Who's Counting?

Know The Score

Although scorecards were developed for use in large corporations, they offer the same benefits to entrepreneurs. "We've used the approach with companies of all sizes," Norton says. In fact, he says entrepreneurs benefit more than large companies do from balancing long- and short-term goals, because managers at small firms tend to focus even more on short-term financial performance.

But scorecards may not be beneficial to very small firms. Although Warner insists that the companies he invests in use scorecards to communicate goals and performance, Capital Insights doesn't use them internally. "That may sound hypocritical," Warner says, "but there are only three of us and we talk all the time."

Good data is vital to successful scorekeeping. "You need to make sure your information is valid," emphasizes Curtis Carlson, group vice president for Walker Information, an Indianapolis firm that conducts customer and employee satisfaction surveys for companies that use scorecards.

And the difference between good and bad information may be subtle. For instance, Carlson says it isn't enough to ask customers if they're happy with your company. You need to pose questions that give insight into customers' needs and motivations, rather than only measuring the strength of the relationships. "If you mistake scorecard information for insight," Carlson warns, "you can make decisions that [take your company] in the wrong direction."

Scorecards are tools that help communicate an entrepreneurial vision to all levels of an organization. And it's important they be used that way, from the top down, rather than allowing lower-level employees to decide what to measure, how to measure it and what the data means.

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This article was originally published in the July 1998 print edition of Entrepreneur with the headline: Who's Counting?.

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