What is a business scorecard?
A business scorecard is a set of graphs and tables that your organization’s senior management use on a periodic basis to monitor performance in key processes. Using the same graphs and tables in each scorecard makes it easier for managers to spot trends and identify problems. Here are some key characteristics of business scorecards:
1. Scorecards are often “balanced,” containing a mixture of financial and operational data.
2. Scorecards have a standard periodicity, ranging from real-time scorecards to track supply chain dynamics to monthly or even quarterly tracking of financial metrics, such as days receivables.
3. Scorecards present measures along a
series of dimensions. For example, sales (measure) might be
presented by channel, product line, or customer (dimensions).
Key Steps to Building a Scorecard
Identify a key business process. For a scorecard to be successful, it must be process-based. By choosing a process, you can focus your measures to track the process performance.
For KMA, the sales process is critical to our long-term success. Without new projects and new customers, we can not grow. We have developed a set of measures to track sales. We use these measures to allocate resources to sales and as an early indicator of future revenue and future growth.
Learn how managers learn. It is critical to understand the process in context. By interviewing senior managers who monitor the process, you can find the measures they use to identify problems. In the same vein, you can find how these problems are diagnosed by interviewing the line managers who have day-to-day responsibility for the process. Through these interviews you can also develop a high level process map, which can be helpful in finding process measures and dimensions.
Find the data. Once you understand the process and how managers identify process issues, take a look at the process-related data that you currently collect. In many instances, most of the data you need is being collected in an existing ERP or CRM system. It may even be stored in a data warehouse or data mart.
Build the scorecard. With a good understanding of the process and the data, you’re ready to build a prototype scorecard. Start with a set of graphs and tables in PowerPoint. Show these to the key managers. You will learn a great deal from showing your charts to them. Be prepared to modify your measures, the graphs and tables you use to display the measures. You might even identify some data quality issues that will require you to recompute some measures.
Repeat for other key processes. Moving one process at a time allows you to provide management with results early on. You can build momentum for the scorecard process and increase the likelihood of improving business performance through improved measurement.
This process by process approach can be carried out very quickly. Prototype scorecards can be completed in as little as one week, depending on the complexity of the process, the availability of managers for interviews, and the structure of the process data.
