Recently, I was surprised while visiting a client. Although the team had a Scorecard, no one had entered data into it for several weeks. When I asked about their lack of consistency, they responded that the numbers didn’t tell them anything significant about the business. So they’d just stopped using it. Yet, when done well, Scorecards are the ultimate tool to help you manage your business. It gives you a quick snapshot to see if you’re on track to win the week. In my mind, not using a Scorecard is like walking by money without picking it up. Scorecards help you in three powerful ways.
1. Gives You a Pulse on Your Business
The hallmark of a great Scorecard is that it is simple, short, and actionable. A great Scorecard has 5 to 15 forward-looking, activity-based numbers. Those numbers give you a pulse on your business for the periods in between your weekly meetings.
Each item on the Scorecard should call a team to action if the number is off track. Having the objective Scorecard numbers in front of you allows you to make better decisions without having to ruminate. If one or more numbers are off track, this should spark a conversation to solve a larger problem. Those off-track numbers in red should prompt a team to dig in to find the root cause of the misses.
2. Predict Success
Forward-looking metrics tell you if you’re on track to hit your monthly, quarterly, or annual goals.
For example, let’s say you need to have $50,000 in the bank at the end of the month. You don’t want to measure cash because you won’t know until the end of the month if you have enough cash on hand. These kinds of measurables are lagging indicators and don’t tell you that you have a problem until it’s too late to do anything about them.
Instead, you want to measure a lever you can pull to make sure you’ll have that $50,000 when you need it. Cash levers typically include accounts receivable and inventory. By monitoring these two items, you’ll know whether cash will be short at the end of the month.
If you’re monitoring your accounts receivable and inventory numbers weekly and either increases, you’ll have time to make adjustments during the month. Measuring numbers like this is how you can use a Scorecard to predict success.
3. Create Accountability
Every number on a Scorecard should have an owner assigned to the measurable. Having just one person responsible for a number on the Scorecard drives accountability.
When each measurable has a clear goal and a clear owner, the entire team understands what success looks like. What gets measured gets managed.
This clarity and accountability should help the person responsible for the measurable manage their activities to achieve the goal. This also allows your team to know when to ask for help when their numbers go off track.
Consistently using a great Scorecard can help your company get an accurate picture of where things stand. Scorecards are only as useful as the things they measure.
Is your team struggling to find the right measurables to get a pulse on your business, predict success, and create accountability? It may help to know most teams have to work on honing which numbers give them the information they need. The only way to know that is to consistently use the Scorecard and adjust until you have an absolute pulse on your business.