What if we could numerically measure capability and not just results? For example, would it be instructive if a business leader knew that the strategy execution index was 67%? Furthermore, what if the leader also knew why the score was 67%?
Business leaders obsess over the balance sheet, a collection of lagging indicators. When a lagging indicator, such as sales results, deteriorates, panic sets in and there is a mad rush to uncover root cause. Precious time is lost searching for the cause and recovery within the current business cycle is questionable.
In one case that I am familiar with, weak sales results were attributed to a flawed sales compensation plan, based on input from the VP of Sales. After considerable time and expense, a redesigned compensation plan had no material effect on sales. Upon deeper analysis, root cause resided in product development – product features were not meeting the needs of the customer.
In this example, “product acceptance” could easily be a trackable leading metric.
Lagging Indicators Tell Us How We are Performing But Not Why
Business leaders live in a metric-centric world. Why not utilize a tool that would provide numerical evidence of organizational competence? In other words, identify and measure the leading indicators before results suffer.
Track root cause continually, allowing for swift course correction when necessary.
Create the Scorecard
I advise senior teams to identify the leading indicators and track them. This involves getting into the fabric of the enterprise to uncover the fundamentals that underlay execution. It’s not always easy. Leading indicators can be allusive.
Once identified, build the leading indicators into a scorecard and measure them monthly. Putting a numerical score on a key growth metric provides a baseline that is critical to sustained growth. This objective approach also circumvents the conventional method of tracking performance – anecdotal commentary, aka word of mouth.
Expecting to stay abreast of the efforts in the trenches from subordinates is risky. Good news is embellished and bad news will invariably be sanitized.
The Scorecard (I call it the Organizational Prowess Scorecard) solves the information gap dilemma. It assesses the key capabilities needed to drive growth. Once these capabilities have been numerically benchmarked, a senior team can build a playbook to address weakness.
The scorecard takes the guesswork out of where to make investments and where to funnel resources within the company. This is the smart, metric-driven approach to sustainable growth.
For more information about The Scorecard Solution and how you can drive sustainable growth within your organization, buy the book here.