We are all in unchartered waters right now--grappling with economic issues in ways that we have never had to before. This economy is testing the mettle of business leaders--from the largest enterprises to the mom and pop shop--and the exceptional ones will rise to the occasion and successfully pull their companies through. What do all of these leaders have in common? Among other factors, they recognize that in good times as well as bad they need to stay focused. They also understand how important it is to have everyone rowing in the same direction and make sure that the ship is balanced so it won't tip over.
One of the best ways I've found to make sure that my company stays on course is to use a Balanced Scorecard measurement tool. Many companies are understandably preoccupied now with their financial performance, but the Balanced Scorecard --originally designed by Robert S. Kaplan[1] and David P. Norton[2] (The Balanced Scorecard: Translating Strategy into Action)--helps ensure that companies don't lose sight of other important metrics. The scorecard is focused on key measures, both internal and external, which are all aligned around a common strategy.
We have adapted the tool at Insight Performance to keep balance of key areas that are of critical importance in our business.
The starting point, which is at the core of the scorecard, is an organization's vision and strategy. In our case it's helping companies build outstanding workplaces that support business goals and employee development. Everything else on the scorecard emanates from there.Next, there are 4 key metrics positioned above, below, to the right and to left of the vision statement.
Above the vision is the financial box. In that box, we ask ourselves, "To succeed financially, how must we measure the business?" We set financial goals that we are aiming to achieve during the course of the year. As most companies are doing, we measure our success in this area by looking at revenue per full time employee, labor costs and profit numbers. Many companies would stop there, but the Balanced Scorecard addresses three other equally important measures of success. The box below the vision focuses internally on the culture of learning and growth. In this area we consider, "To achieve our vision how will we sustain our ability to change and improve?" We set annual training and development goals, recognizing that by investing in the team, we are enhancing productivity and profitability as well as employee satisfaction. We measure our effectiveness in this area by training expenditures per employee and other factors. The box to the left of the vision is externally facing, focusing on client orientation. We ask ourselves, "To achieve our vision, how should we appear to our clients?" We set customer satisfaction goals and measure metrics such as the client retention rate. The box to the right of the vision addresses internal business processes. We consider, "To achieve employee and client satisfaction, in what business practices must we excel?" To address that question, we institute business process goals for the year and look at metrics such as the voluntary separation rate as well as learning and growth.These four measures--financial, culture of learning and growth, client orientation, and internal business processes--are interrelated and impact each other. Well-trained employees, for example, typically provide better customer service, are more productive and can contribute more to the financial well-being of the company. Only by addressing all of these areas with synergy, can companies rally their teams to work together toward a common vision and strategy. In these times of turmoil, it's too easy to hyperfocus on finances at the expense of everything else--but that's a recipe for failure. Only by focusing on health and balance in different areas of your organization can you keep moving toward your business goals, navigate carefully through the economic storm and set your course for smoother waters ahead.
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References
- ^ Robert Kaplan (www.inc.com)
- ^ David Norton (www.inc.com)
