Discovering the Importance of a Business Scorecard as the Key to Rapid Action
I will admit, I was late to the party on the importance of scorecards in running a business. At my previous employer, we had scorecards but I never seemed to care about them and didn’t understand why everyone else cared so much about them. Looking back, the reason it didn’t matter to me was I didn’t think I could do anything about the numbers on the fancy scorecard. It wasn’t until a few weeks after we implemented and refined our own company scorecard that I realized how powerful it can be.
A scorecard is an informative and actionable weekly view of key performance indicators. It’s critical that it’s done weekly so you can take action quickly. The scorecard doesn’t have to be a five-page blur of green, yellow and red icons. It needs to hit the important numbers that can prompt investigation into problems, and allow for the celebration of successes or a change of course in a business.
Our Business Scorecard
We are a software sales and consulting organization, so your scorecard will look different, but the same core ideas can apply. Our business scorecard contains the following:
• The number of team members and billable team members.
• The number of projected billable hours for the week and the actual hours billed.
• The amount of projected revenue, actual revenue, estimated margin and the average bill rate for the week.
• Cash and accounts receivable balances.
• Software sales and annual subscription sales.
• Pipeline and number of new opportunities uncovered this week.
On a recent week, I noticed our actual billed hours were under our projected billed hours by a fair amount. I quickly dug in and figured out someone didn’t get his timecard entered for the week (fortunately, that doesn’t happen very often). We also saw that our accounts receivable balance was high, so we quickly reached out to two customers who have been slow to pay. In another instance, I noticed our actual revenue was low for the week. We quickly figured out we had not yet invoiced a key customer. If I didn’t have the scorecard, I would not have known about any of these issues.
In more positive examples, I’ve been able to watch our weekly estimated margin go up as we have more customer work, which is a great sign for company profitability. Our accounts receivable balance has gone down since we implemented better practices around reacting to customers who are slow to pay. Our pipeline number has continued to go up as we’ve done a better job of getting our name out there and getting conversations started with customers. All of these are healthy signs that would be hard to determine quickly if we didn’t review it every week.
The scorecard is a key agenda item on our weekly leadership meeting. We never miss a week of reviewing our scorecard. If we did, we’d miss our chance to take action quickly to continue to drive the business forward.