For example, in a scorecard that I use at CMOE, Invoice to Payment, we measure the number of days between when an invoice is sent to a client and the day we received payment.  Most of our clients pay within thirty to forty days.  However, by monitoring the scorecard daily, I noticed that some of our clients were taking to up five months before they paid the invoice.  This made the performance line fall above the target goal of 35 days on our scorecard.  My question was why?

What was happening?
A couple of things came to the surface when I talked with a specific handful of companies about why it was taking so long for us to receive their payments.  The first response usually was that the Accounts Payable team was not getting the invoice.  Were the invoices lost in the mail, or buried on someone’s desk?  We began e-mailing all invoices and past-due notices directly to the person who placed the order in addition to Accounts Payable.  For some reason, people respond more quickly to e-mails.  Almost immediately, I started to get e-mails instructing me on how these companies preferred to have invoices submitted.   Getting the invoices to the right parties made a big difference in the time between invoicing and receiving payment.  International invoicing was entirely another problem.  Through trial and error, we found that by simply adding bank information as a mandatory item to every international invoice, the clients were able to get payments to us in a much more efficient manner.

The End Result
Overall, the average payment score went from 58 days to 28 days in a matter of eight months– that’s Thirty days of improvement!  You may ask, “Why didn’t the AR Aging report say the same thing as a score card?”

Why a Scorecard?
I worked with a biweekly report for three years in order to decrease the number of outstanding invoices.  In 2010 the average still seemed high.  The score card diverted my attention from the number of outstanding invoices to the number of days between invoice took to be paid.  The visual reminder of a scorecard also motivated me to think about this issue on a daily basis and prompted other team members to get involved.  I don’t know if thirty days will make a big difference to your company, but to our Regional Vice Presidents 30 days was huge.  Improved cash flow and the use of measurements allowed them to make more accurate strategic plans for the company.

Data however can be useful in helping to identify and create measurements by taking a look at the past so to better understand where to go in the future.  Bottom line measurement is about looking at our effectiveness in real time.  How are we doing today (measurement) as compared to yesterday (data), the past week (data), or past month (data).  They key is to identify a measurement of effectiveness that adds value and contributes to the overall bottom line performance of the organization.  Measurement is about keeping track of the things that are helping us win at work.

Caveat:

People tend to associate measurement as a negative process; measurement of defects, number of safety violations, etc.    However, effective measurement helps us grow and become more effective.  As results based leaders, it is critical to make measurement positive.  If measurement is negative, it becomes one of the quickest paths to demotivating your people.   Measurement needs to encourage more of the same positive, results based behaviors.

QVC, like many organizations, possesses a lot of data, but unlike many organizations QVC uses that information for real time scorekeeping on the right things. Their scorekeeping is based on one of two measurements:

Units Per Minute or Dollars Per Minute

If you take QVC’s unit of measurement and create a scorecard with it, it would look like the following hypothetical graph:

In this graph, the product “Extremely Effective Weight Loss Supplement” is being tracked over its 18 minutes of air time and the profit focused measurement is the number of units sold per minute. If the product consistently sells below 300 units per minute, it is considered unsuccessful and will not be brought back. However, if the product consistently sells more than 650 units per minute, it is considered to be extremely successful and will be brought back, possibly at more frequent intervals, or given more air time. The area in between 350 and 650 is considered a satisfactory level of performance.

Notice how a visual a scorecard above helps you understand the bigger picture as opposed to the raw data:

If you look at the scorecard, we can see at minute 9 and minute 11 have two very different results. We need to identify and analyze these two points in time. What made minutes 9 a unsuccessful while minute 11 was a success? Is it within our control? What were we doing during these specific minutes that could have impacted sales? What do we need to change or reinforce that will impact these two points in our timeline to help us continue to increase the units sold per minute?

When you join profit focused scorekeeping and good leadership with Quality, Value, and Convenience, it’s a powerful combination that can help turn both individuals and organizations into highly profitable assets.

As we walk the halls of the companies with which we work, we often see the “metrics wall”.  This wall is usually in a high-traffic area.  Many employees walk by the “metrics wall” on a regular basis, but how many employees actually stop to look at it?  Our observation has been that not many bother to take the time.

Why is that?  For many employees, the “metrics wall” is just another wall.  More often than not, those employees who walk by without stopping have no idea what it is that the metrics are tracking.  They don’t know how to read the charts and graphs; they don’t understand what the numbers indicate.  Those few who do understand what the charts, graphs, and numbers mean often don’t feel like the information has any real correlation to the impact that they have on the organization.

Making Them More Effective

How can we make the “metrics wall” more effective and motivating?  A good place to start is making sure each employee understands what it is that they contribute to the organization.  Each employee must recognize what they are paid to accomplish.  Once employees understand how they contribute to the organization’s bottom line, understanding how metrics reflect their accomplishment becomes much easier.

Another idea is to create individual scorecards or metrics that reflect each employee’s unique jobs and responsibilities.  Making the scorecards personal and specific increases accountability and responsibility for results.  Once Employees create their scorecards, they can place the scorecards on their cubicle walls or office doors, giving leaders a way to quickly see how the employee is doing and an opportunity to give the employee feedback on his/her work.

Is Is About Employee Engagement

Metrics, when done the right way, can be very motivating to employees.  The key is to ensure that employees understand what the numbers indicate and why the specific action is being tracked.  Using metrics or scorecards in combination with effective and frequent coaching, feedback, and goal-setting can result in rapid improvements to overall productivity and profitability, meaning that your business will become and remain more competitive over the long term.

To keep score they painted a miniature oval on the floor in the back office.    Each person got to choose a miniature car with the number of their favorite NASCAR driver.  Once the dust settled over who was going to get #3, Dale Earnhardt’s old number, the race was on.

Each time an associate sold their item of the week they got to advance their car one length.  The first ‘car’  to the checkered flag won.
It was a raucous week.  Lot’s of fun, lots of incremental sales, and the store increased its sales for the week by over 6.5% which was an unqualified success.

In addition to making the scorecard fun by picking a game board that the team related to and had an interest in, this team captured the essence of effective scorecards as motivators.  To be effective, a scorecard:

• Has to be about what I do

• Has to “talk” to me

• I Have to touch it and own it to believe it

• At some point is has to make me feel successful, whether it is hitting a target, showing improvement, or reinforncing my contribution

Simple, daily profit focused scorekeeping can be and should be fun.

Leave a comment telling us what was the most unique or innovative score keeping method you have seen in your company or another?

Or read this example of a poorly done scorecard: Scorekeeping and Leaderboards to Drive Performance

While working in the publishing industry Thomas S. Monson discovered that when workers were kept in the dark about their job performance they frequently became average performers, and for some workers less than average. But when workers were provided timely, relevant, and easy to understand information about their performance, many became superior performers.

As Marshall Sashkin explained in his book Performance Appraisal, annual performance appraisals can actually be a disincentive or de-motivator, rather than the panacea they are often held up to be. Sashkin observed that when workers’ performance is only “reported back” annually, they often become suspicious and distrustful of the entire measurement and reporting system. In a private conversation Sashkin once observed, “A manager would be better off with no appraisal than only an annual appraisal, because from a performance perspective being in the dark might be preferable than being surprised, shocked, disappointed, or even angry.”

Monson’s quote has been used for decades to explain why workers become more motivated when they are told how well they are performing. The trick in management is finding appropriate methods to not only measure, but also “report back” employee performance. Regrettably, left to their own devices, far too many managers give either vague or critical feedback on workers’ performance. And when the majority of feedback workers receive is unsupportive, untimely, unspecific, and uncalled for, the result can be poor performance at the best, or trouble performance at the worst.

Formal evaluations, such as performance appraisals, often measure job positions in subjective terms, such as, “Meets Job Requirements.” In today’s business climate do you really want an employee who merely meets expectations, or do you want an employee who smashes beyond “Meets” and consistently hits homeruns?

One of the reasons why annual performance appraisals can create more angst among employees than motivation is the subjective nature of the categories in which employees are measured. Workers’ performance must be thought of as scorekeeping, not as a measurement. We measure something to see what is wrong; we keep a scorecard to track what is correct. When employee performance is tracked with a scorecard that visually displays what went correct, the employee can connect his or her behavior with what is needed to win. By contrast, when employee performance is measured to find what went wrong, the employee may or may not be able to connect behavior with results.

Creating a scorecard system to “report back” performance must include ten essential characteristics.

1. The employee must have psychological ownership of his or her scorecards. People believe and trust what they own, not necessarily what is imposed upon them.

2. Scorecards must be based on specific measurable results for which that employee is paid. Traditional job descriptions are constructed with generalities that don’t include specific measurable results.

3. Scorecards must be posted near the employee’s work area. Scorecards place bottom line performance at front of mind awareness, not something that is discussed infrequently, or even annually.

4. Scorecards must be updated by the employee every day, or at the least every week. Scoreboards in stadiums are updated each time the score changes; likewise, scorecards must be updated as frequently as is practical.

5. Scorecards must include an agreed upon performance line. The performance line tells the employee how he or she is doing against an agreed upon standard.

6. Scorecards must include an agreed upon goal line. The goal line tells the employee when superior performance has been achieved and celebration is deserved.

7. Scorecards must include a way for the employee to compare his or her performance against past performance. An employee must be able to see in a glance how he or she is doing now verses yesterday, last week, or last month.

8. When a scorecard shows performance below a performance line, an action plan must be connected to the scorecard. An action plan is necessary for performance below the performance line, and it is optional when performance is above the line.

9. The employee’s coach must pay attention to scorecards and give daily, or at the least weekly, feedback and coaching. Scorecards must become the reason for coaching: supportive coaching for good performance, and corrective coaching for substandard performance.

10. The employee must feel a sense of celebration when his or her scorecard performance exceeds the goal. A goal achieved is worthy of celebration by the employee, coach, and possibly the entire team.

“When performance is measured [with effective individual scorecards], performance improves [because they become an incredibly strong motivational force]; when performance is reported back [through scorecards that adhere to the ten principles described above], performance accelerates. [Employees tap into discretionary performance when they believe their performance is being scored fairly and will make a difference].”

This past week I was assigned to pick up the food for a volunteer test group.  I went to get Pizza and as I was standing at the payment counter, I noticed a computer screen on this wall.  In big, black, block print, it read “LEADERBOARD.”  I was immediately excited to see this.  As I was waiting for my order to be finished, I was trying to identify what was being tracked by the “leaderboard” and how it worked.  It was obvious that the leaderboard was networked with other stores and I quickly noticed that the store I was purchasing from was second from the bottom.  This piqued my interest further.   I decided to speak with the manager to understand how it worked.

Me:  I noticed your leaderboard on the wall; it looks interesting.  It appears to be tracking certain success factors and percentages.  Do you get rewarded when you hit certain levels of performance?  The reason I ask is I work for an organization where we use effective management, measurements, and scorecards to drive bottom line profitability.

Manager:  Yeah, it tracks just about everything in the store from the time a phone call was placed to the time the order leaves the store for delivery.  Corporate can pull up data on just about anything in the store.

Me:  It doesn’t sound like you believe it’s a good thing by the way you are speaking.  Do you get recognized or rewarded for hitting certain levels of performance?

Manager:  No, it basically indicates what you have to do as a minimum to keep from getting fired.

The manager continued to explain that this tracking system was to help employees have higher levels of customer service, reduced mistakes, and shorten production times, among many other things.  While those are great focus areas, I was emotionally deflated by the way he explained it.  This employee was telling me that the “Leaderboard,” this scorekeeping system, was the worst thing about his job.

If organizations are to succeed against strong competition and have higher levels of profitability, measurement cannot build fear and negativity into employees.  Driving bottom line performance with the right measurement will engage people and get people excited and committed to push performance levels.  By using our piles of data, managers can help employees sort out measurements that drive individual results.

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Some scorecards are very detailed and can inform you about the unique design of the course and about each hole so that each golfer can play to their own abilities. Scorecards in golf provide a lot of beneficial information. The score is the ultimate measurement of your ability as a golfer, but that is just the beginning. I have also seen golfers use score keeping to track not only their score, but track every single stroke they make. The serious golfers track the tee-shots ended in the fairway, how often they reach the green in regulation, how close to the hole their “approach shot” lands, and how many putt’s they make on each hole. There is plenty more, but the purpose is to evaluate and improve their game.

In the exact same way that scorecards are used in golf, they can be used in business – to improve your game! A personal score card in business is the perfect way to track an individual’s performance and contribution to the organization. Let’s draw some lines between the two.

Golf:
At the end of a golf round, I know if I am shooting above par, at par, or if I played really well, then I’m hopefully under par. If I’m under par, I’m winning.

Business:
Much like golf, at the end of the day in business a personal scorecard tells me if I’m winning and how I have contributed to the bottom line. It will tell if I’m making money for the business or if I am spending it.

Golf:
When I track all of my strokes in a golf round on my score card, I know where to focus my attention the next time I go practice at the range.

Business:
When I track my individual performance at work, I can see where I need to focus my attention the next day, week, or month in order to be more successful. If you are not tracking strokes at work, how can you improve your long or short game? You must have a personal score card that speaks to you. You need to know how many strokes you are taking to get your work done. Just as you need to know if your tee-shots are hitting the fairway. You need to know if you are hitting your goals or not. Remember, the least amount of strokes in golf means you are getting the most out of each stroke. There is the same focus in business….do more with less!

Golf:
A common phrase in golf is you “drive for show and putt for dough.” (Dough is referring to money or cash). This means the winners don’t just hit the ball far, but they also have a refined skill to make the precision shots that are so important to their game.

Business:
In business, you have to know if you are “putting for dough.” You need to know what it is that you do that creates profit for your business. Developing your business acumen and using a scorecard is critical to individuals and organizations that are looking to up their game.

Competition, Winning, and Business

Your company probably has its own corporate scoreboard, but do you know where it is? If not, ask around and see if you can find it. Company scoreboards will manifest themselves in how the company shows its stakeholders the business’ earnings. Businesses need to make a profit. Companies that don’t make a profit won’t stick around, so, making a profit is a focal point for all for profit organizations. What about at the individual level? Individual performance is also measured in this way, but rather than a scoreboard, some companies use and individual “score card.” A scorecard shows how and in what ways each individual is accountable for performance that increases the bottom line. Scorecards drive results and have a tremendous impact on the bottom line and help people become more engaged in competing for “wins” at both the personal and organizational level. Asking individual members of the organization to develop a scorecard to visibly show and track performance will inspire better performance across the company and make positive changes in the following ways:

1. Hold people accountable for what they do while at work and how they contribute to the bottom line profits.

2. Help individuals see that they earn a pay check for authentic achievement, not for mindless activity.

3. Help individuals understand how each person contributes in their role to the organization’s overall profitability.

Scorecards will drive bottom-line results and create bottom-line leadership as individual contributors think more deeply about their own unique areas of the business. Keeping score of their successes on a regular basis (daily, weekly, monthly) can help people feel more energetic at work and increase their interest in organizational success over the long term. In your next weekly meeting ask everyone this simple question: Did you win or lose this week? Followed this question with, “What were you responsible for in terms of helping our company grow and be more profitable?” Using scorecards, asking questions, and engaging the entire workforce is powerful stuff, critical to the organization’s performance.

Like many of you, I have been intrigued by the bailout programs that have been offered to many of America’s largest companies.  “The Big Three” stood in front of Congress in mid- November and pleaded for $24 Billion in loans.  I guess the “poor house” for the Automakers is coming even sooner than they thought.  Just two weeks after Automaker CEO’s botched their first meeting with Congress, they have the courage to ask for 10 billion more and increase the total bailout request figure to 34 Billion in low interest loans.

Even large cities across the U.S. like Phoenix, Atlanta, and Philadelphia are crying poor.  Governor Schwarzenegger says the State of California needs more than 11 Billion to keep the State from bankruptcy.   We just haven’t seen anything like this since the 1930’s, and frankly it is a little scary that the world economy is in such poor shape.

Many of you working in sales likely have heard from your customers that they are cutting back, spending less, being cautious, and looking for ways to be more profitable.  I have asked myself how can my organization help companies cut back, spend less, be cautious, and most importantly be more profitable?

Perhaps there is a way for organizations to be more profitable right now.  Could there be a process that helps organizations measure performance that ties directly to the bottom line?  A process, in which all leaders give appropriate feedback and coach members of the organization about their performance, that leads to dollars added to their bottom line.  Keeping score is nothing new.  Those of you who play games or play sports know exactly who the winner is and who the loser is by keeping score.  This same scorekeeping principle is easily applied in business as well.  Many organizations have embraced the concept of keeping score.  By helping each employee understand when they are winning or losing, organizations have the ability to create an environment of accountability, responsibility, and focus.  Additionally, it is not enough for leaders and employees alike to know if they are winning, losing, or stagnant.  Leaders in organizations must assist all employees to win, to make a contribution to profit, and to improve bottom line results by frequently talking to people about performance.  Yes, you read this right.  Leaders must engage their employees not just once a year in a performance review, but regularly about winning and losing.

A combination of leadership principles coupled with scorekeeping does provide an internally generated bottom line “bailout” created by the employees and leaders working together for bottom line results.