No Measurement, No Improvement
As important as doing things correctly from the beginning is finding a way to monitor how we’re doing them in order to be able to improve.
We need measurable and realistic results. Assumptions are no good and that’s why we need to establish metrics that will tell us how we’re doing and where we stand.
In an ever more competitive environment, knowing where we stand and where we’re headed can shorten growth times, help us find and seize competitive advantages, keep the whole team focused on the same results, and many other benefits of planning in the short, medium and long term, i.e., having a strategic plan or strategy in place.
Knowing where we’re going is not enough. We need to know how we’re going and when we’re straying off path. There are assessment and measurement tools to make sure that the path is clear and followed.
For these objectives to be assessed we need indicators and numbers so as to align everyone to stay focused on the company’s vision. It is sometimes hard to measure because we may ignore the indicators of the elements that impact the business, we may think that one needs to be a business administrator or an accountant in order to understand them, or simply because we lack revealing information and we end up relying on assumptions.
A very easy to use tool that involves a lot more than a list of indicators and isolated numbers is the Balanced Scorecard (BSC).
According to Mario Vogel, expert in the implementation of this tool, “the BSC helps balance, in a comprehensive and strategic way, the current progress and provide direction for the future of your company in order to turn vision into action by means of a consistent set of indicators grouped under four different perspectives that show the business as a whole.”
The BSC is the representation of the strategy in interrelated objectives measured by internal and external performance indicators for which goals and initiatives are established. Its name comes from the balance among aspects related to stakeholders and clients (external), processes, training, innovation, and growth (internal).
These aspects are presented as four perspectives: financial perspective, customer perspective, internal business process perspective, and learning and growth perspective.
Even though the BSC focuses on the financial perspective since one of the main objectives of any organization is to be profitable, it supplements this aspect with the other three perspectives. These are all present in the processes that are necessary for the healthy operation of a company and need to be considered when defining indicators.
It’s important for the decision makers in the company to be aware of the objectives in all four perspectives. The management team will then be focused on the strategy and ready to correct any diversions.
This is an essential notion for success because, without a clearly-defined strategy that includes all four perspectives, we may end up using indicators that don’t lead to accomplishing said strategy.
For the BSC to give results that help manage the company we’ll need to monitor and analyze all indicators. Among the advantages of the BSC, we can mention:
- Aligning staff with the company’s vision by means of clear communication of the long-term objectives
- Having the ability to redefine the strategy based on results
- Turning the vision and strategies into actions
- Fostering the creation of future value
- Integrating all areas in the organization by means of interrelated objectives
- Having the ability to perform solid analyses
- Improving financial results
This tool will let us know how we’re doing and where we stand based on accurate and measured information instead of assumptions and, as a result, trigger improved performance.