in Blog, LBA Ware News, Performance Management by Lauren Woods

Use Scorecards to Drive Better Behavior

Mari Denton Director of Client Success at LBA WareBy Mari Denton, Director of Client Success at LBA Ware

mari.denton@lbaware.com

In last month’s post, I reasoned that mortgage companies who care about profitability need KPI’s that align with their organizational strategy to set expectations and drive results. Today, I want to talk about how to link your strategic objectives to tangible results by using scorecards. This can be achieved by combining key performance indicators with a balanced scorecard. A thoughtful scorecard that uses the right metrics is a powerful communication tool to help your team stay focused, and monitor their contribution to helping the organization achieve its goals. Three key factors to consider in order to successfully establish and implement scorecards for your team are relevance, reliability, and reportability.

In order to be effective, a KPI should be relevant to the individual employees’ role. This means that the metric should be something that any individuals in a given role can influence. Additionally, the employees should trust the data. Measuring performance based on data is a powerful tool, but if the data is unreliable it will create unwanted distractions. Lastly, it is important to have the results available to the team on a regular basis in order to keep them motivated and have a sense of how they measure up against expectations. Having a few specific KPI’s that are relevant to an employee, based on data that they can rely on, and that is reported consistently will determine how successful your scorecards are in driving the right behavior.

To get started, you will want to begin with identifying your core strategic goals, and then connecting them to a set of KPI’s that can serve as the foundation for balanced scorecards. First, write down your high-level goals. Once you have settled on the initial list, narrow it down to 3 – 5 primary goals and rank them in order of importance. The key is to come up with a short list that aligns with your organizational objectives. Next, consider the data that you have available across your various systems, including your LOS, accounting software, payroll systems, and CRM platforms and identify a consistent, reliable source for pulling data. Each goal should be associated with how you will measure success. Here is an example of what your list may look like:

Now we have established where you are trying to go and can begin to identify KPI’s for each group of employees that you can leverage to help you to get to where you want to be. This should be done by role, and you will want to also assign weights to the individual metrics in order to adjust for importance and the employee’s ability to influence results. Assume you are creating a scorecard for your loan originators based on the above goals. You may end up with something that looks like this:

With the metrics and weightings completed, you will want to then determine the expected value for each KPI. The expected value is what you anticipate can be accomplished by the majority of individuals in a role, over a specified period of time. These should be realistic values based on historical performance data. Start with the data for the last full year of production. Once you have established the expected value, you will want to determine what the tolerance levels are for each metric. These ranges will help your employees understand your expectations and will also provide context to your results.

An easy way to accomplish this is by using a 5-point scale where 1 is unsatisfactory and 5 is exceptional. For each of the metrics you will need to establish the ranges of results. It might be useful to think about a bell curve here. You want the majority of your employees to fall into the “meets expectation” category or the top of the curve.

By establishing ranges that will roughly fit the employees into one of these categories with the above distribution, you make the scorecard results meaningful. Most people will want to see that their results are exceptional in every category but having a scorecard where everyone is exceptional really doesn’t tell you anything. It also won’t help your employees understand what the organization defines as truly exceptional. Below I have a scorecard that has a basic layout to identify what is being measured, how it is being calculated, where the data comes from. I have also included sample ranges which translate to the point scale. Actual ranges will depend on many factors, so the ranges I have listed might not make sense for your company, but this should give you an ideal of what the finished scorecard will look like.

Through careful establishment of the right KPI’s combined with the simplicity of a scorecard, you will provide a framework that will help your team stay focused on the goals that matter most to the organization. Next month, I will talk more about how the scorecard can be used to coach and recognize the right behaviors.

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