The band AC/DC sang (or rather roared) the now iconic “It’s a long way to the top…” But it’s also a long way to fall if you initially succeed and then take your eye off the ball. Successful business owners know they need to keep their balance if they want to remain at the top; and there are business tools available to help you achieve this.
There’s a bias that exists among most existing management performance measures. Managers tend to lean more towards financial measures, thinking that this focus will drive success. But smarter business owners know that financial results are the reward at the end, not the means. In fact, excellent financial results are obtained by the successful implementation of four key business perspectives. So don’t let financial results be the driving force. This is the Balanced Scorecard paradigm.
The Balanced Scorecard framework (http://www.balancedscorecard.org) has evolved since the early 1990’s and is now widely used in businesses, NGOs, and schools throughout the world. It has grown in popularity because it‘s successful in helping businesses grow and prosper.
Simply put, having a plan and measuring how well you are performing beats seat-of-the-pants management every time. If you want to enjoy a growing business, then sooner or later (preferably sooner) you’ll need to get yourself a business scorecard. If the thought makes your eyes glaze over, try pretending it’s like scoring for golf, netball or tennis—or perhaps in your case, an ironman competition.
Remember a previous issue about one idea worth one million dollars? When your business does use a framework, you get results like this:
● 88% of businesses report improvements in operating performance
● 66% also achieve an increase in profits
The Balanced Scorecard tool has four key areas of focus – financial, customers, internal processes (systems) and innovation, and learning and growing people. These are all related to your business strategy. This is where the ‘balanced’ part of the title comes in.
The ‘Scorecard’ bit is all about measurement, so you know what’s going on. Remember in an earlier article we stated “If you cannot measure, you cannot repeat. If you cannot repeat, you cannot scale.”
The Balanced Scorecard tool encourages the identification of measures that answer the following key questions:
● Financial: “How do we look to shareholders?”
● Customer: “How do customers see us?”
● Internal Business Processes: “What must we excel at?”
● Learning and Growth: “How can we continue to improve and create value?”
Even though ‘Finance’ is at the top, you will need to start at the bottom at ‘Learning and Growth’. Unless you have some form of “Terminator – Rise of the Machines” program for your staff, ‘Learning and Growth’ is something you achieve through and for the people working at your company.
Some typical measurable targets you can articulate to your people are:
● “We develop, recognize, & develop great people.”
● “I’m developing the skills I need to succeed.”
● “We understand the strategy & we know what we have to do.”
● “We have authority to make decisions to help solve customer issues.”
● “We have the information & tools we need to do our jobs.”
These are not platitudes. If you agree with these goals then you need to develop them and measure your success in implementing them. Continually improve, this is an ongoing process.
Next time we’ll look at how you can develop and implement these principles into your business.
CEO and Co-Founder
neXtep Business Builder Community Pte Ltd
Singapore ACRA Business Registration Number: 201424522Z
80 Kitchener Road #09-09/10 Singapore 208539