subject: Small Businesses - Measuring Peformance From The Learning and Growth Perspective [print this page] Small Businesses - Measuring Peformance From The Learning and Growth Perspective
The learning and growth perspective is the fourth and final perspective of the balanced scorecard approach, as developed by Kaplan and Norton. This perspective focusses on measuring the performance of the business in relation to the organisational learning and growth required to fulfill it's organisational intent.
Traditionally, businesses have focussed on setting short-term financial goals. The inherent danger in this practice, is that it encourages short-term behaviours, with employees doing what they need to in order to qualify for financial incentives. The adverse affects of these types of measures in the long-term, is that the business suffers from the consistent failure to enhance employee, system and organisational capabilities. These shortcomings will not show in the short run, which only serves to hide the problems which will eventually impact on the business.
The balanced scorecard approach stresses the importance of investing for the future, not just in traditional investments, such as research, development, equipment and technology, but also in the development of the people, infrastructure, systems and procedures in the organisation.
There are three areas of focus for the learning and growth perspective:
1. Employee capabilities
2. Information systems capabilities
3. Motivation, empowerment, and alignment
Measuring Employee Capabilities
Simply doing the same job repeatedly, at the same level of efficiency and productivity is not enough to keep your business operating successfully. Simply doing the same thing you were doing yesterday, is in effect, going backwards, because while you are keeping still, your competitors are becoming, faster, cheaper and better. If you do not keep up, your business will soon be rendered obsolete.
Increasingly, ideas for improving processes and business performance for customers will need to come from the employees who are closest to the business processes, and to your customers. In the knowledge economy, it pays to invest in developing employee capabilities, so their minds and creative abilities can be used to achieve your business goals and objectives.
The core performance measures usually employed are:
* Employee Satisfaction
* Employee Retention
* Employee Productivity
* Competency Matrix (Organisational Competencies required versus Employee Competencies)
Measuring Information Systems Capabilities
For employees to operate successfully - they need accurate and timely information on customers, on internal processes and on the consequences of the decisions they make. Appropriate information systems are required to deliver this information rapidly.
While Kaplan and Norton do not suggest any generic measures of performance in this area, there are a few suggestions, such as:
* Strategic Information Coverage Ratio (Amount of Strategic information required versus Amount System currently delivers)
* Information Delivery Cycle Time
* Data Quality
* Uptime Availability
* Cost per Query
Measuring Motivation, empowerment and alignment
No matter how skilled an employee, they will not contribute to the organisational goals unless they are motivated to do so, or if they feel that they do not have the freedom to make decisions and take action. So it is important to have measures in place that provide an indication of the level of employee motivation, empowerment and alignment. Measures suggested include:
* Number of Suggestions
* Suggestions implemented
* Improvement measures - Reduction of Time, Improved Quality, Cost Savings, etc
* Communication of Goals and Objectives
* Implementation of Goals and Objectives (and progress against)
The Balanced Scorecard is all about maintaining a balanced view of your business's performance and putting the reins of management in your hands. The learning and growth perspective ensures you do not take a short-term view of business's performance and encourages small business owners to invest in activities and behaviours that are an investment in it's people, it's systems and it's future.
Karen L. Paiyo is an Australian Small Business Counsellor, supporting and nurturing the spirit of entrepreneurship in the Asia Pacific Region. Karen empowers small business owne
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