Financial and Non-Financial Scoreboards – our “jumbotrons”
I loved playing sports in high school. I learned that teams worked well together on a common goal – winning the game – when we could all track our successes and failures in real time. It just took some time for me to understand how I could apply that lesson to my business.
Here’s what I mean:
It’s coming up to halftime and you’re up or down by a few points. Everyone on the court or pitch has already agreed what will define a win and knows the score because it is stated clearly up on the “jumbotron.”
This is the opportunity to ramp up their game…to preserve the lead or get it back and they, in either instance, will have to work as a team to pull it off.
A financial scoreboard has the same effect. But business owners, for many different reasons, are often nervous about sharing “the score” in the game of their business. And they’re missing out on an opportunity.
Your team cares about the score…when they know what a “win” looks like
One of the single biggest turnarounds in my landscaping business came by jumping over two big hurdles. I was inspired by my own business coach and my education in the rules of Open Book Management:
- I committed to sharing our company’s finances with the team.
- I committed to teaching myself and my team Financial Literacy. NOT the type an accountant learns, but the stuff that clearly shows us all how our actions are linked to the outcome, so we could do something about the outcome with intention.
Our scoreboards are posted in our office and updated weekly by our team. And one of our company “huddles” is dedicated to talking about the numbers, what they mean, and how we as individuals and collectively can take action to improve them.
Everyone on our team knows – and understands – the score. And a landscaping company that started in 1994 with one guy, a shovel and some hustle has grown into a team of owners and employees who come to win the game every day.
What are the elements of a good financial scoreboard?
First off, we don’t have one scoreboard. We have several…because there are different measures of success in a company. The sum of the scoreboards is greater than the value of the individual parts.
Second, it’s important to have some privacy when it comes to certain aspects of your business. It doesn’t mean you have something to hide, it just means there are layers of your business that are just that…your business. It might be financing, legal agreements…maybe a relationship you have with a silent partner or family member.
Open Book Management doesn’t mean sharing everything. It means finding ways to share the meaningful scores that help your team make better decisions.
Our company has three main “jumbotrons.” They can change from year to year based on what we agree is most important to measure in the coming twelve months. All are updated weekly based on actual to-date data, forward looking forecasts and feedback from our team.
They are all in constant comparison to the plan we made in our Annual Planning Meeting.
From Sales to Gross Profit and reviewed weekly by everyone in each department. 60% of each employees eligible “Profit Gain Share” is determined by the results relative to the “Plan” from the department they work in.
- Company Wide Financial
Results from our Departmental Scoreboards are funnelled here to give a comprehensive view from Gross Profit to NOP (Net Operating Profit) and the entire companies operational financial health to everyone. 20% of each employees eligible “Profit Gain Share” is determined by the results relative to our “Plan.”
This scoreboard tracks the “soft assets” of our business. It’s where we highlight, plan and track our education, leadership, team-building, client development and the other important aspects to achievement that can’t be found on a financial statement. 20% of each employees eligible “Profit Gain Share” is determined by the results relative to our “Plan.”
A good scoreboard requires some effort to build and maintain. And it takes some humility to own up to mistakes made – either in administration, quoting on jobs or onsite hiccups that either weren’t anticipated or managed well.
But an accurate scoreboard will reflect the actual score in the game. Everyone has a chance to learn and decide how to advance the goals of the company.
A good financial scoreboard makes you a better leader.
Here’s what happens when you’ve got an accurate, real-time scoreboard: you have an opportunity as a leader to put your trust in the team…your employees become onsite leaders.
We had one of the busiest, and hottest summers, on record in Kelowna a few years back. Yes, it gets hot in parts of Canada…like, 104-degrees-in-the-shade hot.
It was about 3:00pm on a Friday afternoon, I was walking to the office and saw one of my maintenance crews pulling in. I was shocked, because I knew that Fridays have always been one of our biggest days – our clients want their place looking good for the weekend. So, how could they possibly be clocking out?!
I could feel my blood temperature rising and was ready to let them know that.
But first I needed something from the office so I continued on – and while doing so I glanced at the departmental scoreboard and realized they were ahead of plan. I even knew this from our weekly huddle the day before…
My natural instinct is to push myself and others so my emotions kicked in for that moment. And then the numbers on our scoreboard, hanging in clear view, reminded me of what was important: my team knew the score. They’d hustled all week – in some extreme conditions – and they were headed to the bench at halftime with the lead.
It’s common for entrepreneurs to be “first in, last out” personalities. But expecting everyone else to be the same from the moment you hire them is an impossible, unreachable standard. It’s not how you get and keep good employees.
If you take the time to build your own scoreboard – and commit to teaching your team how to read it – you’ll start to enjoy running your business again. And when you’re ready to retire, that scoreboard will show the next owner the exact score in your game. And it’ll be something you can brag about.
I’ve developed tools and resources to help other business owners build their company scoreboards.
If you’d like to learn more, contact me.