Last week, we discussed the role that scorecards can play in performance management. This week, we’ll talk about the balanced scorecard concept. The idea of the balanced scorecard was created in the early 90s by Robert Kaplan and David Norton, to help solve the challenge of measuring business results. In particular, they were looking for a way to capture results outside of basic financial performance measures. You can read the source material here.
A balanced scorecard should include financial performance measures but should also include the things that go into financial performance, such as the customer perspective, internal business perspective, and the innovation & learning perspective. Businesses that succeed at each will enjoy more sustainable success than businesses that focus simply on financial metrics, largely because the balanced scorecard provides a better view of the trade-offs that occur in business decisions.
An example would be making cuts to your customer service function to boost short-term financial performance. The move might look good today, but if customer service falters because of those cuts, and was a key differentiator, then the business impact of the move is likely to be negative in the long run. Let’s look at each perspective.
Customer Perspective
It’s worth starting with the customer perspective, because ultimately, it’s the customers who pay the bills. An MSP might capture metrics like first response time, or resolution time because these are metrics the customer cares about. Feedback from the customer is captured in metrics like NPS, Customer Effort Score (CES), and CSAT.
Internal Business Perspective
There are a host of internal business metrics that can contribute to a balanced scorecard. Each will tell you how your team is performing, in different domains. Employee turnover, and eNPS, are two metrics that speak to the environment you’re creating. You could look at how much documentation you have, or how often it is updated. The key is to know what metrics speak to how well run you are. A sales team or a marketing team will have a host of metrics that they use to track their efficiency, and most other internal operations should have the same.
Learning & Innovation Perspective
The quality of your team is going to impact customer service, and therefore finances. The learning & innovation perspective will point you towards metrics that speak to team quality. If you’re looking at CSAT metrics in Team GPS, those can be tied to individuals, and you can track the improvements of those individuals over time. Other aspects of this might be how many certifications your techs have, or their progression in skills over time (from L1 to L2, for example).
Financial Perspective
Scorecards should reflect business objectives, and business objectives are usually financial. Each of the other elements of the scorecard will typically roll up to the financial in some way. The general structure of the logic is that you take care of your employees, give them good processes, they will take care of your customers, and your financials will follow. It’s basically reverse-engineering revenue, instead of looking at the income statement first for solutions.
What This Means for MSPs
When you’re creating scorecards for your team members, it is worth keeping each aspect of the balanced scorecard in mind. A scorecard that effectively guides behavior doesn’t just take the outcomes into account, but the different pathways to achieve those outcomes, by incentivizing the actions that lead to effective internal processes, happy customers, and employee engagement.
We have built this logic into Team GPS, our talent operating system. Using Team GPS to build scorecards for your team, and pulling in critical data like CSAT, NPS and CES, will help you create scorecards that lead to success in all domains. Your MSP will run better than it ever has before.
