Using a KPI Scorecard to Grow Your Business
Picture a small plane flying over the Pacific Ocean. Halfway across the pilot announces, “I’ve got good news and bad news”.
The bad news is the gauges are not working. We are lost and I have no idea how much fuel we have left, what direction we are headed, or how fast we are going. The good news is we are making great time!
Sound familiar? That’s how most entrepreneurs run their organizations.
They are flying blind with no data to help them assess if they are on track, headed in the right direction, and making progress. But they are always optimistic that things will go their way.
At New Economy, we believe a good Key Performance Indicator (KPI) in the form of a scorecard will help you manage data and provide you with a pulse of your business on a consistent basis. This will allow you to take prompt, effective action. Say goodbye to managing assumptions, egos, and emotions.
Creating an Effective KPI Scorecard
Creating an effective KPI scorecard takes some strategy. Here are several key highlights to consider as you build your weekly, monthly, quarterly, and annual scorecard.
Typically, we start with setting a leadership team. Your team will include your finance lead including your finance lead. If you don’t have an in-house finance lead, our article, “Does My Company Need a CFO?” will be helpful.
For now, you can start working on the following to create your KPI scorecard:
1. Identify and Agree on The Top 10 Items to Measure
The success of your scorecard greatly depends on the items you choose to measure.
These should be relevant to your business goals and provide you with enough insight to make essential decisions on a weekly, monthly, quarterly, and annual basis.
We have suggested 10 financial metrics in this article, but keep in mind the metrics you track should be specific to your business and agreed upon by your team.
2. Make Someone Accountable for Each Measurable
As mentioned, your team should play a role in creating and carrying out your KPI scorecard.
Assign someone a measurable and make them accountable for it. They will be the person responsible for getting it back on track if it goes off track.
3. Create Goals for Each Measurable
Each of your measurables should have at least one associated goal. Once you’ve created a goal for each measurable, you’ll be able to track how they are performing in relation to your goal.
4. Make the Measurable Time Sensitive
At New Economy, we have measurables that are weekly, monthly, quarterly, and annually. This gives us a reason to continuously reference our measurables and ensure we are making progress in a timely manner.
We recommend having time-sensitive measurables in your KPI scorecard as well.
5. Make Someone Accountable for Getting the Measurable and Filling in the Scorecard Each Week
Accountability is a great byproduct of using KPI scorecards. Take advantage of the opportunity and assign specific measurables to each teammate. Ask that they gather the measurables and fill them into the scorecard each week.
Not only does this ensure the scorecard is being completed but it also makes the teammate feel involved, trusted, and responsible.
6. Use it!
Your KPI scorecard is only valuable if you use it! Meet with your leadership team regularly to determine if your business is on track or off track based on scorecard numbers.
If things are off track, have the accountable person report back as to why and come up with some proposed solutions. This keeps the team involved and ensures you have a pulse on your financials.
A Few More KPI Scorecard Tips:
As you begin leaning into this system, keep these last few tips in mind:
- Push yourself to measure leading indications.
- These are the things that will get you the desired result. This ties back into point number one above. Focus on the most important measurables.
- If things are off track, STOP. Figure out the issue to fix things.
- The point of the scorecard is to show you when you are on and/or off track with ample time to make adjustments. If you notice things trending in the wrong take action right away.
- Consider creating a scorecard for each department in your company (Marketing, Operations, Sales, Accounting).
- Your scorecards will be more detailed and effective when you have one specifically created for each department. This allows for more relevant measurables to be tracked.
Using a KPI Scorecard Has Grown Our Business
At New Economy, we know scorecards work because we’ve seen incredible growth since implementing them in our business. In fact, we’ve seen our top line increase by 40%.
Which is why we suggest you use them too. Our mission is to help entrepreneurs gain control of their finances so they can make smart decisions to build and grow their businesses, so, schedule a time to meet with our founder, Jeff! He’d love to learn more about your business and explain how New Economy can help!