How to drive corporate performance with a business strategy and scorecards
While working with clients and attending pest control industry conferences, PCO Bookkeepers partner Anthony Pepe hears a lot of talk about operations, finances, and marketing.
What he doesn’t hear many pest professionals discussing is a strategy—and he’d like to see that change. Earlier this year he attended Harvard Business School’s “Driving Corporate Performance” weeklong executive education course at the recommendation of Matt Jesson, founder of Green Lawn Fertilizing and Green Pest Solutions in West Chester, Pa.
While rubbing elbows with impressive instructors and professionals from all over the globe in a variety of industries, Pepe learned how companies can manage their performance and create value by developing a business strategy statement, a Strategy Map and a Balanced Scorecard.
First, it’s important to understand that strategy is your game plan, a strategy map translates your strategy into actions and the Balanced Scorecard provides measurement and focus. The instructors, including Robert S. Kaplan and Robert Simmons, explained that these components are a supplement to your mission (“why we exist”), core values (“what’s important to us”) and vision (“what we want to be”).
Identify your Business Strategy
Many small business owners don’t believe the strategy is important or that they need to share it with their team members, but that couldn’t be further from the truth. Pepe says, “you must identify your strategy and share it with your employees to maximize your company’s performance, whether you have three employees or a thousand. If your team members don’t know what their purpose is besides coming to work to collect a paycheck, you won’t be as successful in meeting your goals as you could be. You have to identify and communicate your strategy to get results.”
Your strategy statement should be less than 50 words and include the following:
Objective: Your objective is the metric you’d like to achieve. It may be reaching a certain number of clients or the desired revenue figure. In a pest firm, your objective may be to grow to a certain number of routes.
Scope: Your scope defines the type of business you will or will not pursue. It creates boundaries for employees and managers. Maybe you want your pest management firm to provide only general pest control services and not do bed bug work or fumigation. Maybe there’s a geographic area you won’t serve. It’s important to define your scope because you don’t want your salespeople or employees spending resources outside of your area of expertise.
Advantage: Your advantage should capture your value proposition—why would customers want to use your firm over your competitors?—and the unique traits that deliver your value proposition. For example, the advantage of PCO Bookkeepers is being industry-specific. For pest control, perhaps you’re a completely “green” pest firm. Or you’re all about providing next-day service. Your advantage is simply a way of differentiating yourself from the pack. There has to be a reason why someone would use your company over another company.
A business strategy can and should be used in any size company. Additionally, consider whether it’s best to have a top-down approach or to ask departments or branches to have their own strategies. Strategy can be as broad or narrow as you want—it’s about tailoring it to what you want to accomplish.
Map your strategy
Once you’ve defined and shared your strategy, the next step is to execute it. This is accomplished through a Strategy Map. A Strategy Map provides a framework for managers and employees to follow.
There are four components of a Business Strategy Map
- The financial perspective describes the outcomes of the strategy in financial terms, such as revenue, profitability or other financial ratios.
- The customer perspective outlines what your target client’s value—maybe it’s quality or innovation.
- The internal process perspective names several essential processes that are expected to have the greatest impact on a business strategy.
- The learning and growth perspective identifies the intangible assets (jobs, systems, and climate) are most important to the strategy.
Companies have different priorities and may apply Strategy Maps in different parts of the business, such as branches or departments, as they see fit. The point is to create a structure for managers to understand whether or not they are being successful (and will earn their bonuses!) based on actual versus targeted results as communicated on the Balanced Scorecard (see below). Your Business Strategy Map should evolve as your company grows, and you should review and update it periodically. If you need to pivot—maybe there’s a market change or something happens in the economy—your strategy may change.
Create a Balanced Scorecard
The Balanced Scorecard is how you translate strategy into action. It connects the Strategy Map to measures, targets, and initiatives. Having balance provides longer-term stability and makes the company less susceptible to competitive and market changes.
For example, from a financial perspective, a pest company may set goals around and measure profitability and revenue. In the customer quadrant, pest companies may establish indicators around client surveys like Net Promoter Score, cancellations or referrals. When it comes to internal processes, they may measure route efficiency, windshield time or customer response times. Finally, for learning and growth, a pest firm may track and measure CEUs or other employee training endeavors. All of these indicators are monitored with actuals vs. targets. They are supported with company initiatives and budgets. Ideally, managers can always see how they’re doing in the four areas on a monthly, quarterly or annual basis.
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Marisa is Content Editor for PCO Bookkeepers, PCO M&A Specialists and Turfbooks.