One of the key drivers for employee engagement is to make sure that your employees have a clear vision of the company’s future. They should see a connection to how their daily work contributes to it. The balanced scorecard is an effective tool that helps management crystallize priorities and then articulate them. Later on, the scorecard is used to track progress towards the common goals.
Drs. Robert Kaplan and David Norton created the balanced scorecard concept as a performance measurement framework to balance a purely finance-driven focus with other equally important performance indicators. These are the key performance perspectives:
- Learning and growth – effective workforce and work systems
- Business processes – operational excellence in work flows
- Customer expectations – measuring what matters to customers
- Financial expectations – measuring what matters to shareholders
One way to look at these performance indicators is that one builds on another. Without a good workforce, your work processes will not be executed to high standards. Without good workforce and high quality processes, you cannot meet customer expectations. Without meeting customer expectations, you will not be financially successful – at least not for the long haul.
The metrics in the balanced scorecard are based on the priorities of the company. Most likely you will start setting your company objectives by focusing on financial and customer expectations. When you select metrics for customer expectations, you really have to be true to your customers. If they care about your lead times, you track your lead times. If their priority is your responsiveness or quality, you must find a way to measure that. Customer satisfaction surveys provide a metric that you can track year over year.
You will meet financial and customer objectives by driving improvements in your workforce and business processes. What are your key initiatives this year? What are your business-as-usual metrics that will tell you the “state of the union”?
Once the objectives and targets are set, it is time to cascade the information down to the organization. Each business unit and each department needs to align their goals to ensure that they are contributing to the same priorities. Their goals will be subsets of the scorecard goals. The employees should see a clear line of sight from their work priorities all the way up to the company strategic priorities.
The scorecard wouldn’t be a scorecard without tracking. You set targets, and you frequently track progress to goals. The easiest way to communicate the status is to use the stoplight chart. Green means on target, yellow means limited deviation from it (often max. 10% off), and red means too much deviation from the target. It is easy for the management and for the employees to spot where everything is going well and where problem solving is necessary.
The balanced scorecard process ensures that the strategy process does not become a once-a-year event. Instead, it will be a constant reminder of the company priorities and progress towards the common goals.
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Copyright 2010 Liisa Pursiheimo-Marcks, all rights reserved.
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