What I see every day is that people confuse performance measurement and management. They think they are doing a good job managing the performance of the business, but what they actually doing is just a measurement or monitoring of the current state.
Don’t get me wrong, monitoring is as important as management, but one needs to understand the difference in order to be able to choose a proper tool.
The Difference Between Measure and Managing
The dashboard approach is a fire fighting style
The classical tool for measurement or monitoring task is a dashboard with all its nice diagrams, charts, tables. It is updated in a real time and tells a story about the current performance of the business. A dashboard helps to generate business insights that later can be used to fix problems and introduce some improvements.
The dashboard approach is a fire fighting style. You focus on the problem, but not on the reason for the problem. Moreover, just by monitoring a business state you won’t get anywhere. What you need is a solid plan and a framework that will help you to execute this plan.
Strategy map with the Balanced Scorecard
The plan in business language is called a strategy. The latest research shows that the most popular framework for strategy execution is the Balanced Scorecard.
- Unfortunately, most executives think that the Balanced Scorecard is about four balanced perspectives. That’s correct, but that’s not the key idea of the concept.
What is more important is that these four perspectives are linked with cause-and-effect connections in a very specific way. All of the business objectives of the lower level “Education and Growth” are linked back to the objectives of “Internal business processes” perspective. In their turn, objectives from this perspective are linked with objectives from “Customers” perspectives. Finally, all the objectives are linked to the “Finance.”
If we take into account only these objectives, then what we have is another descriptive tool. How can we convert it to a management tool?
Add an action plan
Each objective should be accompanied with an action plan. What is the company going to do to achieve this objective? Measurement implies that a manager can actually control the process. In the case of the Balanced Scorecard there is a measurement tool – Key Performance Indicator that supposed to be aligned with each business objective.
Find a ready-to-use template
All of the details described above might sound complicated, but they are needed. It is easier to build a management framework in the Balanced Scorecard if you have a ready-to-use template that you can follow step-by-step.
Help employees to see the big picture
Try it and see how your management approach will evolve. You will also see that your
of what should be done to achieve desired results.
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