The balanced scorecard

Without data, you're just another opinion.

by Bill Gaw

Financial numbers may tell us we're winning the war, but it takes kaizen and performance management to show us how to focus our energy and efforts to win each of the battles along the way.

Bob Gee, a good friend and coworker, once said, "You can't control what you don't measure."

Imagine trying to fly an airplane across the country and the cockpit has no dashboard, no gauges and no idiot lights. You may get it up off the ground but without performance management the chances of getting to where you want to go are slim to none.

Business success may not be a life-death situation, but like piloting an airplane, it takes performance management to get you to where you want to go.

Motivational or de-motivational
Performance measurement can be motivational or de-motivational. The individual goal-setting of the ‘80s is a good example of de-motivational measurement. It tested one individual or group against the other, and while satisfying some individual egos, it provided little contribution to company growth and profit objectives.

Today, the balanced scorecard is a performance management system that helps companies pursue their key success factors. The scorecard uses both internal and external benchmarking and employs a relevant cascading method of performance goal setting.

Achievements are acknowledged and celebrated on a real-time basis and not at the traditional annual review.

For a balanced scorecard process to be motivational, it must provide timely and accurate data. Simplicity is a key to the validity of measurements and the tractability of problems to their root cause. Data collection design must employ simple and easy to maintain databases to assure data integrity.

When people are trained in this process and are permitted to participate in relevant goal setting, performance management can motivate teams to higher achievements - including the exceeding of growth and profit expectations.

Five keys to balanced scorecard success
• Establish a "no status quo" mind-set. If you're not winning, you're losing.
• Define company key success factors: cost, speed and quality.
• Identify realistic stretch goals that are relevant to the company's key success factors.
• Implement training/coaching programs. Education is the pathway to excellence.
• Celebrate each goal achievements and raise the bar. Don't wait until next year.

Benchmarking
For a mature performance management process, benchmarking has become the standard for establishing performance objectives. Benchmarking is still one of the most ill-defined management concepts and is one of those words that mean different things to different people.

Our preferred definition comes from Xerox, which describes benchmarking as, "The continuous process of measuring our products, services and business practices against the toughest competition and those companies recognized as industry leaders."

The objective of benchmarking is to build on the ideas of others to improve future performance. By comparing your processes to best practices, major improvements can be realized.

You should not consider carrying out external benchmarking until you have thoroughly analyzed your internal operations and an effective system of internal measurement has been established.

What’s in it for us?
So what kind of results can you expect when a management team introduces the process of the balanced scorecard?

First, people will become motivated and focused on the continuous improvement of their company's critical success factors.

Second, personal and team achievements will become recognized and rewarded, creating an exciting, winning, work environment. Teamwork will improve and employee retention will rise.

Finally, and most important, is the company-wide euphoria as bottom-line results improve and financial pressures no longer create a stressful and defensive work environment.

Bill Gaw’s manufacturing experience spans more than 35 years. During those years, Bill has held positions as a shop expeditor, production planner, buyer, manufacturing manager, director and president. Bill has participated in four successful financial turnarounds. For additional information, click here: Good Manufacturing Practices.

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