes will be required to achieve that differentiation; it cannot be achieved through incremental improvements alone.

Thus, not only could there be Lean Six Sigma DMAIC projects which focus on the improvement of existing processes, there could also be Lean Six Sigma Design for Six Sigma (DFSS) projects as well which focus on process creation and redesign.

Once it is decided that a performance gap exists (another posting will discuss this in detail and why some gaps are not really gaps at all) and projects are planned to close the gaps, a decision must be made on which projects to pursue. In addition, now that we agree that a good portion of these projects can be Lean Six Sigma projects, we must also evaluate the entire portfolio of potential Lean Six Sigma projects when deciding which to pursue. Organizations do not have unlimited resources. The operations group has its priority improvements as does the strategy group. Some initiatives will not be able to be pursued and a balance must be achieved between operations improvements (Lean Six Sigma) and strategy execution (Balanced Scorecard). A good objective process is needed for deciding which projects to pursue.

Lean Six Sigma methodologies typically have a quite robust project selection criteria including factors such as fit to strategy, cost to implement, benefit to business, resource requirements and technological risk. This type of detailed assessment is usually not part of a Balanced Scorecard implementation. The author of this posting has assisted in the successful implementation of a single initiative/project prioritization and selection process in a half-dozen organizations. A future (sooner with more interest) posting will describe this type of process in detail.