Recently my colleague Tim Sternberg has discussed ways that any business owner can create a “Strategic Plan on a Page” and also how important good data is to all businesses, including ways to make Big Data work for even small businesses. Now I’d like to discuss how Strategic Dashboards will help you execute your business strategy more effectively, how they differ from Balanced Scorecards, and how to go about setting up and using them.
A Balanced Scorecard, in our experience, is best used to monitor business operations, where it will track your targets or benchmarks for regular business performance indicators.
Its really important to get that balance of measures right. There is no point only gathering data on sales performance if your business has significant employee numbers and supply chains too – your Balanced Scorecard should be capturing key measures of success in those (and other material) areas of your business too. You should probably also use both financial and non financial data, which can be numerical or qualitative, provided that it is always clear and relevant, and as objective as possible.
Balanced Scorecards often tie together budgeted, forecasted and actual data and focus mostly on the current year, but may show trends over the longer term. They may capture high level metrics from your Profit & Loss, Cashflow Statement and Balance Sheet, but they won’t show much detail.
Strategic Dashboards focus on the data around Actions in your Strategic Plan that will transform your business and achieve your bigger goals over the longer term. So if your Strategic Plan has to focus more on some parts of your business than others, because that is where strategic change is most required, then that will be the focus of your Strategic Dashboard too – which means that it may not appear to be “balanced”. Remember, strategic business focus tends to shift over time.
We often talk to our clients about the importance of working both “on” and “in” the business. Having separate monitoring tools that focus on operational vs strategic activities and outcomes will help you maintain that dual perspective.
One way to ensure that you are not missing important operational measures that should be on your Balanced Scorecard is using a “whole of business” strategic framework like our Six Pillars model. If you capture 2 to 3 key measures per Pillar you will have between 12 and 18 measures on your Balanced Scorecard, which should be both comprehensive and manageable.
On the other hand, very few businesses can run more than say 6 to 12 truly strategic projects in a given year, so your Strategic Dashboard may only have one or two measures per Pillar.
It’s tempting to dive straight into the data if you’re a “numbers geek” and want everything to be on your Scorecard or Dashboard. However, it’s important to reverse your thinking and begin at the source:
Data required for both Balanced Scorecards and Strategic Dashboards can often be “muddy” based on its inputs or how it is being processed or stored. We therefore advise that you test early to ensure the data is “clean” before using it to make any big operational or strategic decisions.
One point that Balanced Scorecard and Strategic Dashboards share is how important it is to schedule and carry out periodical reviews of your progress against your operational and strategic goals – we think that should happen at least quarterly.
Many business owners need help to do that, so we carry out quarterly business reviews that we call “Check Ups” with a number of our clients. In these 3 hour sessions we take a balanced approach of reviewing our clients’ data and questioning them to understand the “big picture” of their business. We then help our clients to better define clear actions for the next quarter to take their business forward, achieve their goals and build value.
