Balanced Scorecard

Managing Your Business

You have a great market, thoughtfully created products and services. You are as busy as ever.

Is your business doing any good?

Business guidance can be challenging to any organization. You track the P&L each month, the numbers look good and it appears the business is operating to plan. Financial reports do not tell the entire story; there are aspects of guiding your business that go beyond those found in a spreadsheet.  There are tools available to define and measure the effectiveness of your organization to grow your business.

One tool to provide structured guidance for several key aspects of your business is the Balanced Scorecard. This tool uses the concept of “Metric-Target-Initiative” to each section of the Balanced Scorecard to track your business plan and progress. The four parts of the Balanced Scorecard are: 1. Customer; 2. Employee; 3. Operations; and, 4. Finance.

The goal with any measurement is to drive action and activity. Examining the Balanced Scorecard on a monthly basis keeps you focused on the important items and make appropriate course corrections. I encourage sharing the results with your staff and employees; it is the reward for the efforts put forward. The Balanced Scorecard also provides a concise, equitable tool have discussions which may be difficult – a discussion you may need to have with yourself.

Metric-Target-Initiative

Metric – the measure you use for items within each of the four sections. Keep the Metric simple to obtain; having a simple process will encourage the required discipline to maintain the Balanced Scorecard. The Metrics could be raw numbers, growth rates, ratios, or comparisons to industry standards.

Target – is the desired goal for each Metric to meet your objectives and plan. The Target could be a range or specified number. You could be looking to grow sales or manage expenses – every item in the Balanced Scorecard will have a Target. Each month compare the Metric with the Target.

Initiative – projects or programs in place which drive the business. The results of Initiatives are measured within a single segment of the Balanced Scorecard, but generally impact the whole organization. A sales training program may be measured under the Employee section and will also impact the Financial reports.

Customer

We know there is no business without the Customer, so here is where we start. In the early stages of the business or when a significant redifinition of the company is occuring this section may be defining the target market and how they can be reached. Measures for customer satisfaction, speed of service, cross-selling ratios, or other measures can be included for the monthly review.

Employee

I am intentional about placing the Employee section in the second position, just after Customer. Business reports often lead with the Financial results; comments about Employees appear as an after-thought. In this section, review training programs, staffing plans, or performance review statistics.

Operations

“The immediate pushes out the important.” The tasks of running a business can overwhelm the long-term view; setting aside time each month to review the Operations ensure actions and activities are driving the business toward the objectives. In this section review efficiency, process controls, quality, and other indicators of process.

Finance

The bottom line is still the bottom line. This is true of not-for-profit organizations as well. The key to understanding the profit and loss is defining which components require additional examination. Units sold and to which demographic, or which channels favor certain products are areas to include when measuring the Financial results.

Discipline

There are no short-cuts, success takes work. I am a big believer in Incremental Improvement – the first pass at creating the Balanced Scorecard may not be elegant, but it is a start. Begin with at least one simple to measure item for each of the four Balanced Scorecard sections. Track the results each month, and the results will guide the definition of the future Metric-Target-Initiative.

Interested in developing a Balanced Scorecard for your business? There are many resources available. The Balanced Scorecard Institute can help: www.balancedscorecard.org. You can contact me if you are interested in personalized assistance.