Write these thoughts under a different thing to keep business executives at night. Are you tracking the right key performance indicators of your organization? We are all familiar with the Balanced Scorecard introduced by Kaplan and Norton in the 90s for tracking purposes. It is simply a tool used to assess, determine, track, and improve key business indicators over time, such as a doctor, who will measure blood pressure, temperature, reflex, and symptoms before delving deeper into a diagnosis. Over time, with the help of several generation enhancements, an exercise was presented on displaying a strategy that seeks to understand the causal relationships between interrelated processes, and then objective feedback tracking and iterative improvement. While the core of a balanced scorecard has stood the test of time for visibility to be vertically and horizontally through an organization, it may need more attention than the traditional approach with four perspectives.
When creating a balanced scorecard for your organization, one of the first things is to define temporary tasks. What percentage do we want to increase our gross income this quarter compared to the previous quarter? What is our customer churn rate compared to the same period last year? As you can guess, both of these examples are probably directly related to our priorities for the organization and in many cases overlap with either a department, or a process, or an initiative. An important role is that your goals are translated into operational goals. Another factor for developing a robust balanced scorecard is the horizontal adoption in the organization with each process and the metrics of each department directly tied to the goals, as well as vertically to the individual Contributor level. Once the business process plan is mapped, you begin to measure the speed and efficiency of the wheels turning the engine. Over time, you can make iterative improvements to the engine, apply a small amount of oil, replace the spark plug there or even better, and determine which parts are moving efficiently.
This brings us to the four aspects of the traditional balanced scorecard; financial, client, internal business processes and learning and growth. In the same way, as the whole organization will have key performance indicators, which are located in these four quadrants, therefore, each department can overlap both horizontally and vertically. A financial perspective is just as you might think, all about income, expenses, growth, and profitability. These are mainly lagging indicators that measure past events, since by the time they hit the balance it is too late to do anything with them. Our client perspective is all of our relationships with whoever buys products, how they rate us, and in some cases we value them in terms of risk or opportunity. Internal business processes can be measured in terms of how a department performs its tasks in terms of efficiency, such as completing projects or delivering them in a timely manner, as well as how they interact with other departments and ensure their effectiveness. Training and growth at the organizational and individual level, when we ask ourselves how to look for new opportunities, do we continue to introduce innovations in our industry?
This brings us to the fifth perspective. Why do you personally choose BMW or Lexus, Tag Heuer or Cartier? This is something in the brand that makes you identify a product or service. If you own a business, you probably think a lot about competitive differentiation and how it fits your target customer and how to strengthen your niche position. But do you really measure this intangible asset? For example, a BMW statement: “The BMW brand stands on one thing: simple driving pleasure. Sporty and dynamic performance combined with superior design and exclusive quality. ” Are there ways to quantify and measure “driving pleasure”, “superior design” and “exceptional quality”? You bet there is, and if I am smart as a performer, I will look at competitive intelligence and third-party data to measure, compare and improve these qualities to strengthen my brand. For Tag Heuer, their mission is that “excellence, accuracy and elegance are strict standards and passionate commitments that create an incredible collection of TAG Heuer Swiss luxury watches”. If I’m the CEO, I’d look for ways to measure more abstract terms, such as “elegance”, “passionate commitment” or “birth”, and this would ensure process performance in four other perspectives. In many respects, the first four perspectives are very similar to the business to business in the industry, but measuring and improving the fifth perspective, which, in essence, is your corporate mission, will strengthen the ability of your business to continue to be excellent and profitable with your target customers.
