In the past few years, many organizations have discovered the value of clear and well-balanced measurement systems deployed throughout their companies. Effective systems include spider diagrams tacked on the CEO's wall, balanced scoreboards posted for all to see, even so-called instrument panels arrayed in every division head's office. All present real-time information on respective companies' progress and provide clear indicators for needed action. Combining measurements from different departments, levels and locations into a few critical pictures is not an easy task. Making this wall chart truly useful proves even harder.
Fundamentally, spider diagrams, balanced scoreboards and instrument panels differ very little. Each clearly displays results from various areas of an organization in a concise and simple format, allowing executives to focus on areas that need immediate attention or to monitor other key performance measurements. Spider diagrams, sometimes called star plots, function as radial plots that display the magnitude of the measures as lines radiating from a central point. Targets or strategic goals are plotted on these lines and connected around the circle, as are previous and current performance levels. The resulting diagram looks much like a spider's web. Usually standardized to the same scale, the different measurements represent concentric polygons, with this year's results outside of the current targets, which in turn lie outside of last year's performance levels.
Balanced scoreboards, or scorecards, highlight different areas by means of boxes. Smaller boxes within the larger ones contain graphs, charts or statistics, usually arranged with connections clearly identified. When intelligently constructed, scoreboards display links between key measures.
Instrument panels, designed to resemble the panels in modern aircraft, seem complex at first glance. However, managers who constantly use the panels to monitor progress quickly become as adept as pilots in scanning the various measurements and determining which areas need attention and which are performing smoothly. The graphical instrument panels, often quite dynamic and frequently updated, lend themselves to organizations with highly developed measurement systems with well-known performance drivers.
One of the best introductions to the subject is The Balanced Scorecard by Robert S. Kaplan and David P. Norton (Harvard Business School Press, 1996). Although authors and researchers hold somewhat different perspectives, most agree about which areas require measuring: customers, employees, stockholders, suppliers and communities. The measures also should originate from two directions: from the vision, mission, beliefs and strategic plan of the organization, and from the direct measures needed daily in operational units to monitor and adjust performance.
After determining key areas for your organization, break down each area into a small number of measurements that will collectively represent performance. For example, 52 measurements make up Xerox's scoreboard. Seven of these measures summarize employee satisfaction, and seven others summarize customer satisfaction. When creating these measurements, you also must balance the drivers and the results. Although results measurements often relate closely to the bottom line, process measurements are most likely those you actually can influence and those that drive the results. To develop meaningful measurement systems, determine the cause-and-effect relationships between drivers and results.
When developing instrument panels, spider diagrams or balanced scoreboards, first determine your company's key areas and list the essential information for each. Next, decide how you want to generate these new measures. Who will gather the data, perform the analyses and present the measures? Who will manage the information flows and take responsibility for changes? Who will take action when indicated?
Determine what technology you need to support the new measurement system. This may include new hardware and software, new automated measurement devices in plants or service areas, or new means to gather customer feedback, field performance, operational performance or other missing information. The fourth step includes integrating the new measurement system into existing measurement systems and operations.
Finally, decide how to present, distribute and share the measurements. Will you distribute them to all employees? Which measurements will you share with customers, suppliers and stockholders? How will you distribute the measurements?
Remember that measurements add no real value to a company. To create value, you must use these measurements to take action and make appropriate changes.
About the author
A. Blanton Godfrey is chairman and CEO of Juran Institute Inc. at 11 River Road, Wilton, CT 06897.
© 1997 Juran Institute. For permission to reprint, contact Godfrey at fax (203) 834-9891 or e-mail firstname.lastname@example.org.