Part One of this series introduced the balanced scorecard concept and discussed how to product managers can use it to align internal stakeholders on priorities.
To move from high level objectives to actionable initiatives, product managers must work with stakeholders to identify the best projects to reach the objectives. Each objective and initiative will have its own measures for tracking and at each review of the balanced scorecard the metrics should be evaluated and the causal link between initiatives and objectives confirmed. For instance, for a financial perspective, an organization may have the objective to increase sales bookings. The initiatives to accomplish this might be to increase the number of inbound leads through a pay-per-click campaign or to purchase a list of contacts for outgoing sales calls. The measure for the objective will be the total number of new bookings. The measures for the initiatives will be leads for the first initiative and outgoing calls or perhaps the number of scheduled follow-up meetings for the second.
The cascading nature of the balanced scorecard can cause the number of initiatives to grow exponentially, beyond the point where they can be accomplished successfully. It's important to ensure the number of initiatives for an individual or group are not more than they can handle in a set time period. However, by starting with the four perspectives, the initiatives will often end up being owned by a variety of groups. This is important for product managers who too often focus only on how product improvements can affect the financial outcomes. By utilizing a balanced approach the product manager can work with stakeholders to identify all the initiatives the company needs to take, not just product changes.
Each initiative may have multiple sub-tasks that need to be accomplished in order to complete it. These should be managed by the individual responsible for the initiative and not tracked on the balanced scorecard. The number of sub-tasks would be unmanageable by a group of stakeholders and forcing a strict procedure would not allow the owners of those initiatives to work in an agile manner. In order to ensure the initiatives stay on track each initiative should be time-bound with specific targets to achieve and reviewed regularly.
Once the initiatives are identified, an owner must be assigned who is accountable for completing the initiative. In a responsibility assignment matrix, such as the RACI model, the accountable person is the person how must ultimately sign off on the work as complete. They may or may not be the person responsible for completing the work. The owner must then agree to the initiative as well as the target metrics to achieve and the timeline to achieve the initiative. These should be built into the final balanced scorecard which will look something like this.
This scorecard then becomes the regular status update for the stakeholders as they review progress with company objectives. The scorecard should be promoted and readily available for viewing by anyone in the organization, but it should be reviewed and discussed at regular intervals with the stakeholder team. The cadence will depend on the size and complexity of the organization, but a weekly update of numbers, a monthly review of the issues and a quarterly update of initiatives and objectives is appropriate. This scorecard should also be utilized for yearly reviews and for the product initiatives that are dictated as part of the yearly product roadmap. While numbers are updated weekly, capturing the numbers on a monthly basis for historical reporting is probably sufficient for most groups. More granular numbers would be helpful, but are not always available.
Objectives and Initiatives have three characteristics which must be considered as the balanced scorecard is built out.
They must be measured
They must be causal, with initiatives causing the desired effect in the objective
They must be the most important items for an organization
These are important because often in an organization the data is not readily available to meet all of these considerations. In such cases, the product manager should work with the stakeholders in an agile fashion to identify assumptions and derive ways to test the assumptions. For instance, perhaps churn is not a readily available metric, but the number of cancellations is available. While number of cancellations does not take into account the size of the customer base, it's a direct correlation to churn and can be used as a substitute measurement. The initiative to correct a report, has other challenges. How does the organization know this report is the most important item to correct churn, is there evidence? Similarly, can the fix be measured? Are there multiple issue with the report, do they all need to be addressed? Because these assumptions may cause waste by working on the wrong initiatives, the team must work quickly and continually test the importance and causal relationship as well as completing the initiative. If, in a review, the impact is determined to not be as significant as was assumed, then the group needs to decide whether to continue (possibly because the level of effort remaining is small) or more likely, to abandon the initiative and move on to something more impactful.
Used in this manner a balanced scorecard is an excellent tool for facilitating a discussion, aligning the organization and measuring results. A scorecard which is published and promoted throughout the organization can be a tool used by all managers to align their own departments on those things most important for the product and the company.