March 2, 2015

Performance Scorecards

The right tool for the job

A few years ago, I was asked by an industry leading technology firm to conduct an Assessment about how their Analytics program might be enhanced to best support performance improvement.  The Chief Operating Officer was not sure that their reporting and analytics deliverables presented an accurate picture of each division’s growth and profitability in their “matrix management” organization, which focused on cross-division product lines and market segments.
With executive sponsorship, we collected, integrated and analyzed all financial, sales and operations information for the prior three years.  I presented the analysis to the executive committee, including the COO and all division heads. One of the smaller, but more innovative product divisions was identified as the fastest growing business unit with the highest profit margin, while products developed by one of the largest divisions – managed by a high profile executive – was found to be losing revenue and market share. The results surprised everyone.
The presentation concluded with the recommendation to implement individual product and division scorecards that included customer satisfaction, employee satisfaction, revenue, profit margin and market share.  They all agreed that more focused scorecards would help everyone stay current with what was important, rather than just monthly high level results.
We proceeded to develop and implement the product and division scorecards, reflecting targeted objectives and actual results, which produced an immediate improvement in quality, productivity and expense management.  The Scorecards were summarized and included in Executive Dashboards, along with other reports and analytics.  The Executive Dashboards were used as templates to develop personalized, auto-generated Dashboards for business unit managers and product development teams.  Everyone now has immediate access to current performance information.  The Executive Committee agreed that business unit scorecards are the right tool for the job.
This story is an example of how most organizations – even the largest – are still learning how to use Analytics to measure, communicate and manage performance.  The main reason is that managing performance is a business accountability, and most business leaders – including IT executives – are just starting to learn about how Analytics can support performance improvement.
Since we’re only discussing Scorecards, let’s take a moment to address the differences between dashboards and scorecards.
  • Scorecards – A list of business objectives for individuals, teams, and business units with measurable targeted and actual results for specific periods of time.
  • Dashboards – Organized views of information, personalized for each individual based on their role and business objectives that may include scorecards, as well as summarized visual and numeric information with the ability to drill down to more detailed information.
From a technology perspective, scorecards are reports that can be included in dashboards.  Just because there is a scorecard, however, does not make the scorecard the right tool for the job.  Accurate, relevant information presented in a timely manner are requirements.  Most importantly, performance scorecards should be the foundation for identifying opportunities for continuous improvement through employee and team knowledge and skills development.  Unfortunately, this is often an afterthought, as scorecards are most often used for incentive plans.  While rewards and recognition programs are good for maintaining focus and motivation, using scorecards to analyze performance deficits at the most granular level will reveal targets of opportunity to continuously improve individual, team and business unit performance.
Scorecards present different information for each level in the organization.
  • Executive – Results Only: financial and units by product/service, location, line of business, market and others.  Only address what happens – rarely why it happens.  Usually delivered monthly after books close, and quarterly in preparation for shareholder announcement.
  • Management – Business Unit financial results and operating metrics. Presents what happened and occasionally why it happened, depending on BU management level and performance measurement sophistication.  Usually delivered monthly, unless exception reporting generates mid-month report.
  • Team – Team financial results and business process metrics. Baseline quality, productivity and cost metrics tell the story of an organization’s performance.  While daily feedback is optimum and weekly is reasonable, many organizations provide monthly reports that include very little useful information.  Most organizations have the ability to capture business process data and develop automated daily or weekly scorecard reports, but don’t recognize that there is a direct correlation between basic organization quality, productivity and expense management…and growth and profitability.
On a recent project with a large, global information technology conglomerate, we were asked to lead a project to develop an enterprise data warehouse to replace the 1,600 spreadsheets that were used across all thirty-three lines of business, with data coming from Finance, Sales, Marketing, HR and R&D.  In addition, we were asked to develop performance scorecards for R&D, so the product development teams could have better information to stay current with their progress against their timeline objectives.
It seemed like an overwhelming task, but when we started analyzing reporting requirements and mapping the various data sources, the data warehouse architecture of conformed dimensions and fact tables emerged much more quickly than anticipated.  In the process, redundant reports across business units were consolidated and with BU-specific security profiles, producing a rather small library of standard reports with prompts that replaced thousands of redundant BU reports. Hundreds of thousands of dollars in wasted time was saved.
Through the process, the Finance, HR and R&D project management data was integrated and maintained in the R&D Data Mart.  From there, it was a rather straightforward process to prepare Product Development Team Scorecards that provided product development performance insight via near real-time reporting, while saving significant time and expense. HUGE Analytics ROI!  HUGE!!!
Many times, the short term Analytics benefit is measurable savings from eliminating spreadsheet development and deployment.  The long term benefit is increasing organization IQ to reduce the insight to action cycle-time. 
People love to play games and are naturally competitive, so when employees have timely feedback about how they’re doing compared to others, work becomes fun, more meaningful and more productive.  How are you helping your employees measure the quality, productivity and cost of their work?  How are you measuring yours?