Why is a scorecard for every person in your organization so important? Because the scorecard connects individuals to your company’s vision and strategy, and when all the jobholders in a company have a scorecard, the entire company is aligned. With a scorecard defined clearly in measurable terms, and with specific roles identified, people will be focused on the most important activities. Accountability is clear.
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The individual scorecard defines the contribution of each person to the organization. It measures the added value to the realization of the vision. It provides a way of measuring and tracking progress on an ongoing basis and keeps the individual focused on important priorities.
The power and effectiveness of the individual scorecard depend to a large extent on each person taking ownership of his or her factors. The scorecard will have a few important factors that are either critical success factors or influence factors. Since these factors will be derived from vision and strategy through a sound methodology, the acceptance and ownership of the scorecard is highly probable. Nevertheless, to further increase the sense of personal ownership, it’s recommended that you involve an individual from each job in constructing their scorecard. With involvement comes understanding, and understanding leads to positive action.
When you define individual scorecards in your organization, the first attempt could produce a large number of success indicators, particularly for top managers. This is because many top managers feel the more indicators they have, the more important their job is. Many are reluctant to delegate to lower levels either because they’re hesitant that the job won’t get done, or they’re reluctant to let go of control. There might be factors listed as critical success factors that should really be critical management factors and need to be delegated to lower levels, or just too many indicators that aren’t significant enough to be on their scorecards. We’ve found that more than five factors is too many. This is because it’s better to focus on three to five main factors and assure outstanding performance of these factors, than diffuse your focus on a large number of factors.
The way to reduce the factors on a scorecard is to delegate. Yet, it might be difficult for managers at first to delegate and let go. It might be difficult for them to rely on lower levels to take responsibility. However, as they begin delegating to competent lower levels, they’ll realize that they won’t need all the factors.
There’s a story in Stephen Covey’s book, The 7 Habits of Highly Effective People, that’s relevant to our discussion of individual scorecards. He describes filling a jar with a few large stones, pebbles, sand and water. He says that if you don’t put the five big stones in the jar first, you wouldn’t be able to fit them in later. If you do put the five big stones first, then the pebbles, then the sand, then the water, all will fit. In our example, the five big stones are the five indicators and initiatives. They’re on the scorecard because they need priority attention, because they’re the main drivers of your vision. The pebbles, sand and water are the many other priorities that fill your agendas. You can address these other priorities as well after focusing on the five.
While the individual scorecards have a few factors that define the accountability of the individual, business scorecards have as many factors as necessary to capture the performance of the business. Let’s look more closely at the differences.
Business scorecard/individual scorecard
Look at the way you measure the success of your business. What do you look at? Probably the key numbers you’d consider are financial, such as the company’s bank account, cash flow, receivables, payables and profit. Additionally, you’d look at how you’re growing your customer base, how happy your customers are and what value you’re providing for them. You’d look at the effectiveness of the processes you have in place to deliver your value proposition, and how you’re managing your human capital. These indicators show the success of your business in these areas.
But how does this type of business scorecard compare to the individual scorecards we are describing here? There are several important differences. Let’s take a look.
Alignment with vision. The alignment to the mission or vision is usually not clear in business scorecards. They’re very clear in the individual scorecard.
Progress of strategic initiatives. Strategic initiatives are tracked outside of business scorecards within the individual scorecard because the five indicators in the individual scorecard are usually a mix of vision indicators and strategy indicators.
Concept of roles for indicators. The concept of roles for the indicators doesn’t exist in business scorecards. It does in the individual scorecard and is there to encourage cross-functional collaboration.
Information in the scorecard. Business scorecards include aggregate consolidated numbers; the individual scorecards show numbers from the source, where performance takes place.
Number of factors. Business scorecards can have a large number of indicators; the individual scorecard focuses on a few.