The Balanced Scorecard

by Bill Gaw

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 Measurement 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 Measurement to get you to where you want to go.

Performance measurement 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.

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 provide 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 elements of the balanced scorecard training 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.

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.

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.

About the Author: Bill Gaw is the founder of Business Basics, LLC and a "been there, done that" lean enterprise advocate. He is the developer of six e-training packages and seven e-training modules published to help individuals and companies reach their full growth and earning potentials.

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