To Balance or Not…that is the scorecard question at hand…

This year, as in year’s past, I attended the BSCOL (http://www.bscol.org) North American Summit in San Diego (well, Coronado, technically speaking)…An invitee of Microsoft who has sponsored our acceptance into the BSCOL hall of fame, I was lucky enough to have lunch for the 2nd year in a row with David Norton, one of the famed founders of the balanced scorecard methodology. Quick witted, candid and passionate about PM, Mr. Norton provides for scorecards what the Coronel provides for chicken, a voice in a muted and for some, boring sector of the business world, performance management.

Ruled by the all mighty buck, many American corporations have focused 80% of their efforts on the top line, rather than looking to optimize and retain (thus, leading to future growth) their current customer and cost bases. Fueled by the rush of going public, I would 100% agree with this mentality when in "start-up mode" — But companies that continue to steer the ship through these seas will be remiss when their glass ceiling from crashing in, and new customer acquisition becomes almost impossible, as competition catch onto whatever new business you are involved — Think about this:

In 1996, when the boom that would soom accompany online travel was a mere glimmer in the eyes of future CEO Rich Barton, the focus on building this new and volatile disruptive technology was growing the top line, which most investors would agree with (myself included). 10 yaers later, the online travel space is filled with competitors all claiming to have the lowest price point, driving the best traffic of inventory (pun completely intended) and room nights, each attempting to out-do the other, in an attempt to reach a pie-in-the-sky point of being numero uno. But the glass ceiling of new customers came hard and came fast for all players in the game, as more and more supplier direct sites went up (think, hilton.com and all of the publicity instigated by the all too famous daughter of said namesake), luring away the less-than-usual non-sticky customers, sometimes offering a mere $1 less than what they claimed to be "their favorite travel site." And so it goes…

For us (those of you who know our history and Rich B will know which company I refer to), we began our performance management and balanced scorecards long before many, tieing all customer satisfaction metrics to dollars early in the game. For example, if your satisfaction index scores (top 2 box) increased from 85% satisfied to 88% satisfied, what does that mean to the business? Does it mean softer dollar gains or savings or is it statistically insignificant?

By utilizing the statistical tool known as a Partial Least Squares model, we were able to derive which factors (or survey questions) influenced our key drivers (overall Satisfaction with company and Net Promoter Scores or ‘likeliness to recommend to family/friend’) to our revenue and conversion %. By doing this on our scorecards, we were able to not only justify the existense of scorecards (as I have mentioned before in my blogs) but also justify the overall cost for the program, headcount, and technology (Microsoft’s BSM).

This fulfilled the financial perspective of the BSC methodology.

The survey fulfilled two perspectives, one was an internal, employee facing survey, thus fulfilling the learning and development perspective, while the other provided the customer’s perspective.

Without having all sides of the coin up front in a limited, relevant view, would a business be able to steer their ship threw the icy waters without a Titantic 2 event sinking them completely…? Maybe that is the question at hand instead…

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