I am very excited to have a guest blogger this week! To give you a little background, Autumn Moore was a grad student at my alma mater when I first met her through my Facebook page. An eager learner, she was always very open and had great insights on the content I shared.
Then, Autumn participated in my then six-week live mastermind and training program, the Bombshell Business Bootcamp. I’m pretty sure she went in wanting simply to network and feed off of other dynamic business women as she prepared to graduate with her masters, and she came out an entrepreneur with a ton of support from her fellow Bombshells for her new business Blissful Serenity Scrubs. OOPS! 🙂
Anyway, while I encourage you to certainly follow her entrepreneurial journey with her amazing product (which I use on the reg), TODAY she is going to leverage her Masters in Management to teach us all about how we can measure how well our Bombshell businesses are doing. You see, while we should all create Glamour Goals every year, using key performance measures (KPIs) in key categories is an ongoing health check for our business. So show Autumn some love in the comments after you get done reading this Bombshell’s rather scholarly take on how to keep it real in your business. 🙂
How to Create a Balanced Scorecard for Your Small Business
by Autumn Moore, Guest Contributor
Internationally recognized management expert and author of The One Minute Manager, Ken Blanchard, affirmed that “feedback is the breakfast of champions.” Feedback lets an individual know that either his/her current action plan is effective, or if adjustments need to be made in order to get back on the desired path towards success. Just as students receive quarterly report cards while in grades K-12, small business and large corporations alike have their own version of a report card commonly referred to as the Balanced Scorecard (BSC) . Robert Kaplan and David Norton coined the concept in the early 90s with the intention of revolutionizing the way managers and owners evaluated business performance.
Balance Scorecard Categories
It is well established that the basic school report card features four main subject areas: History, Literature, Math, and Science. Just like a school report card, the BSC is comprised of four main categories: Financial, Customer, Internal Business Processes, and Learning & Growth. The four main categories are not set in stone; additional categories that are relative to the business can be added when necessary. For example, Safety is a category used frequently by manufacturing and other manual labor intensive industries (ex: food processing, distribution centers, etc.). It is recommended that at least three of the four categories (Financial, Customer, and Internal Business Processes) are used, since those are universal to all types of businesses. The idea is to create categories that similar key performance indicators will fit into.
Key Performance Indicators
A key performance indicator (KPI) is the performance metric that aligns directly with the company’s strategy and goals. It is the performance metric that when glanced at quickly indicates whether or not the company is on track to meet its goals for the month, quarter, and/or year. Think of a KPI as the sub-topic under the main subject areas on a school report card that were most relevant and/or interesting to you. For example, every student in the United States has to learn about American Literature, Algebra, US History, and Biology; however, only a handful of students ever choose to pursue the entire range of advanced math classes offered. When translating that notion to the BSC concept, the end result is each category will only contain the most relevant KPIs for your business. Potential KPIs for each section of the BSC might include but are not limited to the following:
Financial: Gross Profit Margin ( How much of each sales dollar you get to keep after figuring in cost of goods sold. For example, if you have a gross profit margin of 60 percent, then for every $1 in sales, you get to keep 60 cents.)
Customer: Customer Awareness
Internal Business Process: Order Turnaround Time
Learning & Growth: New Market Expansion
Once you as the business owner and/or manager have determined which KPIs are most important to the company’s goals and strategy, it is vital to know how to properly create the KPI.
Creating KPIs
The process to accurately create a KPI is as simple as 1 2 3.
- Determine/Define the KPI
- Determine KPI Calculation
- Define Data Source
The chart below contains a few of the KPIs from the BSC I created for my own business, Blissful Serenity Scrubs, as an example:
Here is an example of how I pull Social Media metrics as a data source to measure my Customer Awareness KPI. The picture represents the total views (10,403) after using paid advertising over a three day period. This post also generated 30 NEW page likes for me.
It is important to keep in mind that all KPIs and goals associated with specific KPIs should adhere to the SMART method (Specific, Meaningful, Action-Oriented, Realistic and Timely) when creating them.
KPI Dashboard
Report cards offer a quick illustration of a student’s success without listing the grades for every assignment. The Dashboard does the same thing using the KPIs chosen by the company. The Dashboard is comprised of charts and graphs that provide a visual comparison of past and present performance. The information is also stated in a table format and highlighted using green, yellow, or red. The green represents the KPI is on target or exceeding the stated goal, yellow represents that the KPI is missing the targeted goal by a small margin, and red means the KPI is way off the targeted goal. It is ideal to track KPIs on a monthly basis so that quarterly and annual results are never a surprise. Tracking KPIs monthly also enables a business owner and/or manager to make adjustments quicker before it is too late.
The bottom line is that all KPIs are metrics, but not all metrics are KPIs! Other metrics are fine, but focus on the performance metrics that most impact the strategy and goals of your business! Remember what Ken Blanchard said, “Feedback is the breakfast of champions.”
Autumn Moore lives outside of Nashville, Tennessee and has recently embarked on her journey as an entrepreneur through Blissful Serenity Scrubs. She has a Masters in Management from Middle Tennessee State University’s Jones College of Business and was mentored by a Six Sigma Master Black Belt.