Applying a Balanced Scorecard to the Dealership

As the automotive retail business model continues to change it is becoming increasingly important to take a holistic and balanced view of dealership performance.

This holistic view should extend beyond single metrics such as market share or return on investment, both of which tell the story of past events but fail to capture the shifting dynamics that modern Dealers have to embrace in order to secure their future. Dealers should be looking at a range of measures, focused on their overall vision for the business and on the organisational capabilities required to get there. While there are a host of performance frameworks and dashboards which can assist with this process, the Balanced Scorecard has stood alone for its simplicity and inherent logic.

Strategic signposts that align strategy with execution

Introduced by Robert Kaplan and David Norton in the early 1990s, the Balanced Scorecard is a performance measurement framework that holds out traditional financial metrics with strategic non-financial measures in order to give management teams a more balanced view of organisational performance. This framework goes beyond simple measurement, pointing to what should be measured and why, providing strategic signposts that align strategy with execution.

Real-time feedback on how the business is performing in each area

Essentially the Balanced Scorecard holds out four perspectives for consideration, all aligning with the company’s vision and overall strategy These perspectives include:

Learning and Growth – the extent to which the organisation and people within it are learning and developing;

Business Processes – the extent to which the internal business processes that are in place are functioning well and are aligned to the mission;

Customer – the extent to which the organisation is customer focused and responsive to customer needs; and Financial – the extent to which the business is delivering against the expectations of its shareholders.
Each of these perspectives is matched with a set of metrics, directly relevant to the business. These are then monitored and analysed on a regular basis providing a real-time feedback mechanism on how the business is performing in each area.

From a Dealer’s point of view, the model is ideal for capturing the essence of the business and for serving as a roadmap to guide strategic decision-making. Each perspective allows the management team to track and assess performance and make adjustments to the way it is ‘playing the game’.

SCORECARD

The key however is for Dealers to look internally at what’s important to them

As Dealers look to the future and consider how they will need to adapt, they will need to broaden the thinking within their own organisations. The industry has never been short of information, whether it be financial in nature including DMS data, benchmarks and composite reporting; customer related such as satisfaction, retention, willingness to recommend; or process orientated, looking at mystery shopping and OEM process initiatives. The key however is for Dealers to look internally at what’s important to them and how they can pull the pieces together in order to support the bigger picture.

The Balanced Scorecard may not be a silver bullet in securing the future but it’s a great place to start the conversation.

 

Greg Strydom
Head of Client Solutions – Sewells Group

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