How would your employees answer this question: Is your team winning or losing?
In many companies, employees have very little, if any knowledge, about the basics of business performance in their area, division or overall company. What this leads to is employees not being able to understand if the business unit is winning or losing or how they contribute to the overall success of the organization.
Part of the reason for this disconnect is many organizations focus solely on financial performance to measure success. This is only part of the picture!
Business Metrics or Key Performance Indicators (KPI’s) are designed to give organizations the ability to make the critical and timely decisions needed to advance the business forward.
To accomplish this, not only should a robust metric system align with the strategic pillars of the organization (i.e. Safety, Cost, Productivity, People, etc.…), but also link with a structured accountability and communication process. These processes are integrated to give an organization the opportunity to not only monitor how the business is performing, but allows the leaders to take control and drive results. By linking to strategic objectives, a business scorecard system tactically deploys strategic initiatives throughout the organization.
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Using a Business Scorecard to Tell the Story of Your Organization
Storytelling is a useful business tool to communicate, educate, and connect with others in the organization about a specific goal, objective or desired outcome. Building a scorecard with the following 4 core perspectives enhances a team’s ability to communicate a fuller picture of business outcomes and the inputs that impact them.
Scorecards should at a minimum be comprised of metrics in the following perspectives:
1) Customer Satisfaction Perspective: Metrics in this perspective should answer the question, what do our customer think about our performance?
2) Management and Employee Satisfaction Perspective: Metrics in this perspective look at the effective of management process and the satisfaction level that employees have in carrying out the business objectives and goals of the company.
3) Internal Operations and Process Perspective: Metrics in this area answer the question, how well do we do things while carrying out the goals of the organization. Simply stated measures in this area measure efficiency of an organization and serve as indicators for areas which may benefit from process improvements.
4) Financial and Shareholder Perspective: Metrics in this area answer the question, how profitable are we from a longer term, lagging perspective.
Utilizing this approach to scorecard metrics, enhances the value of a scorecard system as a tool to see the full picture of a team and organization’s success.
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Top Three Issues with Business Scorecards
“Measurement is the first step that leads to control and eventually to improvement. If you can’t measure something, you can’t understand it. If you can’t understand it, you can’t control it. If you can’t control it, you can’t improve it .” – H. James Harrington
An estimated 85% of organizations have adopted a performance measurement system in one form or another. Although performance measurement systems are useful, one should be aware of the common issues faced with most scorecards today.
Top Three Issues with Scorecards:
- Improperly Defined Metrics– With poorly defined objectives and/or targets, employees can claim confusion and avoid accountability for results.
- Inefficient Data Collection– With weekly or monthly deadlines, most scorecards have incomplete data. Organizations struggle to keep scorecards current by assigning an Administrator to drive data collection and reporting, which is costly and ineffective.
- Lack of Standards for Scorecard Usage -As soon as a scorecard is updated, it begins to age. Without an established, formal review process, organizations can’t rely on the scorecard’s usefulness for timely, relevant decision making.
These issues are real, but can be overcome. To view and download industry specific scorecard examples, visit our website here.
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