This is how to create the right scorecard for your business
By Alex Tuillio, CEO
on September 11. 2019
When was the last time you really thought about the things that drive the success of your business?
I can't tell you how often I meet leaders who have not put enough time into why they measure certain things. Now, I know it's hard when stuff happens and you have to deal with the day-to-day firefighting. BUT not all performance metrics are created equal, and keeping track of the wrong things can actually have dangerous consequences.
So are you measuring the RIGHT things?
You need metrics that tell the WHOLE story
It's often the case that businesses DON'T measure all the things that drive their success. Let me give you a couple of examples. Some managers focus only on sales figures week in, week out because they believe that as long as sales numbers are up, then business is flying. But if you're trying to run a profitable business - which most owners and leaders are - then looking at a single measure is the wrong approach.
Think about it. Your sales might be going through the roof. Awesome. But what if it's actually because your team is discounting the hell out of your margin? You've really got to think through the impact or the potential behaviours that your metrics will drive within your team downstream.
And what if your costs of production have gone up? Again, if you're only focused on the sales part of the equation, you'll end up with an illusion of big profits. As you can see, tracking the wrong things (or not enough of the right things) can give you a misleading picture of how the business is actually performing.
So here are my quick tips on how to create the right scorecard for your business.
Tracking the wrong things (or not enough of the right things) can give you a misleading picture of how the business is actually performing.
Figure out what success means
Remember, getting it right begins with identifying the areas you want to focus on, or those that make sense to keep track of, then deciding how best to measure your performance in them.
Now to do this, you need total clarity around your vision. Yep. Vision (again!). What does success look like? What are the goals of the business?
Having answers to these questions is absolutely crucial to identifying key business drivers. Your performance measures will be way more useful if you're focusing on things that actually determine your overall success.
Now the right metrics will differ from business to business, between sectors and the like, so really put some time into developing awareness of what it is that drives your particular business.
Don't leave your team out in the cold
Once you've identified your key business drivers, you then need to figure out the best way of measuring them. What makes the most sense? What can you target to get closer to your goals?
Then you need to bring your team along for the ride. It's obvious but so often missed. Thing is, your team can offer incredible insight and will take far more ownership of the process as a result. Don't forget too that they're the ones who will be accountable to deliver to these performance targets. Make sure you're setting them up for true success.
The right metrics will differ from business to business, between sectors and the like.
More than just financial measures
Think about what you're trying to achieve and what you're aiming for. Leaders can often get a bit fuzzy here so brainstorming the inputs that will really impact the scorecard or the scoreboard of your business will give you clarity. Remember to invite others in because you don't need to have all the answers. You just need to know how to get them. I know that a sounding board always helps me too.
And bear in mind that you'll need more than just financial measures. So often we forget to include things like culture, customer satisfaction, staff morale and societal impact, when they're totally relevant to our vision of success.
Remember, even though you might be tempted to jump ahead and just go straight to the scoreboard, you'll be far better off if you take your time, engage your team and focus on measuring the right things.
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