Keeping Score

We are awash in data. It comes from our ERP system, our POS system, social media streams, our CRM system and from the market research and sentiment analysis consultant we hired. It has tremendous value as we seek to exploit marketing opportunities or solve operational challenges in our business. The rise of Big Data and the accompanying Business Intelligence has been too long in coming. We are finally leveraging the most important IT asset that any company possesses – data. However, the sheer volume of data available sometimes clouds the picture, instead of clarifying it. William Bruce Cameron said, “Not everything that counts can be counted, and not everything that can be counted counts.” So how do you decide what matters and what doesn’t? There is no one-size-fits-all answer. It depends on your company’s culture, goals, and core values. For a company that’s starting the journey towards data-driven decision making, let me make a suggestion. A balanced scorecard is great way to monitor the financial and cultural health of your organization.

In the world of medicine, there are thousands of diagnostic tests. Each of them helps paint a clear picture of the patient’s condition so the doctor can correctly diagnose and treat the patient. However, every encounter with a medical professional begins with the collection of the “vital signs”. Why? Because they are vital. Of the thousands of tests available, every medical professional begins with temperature, pulse, blood pressure and respiration. The results from all the other tests will add context, but the results from these four are the baseline from which to analyze all the rest. And so it is with a good balanced scorecard.

A correctly built balanced scorecard accurately reports the 8-12 metrics that indicate whether or not there is baseline health in your organization. There is no list of required metrics that must be included on every balanced scorecard. It’s different for every organization. Well built balance scorecards contain a mix of objective and subjective measurements.

Discovering the right metrics for your organization’s scorecard requires –

  • Industry knowledge
  • Intricate knowledge of your company’s financial and operational measurements
  • Identification of the company’s core values

Assemble a lengthy list of all of the measurements that could be included in your scorecard. I’d expect to see things like profit margin, inventory turns, employee turnover, number of customer service issues resolved on first call, customer satisfaction ratings from surveys taken in the store, on-time delivery percentage, and transmission of company mission and values to front line personnel. Start working through the list and asking the questions –

  • If we fail at this, do we go out of business?
  • If we fail at this, are we really true to our core values?
  • If we fail at this, do we put customers at jeopardy?

If your original list of measurements is a good one, you obviously don’t want to fail at any of them, but for purposes of this exercise, you want to identify the metrics that put you most at risk or that are most indicative of your overall company performance.

Once you have your list, track it consistently and share it openly. It should be available to not only your management team, but all your staff. If this is what success looks like, they should know how the organization is measuring up. Finally, be courageous to go where the data takes you. If you’re failing in some metric, own it and fix it. This can be a great first step in becoming a data-driven organization.

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Mike Chirveno

Mike Chirveno

I have great admiration for people who risk their personal wealth to run a small business. I'm honored to be invited into each client organization and be a part of their success.