Everyone, even companies with model Balanced Scorecards, struggles with developing performance metrics. Many organizations don't properly account for frequency of variation, identify the right data sources and ensure their reliability, or use enough leading measures that can reveal trouble before it's too late. And some unwittingly chose measures that drive the wrong behavior. Consider these ideas for eight important, often ill-designed or completely absent, metrics.
Each of these key areas should be tracked with an analytic metric—an index. A composite measure provides more information than a single measure, while simplifying analysis. It also provides a more well-rounded picture.
1. Customer Aggravation. Most companies have no idea how much aggravation their customers endure in doing business with them. Counting all the ways you aggravate your customers daily is a more reliable predictive measure of customer loyalty than any survey. Besides, most people are poor predictors of their future behavior; they're loyal until the next “cool” thing comes along. If any vendor aggravates us enough, we won't bother filling out their survey; we'll just leave.
Create a customer aggravation index. Hold customer focus groups and ask them “How have we driven you crazy?” For software companies, the answers will likely include calling the help line and not getting through, or getting through to someone who doesn't understand you—and whom you don't understand, or getting transferred four times. Airlines drive customers crazy with missed flights, lost baggage, and dropped calls. Count daily occurrences. For greater precision, multiply each occurrence by a severity factor. For example, FedEx might rate losing a package as a “10,” but delivering it to the office next door a “1.”
2. External Factors. Most organizations track external factors, but they rarely include them in their BSC. Yet external events can have a huge, potentially devastating impact on your business. For a bank, one key external variable is interest rates; for an airline, the price of fuel; for a water district, rainfall. A pilot can't control the weather, but tracking it is vital for determining his route and how he flies the plane. By putting external events on your scorecard, you'll readily account for them along with the other key measures that drive your business.
3. Employee Satisfaction. To measure employee satisfaction (“engagement”), most companies conduct an annual survey. Annual surveys have no place on your BSC. An annual metric moves once a year; morale changes on a daily basis.
Here's an inexpensive, but effective solution. Get bags of green, yellow, and red marbles and put them, along with an opaque vase, beside each door where employees depart every night. Have every employee deposit a green marble if they had a great day, a yellow one if a typical day, and a red marble for a terrible day. Every morning, collect all the vases and log the results in a spreadsheet. The vase will identify the department, allowing you to call the manager to inquire why he or she had so many red marbles the day before—and the manager to address the problem immediately. This system cost one of my clients less than $1,000 (versus the $80,000 they'd been spending)—and gives them a daily statistic they can act upon.
This basic approach can also be done electronically; when people submit their timesheets, have them rate their week on a 1-to-10 scale. Include in your index such measures as how many hours people are working, meetings they must attend, and emails they get daily.
4. Brand Image. What are people saying about you? Do they even know who you are? Brand image matters to every organization. Many organizations track awareness only, ignoring reputation.
Besides tracking the number of news stories or website hits your organization garners, a brand image index might also track whether the coverage is positive or negative. What are people saying about you on blogs? A leading measure might track an improvement effort under way, such as the response to a marketing campaign.
5. Customer attractiveness and relationships. Some customers are more important than others. Some are a pain and cost too much to please. Customer relationships should therefore not be measured with a survey. You don't necessarily want a close relationship with every customer.