For example, in a scorecard that I use at CMOE, Invoice to Payment, we measure the number of days between when an invoice is sent to a client and the day we received payment.  Most of our clients pay within thirty to forty days.  However, by monitoring the scorecard daily, I noticed that some of our clients were taking to up five months before they paid the invoice.  This made the performance line fall above the target goal of 35 days on our scorecard.  My question was why?

What was happening?
A couple of things came to the surface when I talked with a specific handful of companies about why it was taking so long for us to receive their payments.  The first response usually was that the Accounts Payable team was not getting the invoice.  Were the invoices lost in the mail, or buried on someone’s desk?  We began e-mailing all invoices and past-due notices directly to the person who placed the order in addition to Accounts Payable.  For some reason, people respond more quickly to e-mails.  Almost immediately, I started to get e-mails instructing me on how these companies preferred to have invoices submitted.   Getting the invoices to the right parties made a big difference in the time between invoicing and receiving payment.  International invoicing was entirely another problem.  Through trial and error, we found that by simply adding bank information as a mandatory item to every international invoice, the clients were able to get payments to us in a much more efficient manner.

The End Result
Overall, the average payment score went from 58 days to 28 days in a matter of eight months– that’s Thirty days of improvement!  You may ask, “Why didn’t the AR Aging report say the same thing as a score card?”

Why a Scorecard?
I worked with a biweekly report for three years in order to decrease the number of outstanding invoices.  In 2010 the average still seemed high.  The score card diverted my attention from the number of outstanding invoices to the number of days between invoice took to be paid.  The visual reminder of a scorecard also motivated me to think about this issue on a daily basis and prompted other team members to get involved.  I don’t know if thirty days will make a big difference to your company, but to our Regional Vice Presidents 30 days was huge.  Improved cash flow and the use of measurements allowed them to make more accurate strategic plans for the company.

As we walk the halls of the companies with which we work, we often see the “metrics wall”.  This wall is usually in a high-traffic area.  Many employees walk by the “metrics wall” on a regular basis, but how many employees actually stop to look at it?  Our observation has been that not many bother to take the time.

Why is that?  For many employees, the “metrics wall” is just another wall.  More often than not, those employees who walk by without stopping have no idea what it is that the metrics are tracking.  They don’t know how to read the charts and graphs; they don’t understand what the numbers indicate.  Those few who do understand what the charts, graphs, and numbers mean often don’t feel like the information has any real correlation to the impact that they have on the organization.

Making Them More Effective

How can we make the “metrics wall” more effective and motivating?  A good place to start is making sure each employee understands what it is that they contribute to the organization.  Each employee must recognize what they are paid to accomplish.  Once employees understand how they contribute to the organization’s bottom line, understanding how metrics reflect their accomplishment becomes much easier.

Another idea is to create individual scorecards or metrics that reflect each employee’s unique jobs and responsibilities.  Making the scorecards personal and specific increases accountability and responsibility for results.  Once Employees create their scorecards, they can place the scorecards on their cubicle walls or office doors, giving leaders a way to quickly see how the employee is doing and an opportunity to give the employee feedback on his/her work.

Is Is About Employee Engagement

Metrics, when done the right way, can be very motivating to employees.  The key is to ensure that employees understand what the numbers indicate and why the specific action is being tracked.  Using metrics or scorecards in combination with effective and frequent coaching, feedback, and goal-setting can result in rapid improvements to overall productivity and profitability, meaning that your business will become and remain more competitive over the long term.

Dr. George Odiorne wrote “Things that don’t change remain the same.  Things that remain the same quickly become obsolete”.    He goes on to suggest that if we look at our behavior and our processes that are no longer serving us, no longer making sense in terms of what we need now or what we aspire to next, and speed up this process of obsolescence we become innovative.  It’s a matter of leading the marketplace and active process improvement.

These changes or innovations don’t have to be monumental.  Simple opportunities for improvement present themselves if we just maintain an open mind.  My favorite example is wheels on suitcases. The wheel was invented when?  And humankind has been toting around suitcases for how long?  Yet it’s only been 20 or 30 years that wheels have become a common fixture on our luggage.  If we had done this sooner would it have been a worthwhile innovation?

Some of my favorite examples of ‘slow to innovate’ are in packaging.  Some of us remember the old metal quart oil cans.  Now who thought these were a good idea?  You needed to store a specialty spout that almost always dripped and was quite impractical.  Sure it was before the wide use of plastic, but there were many types of containers at the time that had spout-like openings.   An old waxed milk carton would have worked better!

Innovations in the way we communicate, seek and use information and enjoy our music are only a few examples of changes that became innovations which increase our productivity and increase profitability, delight us and have made fortunes for those that chose to imagine.

Encourage and empower  your people to find innovations that can improve your process and ultimately increase your profitability.  Don’t wait until the competition finds a way.  Lead the ‘idea marketplace’.

To keep score they painted a miniature oval on the floor in the back office.    Each person got to choose a miniature car with the number of their favorite NASCAR driver.  Once the dust settled over who was going to get #3, Dale Earnhardt’s old number, the race was on.

Each time an associate sold their item of the week they got to advance their car one length.  The first ‘car’  to the checkered flag won.
It was a raucous week.  Lot’s of fun, lots of incremental sales, and the store increased its sales for the week by over 6.5% which was an unqualified success.

In addition to making the scorecard fun by picking a game board that the team related to and had an interest in, this team captured the essence of effective scorecards as motivators.  To be effective, a scorecard:

• Has to be about what I do

• Has to “talk” to me

• I Have to touch it and own it to believe it

• At some point is has to make me feel successful, whether it is hitting a target, showing improvement, or reinforncing my contribution

Simple, daily profit focused scorekeeping can be and should be fun.

Leave a comment telling us what was the most unique or innovative score keeping method you have seen in your company or another?

Or read this example of a poorly done scorecard: Scorekeeping and Leaderboards to Drive Performance

The word “Produce” is derived from the Latin word pro (forward) + ducere (to lead – more at tow [or to draw, to pull]).  If you look at the dictionary, produce is defined as:

1. To bring forth
2. To yield
3. To bear
4. To draw out
5. To cause to happen

Producers vs. Non-Producers
Whether you work in a mine, department, or a small team, there is a critical need to yield, to bring forth, to bear results.  In other words, to produce results.

In business today, there is a need to differentiate the producers from the non-producers.  It is not about digging up a bunch of HR disciplinary and performance issues and staff changes, but like a mine measuring the volume of ore per truck load, people also need a measurement of effectiveness to determine if they are being effective producers.  If they’re not producing, they need identify what efforts they need to shift or determine what measurements will assist them in identifying what “producing” is for them.

Organizations everywhere spend significant amounts of time and effort on the wrong things, such as tactical meetings.  That’s not to say these items shouldn’t be done, but this significant amount of time and effort doesn’t produce value added results.

The mine is a successful operation because the people understand they must produce results.  If individuals don’t understand how to maximize the value they bring, it is imperative for management to sit down and help them discover and identify how to measure what they are producing. You must have a results based leadership mindset.

Why We Need to Make Non-Producers Produce:
We all know what happens to non-producers.  At an organization level, you are killed by the competition, stock price drops, companies go bankrupt and are sold off,  or become a target for corporate raiders.  Regardless of the outcome, it’s not good.  However, if a culture of “producing” can be established in an organization, it will have a direct and quantifiable impact on the bottom line.

Start improving your bottom line and overall success today by asking yourself and your employee, “are we producing results?”

This past week I was assigned to pick up the food for a volunteer test group.  I went to get Pizza and as I was standing at the payment counter, I noticed a computer screen on this wall.  In big, black, block print, it read “LEADERBOARD.”  I was immediately excited to see this.  As I was waiting for my order to be finished, I was trying to identify what was being tracked by the “leaderboard” and how it worked.  It was obvious that the leaderboard was networked with other stores and I quickly noticed that the store I was purchasing from was second from the bottom.  This piqued my interest further.   I decided to speak with the manager to understand how it worked.

Me:  I noticed your leaderboard on the wall; it looks interesting.  It appears to be tracking certain success factors and percentages.  Do you get rewarded when you hit certain levels of performance?  The reason I ask is I work for an organization where we use effective management, measurements, and scorecards to drive bottom line profitability.

Manager:  Yeah, it tracks just about everything in the store from the time a phone call was placed to the time the order leaves the store for delivery.  Corporate can pull up data on just about anything in the store.

Me:  It doesn’t sound like you believe it’s a good thing by the way you are speaking.  Do you get recognized or rewarded for hitting certain levels of performance?

Manager:  No, it basically indicates what you have to do as a minimum to keep from getting fired.

The manager continued to explain that this tracking system was to help employees have higher levels of customer service, reduced mistakes, and shorten production times, among many other things.  While those are great focus areas, I was emotionally deflated by the way he explained it.  This employee was telling me that the “Leaderboard,” this scorekeeping system, was the worst thing about his job.

If organizations are to succeed against strong competition and have higher levels of profitability, measurement cannot build fear and negativity into employees.  Driving bottom line performance with the right measurement will engage people and get people excited and committed to push performance levels.  By using our piles of data, managers can help employees sort out measurements that drive individual results.

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• People work an average of 45 hours a week; they consider about 17 of those hours to be unproductive.

• More than half the participants, 55 percent, said they relate their productivity directly to their software.

• People spend 5.6 hours each week in meetings; 69 percent feel meetings aren’t productive.

• Only 34 percent said they are using proven scheduling tools and techniques to help them gain more free time and balance in their lives. Likewise, 60 percent said they don’t have work-life balance, and being unproductive contributes to this feeling.

• Women had an average productivity score of 72 percent, compared with 71 percent for men.

• The most common productivity pitfalls are unclear objectives, lack of team communication and ineffective meetings — chosen by 32 percent of respondents overall — followed by unclear priorities at 31 percent and procrastination at 29 percent.
(Source:  Microsoft Personal Productivity Challenge)

If you are responsible for Profit & Loss, top line growth, cost management, or higher productivity, this study should have your attention.  What type of impact would it have on your organization if you could reclaim the 38% of vanishing productivity?  Most organizations would be able to increase profits, drive down costs, and simply get more done with existing fixed costs and resources.  Surprisingly, organizations can do this by implementing the right tools and processes that:

• Clarify and communicate goals of the organization in a way that is relevant to each individual.  This requires commitment, results based leadership and is the responsibility of leaders, managers, and supervisors.

• Links the contribution of employees to organizational goals and helps them see why they matter to the organization.

• Use communication, feedback and coaching to build motivation and commitment all while helping employee see how meaningful and engaging the drive for increased profits  and productivity can be.

Develop your people to be more productive and performance focused.

Most satisfied employees feel empowered. This means they must have the tools, support, training and ability to make decisions. In addition, a leader needs to become more of a coach than a “teller” or dictator. Coaching creates an atmosphere of collaboration, trust, and confidence, where constructive and sincere feedback is accepted. Remember, “The worst feedback is no feedback”.

Employees need to understand how their job function contributes to the bottom line of the organization. Employees will tend to work harder if they feel like their work is meaningful and adds value. My first job in high school was at a dry cleaner. I staffed the front counter taking in clothes, entering the information into the system and creating an invoice for the customer. The job was not exciting and every day I wished for the fewest customers possible. When a customer came in I would get the order entered as fast as I could and get back to doing nothing but wait for the next customer. Looking back, I imagine that not everything was entered properly and those mistakes, although small, cost the company some profits.

I wonder if it would have been different if the manager took some time to explain how my work added value to the company through something simple like a scorecard. What if we created a scorecard review of my key functions so I could see the importance of the work I was doing. Even the “front counter” employees need to understand how important the work is that they are doing.

If employees are happy, customers are happy. When customers are happy, they come back and tell others of their experience. Repeat business and referrals equal greater profit. Sometimes we need to step back and look at our own performance. Are we focusing solely on the profit and forgetting about the people driving the profit? Are we creating an atmosphere where employees are coached or are we a dictator? Do the employees know how important their job function is? Do the employees feel empowered and find their work meaningful? Are we tracking the important functions that help build profit? We need to look at these questions often as we lead for greater profit.

So how does Warren Buffett’s success apply to you?  In November 2009, Warren Buffett and Bill Gates participated in a Town Hall meeting at Columbia University.  During this event the following question was posed by a student:

Student Question: “Mr. Buffett, Mr. Gates, thank you for being here today.  My name is Justin, I’m a second-year MBA, as I get ready to graduate, I was wondering, what’s the one thing that your MBA didn’t prepare you for when you got out into the real world?”

Warren Buffett Response: “Well, I was — it prepared me very well, not the whole degree, but specific professors prepared me very well for what I wanted to go into.  I knew I was interested in investing, like I say, from the time I was six or seven years of age.  So I was lucky that I found what turned me on early on.  And I had these two marvelous professors here at Columbia that just being around — I had read all the stuff they had written.  So it wasn’t I was acquiring lots of incremental knowledge but I was getting inspired.  They were terrific for me.  They treated me like a son.  They would take me out to dinner.  Ben Graham did the same thing for me.  So it gave me confidence in myself.  It just propelled me into a field I already love with a terrific tailwind from these professors that believed in me. [APPLAUSE]  But let me add one point because — to the MBA situation.  Right now, I would pay $100,000 for 10% of the future earnings of any of you.  So anybody that wants to see me after this is over — [LAUGHTER] [APPLAUSE]  If that’s true, you are a million-dollar asset right now, right, if 10% of you is worth 100,000?  You could improve — many of you, and I certainly could have when I got out, just in terms of learning communication skills.  You know, it’s not something that is taught.  I actually went to a Dale Carnegie course later on in terms of public speaking.  But if you improve your value 50% by having better communication skills, that’s another $500,000 in terms of capital value.  See me after the class and I’ll pay you 150-thousand.”

Monetary Value of Learning and Communication
This matters because it illustrates the importance of learning and effective communication.   As individuals, it is important to develop ourselves.  Whether you get an industry trade degree, look at going through a mini MBA program, or complete a Masters Degree at Columbia University, ongoing development of yourself is important to you, your future success, and ultimately your net worth.  Investment in learning will pay huge dividends.  If good communication skills are worth an additional $50,000 to Warren Buffet, it’s worth far more to you individually.

Heavily Invested
Ask yourself this question.  What would an investor ask you at the annual shareholders of YOU meeting?   At a high level, you might hear questions such as:
- Do you understand what it takes for you (and your organization) to win today?
- Do you understand where and how we can increase profit margins?
- Are you cutting operational expense to increase profit margins?
- How can you create distance or differentiation from the competition?
- Is the organization focusing on what matters?

If you can answer those questions, you are doing great.  If not, look to refocus your efforts.  Educate or develop yourself to the point where you can answer them.  You are heavily invested in yourself so what do you want your future earnings look like?  Are you a million-dollar person?   It’s hard to argue against hard results.

Take John for example. John recently became the team leader of 14 people who are responsible for $1,000,000 in production. Doing their very best, John’s team delivers 90% of the million dollar production budget. Managing by instinct, John tends to avoid conflict, uses the relationships with his former co-workers to emotionally bribe them into doing additional work, and measures success in the number of days passed where John manages to fly below the radar of the management team. John deserves better. He needs to be given the tools needed to do his job well. A small investment in his bottom line leadership skills will have a two-fold return: A gift to John that will last a lifetime and the opportunity for you to close your $100,000 budget shortfall.

Who’s holding you back? Who, not what, is standing in the way of your initiatives to increase sales, cut operating expenses and learn how to increase profit margins across the board? There is a John in your organization. He deserves a chance to succeed and continue to grow his contribution to the organization. An investment in John is not just an investment in John; he has 14 people reporting to him and they will also reap the benefits of his development. As John becomes a better leader we create the culture that will meet the demands of your business tomorrow and build ownership and commitment in the next group of potential leaders.

Do you think it’s too hard to find the time? Too hard to find the money? Stop for a moment and do the math. Can you really afford not to?