Balanced Scorecard Example

Quantum Leap #2: Sharpen the Focus

Leading at Light Speed is an essential new leadership book by Eric Douglas synthesizing the best business practices into 10 Quantum Leaps that build trust, spark innovation, and create a high-performing organization.

Chapter 2, Sharpen the Focus, talks about building a Balanced Scorecard to measure performance.

Trust grows when people know how performance will be measured. Which is why developing a scorecard is such a critical part of leading at light speed. A balanced scorecard is a term used to describe a set of performance measures that holistically evaluate the health of the organization – not just one part of it, such as its financial performance. If you’ve followed the prescriptions of this book thus far, you’ll discover that by assessing your core values, as well as your mission and objectives, you will possess a balanced scorecard.

A balanced scorecard needs to capture three different dimensions:

• What will be measured (the metric)
• What you’ll aim for (the target)
• The current performance (the baseline)

In measuring core values, you should be focused as much as possible on outcomes, rather than outputs. Like baseball bats, outputs refers to the amount of products produced or delivered. Outcomes define the real value received, such as higher levels of consumer approval or consistency. As the following diagram shows, performance goes up when an organization focuses on measuring outcomes.

Too often I find organizations tracking the number of sales calls per sales person or the quantity of units produced, not the results in terms of satisfied customers, retention of key clients, or profitability. In addition to creating one-dimensional behaviors (such as the salesperson who makes repetitive calls), it also ignites antipathy and rigid boundaries. When you construct your performance measures, make certain that you are focusing on the appropriate aspects. The process will promote a higher level of synergy throughout the organization. It will also help you clear away any lingering ambiguity about your core values, your vision and your goals.

For instance, sustaining competitive advantge in pricing might be measured through comparing with other leading companies. The table below illustrates the capability of infusing that into the scorecard.

A possible core value for your company might focus around consistency. As you explore it, someone might suggest a performance target of six defects per thousand units (the so-called “six sigma” standard). Someone else might say that’s too difficult. After more intense discussion, you conclude that maintaining an error rate of twelve defects per thousand is what’s essential to your company’s success, given the other core values. So that’s added to your performance scorecard.

Lets consider customer approval rate? For consideration, the overarching performance goal might be an average rating of 90 percent on the yearly customer approval survey. Many individual factors of satisfaction might be measured, like telephone hold times or responsiveness to complaints. You can include those implications into the overall customer approval rating.

There are ample amounts of balanced scorecards. All companies should have its own. Each will include its own relevant measures. Lets reflect on the balanced scorecard from a law firm. It finely ecompasses relevant metrics and goals.

Once you have your balanced scorecard, you should start communicating it throughout the organization. If leaders make the effort to hold themselves accountable for spreading the outcomes of the balanced scorecard, it will affect the behavior of the rest of the company. This is the reason why public communication about the vision is imperative. It constructs trustworthiness that leaders hold actions accountable. Done well, your performance scorecard will accelerate the pace of change and focus everyone’s attention on how to improve the organization’s performance.

Take this free work survey to discover how well your company measures up to the 10 Quantum Leap of high performing organizations.