RETAILING Winning with a Balanced Scorecard - Part 1 – by Jeff Cinciripino, JeffCinciripino.com, Former Owner of Scuba Shack, Rocky Hill, CT
There’s a quote often attributed to Warren Buffett that goes something like this: “If you can’t read the scoreboard, you don’t know the score. If you don’t know the score, you can’t tell the winners from the losers.” For businesses, the scoreboard is typically found in finan- cial reports like the profit and loss statement and the balance sheet. While these reports tally up the final score, there are many other measures we can look at to help drive re- sults. In baseball, we keep a scorecard that tells us exactly what
has happened during the course of the game. By examining the details of the scorecard, managers and coaches can de- velop strategies and make decisions that affect their results down the line. Dive shops can do the same - by using a scorecard that balances their efforts and helps guide them toward success. In this two-part series, we’ll first look at the concept of a balanced scorecard: where it came from and how to go
about constructing one. In part two, we’ll look more specifically at creating a balanced scorecard for a fictional small local dive shop. The concept of a bal-
anced scorecard was formalized in the 1990s through stud- ies examining how organizations use both financial and non-financial measures to track performance. Harvard pro- fessor Robert S. Kaplan and management consultant David P. Norton are often credited as the originators of the con- cept. Their research led to a number of articles and, ulti- mately, to the 1996 publication of The Balanced Scorecard. The importance of measurement cannot be overstated. Mathematician and computer scientist Richard Hamming is credited with saying, “You get what you measure.” Man- agement guru Peter Drucker is often quoted as saying, “What gets measured, gets managed.” And Lord Kelvin once said, “If you can’t measure it, you cannot improve it.” But what exactly should a business be measuring? The balanced scorecard uses key performance indicators (KPIs) to track progress toward achieving a winning score on the scoreboard. So why is it called a "balanced" scorecard? The balance comes from the idea that your KPIs should span across four key categories:
Balanced Scorecard for XYZ Dive Shop Mission Statement:
Financial Perspective KPI
Target
Initiatives
Customer Perspective KPI
Target
Initiatives
Internal Perspective KPI
Target
Initiatives
• Financial • Customer • Internal Processes • Employee Growth and Satisfaction
Growth & Education Perspective KPI
Target
Initiatives
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