What is a Business Scorecard?
A scorecard is a management tool used to measure overall performance and aid leaders with strategic planning. With defined focus areas and specific performance metrics, leaders are more easily able to know how well the business is running. For clarity and efficiency, the individual metric results can be color coded, so that anyone can answer the question “are we winning or are we losing?” within five seconds.
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Thermometer or Thermostat?
Many organizations view scorecards simply as a thermometer – it tells them the temperature of the business. Beyond simply knowing the current metrics scores, or temperature, a scorecard should also provide the user with a mechanism for affecting the outcomes, much like a thermostat. World-class organizations review their scorecards weekly and develop corrective action plans for sub-par performance. By talking about and diagnosing reasons for under-performing metrics, individual teams create connectivity to the business and help their organizations succeed.
Key Elements in Business Scorecards
- Focus Areas. To establish a common format, each scorecard in the organization needs to connect directly with the overall mission through predetermined focus areas. These focus areas help establish a common business language and connection with all other work groups.
- Appropriate Goals. With each focus area having between one and three performance metrics, work groups are able to directly contribute to the achievement of the organization’s mission. Metrics scores are able to roll up and contribute to top level metric scores.
- Color Coded. With failing metric performance displayed as “red” and satisfactory performance displayed as “green,” employees can quickly identify how they are performing against their goals. This allows employees to focus efforts in the right areas and develop corrective actions to affect performance.
- Ownership. By assigning employees with the task of updating metrics, you’ll foster an environment of ownership in the business and create a more engaged culture.
- Routine Review. With an established frequency for reviewing metrics scores, work groups can be sure their efforts are focused and timely.
How are scorecards developed?
By developing a clear, concise business focus supportive of organizational goals and objectives, all work groups can maximize their effectiveness. First, senior leadership identifies and defines between five and seven key business focus areas for the organization. These focus areas set the tone at a strategic level, allowing subsequent work groups an opportunity to create specific work area metrics in support of the mission at more tactical levels. The work group arranges these metrics in a scorecard format for routine tracking and integration in to the work group’s standard daily operations.
Getting Started
Need help creating meaningful scorecards? Whether you are just getting started or you need to verify that your current scorecard is meaningful and effective, we’ll be glad to work with you every step of the way. Contact us now and discuss how we can help you get started.
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Business Scorecard Creation and Development
