What Is A Scorecard?
A scorecard gives your organization a current snapshot of various performance metrics compared to your goals. A scorecard is a great tool for your organization to make strategic, data-driven decisions. A scorecard also helps you monitor and manage how parts of your organization performs. All of this improves your ability to achieve goals.
Each team member may have their own scorecard. The items tracked on an individual scorecard, if set up correctly, can help team members know how their contribution helps the organization as a whole. They can monitor progress towards their own individual goals as they relate to the organization’s goals.
The information that goes on a scorecard should be available from sources within your organization, your social media accounts, website statistics, financial reporting, CRM, etc.
Why Have A Scorecard?
By gathering information available throughout your organization and sweeping it into one place, the raw numbers, trends over time, and difference calculations can paint a clear picture of the health of your organization. Your team can see at a glance how the group is doing, what corrections need to happen, and what decisions need to be made.
A scorecard is THE PLACE to sweep the key performance indicators that show how you’re doing and where you’re going.
The Main Sections Of A Scorecard
To expand more on the section above, you would want a scorecard to help you keep an eye on the most important key metrics across your business. A “balanced” scorecard usually contains four sections. Within these sections, you typically want to monitor metrics that help you focus on both stability and growth. You also want a mix of leading and lagging indicators. We’ll dive more into these topics in a minute.
You would typically want to monitor your current account balance.
- To help you maintain stability within your business, you would also want to track expenses.
- Financial growth happens in your business when you generate income.
The number of current customers or clients (or members if you’re a non-profit organization) tells you something about the health of your organization.
- Retaining existing customers adds stability to your business.
- Adding new customers contributes to your growth.
Your internal documented processes, key activities and resources that you use to deliver value to your customers are examples of metrics you want to track.
- All of these add to stability within your business.
- If you can handle more capabilities, more throughput, you can handle more customers and grow.
Having the right people, sitting in the correct seats, is critical for the health of your organization. Each person in your organization needs to manage to key metrics. Each person also needs to continue learning and growing. This is where you would document and track progress your employees make towards their training goals, along with their performance goals.
I’ve heard of a “Balanced Scorecard”, So What Is That?
So far, you’ve seen that a scorecard contains financial, customer, operations, and people metrics. That’s one type of balance that helps your leadership team see a holistic view of the entire organization.
Another way to find balance is, as we mentioned above, is by tracking both “stabilizing” metrics and “growth” metrics in your organization. Within the four sections, look for a balance between metrics that help you focus on 1) reducing or eliminating waste, like financial expenses, and 2) metrics that help you focus on increasing and growing the organization, such as income and clients.
The third way to add balance to your scorecard is to incorporate a balance of both leading and lagging indicators.
- Lagging indicators are your outcome “results” metrics. Examples include your bank account balance and the number of customers you have. These outcomes, say at the end of a month, can be compared to the previous month’s amounts.
- Leading indicators are the “activities” it takes to affect your lagging indicators. The number of outbound sales calls, sales presentations given, blog posts written, etc. are activities that, hopefully, can be tied back to results.
- Your weekly weigh-in number is a lagging indicator
- The leading activities that can be used to predict with some level of accuracy would be 1) the calories you consume in each of 21 meals between now and the next weigh-in, and 2) the amount and type of exercise you perform for the next 7 days. Diet and exercise is lead activity, your weekly weigh-in is the lagging indicator, the result you wish to accomplish.
Tracking The Numbers
The last building block you need for your balanced scorecard are key performance indicators, or KPI’s. We’ve talked a little about the things you will want to measure. These metrics (what you’re measuring) will come together into one document or webpage, or internal communication of some sort.
Within each of the four sections of the scorecard, you’ll want to identify high level strategic objectives. Within the financial section, for example, you may have two strategic objectives like “reduce expenses” and “increase revenue”.
For each of the strategic objectives, you’ll want to define at least one SMART goal.
- “Reduce expenses from $5000/month to $4000/month by December 31st” is an example of a lagging indicator that is time bound and measurable. You can pick up this number each month from your P&L and the head of your accounting department would be the person responsible for providing this update every month. Just like the 10 pound weight loss challenge, money spent each month is the lagging “result” of “activities” throughout the month.
- Every department can have at least one leading activity that helps contribute to reducing costs, actions they each can do that contribute to the bottom line. Building maintenance, fleet management, HR, legal, operations, sales, marketing, all can waste money and can find places to save. The cost-saving measures throughout the month can be used to predict with some certainty how much will be spent by the end of the month. Each of these would also be written as SMART goals. Just make sure they are set to a date, can be measured, you know the source of where to find the number, and someone can be held responsible for providing the number for the organization’s overall scorecard.
Bringing It All TogetherThe final step is to simply assemble all the parts we’ve already talked about.
lead magnets: KPI planner, DSHBD