How to Create and Use a Business Scorecard

Ever feel like you’re running your business on crossed fingers and gut instinct alone? 

Do you feel like you’re flying blind?

Wish you had a clearer picture of where you’re headed?

We get you. 

That’s where many of our clients are when they first approach us. 

Don’t worry. Get ready to ditch the guesswork and embrace a powerful tool that we’ve seen transform business: the scorecard.

But this isn’t 8th grade…why do grown adults, savvy entrepreneurs like us need scorecards? 

• Everyone needs numbers to ground them and set goals in an organization. Scorecards give clear and concise direction to all team members. 
• Scorecards let us focus on future indicators instead of lagging ones that are barely relevant. 
• Speaking of the future, scorecards help us see helpful patterns and trends.
• Scorecards can be concise and visual, which helps us process complex concepts quickly and more easily. 

And lastly…we need to stop managing businesses on assumptions. Letting our emotions lead the way instead of checking what the numbers are telling us typically isn’t the best solution. 

We saw this ourselves at New Economy. We experienced incredible growth, including our top line increasing by 40% once we began implementing a scorecard across our business. 

But we’d never leave you hanging. 

Let’s explore how you can create and use a scorecard to skyrocket your business success.

Steps to Create a Scorecard

There are many ways to create and use a business scorecard, but here’s what we’ve found works:

1. Meet with Leadership: Gather your leadership team and brainstorm 10-15 key performance indicators (KPIs) that will help you manage the business effectively. These numbers should be relevant to your specific goals and industry.
   • DON’T fall into the trap of too many KPIs on your scorecard, it will only lead to overwhelm. 
2. Assign Accountability: Make someone responsible for driving each KPI. This prevents anything important from falling to the wayside. 
   •  If a number is off track, that person owns it and is responsible for taking corrective action. 
3. Set Goals: Establish clear, measurable goals for each KPI. This provides a benchmark for success and helps you track progress.
   • Remember the classic SMART goals formula – specific, measurable, achievable, realistic, and timely.  
4. Measure Regularly: Track your KPIs on a weekly, monthly, quarterly, and annual basis. This allows you to identify trends and address issues promptly.
   • DON’T wait until the end of the year to measure and try to fix issues. 
5. Root Cause Analysis: If a KPI is off track, dig deep to understand the root cause of the problem. This will enable you to develop effective solutions and prevent similar issues in the future, keeping your business in the green.
   • Make sure that it isn’t a witch hunt or blame game situation. While everyone is responsible for their number on the scorecard, it’s about finding the root cause and solutions together, with a curious and compassionate problem-solving approach. 

Everyone in the Business Needs a Number

You get a number. And you get a number. And YOU get a number!

It’s not just Oprah who can hand out the good stuff. 

Providing everyone with a clear number, which is their responsibility, can inspire confidence, motivation, and encourage everyone to work together collaboratively.  

You may be reluctant, thinking not everyone on the team needs one. But here’s why we encourage this approach: 

1. Clarity: Numbers cut through murkiness and provide a clear picture of performance. They eliminate ambiguity and ensure everyone is on the same page.
2. Accountability: Assigning numbers creates accountability. Each person knows what they are responsible for and is motivated to achieve their targets.
3. Appreciation: Accountable people appreciate numbers. They provide a sense of ownership and a way to measure their contribution to the company’s success.
4. Commitment: Numbers create clarity and commitment. When everyone knows what is expected of them, they are more likely to commit to achieving those goals.
5. Competition: Numbers foster healthy competition. Employees are motivated to outperform their peers and strive for excellence.
6. Results: Numbers produce results. By focusing on measurable goals, employees are more likely to achieve tangible outcomes.
7. Teamwork: Numbers promote teamwork. When everyone is working towards a common goal, they are more likely to collaborate and support each other.
8. Problem-Solving: Numbers help you solve problems faster. By identifying issues early on, you can take action before they become major obstacles.

However, it’s important to ensure you’ve built a strong company culture. You don’t want employees to prioritize numbers over the overall best interests of the organization, people, and society in general. A strong company culture, with values-based leadership, will help ensure that the assignment of a number will not get in the way of common sense and collaboration. 

3 Rules of Thumb for the Scorecard

Here are some more things we’ve learned in successfully implementing scorecards at New Economy and with our clients. 

1. Leading Indicators: Use activity-based numbers that are leading indicators. For example, track leads generated instead of revenue, as leads are a predictor of future revenue.
2. Proactive Tool: Use the scorecard as a proactive tool to make changes in your business. Don’t wait for problems to arise; use the data to identify potential issues and take action before they escalate.
3. Prioritize Red Flags: Flag off-track items as red and give them the attention they need. Addressing problems promptly can prevent them from becoming major setbacks. Literally using the color red can visually signal a sense of importance and urgency when looking at a scorecard. 

3 Key Takeaways

At New Economy, we help companies harness their data to do a world of good for their business. I hope you’re starting to see why the clarity of a scorecard can be so helpful.

Scorecards can help you soar, instead of wildly flapping around and hoping something works. 

Here are my 3 key takeaways.

1. Embrace the power of data: A scorecard is your compass, guiding you towards informed decisions and sustainable growth.
2. Empower your team with numbers: Give everyone a metric to own and watch their engagement and performance take off.
3. Make your scorecard a habit: Regularly review and refine your metrics to ensure they’re aligned with your evolving goals and challenges.

There you have it 🙂

New Economy Team Members are Experts in Accounting for Entrepreneurs

If identifying the best KPIs for a scorecard is not in your skill set, or you want to gain control of your finances to make smart decisions to build and grow your business, New Economy is an excellent partner. 

We’ll help you get your accounting and taxes done, and done right.

Schedule a time to meet with our Founder, Jeff, and discuss how we can add value to your situation.