Our departmental scorecards are all showing green, but our overall company profit margins are shrinking and our leadership team is constantly in fire-fighting mode. Why is there a disconnect between our team's green metrics and our actual bottom line?

Question

Tyler Smith · Accepted Answer

This disconnect happens when you measure activities instead of outcomes, or when your metrics are entirely backward-looking. If your team is hitting their targets but the company is losing margin, your scorecard is tracking the wrong things. You have created an activity trap where busywork is celebrated while profitability suffers.

To fix this, you must audit your Scorecard to ensure you are tracking true leading indicators of financial health. For example, if your sales team has a green metric for sending fifty emails a week, but your overall sales margin is down, the email metric is useless. You should instead measure the margin percentage on signed contracts or the average deal size.

Your metrics must have a direct mathematical relationship to your profit and loss statement. Every seat on your Accountability Chart must own a weekly number that directly impacts cash flow, capacity, or delivery cost. Look at your current metrics and ask yourself: if this number is green for four consecutive weeks, is it physically impossible for our margins to shrink? If the answer is no, you have the wrong metric. Bring this issue to your next Level 10 Meeting, drop it down to IDS, and ruthlessly prune any numbers that do not predict the actual economic health of your business.