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Keeping on Top of Things

March 21st, 2013

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balanced scorecard
There are only so many hours in the day and when your business is growing there is an urgent task for every one of them and plenty more besides. In all the adrenalin rush of dealing with issues, problems and opportunities as they arise, it is sometimes hard to keep track of all the many details that tell you if your business is still firmly on course.

I’d ask you to consider the spider and his web here for a moment. I’d like you to think of the web as your business and you take the role as that spider. Having created the web, a spider may sit for hours in the centre, all 8 legs connected to the strands of the web, waiting for minor movements of those strands that announce the arrival of another insect. The spider will know exactly how big and in which direction the arrival may be found and move rapidly to secure it.

There is a slight defect in this metaphor. Most CEOs that I know don’t have time to sit for hours waiting for something to happen. However, imagine having that level of connection to all parts of your business. Something happens and your intelligence web delivers you information about what it is, how important it is and allows you to assess what action is needed. That would be useful and most CEOs have something, but often not everything they need in that respect.

Since they were first developed as software applications, Executive Information Systems or Information Dashboards have got more and more accessible and affordable. The ability to show information graphically has also improved. However, they are only as good as the information that is actually displayed and for that, you need to think through the Key Areas of your business and the KPIs (Key Performance Indicators) that will allow you to know, at a glance, whether they are healthy or not. They are like the vital signs that your Doctor will view when checking you out annually or when you present with worrying symptoms. They are your sensitive spider legs.

To develop KPIs, you will need to consider which are the areas of your business that will give you the best indication of good health. Some will be financial but many will not. How do you measure staff morale, for example – or your capacity usage in case of a large order arriving? How do you ensure that the company is living its values in everyday behaviours?

Back in 2008, we blogged reflecting the feedback from an Experiential Learning Group on just this topic. The key learnings there were

  • Reduce the number of values under review, 12 is too many! Discuss with your management team which of the values underpin the others;
  • Take the time to get it right, establishing an unsuitable KPI can do more harm than good;
  • Ensure a discussion takes place with any senior managers who are not displaying your values. Establish exactly which behaviours you want to see and which behaviours you don’t as this is as important as choosing a KPI. Discussing the desired behaviours makes the values more tangible and promotes common understanding. Respect may mean very different things to two very different people;
  • Have the discussion on values leading to desired behaviours at the company induction session. As the company grows you need to work harder to maintain consistency and induction is a key time for establishing way of working and mutual expectations.

One method for developing a mix of lagging and leading indicators across a range of perspectives is the Balanced Scorecard. The original perspectives were financial, customer, internal business processes, and learning and growth. They are often linked together in such a way as to present results in some form of map that gives immediate and clear indications of where in the business attention is needed and where is currently functioning well.

All of which is fine if you are already experienced in developing such approaches. For those who are experiencing business growth and the feeling that what was once quite obvious is now becoming obscured by complexity or size, the first step is to recognise that something needs to change. The step beyond that is to begin to notice and record those factors that you currently check and begin to enhance them so that they give you, maybe manually at first, a picture of the business operation.

Once you have the data right, the technology can help immensely. If the data is wrong, no amount of technology will help with that.

 

For more information from the Academy for Chief Executives, please follow us on Twitter –@academyceo. You can also find out more about us at www.chiefexecutive.com.

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