Keeping Score

How Do You Know if You're Winning?

In sports, we enjoy the game because we can easily follow the action and keep score. By following the action and keeping score, we experience it all—the stories behind the score, what individual actions and team accomplishments changed the score, what plays made the difference, and ultimately how The Game was won. Every sport has its scoreboard, scorecards, and team stats—and so must every business.

However, unlike sports, too many businesses are running their companies by focusing their players on the stats and only the stats, all without ever really knowing if they’re winning or losing. They have no visibility to the center-court scoreboard (the financials).

If Youre Not Keeping Score A number of years ago, while on a visit to a Fortune 500 company, we were proudly led through its expansive facilities as our guide lauded the extensive scoreboarding that was happening at every turn. Man, they measured everything. They had KPIs on safety, utilization, units, employee engagement, and even temperature. In total, they boasted an impressive 157 KPIs they tracked at any given moment.

At the culmination of the tour, the executive beamed with pride when he asked what we thought of all this amazing tracking and measuring. Jack asked him, “So how do you know if you’re winning?” Dumbfounded, the exec retorted, “Well, we’re winning in some areas and struggling in others,” pointing to different scorecards in the meeting room. Stack asked again, “But how do you know if you’re winning? Are you making any money?” It seems the only thing that wasn’t being measured in that incredible operation was if all their efforts were worth it. They weren’t watching the ultimate scoreboard—the financials.

Companies that focus only on KPIs can sometimes miss out on larger goals. Is it possible to be profitable and still run out of cash? Is it possible to hit quality goals and still lose a customer? Absolutely. Balancing all the aspects of business simultaneously is imperative, albeit challenging.

Financial Scoreboard

It was 1494 when a Franciscan friar named Luca Pacioli popularized financial statements like the P&L we use today. But one thing he forgot to include was another column—a column where you can put someone’s name: the owner of the line item.

Each person in the business has accountability for those line items you are building. All of a sudden, the financials don’t seem like something an accountant dreamed up—they are the facts of everyone’s daily life.

The following are four important concepts that make Great Game scoreboarding unique and powerful.

Common-Sense
Financials

Turn your financial information into a common-sense, simplified scoreboard. Your financial scoreboard is a simplified version of your financial statements that revolve around the company’s Critical Numbers.

When we talk about common-sense financials, we mean financials that are unpacked—providing information not just about the whole company or business unit but about individual departments and processes, showing what key measures are needed in order for employees to understand how the financials are created.

Bottom-Up
Financials

Instead of sharing financials with your employees, try asking your employees to share the numbers with you. With The Great Game
of Business, information comes from every corner of the business into an accurate, up-to-the-minute big-picture view of the company’s
financial performance.

In time, each line item on the financial scoreboard will be owned and represented by your people as they learn the business.

Forward
Financials

You can’t change history. We want information in real-time, not past time.

Many companies steer their businesses while facing backward. They tend to measure the past, which is telling them only what has happened. The key is spending less time discussing what has occurred and more time discussing what will happen in the future—and what we can do differently tomorrow to help create a better future. Design your financial scoreboard in a forward-focused format.

Living
Financials

The primary purpose of creating real-time common-sense financials is to help bring operational and financial realities to life and make them interesting, understandable, and relevant to everyone in the company.

Frontline employees benefit from being responsible for tracking, measuring, and reporting their own operational numbers
as well as how those numbers impact financial results. These employees are responsible for helping to gather the data that goes into their line items, for forecasting their numbers to the company, and for understanding what’s happening to their line items over time.