By: Jeff Whittle, Whittle & Partners
Use scorecards to get a handle on the few numbers that answer whether things are going right for your business.
It's easy to appreciate the importance of a scoreboard at a football game. The scoreboard gives us critical information - not just about who's leading at the time, but who is most likely to win. Quick glances at the scoreboard show how much time is left in the game, how many timeouts each team has remaining, who has the ball and how far they are from the goal line. Scoreboards indicate whether it's first down or fourth, and how many yards are required for a first down. But each of these data points are more than just a snapshot of the current state of the game; they have predictive value relative to the ultimate question that matters the most: Is my team going to win?
Great businesses use a scoreboard - often called scorecards - for exactly the same reason. A great scorecard isn't a backward-looking report card; it's a forward-looking tool that helps leaders achieve goals and adapt strategies. With a good scorecard, business leaders get an immediate pulse on their business and quickly spot trends, challenges and potential train wrecks.
Every business generates tons of information, yet that information often gets delivered in the form of huge data dumps using reams of paper that make your brain hurt. Executives strain to find nuggets of helpful insights in mountains of eye-aching minutiae. The trick to building a great scorecard isn't to dump every single measurable from the business into a stack of paper…the trick is to do the hard work necessary to identify and then religiously monitor the meaningful few.
When we work with leadership teams to build a scorecard, our goal is to find those five to ten numbers that answer a simple but critical question: Did we do the right things last week? Monthly, quarterly and annual reports are all great things, but they don't usually give you the opportunity to be proactive. If you can identify just a few data points that you can monitor regularly and use as a basis for course correction, you've got a powerful tool that can help you achieve your goals.
Think about your annual sales goals, for example. At the beginning of the year, you set revenue targets, and on a monthly basis, you track how you're doing against those goals. If you're behind at the end of the first quarter, you start to worry. If you're behind at the end of the second quarter, you might panic and start implementing new programs or policies. And if you're behind at the end of the third quarter, it's often too late to get the sales ox out of the ditch.
For this reason, great sales managers don't just track the sales numbers; they track the behaviors of the sales team to make sure they're doing the right things to actually generate a sale in the future. Those behaviors are usually tied to the sales process. If you're in the consulting business, you may know that you are able to obtain business from about half of the prospects to whom you make a proposal. It probably takes a certain number of introductory meetings to earn the right to make a proposal, and those meetings are generated by a critical number of prospecting calls. If you want to know whether you're going to hit your revenue goals, you can look into the future by simply tracking the number of prospecting calls your team is making on a weekly basis.
Building a great scorecard with predictive value, then, involves examining your processes and identifying those key behaviors that you can measure to gain confidence that things will be fine in the future.
Don't get me wrong – financial reporting and the information you get from P&L statements are critical. But they don't give you the same kinds of insights you'll get from measuring activities on a weekly basis.
Jeff Whittle is the founder of Whittle & Partners, a Dallas-based business consulting firm dedicated to helping entrepreneurs, owners and leadership teams build better businesses.
