Scorecards - Adopt a More Dynamic Approach

Is our scorecard serving business needs of the moment? Scorecards are widely debated within organizations and what I have found is that scorecards end up reflecting personalities rather than business imperatives. We argue and sell the concept of a consistent set of metrics and a standard format, so business can be monitored and decisions can be made. But, I have found that the theory of standard format and set metrics only says that “I don’t want to rake my brain on a frequent basis and make decisions dynamically.” There are a very few businesses that do not pose a new challenge every day – some days we are fixing what is broken, on the others, we may be finding ways to optimize the operations, yet another, we may be trying to find new ways to grow the business. So, why should the scorecard always look the same?

There are ways, a lot of managers pretend to get by that problem – add more metrics to the scorecard, make the font small to fit on one-page (often as a result of the former), etc. But, do they solve the tactical business challenges that are discussed in the review meetings every day/week/month? A better approach would be to identify what metrics are meant to be the health indicators of the business and what metrics need to be monitored for making tactical decisions by pointing out wins/challenges. To achieve this, we need scorecards that are not repetitive indicators of our performance, instead can dynamically capture the data points that help executives hone-in on the issue and make a call quickly during the review meetings.

I am not suggesting we dump the old formatted view of our metrics, but instead, we create one that speaks to our most current challenge (today, this week, etc.) – which retail department is moving ahead and which is hurting, which promotions worked for us, how do we help our dealers and vendors be more successful, what helps the consumer buying decision, how do we grow revenue to meet this months targets, etc. This slight change can help surface underlying issue, as for example; With stagnant sales – increasing the share of consumer’s wallet is tough in these times, but bringing more consumers in through the door is still a viable growth strategy. If we can dynamically demonstrate the value of our key projects through the right scorecard, it might be just that much easier to gain executive approval and show the results as they come in.

Building an analytics culture!

Organizations apply analytics in mostly ad-hoc manner, often to answer a query from management about business performance. But, companies with more advanced analytics capabilities apply the models to unearth value in their businesses and create competitive advantage.

Since I am working with organizations with less than robust analytics capabilities, I find answering questions as the more prevalent reason for looking into the data. However, the bigger challenge with such organizations is the lack of, what I call the “analytics culture” or, the mindset for data-driven decision making. There may be several reasons that organizations are handicapped on this front, and in my consulting experience, I have found the following three factors to be extremely helpful in alleviating the problem to a large extent.

• Management support – senior leadership needs to support investments in analytics function and insist on data-driven decision-making.
• Knowledge of relevant metrics – business unit heads should take a critical look at the metrics that drive their business and not just the ones that make them look good in weekly reviews.
• Ownership of data models – a data model owned and managed by a neutral team within the company is a priceless resource to managing business performance, finding opportunities and enabling the data-driven decision making.

 I have come to believe that analytics culture needs to be established, supported and nurtured to really benefit from the insights. Where does it sit, who runs it, who needs to be hired in, what processes need to be in place, what are the key metrics, how is the accountability defined, etc.

First answer the question – what is my organization’s goal? Do we sell widgets online? Do we engage users to drive offline sales? Do we push content based on user preferences? Etc. While revenue is the bottom-line for however you look at a business, knowing the above goals will help us qualify the right set of metrics and analysis.

If I look at the business as an outsider, I believe for any business to succeed, it needs to build the analytics function outside other functional groups, simply to ensure the neutrality and to prevent the analysts from being encumbered by business unit goals.

The larger the organization, the more imperative it is for its management to recognize the subtle impacts of not following this policy. Often, marketing and data reporting teams would be asked to provide business analysis. This may not be the best strategy – marketing has personal interest in showing that the conversions are working well, and reporting is often too technical to understand the nuances and make educated recommendations for business improvements. Either is not an ideal strategy to provide a neutral view and critique into the business performance!

Are there lessons learnt in your organizations that you would like to share? Feel free to post your views below.

One metric to define website performance - Continued!

Some interesting questions were raised based on my last post on one metric to define website performance (http://www.analyticsheaven.com/2010/03/one-metric-to-define-website.html), so I felt like I should expand on the thought a bit more.

This theory of one metric often confuses the readers. It is not meant to replace the other more prominently monitored metrics, such as, bottom-line (which will be revenue). Return frequency is simply an indicative of consumer satisfaction with our product. Don't we all visit the same store, if we like what we see and get what we like? This philosophy extended to a web experience is what I am referring to as a metric that defines your web performance.

A higher return frequency means that our visitors are coming back to consume our content, buy our wares, conduct research, or whatever else we are programming. Looking at it from a mathematical model perspective, the metric is going to drive more revenue through our own unique revenue models (display, CPC, leads, etc.). I view revenue performance as a variable that is dependent on some of the more "upstream" variables (like, visits, return frequency, conversions, etc.) that can more directly be tied to consumer satisfaction which typically leads to higher bottomline.

An example of a parallel will be in call center industry, where Member Satisfaction Index (MSI) is often used as a metric to measure service quality. Similarly, Harvard Business review had published a study on "net promoter" being that "one" metric that everyone should monitor.

Monitoring one metric as an overall indicator of the health of your business does not mean that we ignore; defining corporate/business unit goals, identifying the KPIs and metrics that define success and acting on recommendations to improve upon each collectively - as may have been misunderstood from this post.