An effective metrics measurement system includes the ability to display insights into sales, operations, and financial performance, enabling proactive decision-making and continuous improvement.
Primary Implication
You either know what’s happening across your business week-to-week and month-to-month, or you don’t. If you have the processes that ensure your weekly business transactions are accurately recorded, you have what you need to implement a scoreboard to make better decisions.
Without a scoreboard, you will spend more on COGS, SG&A, and other expenses than you planned for or ever intended, resulting in lower profits and less cash on reserve in the bank.
Overview
Tracking Business Performance: Scoreboards, Scorecards, and Dashboards
Want to keep your finger on the pulse of your business? Scoreboards, scorecards, and dashboards are powerful tools that help you track performance, identify areas for improvement, and make better decisions.
Why You Need a Metrics Management System
Without a system to track your progress, you’re essentially flying blind. A good metrics system helps you:
- Connect the Dots: See how your sales, operations, and finances are all related.
- Anticipate Challenges: Spot potential problems before they become major issues.
- Make Informed Decisions: Use data to drive continuous improvement and achieve better results.
Types of Performance Tracking Display Tools
- Scoreboards: Provide a high-level overview of your key results. Think of it like the scoreboard at a sporting event – it shows you the overall score and how you’re tracking towards your key goals.
Scoreboards represent a central hub for multiple reports that provide easy access to various datasets simultaneously. Unlike scorecards, scoreboards are used to assess monthly results. Information is reported once the bank statements for the month have been reconciled with the recorded accounting transactions.
As opposed to progress reporting, scoreboards report the results of the actions taken that month, comparing them to target values. Scoreboards are used to provide a foundation for better decision-making and more efficient month-to-month management of teams, resources, and expenses. More importantly, scoreboards help management view their historical and planned results against current results.
Your profit plan, financial statements by month are the required inputs for populating a monthly scoreboard. Examples of scoreboards are everywhere people gather in a stadium or arena to watch a game played. Sporting even scoreboards reflect the key results of a game in progress, so the fans better appreciate what’s happening in the field of play during the game. Business employees need the same type of visual of how the business is scoring month-to-month and through the year.
- Scorecards: Dive deeper into specific areas of your business. Like a scorecard in golf, it tracks performance against targets for individual departments or teams.
Scorecards offer a snapshot of current performance compared to goals for key areas of a business. They help those accountable for each area see gaps between current performance and the goal so they can be corrected before they negatively impact planned business results.
Scorecards are most commonly used to track KPIs, as they focus on both the current status of the metric being tracked and the target value. They monitor KPI results to identify where problems need to be resolved without delay and where successes need to be acknowledged. Scorecards are generally weekly measures, updated for reporting at the weekly management team meeting.
- Dashboards: Offer real-time insights into your operations. Imagine the dashboard in your car – it gives you instant updates on speed, fuel level, and other critical information.
Dashboards are automated hubs from your business intelligence system that hold multiple reports pulled from automated access to various datasets. They are used as a monitoring tool in real time. Data is automatically updated, allowing management to track their operational performance in real time.
The data available for dashboards provides a foundation for better decision-making and more efficient day-to-day management of teams, resources, and expenses. Large businesses commonly use them to report functional KPIs monthly KRIs. Business dashboards are likened to vehicle dashboards that relay vital information to the driver of the vehicle’s speed, fuel level, and temperature while in operation.
The challenge for small businesses is that dashboards only work if you have an automated system for pulling the required data being recorded across the business into the dashboard. This is possible for large businesses that have integrated financial, sales, and operational information systems. They are limited to only their financial statements to gauge how the business is performing. They will use marketing dashboards to monitor advertising campaigns and operation dashboards to track operations centrally.
Which Tool is Right for Your Business?
- Start with a Scoreboard: Get a clear picture of your overall performance and identify areas that need attention. Knowing the gap between actual and plan helps management isolate what worked well and what fell short of the plan. When this is known, management can make informed decisions on what needs to continue, be started, and stopped for better results in the months ahead.
- Add Scorecards: As the management team becomes comfortable working with scoreboard results, it is time to implement scorecards to track progress in key areas like for sales, operations, and finance. They are used to determine how well each area’s KPIs are being met, how they are keeping up with their daily tasks, to appreciate how close or far they are from their weekly goals. This is useful when attempting to identify areas for improvement or ways to make specific tasks more efficient.
- Consider Dashboards: If you have the technology to automate real-time data capture, dashboards will provide valuable actionable insights across your business.
Key Takeaway
By using a combination of scoreboards, scorecards, and ultimately dashboards, you can gain a comprehensive understanding of your business performance. This allows you to make data-driven decisions, improve efficiency, and achieve your goals.
