Makarios Consulting Blog

Yes, You Should Be Keeping Score

KPIs and business scorecardWe have never yet come across a leadership team that said, “We don’t want good information. We don’t need to track metrics to succeed as a business.” But we have worked with many leadership teams that acknowledged, “We don’t know what metrics to track to get meaningful insights so that we can make strategic, timely business decisions.” These leadership teams lack an effective business performance scorecard.

If your leadership team does not have a scorecard in place, today is the day to start creating one. Developing a scorecard of five to fifteen metrics to monitor business performance (weekly metrics are optimal) lets you see trends as they emerge so you can quickly address negative trends and take advantage of positive ones. Put simply, data visibility enables business agility.

Now, your immediate reaction to this idea may be, “I don’t know where to begin!” That is not a problem. In fact, we strongly encourage a “ready, fire, aim” approach to creating a scorecard: just pick some metrics and track them for a while. Don’t fret over whether they are the “best” ones. Simply ask each member of the leadership team, “What number do you care most about to tell how the business is doing?” Use the answers as the first draft of your scorecard.

A well-rounded scorecard will have the following:

  • Financial metrics. Financial metrics are usually the easiest to identify. For instance, you may want to track revenue, cash, or profitability.
  • Sales metrics. Sales activity is the lifeblood of your business, so you want to keep your finger on the pulse by tracking matters such as the number of prospects in the pipeline or the close ratio.
  • Operational metrics. Operational metrics differ widely depending on what type of industry your business is in, but they all have one thing in common: these metrics measure how you are performing in your daily work of delivering on your commitment to your customers.
  • Customer metrics. We operate in a customer-centric marketplace. Consequently, you will want to track matters such as the rate of customer retention, the level of customer satisfaction, or the speed of customer service.

Don’t limit yourself to these categories, since there may be vital metrics that are very specific to your industry or company. But be sure to include metrics from at least these four categories so that you gain a holistic view of your business performance.

After two or three months, step back and assess which of the metrics are giving your leadership team meaningful, actionable insights. Keep those and discard the others. Then, add a few new metrics to see how those work for your team. Accept upfront that your scorecard will go through several iterations; this relieves the pressure to “get it right” immediately.

As a side note, you may discover that a useful metric is very “painful” to get on a regular basis. For instance, it might require significant manual labor to gather the data necessary to update the metric. If so, you will need to weigh the benefit of having the metric versus the cost of getting the data. If the benefit does not outweigh the cost, drop the metric from your scorecard.

Within a few iterations, you will have developed a scorecard that your leadership team loves. Why? Because the scorecard will enable your team to make faster, better decisions that drive business success. A good scorecard gives you the visibility you need to get the agility you want.