Key performance indicators are important gauges of progress in any endeavor. Balanced scorecards encourage 360-degree views of progress for a corporation or initiative. The scorecard typically covers several categories, for example: customer, financial, productivity, and competitive metrics. By linking these categories in a single view, managers may see linkages between these areas and make all-encompassing, better informed decisions. Of course, the selection of these metrics is quite important, to ensure a truly holistic view with meaningful linkages and subsequent high-quality decision-making.
For senior executives the traditional balanced scorecard provides insights for steering the corporation or initiative in the right direction. However, these high level metrics may appear out of reach for most employees. The potential impact perceived by most employees in their specific job might be very disconnected from the high-level scorecard metrics.
You see, the balanced scorecard metrics are likely process consequences — things that stakeholders see in the marketplace, such as market share, profit, revenue, earnings per share, net promoter score.
The scorecard metrics also likely include process outputs, such as retention, turnover, satisfaction, quality defects, cycle time, productivity, gross margin.
Since all of these metrics are measurable only at the end of the work process, and are already visible at that point to stakeholders, we define these metrics as lagging indicators. Lagging indicators are extremely important as big-picture views. But because of the timing of their visibility to managers, they are not actionable metrics.
Leading indicators are lower-level metrics that are actionable by work teams. They include process inputs and in-process control points that provide early warning signals of potential waste, re-work, inefficiency, and ineffectiveness.
Inputs: The old adage ‘garbage-in, garbage-out’ describes why it’s essential to monitor process inputs. These are the materials, information, and other items that go into a process.
In-Process: Process control points refer to the most critical steps and decision points within the process; these points determine whether the output will be acceptable, and whether the process will have re-work, scrap, delays, and associated wasted time and costs.
Employee engagement in balanced scorecards is enabled by making obvious linkages between high-level and low-level metrics. Consider updating your balanced scorecard with connected levels of metrics: external metrics, process consequences, process outputs, in-process control points, process inputs, metric levers.
This visibility builds employee awareness of the role they play in the corporation’s or initiative’s success. It expands morale and passion for continual improvement.
Metric levers are another employee engagement tool in balanced scorecards. Often work teams feel they’re limited by the current definition and makeup of inputs and process steps. Infuse creativity among employees by reminding them of the levers that may be adjusted to enable improvements.
The how elements (metric levers) represent capability for the what elements (leading indicators). Abundance or lack of how factors can spell success or failure of your process. How elements are levers you can employ to improve the process inputs and process control points.
- Resources include budget, materials, information, space and tools.
- Skills include education, expertise and experience.
- Stakeholders include anyone affected by the process: workers, management, other functional areas, suppliers, customers, investors, regulators, lawmakers, community, media and so on.
- Culture represents attitudes, values, politics, habits and ways of thinking and doing things.
Self-reporting team recognition and balanced bonus components are also instrumental in catalyzing employee engagement in initiatives. Managers should also place great emphasis on the power of intrinsic motivation factors and building a customer-centric culture in the quest for maximum employee contribution to the organization’s goals.
by Lynn Hunsaker, President of Marketing Operations Partners and Customer Experience Strategist at ClearAction