Number nine is a mistake that I made over the years with my clients. I used to recommend to them, like how a lot of books recommend that your scorecard should include measures of your performance. How are you doing with money? Are you making money so that you’re profitable? How are you doing with your customers? How are you doing with your employees?
I’ve been teaching people this for years. In the last couple of years, I’ve learned that there’s something missing from most scorecards. That missing category of data is external day. What’s going on in the world in the economic, in my industry, and in my markets that I serve that could impact my business in a huge way.
So if you think about it, it’s kind of like all the gauges are on a pilot’s cockpit that measures weather. The pilot can do nothing about the weather but the weather is a very important determinant when you fly or how you fly the plane. Could weather impact whether or not you’re successful at your job as a pilot? You bet. So what would be a weather gauge for General Motors today? It would be an external measure of something that’s going on in the world that is having a huge impact on General Motors’ success or failure, like gas prices.
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Measuring Gas Prices on a Dashboard
If your product is a bunch of big suburbans that get nine miles to the gallon and gas is four bucks a gallon, that’s a little bit of a problem isn’t it? So do you think GM ought to be measuring gas prices on their dashboard? Yeah, you bet. What else? What else might be a factor that would impact GM’s success or failure? Perhaps cost of capital? That’s a big one. They spend a lot of money. What else? Competition? Maybe ask what’s Toyota doing? You got to be really watching those guys right?
So I think every dashboard is going to be a much better intelligence tool for managers if we got a whole section that summarizes what’s going on with key metrics in the world on a daily basis that could impact my business.
So the school district I am working with in Long Beach, one of their measures is demographics. What’s going on with people moving into our country, out of country? What’s going on with poverty values and things like that? What’s going on with mortgage rates? What’s going on with how many people are being born? How many people are dying? Things like that.
So they look in a lot of demographics because that allows them to predict how many new schools we are going to get or need in 10 years. How many kids are going to come into the school district?
A company I worked with in South Carolina had a whole external section on their dashboard, and they are a company that’s in the metal products business. So they measure the cost of raw materials like steel, electricity, gas, etc. and they look at the world market for their product. What’s going on with pricing in our market? So every day, the boss can look at it and measure how the company is doing and see what’s going on in the world.
Importance of External Metrics
That could have a huge impact on my business and then those two things are used to make decisions about cutting back or performing other necessary actions. I don’t see most scorecards with that. In fact, none of the five companies that were picked for being the best in customer satisfaction, whether it be Bank of America, Saturn, JetBlue, L.L. Bean, or a company called Crown Castle, has the best balanced scorecards in America.
None of them had external measures on their dashboard and most of them committed about six of these stupid 10 measurement mistakes that I’m telling you about here. They all admitted it too. They all said you know, you guys might have picked us as having the best balanced scorecards but we still think we got a lot of work to do. We’re still struggling with this stuff.
So if you all have been struggling with performance measures, you are in good company, everyone else is struggling with it too. So that’s number nine, no external measures. I think it could be a lot better if you added these to your scorecard.