What gets measured gets done. Complete mastery of your Data Component is achieved when you boil the organization’s numbers down to the point where everyone has a single meaningful, manageable number to guide them in their work. This number will enable leaders to create clarity and accountability throughout their team. With a completed Scorecard, you can track high-level numbers down to a single person as the source.
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Power of Number 6
Dale Carnegie’s book How to Win Friends & Influence People contains an example illustrating the power that numbers can generate among your people: Charles Schwab ran Bethlehem Steel Company in the early 1900s, and he had a mill manager whose people weren’t producing their work quota. One day Schwab asked him, “How is it that a manager as capable as you can’t make this mill turn out what it should?” The mill manager didn’t have an answer. He had tried everything. This conversation took place at the end of the day, just before the night shift came on. Schwab asked the manager for a piece of chalk and asked the nearest man how many heats (i.e., batches of refined steel) his shift had made that day. The man said six. Without another word, Schwab chalked a big figure six on the floor and walked away.
When the night shift came in, they saw the six and asked what it meant. The day people explained that Charles Schwab, the big boss, has asked how many heats they’d made, and chalked the number down on the floor. The next morning, Schwab walked through the mill again, and he found the night shift had rubbed out the six and replaced it with a big seven. When the day shift reported to work that morning, they too saw the seven chalked on the floor, and decided that they would show the night shift a thing or two. The crew pitched in with enthusiasm, and when they quit that night, they left behind them an enormous 10. It wasn’t soon before this mill, which had been lagging way behind in production, was turning out more work than any other plant.
Advantage of Numbers
There are below distinct advantages to everyone having a number-
- Numbers create accountability. When you set a number, everyone knows what the expectation is. Accountability begins with clear expectations, and nothing is clearer than a number. For example, if in the accounting department the people’s expectations are “collections,” which is unclear. However, if they are supposed to keep accounts receivable days below 40, balance below $100,000, or aged receivable less than $50,000, that is a clear expectation. The people know exactly what their target is.
- Numbers create clarity and commitment. When an employee is clear on his or her number and agrees that he or she can achieve it, you have commitment. There is no grey area. A great example is the number Nordstrom, an American luxury department store chain, uses with its salespeople: sales per hour. The number shows up on their paychecks and perks are tied to it. Nordstrom salespeople know exactly what their sales expectations are all the way down to an hourly basis.
- Numbers create competition. Charles Schwab was able to create competition by making a target number known to all teams. Sure, they might experience some discomfort and a little stress, but there is nothing wrong with a little pressure.
- Numbers produce results. If the customer service department’s expectation is zero unresolved customer issues, by hitting this number, you will achieve the ultimate result of customer retention and satisfaction. Or if your customer service people are accountable for ancillary sales, and they know $1,000 in daily ancillary sales will reach the total ancillary sales goal, you’ll typically hit it, or at least do better than if you don’t provide this number. What gets watched improves.
- Numbers create teamwork. When a team composed of the right people in the right seats agree to a number to hit, they ask themselves “how can we hit it,” creating friendship and peer pressure. When a team of technicians is challenged to perform their service in four hours or less collectively, they will all pull together to figure out ways to achieve that number. The ones that aren’t pulling their weight and hitting the number will be called out by the other team members that are.
- You solve problems faster. When an activity-based number is off track, you can attack it and solve the problem proactively, unlike with an end-result based number that shows up after it’s too late to change it. In addition, the use of hard data cuts through all the emotional opinions that create darkness and lengthen the amount of time it takes to make the right decision.
Logic of Scorecard
According to an old business maxim, anything that is measured and watched is improved. The concept of managing through a Scorecard has been around for a long time. The idea has been expressed through many different terms. It’s been called a dashboard, flash report, scoreboard metrics, measurables, key performance indicators, smart numbers, and so on. Whatever you call it, it’s a handful of numbers that can tell you at a glance how your business is doing.
The unfortunate reality is that most organizations don’t have a Scorecard. They lack activity-based numbers to review on a regular basis. They might rely on a P&L (profit and loss statement) to tell them the score, but by then it’s too late to make corrections. A profit and loss statement is a trailing indicator. Its data comes after the fact, and you can’t change the past. With a Scorecard, however, you can change the future.
“Scientific monitoring is going to be terrifically important, because whatever steps we take … we will have to monitor those steps in order to know if they’re actually working.” ~ Naomi Oreskes
Advantage of Scorecard
Let’s look at someone who managed the most seemingly unmanageable beast of all using a Scorecard. In his book, Leadership, Rudolph Giuliani says in a chapter aptly titled “Everyone’s Accountable, All of the Time” that one of the first things he did when he took over as mayor of New York City was to introduce CompStat. CompStat is a multilevel management tool that allows officers of the New York Police Department (NYPD) to report specific crime numbers on a daily or weekly basis.
Giuliani says it enabled local sector commanders to see patterns and trends, and then to react and deploy officers where necessary. In the past, the NYPD had merely tracked the number of arrests and the response times to 911 calls, but these are trailing indicators. By the time these numbers were received, quarterly or even annually, the pattern of crime would have changed. CompStat tracked crime activity on a daily and weekly basis, which Giuliani says allowed the NYPD to take the pulse of criminal activity and thus gain the ability to prevent crime rather than just report it.
In eight years, murder figures went down by almost 70 percent and overall crime went down by about 65 percent. In 1996, CompStat won the Innovations in Government Award from the Kennedy School of Government at Harvard University. Now many cities are using the same type of tool. After the success of CompStat, Giuliani went on to unveil a citywide Scorecard called CapStat, which allows a detailed performance evaluation of 20 city agencies. (Excerpt is from “Traction” by Gino Wickman).
So, are you having Scorecard or a similar concept in your working area? If not, then you can do it now.
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