Balanced Scorecard Example
Leadership Workshop (3 of 12) – Sharpen the Focus
Leading at Light Speed is an essential new leadership book by Eric Douglas synthesizing the best business practices into 10 Quantum Leaps that build trust, spark innovation, and create a high-performing organization.
Chapter 2, Sharpen the Focus, talks about building a Balanced Scorecard to measure performance.
When you measure performance levels, trust grows. A vital way to lead at light speed is to create a scorecard. A balanced scorecard is the notion of using a plethora of performance measures that evaluates the overall health of the organization – not just one aspect, such as its financial performance. If you’ve followed the prescriptions of this book thus far, you’ll discover that by assessing your core values, as well as your mission and objectives, you will possess a balanced scorecard.
A balanced scorecard needs to capture three different dimensions:
• What will be measured (the metric)
• What you’ll aim for (the target)
• The current performance (the baseline)
In measuring core values, you should be focused as much as possible on outcomes, rather than outputs. Like baseball bats, outputs refers to the amount of products produced or delivered. Outcomes define the real value received, such as higher levels of consumer approval or consistency. As the following diagram shows, performance goes up when an organization focuses on measuring outcomes.
The re-occurring theme I find in organizations revolve around tracking the number of sales calls per sales person or the amount of products produced, and not on the measurements of customer satisfaction, retention of loyal clients, or profitability. In addition to creating one-dimensional behaviors (such as the salesperson who makes repetitive calls), it also ignites antipathy and rigid boundaries. So when you’re putting together your balanced scorecard, make sure you’re focusing on the right stuff. The process will generate a strong level of alignment throughout the organization. It will assist in removing the remaining vagueness of your core values, your vision and your objectives.
For example, maintaining competitive prices might be measured via an index of leading competitors. The following table demonstrates how that could be implemented into the scorecard.
Another core value for your organization might be reliability. As you explore it, someone might suggest a performance target of six defects per thousand units (the so-called “six sigma” standard). Someone else might point that’s too hard. After further inquiry, you determine that sustaining an error rate of twelve defects per thousand is significant to your organization’s success, in consideration of the other core values. So that’s added to your performance scorecard.
What about customer satisfaction? The overall performance target might be an average rating of 90 percent on an annual customer satisfaction survey. Many individual factors of satisfaction might be measured, like telephone hold times or responsiveness to complaints. You can include those implications into the overall customer approval rating.
Balanced scorecards are widespread and abundant. Every company should have its own. Each will include its own relevant measures. Consider the example of a balanced scorecard from a law firm. It finely encompasses relevant metrics and goals.
Once your plan is set, you should start communicating it to your agency. If leaders make the effort to hold themselves accountable for spreading the outcomes of the balanced scorecard, it will affect the behavior of the rest of the company. This is the reason why public communication about the vision is imperative. It builds trust that leaders are holding everyone accountable. The pace of change and shift in focus for change will depend on how well the organization measures up to the performance scorecard.
Take this free work survey to discover how well your company measures up to the 10 Quantum Leap of high performing organizations.
Filed Under: Marketing Strategy
