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Maximizing CRM Success Through Performance Measurement
Organizations today are now looking for and applying approaches that help guarantee the success of their CRM initiatives. One approach that organizations are turning to for maximizing CRM performance and ROI is the balanced scorecard.
Posted Nov 3, 2003
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Maximizing CRM Success Through Performance Measurement Using the balanced scorecard approach to drive strategic CRM results. James Brewton, president, CRMetrix Organizations today are now looking for and applying approaches that help guarantee the success of their CRM initiatives. One approach that organizations are turning to for maximizing CRM performance and ROI is the balanced scorecard. The balanced scorecard, first introduced in 1992 by Robert Kaplan and David Norton, is a comprehensive measurement system that deliberately links long-term strategic goals and measures to specific short-term tactics, measures, and action that drive strategic performance. The balanced scorecard focuses measurement on four inextricably linked strategic performance areas, called perspectives (e.g., financial, customer, employee, and process). In a typical balanced scorecard, each perspective will contain four to six key success factors and related measures that will drive overall performance in that perspective and, collectively, enterprise strategic performance. Examples of CRM key success factors and measures that might occur in a balanced scorecard approach include:
CRM Perspective Key Success FactorMeasure
Financial Maximize Customer Profitability Customer Lifetime Value ($)
Customer Increase Retention, Increase Product Penetration Retention Percent (%), Penetration Ratio (#)
Process Maximize Service Quality Service Level per Channel (%), Cost per Service Encounter ($)
Employee Increase Employee Satisfaction, Increase Core CRM Competencies Employees Highly Satisfied (%), Core Competency Coverage (%)
There is considerable evidence of the benefits of using the balanced scorecard on strategy execution and strategic performance. The results of a study conducted by Metrus Group (Figure 1) illustrate some of the key benefits of using the balanced scorecard approach.
Figure 1: Benefits of The Balanced Scorecard Approach
Success Measure Organizations Using Balanced Scorecard Organizations Not Using Balanced Scorecard
Perceived as an industry expert over past 3 years 74% 44%
Success in last major change effort 97% 55%
Clear agreement on strategy among senior management 93% 37%
Effective communication of strategy to the organization 60% 8%
The results clearly demonstrate that using a balanced scorecard approach to manage strategy execution produces superior performance and enables corporations to excel over the long term. Why does this measurement system work? There are six key reasons why the balanced scorecard measurement approach is so powerful in enhancing strategic performance: 1. Increased strategic agreement The balanced scorecard removes the ambiguity and disagreement that surround strategic concepts and facilitates understanding and consensus by senior leaders. 2. Common language for communicating strategy and key success factors The balanced scorecard provides a precise language for clearly communicating to all levels what the organization wants to accomplish and how. 3. Aligned and focused organization The balanced scorecard continually focuses the organization on the measures and actions that drive strategic performance. 4. Accelerated rate of successful change The balanced scorecard provides unambiguous feedback on the progress of change improving the probability of success, and the pace at which change occurs. 5. Increased predictive capabilities Balanced scorecard measures not only focus on outcomes but on the specific drivers of those outcomes. These "early warning indicators" greatly improve the organization's ability to anticipate future performance and to take action before long-term performance is negatively impacted. 6. 360-degree performance perspective The balanced scorecard positions executives to see how actions taken in one strategic perspective or process affect performance in another. While the balanced scorecard is a powerful strategic measurement system, it can be modified to maximize its impact on CRM performance. For a best practice CRM-measurement system, the balanced scorecard needs modifications in three important areas:
  • A scorecard should be established for each customer segment targeted for CRM
  • The process perspective should focus specifically on core CRM functions and processes, e.g., marketing, sales, and service
  • The scorecard should monitor performance for all customer contact channels This adaptation of the balanced scorecard is The Balanced CRM Scorecard. This new scorecard design works to clearly identify the targets of enterprise CRM strategy and how well the organization is achieving its CRM goals. Further, it avoids suboptimizing strategic performance by aligning and concurrently measuring performance for all core CRM processes and customer contact channels. Successfully implementing the Balanced CRM Scorecard requires the careful planning and execution of five key steps: Step 1: Define CRM Strategy Consensus by senior leadership on what the organization's CRM strategic goals and objectives are for each targeted segment. Clear articulation and communication of the CRM strategy to the entire organization Step 2: Select Strategic CRM Measures Selection of the best indicators of success for each strategic CRM objective Step 3: Cascade Strategic CRM Measures Strategic CRM measures directly linked to function, team, and employee performance measures Step 4: Implement CRM Performance Intelligence System Effective system implemented for capturing and presenting strategic CRM performance results Step 5: Entrench CRM Measurement in Organizational Culture Strategic CRM measurement embedded in the culture of the organization Clearly, measurement is a key success factor in maximizing strategic performance. So what is the status of CRM performance measurement in today's corporations? CRM Magazine and CRMetrix conducted a survey to measure the effectiveness of enterprise CRM performance measurement systems using the balanced scorecard approach as best practice. More than 260 executives responded. Survey respondents were asked to rate aspects of their organization's CRM measurement system. The survey used a five-point scale (1 = Strongly Disagree, 5 = Strongly Agree) to capture the ratings. A score of five represents best practice attainment. The results of the CRM Measurement survey indicate that on average responding organizations have CRM measurement systems performing at a minimal level of effectiveness across virtually all key CRM measurement strategy elements (see "How Do You Measure Success?"). It is no surprise then that the average overall CRM measurement system effectiveness rating (2.87) reported by survey respondents is identical to their rating of their CRM strategy's success (2.87). Industry pundits say that an effective CRM measurement system is one of four top predictors of CRM success. This survey clearly supports this hypothesis. The balanced scorecard, with the modifications mentioned earlier, provides a powerful framework for a CRM measurement system. Using the balanced scorecard approach, organizations are able to clearly communicate what's important and where and how each level of the organization contributes to CRM strategy success. Further, the balanced scorecard measurement approach enables an organization to quickly and continuously identify and take action on the processes, customer touch points, and measures in need of improvement for maximizing CRM strategy performance and return on CRM. About the Author James Brewton is president of CRMetrix, a strategic CRM measurement and improvement firm.
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