EP28 Creating and Using a Company Scorecard

In this episode, Mike discusses the importance of creating a company scoreboard or scorecard to increase accountability, improve data quality, and drive results.
He emphasises the need for a clear artifact that defines what winning looks like and what needs to be done to achieve it. Mike explains the difference between leading indicators and lagging indicators and focuses on the former for the scorecard. He provides examples of leading indicators such as revenue, profit, LinkedIn posts, podcast episodes recorded, in-person meetings with leads, new referrals, cash runway, and employee and client satisfaction scores. Mike outlines the process of creating and using the scorecard, including assigning accountability, setting targets, and conducting weekly scorecard reviews.

Takeaways
Creating a company scoreboard or scorecard helps increase accountability and drive results.
The scorecard should focus on leading indicators, which are metrics that can be influenced and impact future results.
Examples of leading indicators include revenue, profit, LinkedIn posts, podcast episodes, in-person meetings, new referrals, cash runway, and employee and client satisfaction scores.
The scorecard should have a small set of metrics, ideally between 5 to 15, that are critical to the business.
The scorecard should be reviewed weekly in a leadership team meeting, with a focus on accountability and action plans to address any metrics that are off track.

Chapters

00:00 Creating a Company Scoreboard
06:23 Focusing on Leading Indicators
09:47 Examples of Leading Indicators
12:10 Keeping the Scorecard Simple
15:32 Reviewing the Scorecard Weekly

Find out more about working with me. mike@smbmastery.com.au or https://www.linkedin.com/in/mikeadamscott/

Transcript

Mike Scott (00:01.39)
Hey guys and girls, it's definitely been too long. I think the last time I recorded an episode was in about February. So really good to be back. I've had a bunch of you reach out and ask when the next episode is coming. So here it is. So today I want to talk about a company scoreboard, or you might know it as a dashboard, or you might know it as a scorecard. But really I want to talk about...

an artifact that we can create that will help us increase accountability, increase the quality of the data, for lack of a better word, that we're using in our business, and drive results. And I want to start by describing this through the problem. So when we don't have this, some of the things that happen in our businesses are endless conversations around...

driving results in various parts of our business. Endless conversations because there's no clear accountability. There's stuff that needs to be done, but it's not clear who needs to do it or how we're measuring it. It manifests in people not being clear about what they are optimizing for themselves. It results in people doing lots of busy work, but not necessarily work that's actually moving the needle because we don't know what needle it is that we're actually trying to move.

It results in us not actually having a clear idea of how things are actually progressing. So this results in like week to week, we can't objectively say, did we have a good week or did we have a bad week? It results in people not having a winnable game, people not knowing what success looks like. You know, when we look at sport, the reason why we call this a dashboard or a scorecard is because in sport, it's really clear. There's a scoreboard.

You are optimizing for increasing the score on the scoreboard. It's really clear. Everyone's rowing in the same direction. Everyone is going for the same thing. Now that's a very simplified example, but it rings true. So we really want to create a very simple artifact that we're looking at at a leadership team level every single week so that we know what winning looks like and we know what we need to do about that in the next seven days. Cool. Okay. So.

Mike Scott (02:14.638)
How this manifests, if we don't have it in place, is the things that I've mentioned, but rarely the net result is that people are guessing. We are guessing how things are going. We are guessing that the things we're doing are moving the needle. We are guessing that people are actually doing the things that are most valuable, that people are contributing at their highest level. And that is not a great way to run a business. Hope is not a strategy. Okay. So common pushbacks.

to this process are, you know, that's cool, Mike, that's a metric that I would love to measure, but we don't have the visibility or we don't have the tooling or we don't have the ability to measure this thing. That might be true. I would push back on that and saying, if you've identified, later on today in the session, we'll get to it, if you've identified that this is a critical number that you need to be measuring every week, but you can't currently measure it at the risk of sounding really obvious.

You've identified that it is a priority that you have to get to the point that you can measure it. And it's an amazing thing that happens when you identify this thing. It seems as if it's too difficult to measure, too complicated. But if you commit to doing it and you make it a priority to be able to measure the thing, you will be able to measure the thing. There's a very great saying. There's two sayings actually. One is what gets measured gets done. The other one comes from Lord Kelvin, which is that which we cannot measure, we can't improve. And that's really what this is all about is.

picking the handful of metrics that we need to be able to measure so that we make progress in the areas that we need to make progress. The other piece of pushback that I get is come up with a metric and someone says, three people are responsible for this. No. A rule that you would have heard me say a few times if you listen to my content is when more than one person is accountable for something, nobody is accountable for something. We need a single point of ultimate accountability.

Tons of people can be responsible for the tasks and the things that have to happen to achieve that, but only one person can be accountable for these metrics. Okay, cool. So how do we begin to solve this problem? We create a scorecard or a scoreboard or a dashboard, whatever you want to call it. I think for this purposes, I'll use the term scorecard. It's called a lot of different things and a lot of different books and a lot of different frameworks. I quite like the simplicity of the way that the EOS system...

Mike Scott (04:34.734)
sort of lays this out. That's probably the sort of language I'll use today. It's also nice and referenceable. If you haven't read the book, Traction, it's a really pretty great book. And this is sort of very heavily inspired, I guess, by their work. So before we sort of start creating this, and I'm going to talk you through how to do this in a minute, we should probably start with...

rarely grasping or at least agreeing on the concept and the definitions of leading indicators versus lagging indicators. So leading indicators are metrics of things that we can actually impact, that we can influence the result of moving forward. Lagging indicators are metrics of things that have already happened, things that we can't actually do anything about. Now, there's no...

It's not like leading indicators are more important than lagging indicators or vice versa. They're both very important. And the context in which you're meeting in the context in which you're working may be better suited to lagging indicators or leading indicators. We're going to be talking today primarily around leading indicators. And the way I want you to think about that is not sort of theoretically, I just want you to think of the indicators that we can actually do something about that we can actually move the needle on in the coming week or weeks.

So that's what I'm talking about here when I talk about leading indicators in the metrics that we're going to be discussing. So some examples of very simple lagging indicators are things like revenue, things like profit. These are things that have already happened. Now, it's not that these are not important. They're obviously critically important, but that's not what we're going to be looking at in the scorecard. We're going to be looking at leading indicators. We want to focus on the things that we can actually do something about. We measure them weekly.

We want to have influence over these things. And we want to know about the things that if we move the needle on these things, the results of these things will be the company results that we want. So examples here might include new leads, pieces of content created, projected revenue for the quarter or projected profit for the quarter. So we're looking forward and we're looking forward on things that we can have influence over. There's no point putting something in here if it's forward looking.

Mike Scott (06:53.102)
but we can't influence it. And that's a bit of a trap that we sometimes fall into. Now, as with everything that I ever talk about on the podcast, these are tools and these tools need to serve you and your business before anything else. Do not approach this as if it's just an item that you tick off and then you're done. This needs to serve you. So if you've got to use a bit of poetic license, do that. It needs to serve you first and foremost. Just remember that. I get a bit frustrated with like...

business implementers and coaches who kind of fixate on the rules of the tool, not actually looking at whether it's serving the business and what you're trying to do in the business. It's got to serve the business first and foremost. It's got to be practical. Okay. So with that said, we want to start by listing out the handful of leading indicators in the business that if optimized and improved will drive the results that we want to see in our business. The results being generally,

profit, revenue, cash generation, people being happy in the business, clients staying with our business, clients being happy in the business, driving the results that we want. The things that if we do have the highest chance of getting the results that we want. I'm going to use pretty hypothetical examples to make it really simple. And I'm probably just going to use my one man band consultancy business as an example. They're probably going to be over simplistic in terms of your business, because if you're listening to this, you're probably within my sort of target, which is.

bigger businesses than one person businesses, probably staff of between, I don't know, 10 and 100 people. So while the examples today will probably be over simplistic, the idea is that I just sort of impart the general way of thinking, and then you do this for your business. Cool. So I want to start by saying, if your scoreboard ends up having 50 numbers on it, 30 numbers on it, 80 numbers on it, it's not impressive. In fact, it tells me two things. One,

you don't really understand your business. Because if you do really understand your business, you'll have probably five to 15 metrics on there that really boil down the key indicators that we need to be looking at and optimizing week in and week out. If you've got 50 on there, you don't understand your business. You're measuring everything and two things will happen. The second thing it'll tell me is that nobody's using it because there's too much data, it's too overwhelming, there's too much to talk about.

Mike Scott (09:17.614)
And you can't run through this in a five or 10 minute session in your weekly meeting. So we're looking for somewhere between roughly five to 15, maybe 20 at a stretch metrics. Okay, cool. So let's move on from there. We begin to list them out. So for me, I'll give you some real examples mixed in with some hypothetical examples. So let's start with revenue and profit, because most people will begin by saying, cool, Mike, we need to put revenue and profit on here. No, we don't. We don't want to put revenue and profit.

If you want to have a revenue and a profit number on here, you want to be putting in forward -looking revenue and profit. So something that we used to do that was really, really useful at Nona was projected revenue for the quarter, projected profit for the quarter. Okay, so that's maybe two of them. Then in my case, I want to keep myself accountable, so I'll have LinkedIn posts. Right, remember these are leading indicators. The things that we do that are likely to lead to results.

So I know that if I'm putting out really high quality LinkedIn posts on a frequent basis, that that leads to engagement. It leads to top of funnel leads. That top of funnel lead leads to conversations. Conversations have been a conversion rate that then have a higher likelihood to actually getting clients and business. It also helps with brand awareness. So the leading indicator here for me is LinkedIn posts. I'm recording a podcast. I've been failing dismally, but for me, podcast episodes recorded. We'll get to the targets later.

but I want to be tracking the podcast episode because again, it's high value content, creates a lot of engagement, creates top of funnel interest. It's a leading indicator. For me, I look at how much revenue have I booked in for the current month. So that's similar to projected revenue for the quarter, but it's now in the current month. Another thing I might look at is number of in -person meetings with leads. So it's one thing getting interest, but I also want to be keeping myself accountable to how many actual meetings am I having with...

these people who want to potentially do business with me. Again, it's not just for revenue, it's also for brand building, brand awareness, et cetera. We might look at things like new referrals. We definitely will want to look at cash runway measured in months. We also might look at things like internal indicators. So indicators that show our staff whether they're happy or not. Now you don't want to do an ENPS employee net promoter score every week.

Mike Scott (11:41.134)
but you might want to have that score running throughout the quarter, front and center. Similarly, you might want to have an NPS to your client that you're looking at week in, week out. So look, these are sort of hypothetical and real for me, but hopefully you get the sense here. We're looking at leading indicators, things that we have influence over, things that if we're improving and moving the needle on week to week, increase the chances of getting to the results that we want in the business. Okay.

So now we have our list. The next thing we want to do is we want to indicate who is accountable for each one of these things. So I use a very simple Google Sheets template. If you're listening to this and you want a copy of the Google Sheets template, just send me an email, mike at smbmastery .com .au, and I'll send you a copy of the template. But you can make this up. It's very, very simple. So in the column on the left, we have the metric, cash run where in months, for example.

podcast released, for example. In the next column, we have who is accountable. So for me, every single one of these is me, but it's really important that in your business, next to the metric, you are very clear about who is accountable for this metric. Who needs to know where this is, if it's on track, why it's on track, if it's off track, why it's off track, what is being done to move it forward. One person with ultimate accountability.

Mike Scott (13:07.562)
Then we need to, next to that, have another column, which is the target, the weekly target. So, for example, if we're looking at cash runway in months, every week we have to have a target so that when we actually fall in the actual, we know whether we are on track or off track. So let's just take cash runway in months. So my sort of firm belief in a small or mid -sized business is you need to work really, really hard until you have three months of entire...

outgoings covered in cash. That might scare you if you're listening to this. That's fine if it does. But if you work very hard to get there, that gives you a lot of optionality in your business. When you've got three months of, in other words, if you didn't earn a cent for three months, you could still survive. That gives you a really strong position to make decisions from. It gives you optionality. It allows you to negotiate better. It allows you to sleep at night. So if you're listening to this, it's probably unlikely that you have that in your business, but I would really start optimizing.

for this. So in my case, I'm a business of one. I'm going to pull out pretty random numbers here. But I will say that I want a goal of three months cash flow runway. So I obviously then look at my entire outgoings, and I'll come up with a number to measure that. So that's the goal. So we've got the metric, we've got who is accountable for it, and we've got the target for the week.

At this point, it's probably worth mentioning that when we're building our scorecard, we don't just want it to go on forever. We want to build the scorecard in the context of a quarter. So we map out 12 weeks, right? So we have the metric, who's accountable for it, the target, and then 12 weeks where we're going to fill in the actuals every week when we meet for our senior leadership team meeting. Okay? So now we've got the bare bones to do this.

And every week we want to get a very quick view of how we're doing with this. So from a visual perspective, we want to probably use something like conditional formatting, where if we are above or on the target, it highlights green. And if we're off the target, it automatically formats to red. Why do we do this? We do this so that there isn't even discussion needed. You can just look at it every week and immediately we know instantly whether it's on track or whether it's off track.

Mike Scott (15:32.11)
Now, that's the bare bones of the scorecard, right? It's really simple. It's leading indicators, five to 15 of them across your business that really give you a very, very strong view of the health of your business in numbers. In the EOS methodology, they sort of use an example of if you're on an island and the only communication that you get every week is somebody comes and reads you a little scorecard on a piece of paper with a handful of numbers on how your business is doing.

you need to be able to look at these numbers with no discussion and get a very good sense of the health of your business, right? An objective view of the health of your business. That's a good way to think about this, right? Not 80 numbers, not two numbers. As I said before, probably five to 25 to 15 metrics. Okay. So we've got the layout. We've got the actual metric. We've got who is accountable for it. We've got the target that we want that to be every week.

then we put in some conditional formatting so that if we're on target or above it, it's green. If we're below target, it's red. Now this is really where it comes to life is bringing in some process. You should be running a weekly leadership team meeting with your senior leadership team. If you're not, you really, really should be. Even if you are a small business, you really should be doing this. I'm not going to go through the exact structure of these meetings. I've spoken about it before and it's maybe outside of the scope for this, but there's a section in that meeting.

where you look at these numbers, you have the discipline not to derail into long discussions, and you have some process that you put into it. It's very, very simple. You pull up the scorecard, everybody has updated their metrics. If it's green, great. You high five and you move on. You're killing it. If it's red, there's no discussion. You simply say to the person who's accountable, cool, what can you do in the next seven days to get this back on track?

And in your weekly leadership team meeting, you should have a section where you are recording the tasks that are agreed to. And next week when you come back, you bring some accountability into it. So there's no discussion here. It's like, hey, that's red. What are you doing in the next seven days to bring this back on track? It is clear who you're asking because the accountability is predetermined. And that's it.

Mike Scott (17:46.318)
If you need to, depending on how you run your weekly leadership meetings, you automatically drop this down as a topic of potential discussion for the period in the meeting when you get into the discussion items. You don't have to discuss it, but you put it there on the parking lot if it needs to be discussed, but you do not discuss it when you're looking at the scorecard. If you follow this discipline, the scorecard review takes like five minutes. So in five minutes, you get an objective view of the health of the business. If it's red, you automatically just

simply default to, hey, that's red. What are you doing in the next seven days to get it back on track? You don't have to talk about who's accountable for it because it's predetermined and it automatically drops down into a parking lot for later on in the meeting. If you want to go into the detail of it and you move on to the next one, this is critical. It makes it totally different from sitting in a long drawn out meeting trying to figure out.

what the health of the business is, trying to figure out who's accountable for it, trying to figure out how you will bring objective measurement to it. It really turns it into like a five minute segment within your weekly meeting and you're back on track. Now, if you're doing this right, you're actually doing a few things. Number one, you're increasing clarity on what the most important metrics are in the business that we need to move the needle on in order to get the results we want week to week. You're removing confusion. You're increasing the ability to prioritize.

The second thing you're doing is you're increasing accountability, right? Until this point, it's probably not super clear in your business who is ultimately accountable for every single one of these metrics. In fact, you probably haven't even articulated all of these metrics, just some of them. But by articulating the metrics together as a leadership team, then by agreeing on a single person who is accountable for each one of these metrics, you're bringing a lot more accountability into the business. You're then adding what a target looks like every week.

which is gonna force some pretty uncomfortable conversations. A lot of these things you're gonna be like, we can't have a target. You have to have a target. You've got to know what success looks like here. Probably what this is gonna also result in once you get it humming is you're gonna remove a lot of busy work. It also helps people whose names are accountable for this to go like, I now know what an objectively good week looks like for me. So is the work that I'm doing now moving the needle on these things? If it is, awesome. If it's not,

Mike Scott (20:09.006)
Should I really be doing this? Right? It helps with self prioritization, which is really, really important, especially as your business grows. It really helps you get clear on the work that actually matters. The last thing that this does, and it's probably the hardest part, is it's forcing you to start using data to make decisions. It's forcing you to start implementing the software or the tools or the process or the discipline to actually be able to measure the things that you need to measure. The chances are, if you're listening to this and you start implementing this process,

a lot of the things that you want to measure, you probably can't yet, right? Don't stop the process because you can't measure stuff yet. Measure what you can, make it very clear what you can't measure, and in your quarterly planning cycle, you wanna be talking about like, hey, this quarter, is this the quarter that we buy to off the big project that allows us to actually measure this thing? I can tell you that when we started doing this, we couldn't measure a lot of the stuff, but that also then highlighted.

That was why we weren't performing because we couldn't actually objectively measure the things that we really needed to know that we were doing in order to drive the results. We went through a lot of iterations to be able to measure all of these things. Once we got to measure them, it was terrifying because we saw how terribly we were doing a lot of these things. But then we were able to start improving it and eventually the results followed. What gets measured gets done. Similarly, that which we cannot measure, we cannot improve. So this stuff...

like a lot of the stuff that I talk about is very, very simple. That does not make it easy. And it does not mean that it is not powerful. We must never conflate simplicity with easy. In the space that I work in, which is small and mid -sized businesses, this will remain very simple and it will be deeply powerful in its simple format. If you're a big corporate listening to this, well, that's outside of my sphere of influence and knowledge and everything. I'm not even talking to the massive corporates that are highly, highly complex. If you're a business that is...

sub a hundred people, sub a hundred million revenue, chances are a very simple five to 15 or five to 20 metrics dashboard that is well thought through, well structured, measurable, will make an outsized impact on knowing objectively where your business is week to week, knowing which levers you need to actually be able to drive to see the results, increasing accountability, decreasing the amount of busy work and really

Mike Scott (22:32.91)
forcing you to deeply understand your business. Remember what I said in the beginning is that quite often when I see a really long, very fancy looking, very complicated looking scorecard, what it's telling me is you haven't actually done the critical thinking. You haven't actually done the work to reduce that to a small set of numbers that'll have an outsize effect. There's a great quote, I think it's Einstein that was, I don't know if it's Einstein, doesn't really matter, but it was, he wrote a very long letter and he said, my apologies that this letter is so long.

If I had more time, it would have been shorter. That's the sort of thing we're talking about here. Take the time to really scrutinize the number of numbers, the number of metrics, and you want to get it down and you want to get it to a small amount. So that's it in a nutshell. This is not a massive and complex artifact, but it will take a lot of iteration. It will take collective minds. It will take some stress testing. It will almost certainly be uncomfortable because you'll start to realize that

Some of the stuff that you really, really need to measure, you're not able to measure yet. That doesn't mean you shouldn't do the process. It also doesn't mean that it's not going to be effective. It does mean that you should start really looking at, Hey, what are the really big, scary areas of the business that we need to start investing in being able to measure? Now is the best time to start, right? Like 20 years ago, as they say, it was the best time to plant a tree. The second best time is today. It's that sort of thinking. Just get started.

As I said, if you want a copy of this template, it's very, very simple. Just email me at mike at smbmastery .com .au and I'll drop you a link to the template. You know, this stuff can be done by yourself with your leadership team. It's always better to have this kind of stuff facilitated just so that you can fully participate, but don't let that stop you getting started. Hope you found this useful. If you want to check out some sort of, I guess,

inspiration for this. Like I said, I've pulled a lot of the stuff from the EOS methodology from the book Traction. It's not original to them, but they've sort of laid it out in what I found the sort of simplest way to think about it. Hope this was helpful and I'll see you again soon.