Ever try to keep a scorecard at a little league baseball game? After a while, you learn to track what's most important, ignore the niggling errors and just make sure there's a snack at the end. Well-managed businesses--large and small--use a similar approach.
The concept of managing by "balanced scorecard" has been around awhile. It boosts performance using a combination of metrics, goals and process improvements. The U.S. Navy, City of Newark and the Atlanta Public School System are just a few large organizations that have benefited from this approach. Small businesses can too.
"The big thing that a balanced-scorecard approach does is that it helps management focus on strategy and results instead of tasks," says Howard Rohm, chief executive of the Balanced Scorecard Institute, a nonprofit consulting firm. "When effectively implemented, companies improve performance by measuring what matters and prioritizing work."
Balfour Beatty, a $2.4 billion (sales) construction firm headquartered in Dallas is in the balanced-scorecard big leagues. "All of our scorecards are structured around people, process, customers and financials," says John Parolisi, a senior vice president at the company.
Parolisi uses multiple scorecards, each drilling down on a different aspect of the business. Each scorecard lays out 2-to-4 strategic objectives and 1-to-3 metrics per objective--so 2-to-12 metrics per card. "For example, we have a process objective called 'consistently deliver the signature experience' where we measure customer satisfaction through surveys," says Parolisi. "This is a critical metric for us." Other key metrics could include employee turnover rates or on-time delivery performance.
For many of us, Balfour's complex metric-management system is probably overkill. We'd do just as well with a little league version.
Alex Phinn takes this approach. Phinn, a little league coach, is also president of Griff Paper and Film, a 50-person manufacturer and distributor of protective films, silicone-coated liners and specialty labeling materials in Pennsylvania. Phinn started with a sheet of paper and chose a handful of important operating and financial metrics, including, open purchase orders and open quotes, as well as daily receivables, payables, cash balance and year-to-date sales (vs. the prior year). He also threw in some other tell-tale performance and quality indicators, like the number of employee absentee days and customer complaint calls. Phinn peruses these numbers every day over his morning coffee.
While large companies need all kinds of sign-offs to implement a detailed scorecard approach, the lighter flashcard version is easy to install for small business owners. Says Phinn: "Once my [three] bothers and I signed on to the daily flash report, we had all the executive approval needed."
Phinn isn't buying special Balanced Scorecard software (and there's plenty of it out there), nor is he hiring a lot of expensive consultants (there are plenty of them out there too). He's doing today what will make him quicker, better, wiser--and richer--tomorrow.