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Balanced scorecards offer a comprehensive view of your organisation’s performance and are a great way to optimise efficiencies. Although much of what we discuss will be relevant across all sectors with multi-site management challenges, we’re focusing here on examples of automotive balanced scorecards for OEMs.
The automotive industry is facing some significant challenges and opportunities at the moment, such as meeting EV quotas, the development of the agency sales model, and supplying the fluctuating customer demand for ICE and EV. Effectively keeping track of all this, and far more, requires a system that can give you strategic visibility across all locations. Balanced scorecards allow problem areas to be surfaced, from which improvement plans can be created and change driven.
The ability to benchmark locations against each other adds an element of gamification to the task at hand. We regularly witness sites vying for the top spot in the league tables, with a healthy dose of competition on show. Rather than seeing progress towards targets in silos, dealers can see their rank and that of others in a balanced scorecard. This transparent approach lets everyone understand what is achievable and realistic. Lessons can be learnt from those that are meeting the targets, and extra support can be given to bring everyone to the same performance standards.
From our experience of helping many automotive brands with their business performance management, here are five essential best practices for developing and utilising balanced scorecards in the automotive industry.
1. Take a Holistic Approach
When Dr. Robert Kaplan and Dr. David Norton developed the balanced scorecard methodology in the 1990s, it was to provide managers with a comprehensive and collective overview of both non-financial and financial metrics across the whole business, as illustrated here.For an automotive OEM, what should you include in your scorecard? In truth, this depends on the size, structure and complexity of your organisation – one size certainly doesn’t fit all. However, you’ll likely want to include the following metrics:
- Financial: revenue growth rate, gross profit margin, operating profit margin, return on investment, cash flow, cost reduction, market share.
- Learning & Growth: employee satisfaction, employee turnover, training and development progress, employee engagement, innovation, knowledge assessment.
- Internal Processes: process cycle time, quality, improvement, resources utilisation, time to market.
- Customer: customer satisfaction, net promoter score, customer retention rate, customer lifetime value, customer acquisition cost, time to resolution.
2. Carefully Consider the Structure of Your Automotive Balanced Scorecards
As we alluded to above, one size doesn’t fit all, so you should present your balanced scorecards to react to the different areas of focus and your sales channel structure. For example, it’s common for our automotive customers to have a different set of scorecards based on aftersales, new sales, used sales, and fleet sales – each of these then breaks up into sub-sections that focus on the four key areas highlighted above. We’ve also seen a move towards designated scorecards for EV, as they recognise the importance of being able to provide a detailed audit to satisfy government legislation.
Interestingly, one of our customers is currently exploring splitting their balanced scorecards by dealer group size, reacting to feedback that it was felt that the larger groups had an unfair disadvantage in the leagues. This reminds us that whatever route you choose, consider whether the results will act as a motivator.
Once you’ve got the overarching structure, we would recommend a maximum of 10–15 KPIs for each scorecard, to retain focus and aid decision-making.
3. Automate Your Automotive Balanced Scorecards
If your organisation manually manages your scorecards in Excel, or similar, you’ll be aware of the significant amount of time that pulling together the data takes. The team then also has to convert it to PDFs and distribute these separately to the relevant dealers. What a massive time drain. Imagine if this process was automated, your Market Analysts could then focus more on strategic planning.
We helped Volkswagen Group UK do just this, and their Network Insight Manager, Matt Bishop, told us:
“Loop has given us a 10% improvement in efficiency and performance across the Volkswagen Group UK, time savings, and a more standardised way of working and reporting.”
The network is able to access the scorecards in a consistent and transparent view, and therefore decision-making and actions can be more timely. A word of caution here though, you’ll get more valuable results if you ensure that the data is updated on a regular basis and also understand that the data is retrospective, as it’s evaluated over a set time period.
Having the process automated also eliminates human error; not only will this improve overall efficiency, it will also help build trust in your data. If there’s a robust process that is ‘right first time’ you can also minimise the number of queries from the network.
Having specific balanced scorecard software can also drive improvement with its automated recommendations - see below for an example. This will of course relate to the latest data, so for these to be most impactful, the data feed needs to be updated often.
4. Communication is Key
Another benefit of using balanced scorecard software is automated communications. Loop allows users to customise the frequency of messaging, so that organisations strike the right balance between informing the users of key information (such as when a scorecard is published) and not bombarding users with notifications that they then switch off too.
Regardless of where you house your balanced scorecards, communication really is the key, encouraging colleagues to have data-led conversations, leading to data-led decision making. Clearly defined roles and responsibilities mean there’s accountability and the system should be set up so that relevant communications are sent to the right users – once again so much easier with an automated system. By promoting open communications, you’ll witness an increase in sharing ideas and solutions, which means that progress across the organisation is made at a more rapid rate.
5. Reward High-Performers from Your Automotive Balanced Scorecards
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Balanced scorecards are an invaluable tool for quickly identifying your high performers and being able to reward them for being so. The automotive world loves an annual ‘Dealer of the Year’ award event, often with impressive incentives up for grabs to motivate sites to aim for the top slot. However, the purpose should also be to identify and support the underperforming sites, using examples of good practice and leading customer service from those that are performing well.
Implementing the above best practices in your automotive balanced scorecards can help drive significant improvements across your network and ensure you stay competitive in the quickly evolving automotive industry. If you’re ready to transform your performance management, come and discover Loop’s range of practical modules, including balanced scorecard solutions and a unique action centre.
