Peter Drucker once said, “what gets measured, gets managed.” I’m beginning to understand the true meaning of his words as I work with my clients and businesses I own.
In strengthening the Six Key Components™ of a business, the Data Component™ is often the last to get attention.
A good Scorecard is the key to accountability. I began asking why this was and the answer became so obvious, I have to admit I was a little embarrassed that it took me so long to get it.
A Scorecard is Key in Any Business Operating System
The Scorecard is a set of activity-based numbers that let you know how a business or department is performing. So why is it that managers and leaders shy away from developing a meaningful scorecard?
What Gets Measured, Gets Managed
Accountability is a funny thing.
The avoidance of accountability is like electricity and water. It flows toward the path of least resistance. So, we make excuses on why we can get good data. All sorts of excuses, like our accounting categories are wrong or our CRM data isn’t updated.
The reality is that we find all kinds of excuses to avoid accountability that a Scorecard shines a spotlight on.
So what should be in a Scorecard?
A great Scorecard should contain 5-15 activity-based indicators that you review every week. The numbers should be leading indicators that help you keep an absolute pulse on the business or project. Relying on business applications, like Quickbooks for Scorecard information is inadequate. By the time information on revenue and costs are available, it may be too late to make a meaningful decision. Data needs to be as real-time as possible or, even better, leading indicators of future performance.
Some great leading indicators, for any business, would be sales-related activities. A good example would be the number of meetings with potential clients or the number of emails sent.
From an operational perspective, it could be the number of errors made during a process or project delivery. In professional services firms, utilization can be the best indicator of financial performance. Although a lagging indicator, timesheet data, entered daily, will be as close to real-time as you can get. These are just some simple examples of good Scorecard numbers. Yet, people avoid them to escape accountability and not for their complexity.
In the end, if you think you have an accountability problem, take a look at your scorecard. Does it give you a weekly pulse on your business or project? Are you avoiding it and making it complex to avoid accountability?
Originally published on the Optimize for Growth blog
- Download a copy of the Accountability Chart from the EOS Toolbox™ to help you discover the right structure for your company.
- Unlock the EOS Toolbox to download a copy of the Scorecard.
- Download a free chapter of How to Be a Great Boss by Gino Wickman and René Boer to learn how to be a more effective leader and manager.