The Best Drivers For Long Term Success

How will the decisions you make today affect your business tomorrow?

That’s the most important question a manager can ask. But to answer it, they often rely on financial metrics which can overemphasize the short-term. To win in the long term, you need to take a more balanced view. That is where the concept of a balanced scorecard comes from.

The scorecard uses four perspectives to measure your organisations performance. The financial perspective – are we hitting the numbers, is only the first. Second is the customer perspective. Do they like your products and services ? Next is the internal perspective. Can you efficiently deliver what your customers want ? Finally, there’s the learning and growth perspective. Can you continue to improve and create value ? For each perspective, you need to list both goals and measures.

Take an Asphalt, Readymix & Aggregates business for instance that has adopted the Balanced Scorecard. It’s financial goals were to survive, succeed and prosper. For assessment it used gross margin, sales growth, market share and return-on-investment. It’s customer goals were to develop innovative, tailored products and to get them to market faster and to become a supplier of choice. To measure success, managers used percentage of sales from new products. On time delivery rates and popularity with key customers.

Looking internally, the business prioritised goals like excellent production reliability, maintaining costs within budget, excellent product quality and again developed operational measures for each goal.

Last, for it’s learning and growth goals it decided to focus on developing productivity improvement capability and improving team engagement. The business found that learning and innovation led to better competencies and processes, which in turn boosted customer satisfaction and ultimately generated better profits.

In other words, they learned that the order of the Balanced Scorecard matters. When used correctly it reveals the real drivers of long term success.