Balanced Scorecard – Looking Back A Year Later

It’s been about a year since Stockton Graham & Co. (www.stocktongraham.com) created its first Balanced Scorecard. At the time, the 10 year old wholesale specialty beverage company in Raleigh NC was a profitable multimillion dollar business. But Jeff Vojta, the company’s founder and CEO, was dissatisfied with the company’s rate of growth and was looking for a better way to create and communicate a strategy that would focus the entire organization on its most important activities and outcomes.

Stockton Graham is a roaster and distributor to the specialty coffee industry. It sells fresh roasted coffee, an assortment of coffee and non-coffee beverages and beverage related supplies. It also runs a “coffee college” where it trains its customers and their employees.

When Jeff learned of the Balanced Scorecard he was drawn to its straightforward, logical approach and was encouraged by its documented success in larger companies.
In July, 2003 Jeff and his senior team set out to make Stockton Graham a strategy-focused, Balanced Scorecard organization.

Jeff and his team updated the company’s strategy over several sessions then mapped it to a Balanced Scorecard and shared it with the entire company.

I recently asked Jeff to update me on his experience with the Balanced Scorecard.

BK: Jeff, you went into this a year ago with some preconceived notions of what a Balanced Scorecard implementation would do for your company. What were you expecting?
JV: I initially thought of it as a great measurement tool. Believing that “what gets measured gets done”, I wanted our Balanced Scorecard to measure not just the usual financial results but also some key intangibles that are the building blocks of a successful company, e.g. customer satisfaction, industry know-how, operational excellence, training and innovation etc. It has done all that. We have identified the company’s key drivers and critical outcomes and we measure how we perform against them.

BK: Was it all smooth sailing?
JV: No. In particular we picked a few measures that were impossible to report against. For example, part of our strategy is to be a full service supplier. We want to carry most everything a customer needs to run a successful coffee and specialty beverage operation. To measure our effectiveness in this area we wanted to report how broadly our customers purchase across the product line. We thought our system could generate what we needed but then discovered that it can’t. So we’ve been working on system upgrades to collect and report more detailed customer data, e.g. number of items sold, average order size, frequency of order, etc., and in the mean time we’re using an easier measure.

We’re tracking growth in average order size on the theory that customers who buy more broadly will show increases in overall purchases. It’s not the best measure but it’s adequate for the time being and it does keep us focused on the objective.

We also had trouble setting some of the initial monthly Balanced Scorecard target values because we had not been tracking the information previously. After a few months we saw that a few of the targets were way off so we adjusted the targets in the following months to be more realistic.

BK: Has the Balanced Scorecard implementation had effects you did not anticipate?
JV: Yes, I was surprised at how effective it is at directing short term action in relation to long term goals. That and its ability to get everyone in the company focused on the same priorities are possibly the Scorecard’s most important contributions. Before we installed it we spent too much time in reaction mode. We tended to work on what seemed like a good idea at the time instead of using a compass to give us more consistent long term direction. We got a lot done but we never felt sure that we were working on the right things or looking at the right numbers or making the overall progress that we were capable of. Now we use the Scorecard to guide our selection of priority activities that support our long term goals and we’re saying “no” to those that don’t. By the way, saying “no” with confidence can be a wonderful thing. It definitely makes you more effective.

BK: And what about the focusing aspect you mentioned?
JV: We got senior level focus by developing our strategy and Balanced Scorecard with the input of multiple levels of management. Then we used the Scorecard to communicate our strategy and priorities to everyone else in the organization. It was the first time everyone saw how they could individually and collectively support the company’s overall strategy. That’s been a pretty big deal. Our employees appreciate knowing how their daily work contributes to the company’s goals and they make better choices with their time because the Balanced Scorecard helps them establish priorities.

BK: Can you give us some more examples of how the Scorecard has affected your business?
JV: Sure. As I noted before, one of our strategic objectives is to sell a greater number of different products to each customer. As we got to thinking about how to do this we came up with the idea of offering heavily discounted starter packs of certain products to encourage customers to try items they don’t normally buy from us. The program has paid off. For example, we have gone from selling 250 cases of cups every 90 days to 500 cases every 40 days. Another Balanced Scorecard objective is to increase our fill rate on customer orders so that more orders ship complete. We’ve made a number of operational changes that have improved the accuracy of our perpetual inventory numbers, reduced slow moving items, and increased stocks of our most popular products. As a result more than 95% of our orders are shipped complete and on time, which is a big improvement from the 85% level of a year ago.

BK: What else can you tell us about your experience?
JV: I’ve come to appreciate how the Balanced Scorecard is a fundamental yet dynamic management tool. It’s fundamental in that it keeps the organization thinking constantly about where it expects to be and how it can best get there, which in my view is the key to success. But life is about change. We change, our customers change, our competition changes. With the Balanced Scorecard we protect ourselves from the distractions of small, short term changes by staying focused on key long term objectives. But we also know that we must periodically revisit the wisdom of our long term strategy in the context of the changes that are taking place around us and in light of our performance against the Balanced Scorecard targets. That’s why we plan to review our strategy and possibly modify portions of the Scorecard later this summer. In the end there is no question that the Balanced Scorecard is the strategic and operational backbone of the company and that it has given us a clear competitive advantage and made us more confident and successful.

Brian Kinahan of SUMMIT Performance Systems shows companies how to accelerate growth and profitability using the Balanced Scorecard to create a more powerful strategy focused organization. Brian can be reached at through the Contact Us page or 919-225-3040.