Balanced scorecards and well structured KPI dashboards remain important to help businesses drive their operational performance. Organisations that use a balanced scorecard approach tend to outperform organisations without such a well structured approach to strategic performance management.
Here are six quick tips to deliver better balanced scorecards and KPI dashboards in your business.
Change comes first
Balanced scorecard implementation touches a wide audience so requires a proportionate change effort. Any set of KPIs will confront your operational culture by providing greater openness and visibility of measures and performance. As a result you will need a structured approach to enabling individuals, teams and organisations in your business to transition from a current state to a desired future state. Whether that transition is from your old measures to your new measures or whether you are transitioning from no structured scorecard to putting one in place; you will need to focus on building sufficient engagement and commitment amongst your people to ensure that the outcomes of the change are fully realised and sustained.
Involve your staff in the process
A set of measures in a balanced scorecard will typically be designed to be hierarchical and will require the right goals and targets to be set (and adjusted over time). The lack of lower level involvement in the development and management of the scorecard can greatly contribute to its failure. Your strategy has to be well understood, communicated to and executed by front-line staff so they should be clearest on the impact they can make on overall performance. The link between the scorecard and the strategy needs to be maintained so that it avoids becoming merely a collection of indicators that may ultimately lose their relevance.
Measures need ownership
Measure owners should be clearly articulated and understood alongside the teams who own the scorecard in their business areas and overall. This helps to ensure the right level of accountability. The focus of the scorecard will inevitably be on internal performance against targets. But is is important to keep consideration of the externally focused indicators (those that are market, shareholder, competitor and employee-based) and also understand who will be the owners of these measures.
Scorecards demand action
The value of any scorecard-based approach relies on the idea that once performance problems are identified, there is an efficient and effective resulting method for addressing underlying root cause issues. From these gaps, solutions should be developed and the performance gaps (or deviation against target) closed. A standard methodology and toolkit for addressing process or operational challenges (and the resulting effort required) is required to close each new performance gap that otherwise could eventually damage the performance improvement. Translating the scorecard to an accompanying Strategy Map can also help to ensure a sustained focus on the right goals and improvement activities.
There is value in the process
It is important to note that there is no ‘one size fits all’ approach to balanced scorecards. Rather, there is significant value in managers being engaged through the development process – asking why certain measures should be used and how they should be used. Don't be tempted to over-accelerate the development process and miss the valuable opportunity to discuss your strategy and properly set objectives and KPIs that relate to what is important. Equally, time spent in exploring different trade-offs and aligning each part of your business around common KPIs has real value.
Keep things flexible
From our experience it is typical that around 30% of the initial indicators change during the first year of using an operational balanced scorecard. This is because many of the indicators that were thought to be good ideas at the time, do not actually indicate what is needed and others, that were thought less useful may prove to be beneficial. It is important to test the indicators for a short period of time (usually 3-6 months) and discard those that do not fit the strategic operational needs.
We would advise that your operational leaders consider the performance measures part of a continuous process to test, purge and innovate the indicators required to deliver your desired objectives, although some stability is also required in the measure set so that you get a substantive performance baseline over time instead of just rushing to change things or blaming the measures when they don't tell you what you want to hear!
How we can help
Working with many field service organisation at Leadent, we have seen at first-hand the ways organisations can improve their performance management approach and ensure their performance measures and KPIs focus on the right things.