What gets measured gets done--if your company posts the right kinds of numbers. Which is why scoreboards are back--with a twist
Consider three questions. but be warned: the answers may have a dramatic effect on how you run your company. Question 1: What are the business goals you'd like to hit this year? I'm thinking of specific numbers--sales growth, profits, maybe operational targets like on-time delivery or percentage of revenues from new products. Those are the goals that, if you do hit them, will entitle you to look back and say, "Wow! 1998 sure was a great year for our company." Question 2: You have your objectives. Who else in the company knows what they are? Are you the only one lying awake nights worrying about how to reach them? Question 3: What would happen if each person in your organization knew what the goals were and tracked the company's progress toward them on a big scoreboard, and not only monitored the numbers but also understood how he or she could help push them in the right direction?
What, indeed. "You'll really need to stand back," says David Gasper, CEO of Gasper Corp., "because your people will make those numbers happen."
The idea of putting numbers on a scoreboard has a checkered history. Ten or 15 years ago companies discovered (or rediscovered) a simple truth about human nature, summed up in the adage "What gets measured gets done." Managers began putting up whiteboards, chalkboards, and corkboards. They cranked out data on defects per 1,000, average time spent on hold, and dozens of other performance measures. It was hard to walk into a plant, warehouse, or office without seeing a metric or two charted on the wall.
For a while, the numbers on the charts improved. People paid attention to the boards and figured out how to better their performance. But then something funny happened. A week might go by without anyone updating the scoreboard. Or maybe a whole month. Somebody finally did mark in the new numbers and noticed there hadn't been much improvement--which meant that nobody was eager to update the board the next time, either. Before long the boards fell into disuse. Soon they were taken down.
With hindsight, that outcome isn't so surprising. The real truth about human nature is that what gets measured does get done--but only for a while. Then other human reactions are likely to cut in, such as "Why are they always measuring us?" and "Who cares if we make those numbers, anyway?" A chart that tracks job performance can come to feel like an edict from management: make the numbers or else. When people believe Big Brother is watching them, they do exactly what they have to do, and no more.
Today the pendulum is swinging back toward scoreboards--but with a couple of twists. For one thing, the boards now sprouting on plant and office walls display a ton of information, such as operational figures tracked on a dozen different scales, department-by-department performance, and companywide financial data. The giant board at Colonial Mills Inc., a $7-million specialty-rug manufacturer in Pawtucket, R.I., stretches 30 feet or so, covering most of the lunchroom wall. A big gold rocket ship in the middle shows the year-to-date profit. Columns for winding, braiding, and the other production departments show monthly output--cans filled, square feet braided, and so on--all compared with the plan. What happens when people see that information month in and month out? They learn the connections between work-group or department performance and big-picture results, knowledge that goes a long way toward answering questions about why the numbers matter. Since there's no law requiring a scoreboarder to practice open-book management, the big-picture numbers may be something other than actual sales or profits--for example, an index comparing companywide performance to the plan. Regardless, the message is the same: this is the real measure. It's a measure of our business success and thus an indication of job security and opportunity.
A second big difference between the old and the new scoreboarding is that now the employees typically get involved in setting targets, creating the boards, and figuring out what rewards or bonuses to give themselves if they succeed. "Our targets aren't the powers-that-be coming down and saying, 'This shall be the number," says Colonial Mills CEO Don Scarlata. "They're numbers everybody has discussed and signed off on." It's much the same at most scoreboarding companies. Employees take part in the planning process, discussing (and coming to understand) the annual goals. On the department level they challenge themselves to hit objectives such as cutting cycle time and reducing accounts-receivable days, and then they build homemade boards to track their progress. Usually, the company owner and employees work out a deal for a bonus--or maybe just a celebratory barbecue--if they "win." The from-the-bottom-up process transforms the connotation of the scoreboard from them measuring us to us measuring ourselves.
Maybe most important, the new scoreboarding is a dynamic phenomenon. The goals and metrics change. Employees learn to think in new ways. "People start asking the kinds of questions a business owner would ask," says Brenda Wilbur, chief operating officer of CompuWorks, a $4-million computer-systems integrator. "They ask, 'Why are we leasing equipment instead of buying it?' 'Could we purchase this any cheaper if we bought it in bulk?" One CompuWorks employee volunteered to water the plants every week, another to paint his own office--all, says Wilbur, so that the expense numbers on the scoreboard would turn out better.
Look at scoreboarding in action at several companies and you can see how it evolves into a tool that gets people focused on the figures that would make a great year.
Identifying the key numbers
The scoreboard at Elements IV Interiors, a $9-million office-furniture dealer in Dayton, sits unobtrusively in the break room. In fact, you might not take it for a scoreboard at all, because it's a not-too-big cartoon of a flamingo poised to plunge into a rose-colored swimming pool. On the other hand, it is a picture with meaning.
Elements IV Interiors--the Roman numeral reflects the company's founding by four partners--is new at score-boarding and just recently faced the challenge of determining its objectives. Owners Bruce LaVielle and Kim Duncan were clear about one objective, at least: they wanted a certain amount of net profit. But they knew they couldn't pursue profit without keeping a watchful eye on another number, namely, shipments of Haworth Inc. furniture, their primary product line. If Haworth sales ever tank, their company risks losing its valuable franchise.
Back to the flamingo. Every month, support-services manager Heather Patrick tapes the "water level" onto the side of the pool. That's the company's year-to-date profit, and employees are learning that the profit level determines how much is available for their bonuses. Every month, too, Patrick moves the flamingo up the ladder that goes to the diving board. That scale shows the goal for Haworth sales, and the flamingo's foot marks the progress of Elements IV Interiors toward reaching that number. If the company hits the goal, the flamingo dives in--so to speak. Meeting both profit and Haworth goals triggers quarterly payouts.
Elements started out scoreboarding only those two numbers. As scoreboarders become more experienced, they learn to put up a cascade of numbers--tracking, in effect, all the lower-level metrics that drive the company's key objectives. A few miles down the road from Elements IV Interiors is Gasper Corp., a $6-million developer of management systems for banks' computer networks and automated teller machines. Where's the scoreboard? Well, there are dozens of computer-generated charts plastered all over the walls, but the up-to-the-minute data are stored in an intranet, where they're available to all the company's employees at the click of a mouse. Open up the home page and you see a menu guiding you to the data. Click on "Gasper Corp. Key Success Factors" and you call up the latest information on the number of new orders, the revenue from new orders, the anticipated revenue from systems sold but not yet installed, and the revenue from maintenance of installed systems.
At Gasper, the key success factors focus on revenues. "That's where the greatest variability is," explains founder David Gasper. To realize the company's revenue goals, salespeople have to hit their targets. Installers must work efficiently, getting new systems up and running on schedule. Tech-support people need to respond to problems quickly and effectively so that word of mouth about Gasper remains favorable. Software-development teams have to be on time and on budget with new releases so that products don't fall behind in the marketplace.
Not content with keeping all the data on the computer, Gasper puts the charts on department bulletin boards and in conference rooms so people can see the information, talk about it, and act on it. A recent problem with timely complaint resolution, for instance, showed up instantly. "When something like that happens, we're all trying to look for solutions," says Mark Marratta, a senior software engineer.
Building buy-in and unleashing creativity
The new scoreboarding is essentially a learning process. But what makes learning effective? As any teacher will tell you, it's when learners participate actively in the process rather than watching passively from the sidelines. Scoreboarding gets employees involved in their own learning. That means that they not only grasp the objectives--and the many numbers that drive them--at a gut level but also take on those objectives as their own.
Check out how the process has unfolded at CompuWorks, the computer-systems integrator. Last year a team of employees at the Pittsfield, Mass., company painted a big section of office wall green and marked off 52 weeks along the bottom. Up the left side, they inked in net profits in dollars. Then they stretched various colors of ribbon diagonally across the makeshift graph, indicating their goals for weekly performance. (The blue ribbon, indicating CompuWorks' ambitious plan, was promptly labeled "Al's Pipe Dream," in honor of president Alan Bauman.) As the year progressed scorekeeper Kristin Czelusniak stuck pushpins into the scoreboard once a week, showing the level of profits earned that week, and tied red yarn to the pushpins. Over time, the yarn created a handy chart of performance actuals that could be compared at a glance with performance benchmarks.
This year a series of strategic-planning sessions produced new goals--another Pipe Dream--and the big board was updated accordingly. This year, too, the whole company began to sprout scoreboards. (P.S.: The company is currently beating this year's version of Al's Pipe Dream.)
CompuWorks calls itself a systems integrator, but it makes money in a variety of ways. There's a sales department and a service-and-installations department. There's one group that develops custom software and another group that conducts computer training classes. The company's plan called for revenue and earnings contributions from each of the departments. The departments themselves had to figure out how to get there and how to measure their progress.
The solution? More scoreboards. Groups got together to brainstorm. What are our key numbers and our targets for improvement? Where do we have to be each month? And then the plaintive question: Has anybody here got any artistic talent?
Some did. In the custom-software group, Marianne Hall designed a striking Yellow Brick Road scoreboard, with sales dollars up one side and the wizard in a balloon marking progress. And what drives sales dollars? "We have two things we do," explains programmer and analyst Deb Van Tine, "billable time and internal time. So you can see"--she points to the scoreboard--"here's Dorothy, representing billable time, and here's the witch, representing internal time. We want to have Dorothy ahead all the time."
Other departments were more modest--not to say artistically challenged--in their efforts. The sales department produced a picture of nearby Mt. Greylock, with numbers indicating total sales, gross profit, and sales expense per gross profit dollar. The training folks created a vase with paper flowers: hit certain targets for billable hours or students trained, and you get to put a flower in the vase. The service department contented itself with a whiteboard-and-marker chart indicating each person's percentage of billable hours by month. Every department established targets by month, quarter, and year; each had a small budget for rewards if it reached its goals. Presto: everyone was working for objectives that fed the pushpins on the big green board. "People don't necessarily feel they can change the big board directly," says Bauman. "What they do feel they can do is change their numbers."
Scoreboards force a level of accountability--hence performance--that's often missing in small companies. The numbers come in fast, usually every week. They're watched not just by the CEO but by every manager plus quite a few employees, so problems get addressed faster. "It's the feedback loop that makes the difference," says Douglas Devlin, chief financial officer of TriNet VCO, a 100-employee, $250-million professional-employer organization in San Leandro, Calif. "Communicating the company's progress lets managers and employees see the effect of their work. It definitely has a positive impact on performance."
Sometimes the numbers are so much on track that the scoreboard gets--well, boring. That's when it's time to plug in new numbers to watch. TriNet has a "dashboard" scoreboard, complete with dials and gauges representing revenues, subscriber head count, and other key variables. One section of the dashboard is a space that each department uses for the numbers it wants to track--numbers that are likely to change as issues are resolved. TriNet's payroll department, for example, tracked the timing on its electronic submissions to the bank "because," explains Devlin, "we were getting close to our banking deadlines on peak days." After a while the department got its procedures under control and submitted the payroll in plenty of time, so the metric disappeared from the scoreboard. Says Devlin, "Each month, we ask the managers, 'Do you want to change your gauge?' We want every department to have something that's meaningful to them on there."
But the real value of scoreboards comes over the long haul, as people learn not just to watch numbers but to take responsibility for them and as employees incorporate the scoreboarding process into their year-in, year-out approach to the business. An exemplar of that value is Neilsen Manufacturing Inc. (NMI), a precision sheet-metal job shop and assembler in Salem, Oreg.
Sales at NMI have been up an average of 17% a year over the past five years. The company recently added 65,000 square feet of manufacturing space. On the shop floor, robots and humans operate state-of-the-art cutting machines and presses seven days a week, 24 hours a day. The company provides high-value-added parts and assemblies to customers such as Hewlett-Packard and Tektronix.
NMI president Tom Neilsen began scoreboarding a few years ago. First he assembled a team of employees and managers to identify and agree on the key measures. Some were financial: sales, direct costs compared with budget, indirect expenses. Others were nonfinancial, including on-time delivery, customer returns, and in-house quality incidents, such as a part that needs to be reworked before it can be shipped. "We felt those were important for our long-term success, over and above our financial performance in any given period," says Neilsen. The team created a scoreboard that awarded points when performance met plans on each measure, dubbing the sum the Health Index. The Health Index itself was posted in the lunchroom and in the corridor, where customers (and anybody else) could see it. On the wall of Neilsen's office--open to all employees, the office serves as a small meeting room when he's not there--were full financials, along with all the other hard data that lay behind the index.
Today the index is gone, replaced by a bevy of 8 1/ 2-by-11-inch graphs and charts. "We wanted to shake up the troops a bit by changing the way we presented the material," says Neilsen. Some charts are posted in the corridor; many more are on Neilsen's office wall. Department managers get score sheets tailored to their own numbers. Employees get summaries at plantwide "coffee talks" every two weeks. The sheets are laid out for easy reading. "We wanted to design each one so that if somebody spends only 20 seconds with it, they'll get the essence," Neilsen says.
A sense of responsibility for making the numbers turn out right permeates NMI because of Neilsen's "thumbprints of ownership," which he builds into the scoreboards. Early every September, the company begins an arduous two-month process aimed at creating the budget--essentially, a highly detailed projected income statement--for the next fiscal year. The budget becomes the basis for the plan number on the scoreboards--the number with which actuals will be compared every month. The process itself gives new meaning to the phrase employee involvement. "Tom sets up small groups of people to gather information and participate," explains Charles Hopewell, NMI vice-president and general manager, pulling out a multipage schedule for last fall's series of meetings. "Let me show you a quick example. Here's a subgroup for materials. Our primary point person for that line item is Dave Fitzgerald, our maintenance supervisor. The secondary person is Scott Wallace, our technology manager." Every line item and sub-line item on Hopewell's schedule has a couple of names attached. Perhaps 50 of the company's 200 employees are actively involved in producing the budget.
What happens, says Neilsen, is that everyone involved in creating a number feels a degree of ownership toward that number--and a responsibility to keep it in line. An order of welding tips is wrong? "In the past we'd have said, 'We might need those tips someday, so we'll just hold on to them.' But the guy who was monitoring the budget said, 'No, those would be dollars that we're not really utilizing. We're going to send those back and get the right ones." From month to month, Neilsen's managers use the scoreboard not just to evaluate their performance but also to forecast 60 days out--and to take whatever steps are needed if the forecast isn't jibing with the plan.
In the end, of course--as the NMI experience illustrates--scoreboards are no more than a tool for encouraging good business practices like goal setting, budgeting, performance management, mutual accountability, and the employees' understanding of how they can move the numbers along, as well as their involvement in doing so. The tool's appeal is that it can start so simply--a pink flamingo with two numbers--and evolve rapidly as companies learn to do more and more with it. Not many management techniques these days are quick, cheap, effective in boosting performance, and capable of growing as a company grows. Scoreboards fit that demanding bill.
John Case, a contributing editor at Inc., is the author of The Open-Book Experience (Addison-Wesley, 1998) and the editor of the newsletter "Open-Book Management Bulletin."