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The Balanced Scorecard; How to
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May 25, 2009
Hi MBBP Subscriber,
Financial
numbers may tell us we’re winning the war, but it takes
performance management to show us how to focus our energy and
efforts to win each of the battles along the way.
Have a nice day, and stay connected.
Bill
Gaw
Business Basics, LLC
bg@bbasicsllc.com
760-945-5596
The Balanced Scorecard
Financial
numbers may tell us we’re winning the war, but it takes
performance management to show us how to focus our energy and
efforts to win each of the battles along the way.
Bob Gee,
a good friend and coworker, once said, "You can’t control
what you don’t measure". Imagine trying to fly an airplane
across the country and the cockpit had no dashboard, no gauges and
no idiot lights. You may get it up off the ground but without
performance Management the chances of getting to where you want to
go are slim to none. Business success may not be a life-death
situation but like piloting an airplane it takes performance
management to get you to where you want to go.
Motivational or De-motivational?
Performance management training can be motivational or de-motivational. The individual goal setting of the 80’s is a good example of de-motivational measurement – it tested one individual or group against the other, and while satisfying some individual egos, it provided little contribution to company growth and profit objectives.
The Performance Scorecard
Today,
the performance scorecard is a performance measurement system that
helps companies pursue their key success factors. The scorecard uses
both internal and external benchmarking and employs a relevant
cascading method of performance goal setting. Achievements are
acknowledged and celebrated on a "real time" basis and
not at the traditional annual review.
For a
balanced scorecard process to be motivational it must provides
timely and accurate data. Simplicity is a key to the validity of
measurements and the tractability of problems to their root cause.
Data collection design must employ simple and easy to maintain
databases to assure data integrity. When people are trained in this
process and are permitted to participate in relevant goal setting,
performance measurement can motivate teams to higher achievements
– including the exceeding of growth and profit expectations.
Five Key Steps
Five key steps towards developing an effective Balanced Scorecard are:
1.
Establish a "no status-quo" mind-set – if you’re not
winning, you’re losing,
2.
Define company "key success factors" – examples: cost,
speed and quality,
3.
Identify stretch goals that are relevant to the company’s
"key success factors",
4.
Implement training/coaching programs – education is the pathway to
excellence,
5.
Celebrate each goal achievements and raise the bar - don’t wait
until next year.
Benchmarking
For a
mature performance management process, "benchmarking" has
become the standard for establishing performance objectives. Benchmarking
is still one of the most ill-defined management concepts and is one
of those words that mean different things to different people. Our
preferred definition comes from Xerox, who describes benchmarking
as: "the continuous process of measuring our products, services
and business practices against the toughest competition and those
companies recognized as industry leaders".
The
objective of benchmarking is to build on the ideas of others to
improve future performance. The expectation being that by comparing
your processes to best practice – major improvements can be
realized. You should not consider carrying out external benchmarking
until you have thoroughly analyzed your internal operations and an
effective system of internal measurement has been established.
Results
So what
kind of results can you expect when a management team introduces the
process of the balanced
scorecard? First, people will become
motivated and focused on the continuous improvement of their
company’s critical success factors. Second, personal and team
achievements will become recognized and rewarded – creating an
exciting, winning, work environment. Teamwork will improve and
employee retention will rise. Finally, and most important is the
company-wide euphoria as "bottom line" results improve and
financial pressures no longer create a stressful and defensive work
environment.
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