Using a Company Performance Scorecard
4 of the 5 Required Disciplines for Managing Your Business
Compared to the other critical Management Disciplines we have discussed, monitoring a practical Company Performance Scorecard is a less known, and less implemented concept.
This article focuses on the what, why, and how of creating and using a Company Performance Scorecard to help you to monitor, identify, and resolve company performance issues.
As a quick reminder, there are five core disciplines all business leaders need to ensure are well implemented and maintained to have a strong and adaptable business.
The five disciplines are:
#1 – Practical Company Planning
#2 – Using an Accountability Chart
#3 – Effective Management Meetings
#4 –Using a Company Performance Scorecard
#5 – Strong Financial Control
What is a Company Performance Scorecard?
Your company’s Performance Scorecard is a set of figures that informs the management team – whether a single leader or a team of 10 – how the company is currently performing, as well as forecasting future financial results. The scorecard should capture the most telling Key Performance Indicators (KPIs) and financial numbers for the company.
They say a picture is worth a thousand words, so we’ve created a Company Performance Scorecard Infographic for you to review below:
Why Should You Use a Company Performance Scorecard?
One key benefit of effectively using a scorecard is that it gives you more time to identify and fix company performance problems before they lead to financial implications. Additionally, it increases your team’s accountability for those performance problems.
Recently, one of our business coaching clients identified a monthly revenue issue on their scorecard. Their sales were fantastic, but the issue was that COVID lockdowns were preventing them from invoicing for work that was being delayed, which created a problem in revenue recognition. With this information, a company-wide initiative was created to reduce or defer costs until construction projects started back up again and revenues could catch back up. This action helped mitigate a downstream problem of decreasing Company Profitability for the month and quarter. They were able to maintain much of their desired profitability outcome by taking quick action in reducing costs during work delays.
The act of monitoring these key performance numbers not only helps management teams identify and take action earlier, but it also increases the entire company’s awareness of what really matters. We often hear from frustrated business leaders that their people don’t seem to understand how business works. This is an opportunity to educate team members on why these numbers are so important to the company’s health.
How Can You Create an Effective Company Performance Scorecard?
It is important to understand that every company is its own unique set of KPIs. A good starting place for clarifying your own company’s numbers is to imagine you are cut off from receiving any information on your company except for five figures on a card each week. What would those five figures be?
In our business coaching practice, we find that the quantity of these weekly numbers typically increases from five to 10 once you begin to consider the breadth of the company and the range of details you require. If a company wants more depth in the scorecard numbers, they may want to include Debtors’ Days in addition to a Current Accounts Receivable number. A Work Safety Incidence number is a good example of some additional breadth companies may want to include in addition to the more standard business performance areas.
If a Company Performance Scorecard is new to you and your company, start simple. Begin with just what is most telling about your company’s performance. As you develop the discipline to report on these numbers accurately, you can add just enough additional numbers to give the scorecard more of a balanced feel. This scorecard maintenance process includes some art, some science, and slight adjustments from time to time.
Hopefully this information provides you with the details and justification to implement (or revisit) your company’s Performance Scorecard. As always, let us know if we can answer any questions as you try to better execute.