I was talking recently with a colleague about the concept of Marketing Automation for B2B business and the changes that it entails. He made an interesting analogy: that it’s similar to the early 1990s when the Balanced Scorecard concept was introduced.
Both involve innovative ways of communicating company strategies and use new technologies to measure performance against goals. Both move from the traditional financial measure of success to include non-financial measures, such as customer satisfaction. Both involve a focus on sales, so let’s revisit the merits of the balanced scorecard.
The balanced scorecard is a planning and management system that aligns everyday tactical activities with an organization’s overall strategy. It provides a framework for managing the business by translating high level strategies into operational objectives, and communicating them in terms of measurements and goals to which every employee can relate. The scorecard goes beyond financial measures that tell only the history and focus on short term results, to include operational measures that drive future financial performance.
The process of building the scorecard is just as important as the scorecard itself. It’s essential for major stakeholders throughout the organization to sit down together and identify a balanced set of measures that will give them a view of where the company stands today and where it is headed. Define where the company wants to be in three to five years, then map out performance objectives that will reach that goal.
The scorecard asks managers to view their business from four different perspectives:
Customer Perspective: This asks “How do customers see us?” It includes critical measures such as customer satisfaction, customer retention rates and market share. The Internet has changed the way customers buy. With information readily available, they’re researching products, services, and your company, long before they’re ready to talk to a sales rep. So understand who your customers are, how they buy, and how they want you to engage with them. Improving customer satisfaction is critical – it’s too easy now to jump to a competitor.
Financial Perspective: How do we look to shareholders? This includes goals on profitability, growth and shareholder value. Measures include operating income, return on capital or earnings per share.
Internal/Business Process Perspective: This asks “What critical internal operations must we excel at in order to satisfy customer needs?” It includes productivity, order fulfillment, product quality and cycle time, and measures performances such as maximizing profit from current products and services or future growth indicators.
Learning/Innovation Perspective: This asks “How can we continue to improve and create value?” It might include launching new products, increasing revenues and margins, or entering new markets. It includes growth and development activities that measure employee satisfaction, skill sets, employee retention and growth.
All four perspectives are connected and designed to balance the internal and external, the financial and non-financial, and past performance with future. For example, learning and growth lead to better employees who are more willing or skilled to carry out business processes, which leads to increased value to the customer (satisfaction and retention), which in turn leads to improved financial performance.
Each perspective should include:
Objectives – the major goals to be achieved,
Measures – the quantifiable parameters used to measure progress toward reaching objectives
Targets – specific target values for each measure
Initiatives – tactical action items required to meet the objectives
Building your balance scorecard might seem overwhelming at first glance. Many companies find it challenging deciding exactly what to focus on. After all, we live in the information age – we’re surrounded by technology spitting out data by the second, just waiting to be analyzed. So just what performances do you measure? I caution you to think about what really matters, not only in terms of keeping your business open this month, but in terms of growing your business to keep the doors open two years from now.
Identify your priorities. Is it winning new customers, or providing better customer service to keep existing customers happy, or launching innovative new products?
Once you’ve done that, it’s imperative to discuss your objectives throughout every level of the company, and to face where improvement in one area might come at the expense of another. If the executive team decides that customer service is a top initiative, but you don’t have the service team in place to provide support, well then, you’ve got problems. Here is where everyone needs to sit down and map out tactical strategies to address these issues – hire more service people, train them better, put plans in place to reduce turnover, etc. You get the idea…
If you are interested in using the Balanced Scorecard in your business, watch my webcast Balanced Scorecard Drives Sales Performance. Inside you’ll learn how companies leverage the balanced scorecard to boost sales performance by identifying and focusing sales operations on the key elements that drive success
I’d be interested to hear your thoughts. Are you using the Balanced Scorecard to drive success? If so, how are you using it and how has it helped?
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