Michael Gerber once said that every startup founder has an entrepreneurial seizure. The soon-to-be business owner realizes they are great at widget building, so they start a business. Later, they find out how hard running a business is because it also entails marketing, sales, and operations, along with administrative activities such as accounting, payroll, banking, and insurance.
Accordingly, I’m calling the most important scorecard in contract manufacturing the one that revolves around marketing and selling. Operations-centric scorecards are critical, but those are typically mastered early in the game by the business owner who had the entrepreneurial seizure. Their strength is typically in operations, not marketing and selling.
Why Contract Manufacturing Scorecards?
Are scorecards overrated in business or over-emphasized? Are they even needed in the business?
Before moving forward, let’s step back and look at scoreboards in another context, one you probably know very well.
Here are a few takeaways from the video above:
- Scorecards give the score in real-time, and this immediate feedback can alter the future behaviors of those using them
- They tell us what has happened and provide clues as to what can happen
- Effective scorecards eventually lead to self-managing teams
- When self-managing teams know the score, they have better insights into how to improve their odds of winning and getting better
A Business Model Primer
Before providing a scorecard example in contract manufacturing, I want to show my favorite customizable framework for any industry.
Contract manufacturers only have three distinctive roles: to find clients, to get clients, and to delight them. Let’s see how this applies to scorecards.
Incidentally, I’m not saying scorecards for operations are not important; they are. WIP reporting, customer analytics, and forecasting are critical too.
My experience reveals that contract manufacturers are generally weak in marketing activities. While they may be good at selling, tracking performance can be lacking in that critical activity too.
A Simple Contract Manufacturing Scorecard Example
Do a Google search on business scorecards, and you’ll find many posts on why they are important. You will also encounter the term ‘KPI’ frequently in these posts. Rarely will you find a how-to on creating your first business scorecard.
Let’s buck the trend by examining how easy these scorecards are to create. Please do not get hung up on the software. I’ve patterned several manual scorecards on large dry-erase boards where the technical skills are limited with the ownership team. Instead, focus on the simplicity of the scorecard creation.
Here are a few reminders for your first business scorecard:
- Keep it simple
- Teach every staff member how to read and use the scorecard
- Keep the process fluid – update actuals promptly and update goals as needed
- Consider one main scorecard for the three distinct roles of the contract manufacturer
- While this was not addressed in the video, provide the means and resources to help team members achieve the weekly goals
- Regarding those weekly goals, set up a weekly After Action Review for all team members using the newly-created scorecard for input and guidance
A Word on History
This is not a post on data viz or data analytics. However, as you build history, consider showing views for the trailing twelve or thirteen weeks. Also, consider employing process behavior charts to work on continuous improvement projects.
To learn more about data viz and analytics, you can check out the following episodes on the CFO Bookshelf Podcast:
- Practical Performance Measurement with Stacey Barr
- Measures of Success with Mark Graban
- Why Do KPIs Have to Be So Hard?
Three Improvements Stemming from Scorecards
Once you get started with your first scorecard, several improvements will occur in your business:
- Your weekly meetings will become more focused, and staff members will be more engaged
- Your scorecards will lead to teams who become more self-managed
- Overall business performance will be enhanced