This case is about the experience with the Financial Scoreboard at a thirty-three person firm. This is an interview with the CEO, who has used the Financial Scoreboard™ as a business-planning tool with all his employees over a three-year period.

Jan ( JW Ballard ): What first drew your attention to the Financial Scoreboard?

CEO: I used an earlier version to run a company with an entirely different business model, and with entirely different challenges.

Jan: How did you begin to address your performance-management challenges?

CEO: Our senior team started by talking through Three Bottom Line Theory and looking at the Financial Scoreboard to see how this would apply to our challenges. Based on what we learned from our discussions, I delivered a presentation to all staff and walked through a performance-measures example using the Scoreboard.

Jan: Could you give some more detail?

CEO: We have four senior staff here, and we worked through a basic example and talked about how we could engage the full team in looking at our financial realities using the Financial Scoreboard. We have always done financial reports at our staff meetings, but pretty much to a passive audience. They listen, but, other than taking it in at face value (whether we are doing well or not, whether the budget was of concern), they really didn’t know what to do about it. So the senior management team presented it to the entire management team in two four-hour chunks about a month apart.

I found the group to be engaged, but not quite knowing where it was all going. Then there was an epiphany as we realized that as we get into performance measures, that suddenly we are going to be very accountable. So there was a little bit of hesitation, but overall the amazing thing was the group responded favorably as we started talking about some of the key performance indicators and, more important, how our operating decisions related to our financial results and our financial goals. Things like, if you were saving money on expenses, what does that mean for our return on assets and return on investment, and how does that work in terms of cashflow and profitability? There were lots of light bulbs coming on.

So that was the introduction and since then we’ve closely examined the situation of each team at least on an annual basis, a little bit of projection and accounting based on the Financial Scoreboard. We used that as an annual analysis tool and would present that to our board, and obviously to our whole finance team, and we’ve had some pretty remarkable results. We got the whole team behind accelerating our billing, which made a huge one-time increase in cash flow, which obviously corresponded to a cash ROI. So that would be a good tangible example of one major decision. We knew it would be very difficult to figure out how to accelerate billings. But they worked through it knowing what the impact could be, and that made that decision more tangible and easier to buy into because they could see a major positive financial implication.

Jan: What about fleshing out the KPIs ( Key Performance Indicators ) at an operating-team level?

CEO: We’ve done that, some deeper than others. Every group, for the most part, has a set of operating KPIs that they are working on. The interesting thing is that KPIs that had been kept separate and distinct from the financial side are now related to the financial results even by people not in accounting or in finance.

Jan: And any employee can do that?

CEO: Correct. That’s been the major impact. Interestingly, we also had some employees who quit almost as soon as we began this initiative. I think that was because they didn’t want to be held accountable to generating results that would be obvious to everyone.

Jan: In the core team, what are the kinds of shifts you’ve seen?

CEO: I think the difference is the quality of their decision-making. That they can now conceptually understand the financial impact, and therefore make better decisions.

Jan: Did you shift in any way your capacity to delegate responsibilities?

CEO: Absolutely! That’s the whole point. As a manager I feel comfortable that better decisions are being made because they understand the financial implications. One always has problems when people are making decisions in a vacuum, so to speak. We had done a lot of other cultural change to make sure everyone is involved in strategy, so the last thing missing was the financial side. The Financial Scoreboard helps close that gap.

Jan: Great. So the performance measures groups meet once a year, you have done a cycle of three at this point?

CEO: We’re on our third one.

Jan: And is that a multiple-meeting process?

CEO: Yes, One is an evaluation and then the next one is budgeting and forecasting.

Jan: Do you have any particular “ah-ha’s” or light bulbs?

CEO: Absolutely! It’s amazing how many people will surprise you once they understand that information. It helps all the way around. Even to this day they will make statements such as “I did this today and it saved expenses and it’s helping our return.” It creates a different language that is very positive. Even our receptionist actively asks questions about cashflow and return.

Jan: What are the next barriers you now perceive that have to be addressed?

CEO: The barrier is about performance in terms of sustainable cash-flow and income. Where I think we’ve got to spend more time is getting more engaged with financial forecasting, and active measures to improve efficiency and effectiveness. For instance, using the Financial Scoreboard much more in a predictive capacity.

Jan: Thanks for your telling how the performance measures journey has progressed so far.