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Keeping Score

Opening:
Any discussion about organizational performance measurement can be boiled down to one simple question: "How do you know?". How do you know when you have achieved your goal? How do you know you are making progress in your quest? This question, in all its simplicity, is the cornerstone of any measurement program.
The problem I have with this opening is that Deming's quote begs the question 'how do you know .... what? I'd prefer "How do you know you are winning?" This is more in line with our ideas about scoreboarding. It ask implies the question, "why measure?" Our answer: you measure to check the score to ensure you are winning with your customers, employees, shareholders and (against your) competitors. And you want scores that are balanced between historical and future, inside and outside, financial and non-financial, etc.


Traditional Measures:
Traditional performance measures like sales growth, operating income, return on investment, and many other financial measures have been the primary means of measuring ourselves. These traditional measures, though, have been too inward looking. So what? Yes, inward can mean insular, but the key reason is that the traditional measures have been a poor indicator of future success. They are an internal view of the company without external feedback. The client's opinion of the company's performance can only be indirectly derived from the sales data and client turnover can often mask that information. Financial metrics provide us with a means to look back over time and assess our performance in the past, but lack the ability to help assure the future health of the organization. They lack predictive power. OK! Return on investment and revenue growth does not necessarily indicate that we will be in business tomorrow, but market share and client satisfaction measures would provide a better indication of future health. Just these two? Also measures of innovation: like new products launched, revenue growth of new products, etc.

The Quality Era in the late '70's and early '80's introduced quality measures, quality circles, and work processes analysis to the scene. However, for many companies, these quality programs never succeeded to transform the organization. Quality became its own goal and, as with financial measures, often lacked an external perspective. It has not been unusual for companies to improve their quality charts but increase the number of dissatisfied customers.
The example Bob uses of Varian from the Business Week issue on quality is good. We should get the quote from BW.

The balanced era:
This brings us to the Balanced Era. This new period, emerging in the early part of this decade, consists of a balanced set of measures. This era's thinking takes the best quality measures, the best financial measures, and the perspectives of the main "stakeholders" of the success of an organization, and creates a balanced set of performance measures that are linked to an organization's strategic plans. Jack Welch, CEO of GE, had this balanced view in mind when he said: "Too often we measure everything and understand nothing." He went on to say that the triumpherate of The three most important things you need to measure in a business are customer satisfaction, employee satisfaction, and cash flow were most important. In Welch's words, "If you're growing customer satisfaction, your global market share is sure to grow, too. Employee satisfaction gets you productivity, quality, pride, and creativity. And cash flow is the pulse..." -- the key vital sign of a company."

Keeping Score:
One of the country's favorite management gurus, Tom Peters, likes to say: "What gets measured, gets done." Keeping track of something certainly increases productivity. Did you ever notice what happens when two people play tennis? During the warm up, both players are relaxed and lob the ball back and forth without much excitement. But, what happens when they start keeping score? The adrenaline starts flowing, there's sweat on the brow. The players lunge and run faster! Now that's increased effort and focus -- just by keeping score!

Highly visible measurement helps people to focus on the important things that need to be done. If you ever visit Milliken, the textile manufacturer, just take notice of all the charts hanging on the walls every place you go. Highly visible measurements are performance measurement at its best! The Measurement Scorecard is a concise, visible display of a company or department's measures and their performance against those measures.

Case in Point:
At Reuters America (RAM) we developed a Lotus Notes based Balanced Scorecard for RAM, the Latin America (LatAm) region, and the Reuters Data Center (HTC). The Scorecards were developed using Lotus Notes as the application platform. The scorecards are divided into four Critical Success Areas, similar corresponding to Jack Welch's balanced view of measurement: Client Satisfaction, Employee Effectiveness and Satisfaction, Operating Efficiency, and Contribution to Shareholder Value. On each scorecard, four to six measures for each of the areas are listed with the current value. Each measure also has a trend indicator, showing the relation of the current value to the last three periods. On key measures there is the ability to drill down to an historical graph and each graph has the ability to drill down to an associated table of values.

[Need to show a sample at this point]

Notes gives the ability to distribute the scorecard to the RAM network, so all can see what the score is. To enhance the visibility, Reuters also employs what we call "Scoreboarding". Like the charts at Milliken, the scorecards and key graphs are displayed throughout the workplace for added emphasis. And people are working toward improving their scores.

[We need a section of top-ten things to do to make a scoreboarding program successful.]

Close:
So, back to the first point: "How do you know?". How do you know that your clients are satisfied, your employees are satisfied and effective, that you're becoming more efficient and you're keeping your shareholders happy? You don't, unless you're keeping score.