Balance Scorecard for Real Estate Companies

Most real estate companies are first generation companies if not business wise certainly as far as professionalism is concerned most companies are new and emerging. Growth of business and its size will quickly move these companies in big league as compare to its peers in other sectors. As organisation grows large part of management resources – time and mind-share goes in into managing the organisation. Managing means building and keeping it competitive. Initial dream was to build a building but now after many buildings dream not only expands but HOW part also becomes important. Making business an ongoing and sustainable entity is the real challenge.

Not necessarily those who can build buildings are equally capable to build an organisation. It requires different skill sets and discipline. Someone rightly said key challenge of every organisation is to attract and retain the talent.  Organisation is made up of people and its survival or break largely depends on people it employs. Talented people today will not come to unprofessional companies and for un-challenging roles. Therefore for the sake of attracting key people who can put their talent to work for the growth of your company is what business owners must aim to do.

Business Balance Sheets hides many things than what it displays. Tangible assets have no longer remained competitive advantage for the companies. Assets balance sheets captures are no longer the strengths of the company. In business environment many critical assets are intangible assets. These are customer loyalty and experience company creates,  kind of talented and innovative  people company employs, kind of robust and killing technology it possesses and the likes. Therefore when physical assets have become less important than intangible assets companies need to focus on creating these assets which will keep them in business and make them sustainable entity. 

Every company has some financial goals like ROI or Turnover Growth or Operating Margin Number of Flats and Sq feet to deliver for real estate companies etc . Companies are working towards these goals. Most companies measure their success merely on the basis of these goals.

However merely focusing on this goal will create lots of issues.

In order to achieve this goal company may ignore customer experience and expectations, happiness of people working for the company, people training & retention issues, business processes that need to be developed for making company process centric from people centric, ethics and environment. Therefore mere financial goal driven measure of success is not the right way to assess the success of the organisation.

Balance Score card is the matrix designed by Robert Kaplan and David Norton of HBS, during early 90s. The model assumes that bottom-line and profit is not the only criteria to measure success of any organisation. Every organisation must endeavor to balance various other things in its mission to earn profit and become sustainable business entity. It focuses on 4 things which will balance the focus of the management to equally other area of the organisation. Since business entities would like to remain sustainable and competitive over the period of time focusing on these 4 aspects will make them become and remain so.

I will briefly touch upon each of the 4 areas before I add few more of mine:

Financial Goals:

Predominant objective of every for-profit organization is to make profit. It can be measured in terms of ROI or ROCE or whatever suits the company. In order to achieve the same companies plan cost reduction, sales boost, asset utilization, branding and positioning etc.  Companies design strategies to achieve the same. However as mentioned above it has to be in sync with many other balancing factors.

Customer Perspective:

Every organisation has to consider this very critical perspective in their business strategy. Customer is the key for every business. Customers who pay for the product and therefore cause of profit of the shareholders and salary of the people of the company. No financial targets can be achieved if customer perspectives are ignored by the company. Therefore every company must have strategy for customer experience and on fulfillment of customer expectations. 

Internal Perspectives:

In order to achieve stated financial and customer perspectives companies have to align its internal processes and policies to enable the organization to achieve financial and customer perspective.  It can work towards better customer experience, speeding up the critical processes , educating customers , concerns for environment etc. Internal changes that will be required to achieve the two perspectives stated above.

Learning & Growth Perspectives: 

Organisation must learn and change in order to achieve the strategies outlined above. It also requires talent induction, training, retaining policies, knowledge management, new competency, out sourced partners etc. These strategies will be in alignment with overall financial, customer and internal perspective strategies and objectives defined by the management.  

The above form of Balance Score Card was designed during early 1999s. Many companies in India as well as international have implemented the same and reaped benefits. Recently Tata Motors was awarded Hall of Fame by the BS group.

The Way Forward:

In last 20 years management and business science have grown and changed considerably. Balancing requirement has also altered considerably. Customer Experience movement by Pine and Gilmore, People Happiness practices by Zappos CEO Tony are the new elements that have emerged. These are the success factors that have emerged which are again not a part of any balance sheets.

Companies like Starbucks, Virgin Airlines, Yes Bank, Microsoft and Googles of the world have embraced these new elements of sustainable competitive advantage. Customer Experience and Employee Happiness is a cultural issues and it takes years for any organisation to change the culture. Therefore it is termed as sustainable competitive advantage.

Corporate Governance has emerged as another critical area of business survival. Unethical behaviors are one of the major reasons for companies going out of business. Corporate Governance as stipulated by SEBI or BSE is not what I am talking about.  It is mere a statutory requirements. What matters most is Governance for survival, Governance for growth and Governance for Sustenance. This governance is not merely about independent directors on the board for statutory reasons but cross cultural talent on board for business benefits, it is also about ethical social conduct by an entity.

New Balance Scorecard Matrix:

Famous quote of Customer Experience Champion Steve Jobs is very useful to remember “Everything starts with customer experience and work backward for technology, process and people. “

Believe it of no when entrepreneurs start the business they desperately tries to get its first customer and do whatever it take to please them. When they go to VCs they will ask about customer traction. However as the organisation grows these customers become part many things organisation manages. They become subject to internal system and processes, people training or lack of it, governance policies like mis-sell, wrong commitments, misleading advertisements and what not. Customer experience is the first casualty of organisation growth.

Start up never start with ROI in mind it starts with product they want to offer to customer to solve their problem which will results into earning profit. There has to be a existing or latent demand from customer. Then comes the product and then comes profit. By serving customer with what an enterprise produce or offer business makes profit. ROI comes first in investing activities, in business customer comes first.  ROI is also dependent on raw material sourcing capability, business processes, own or outsource decision etc non customer centric things. But in most cases higher ROI is a result of better customer experience & therefore better pricing capabilities, more word of mouth referral customers, more repeat customers. Better ROI approach keeping customers aside has limitations and limit up to which it can be pushed. 

Cause	Customers	Customers	Internal to Business	Customers	Customers
Action	New Product	Achieving Scale	Bettering Processes ,Better Sourcing,  Eliminating Waste	Bettering Customer Experience	Best in class Customer Experience
ROI Effect	-     4% ROI	+ 6% ROI	+ 10% ROI	+ 15% ROI	+ 20% ROI

Therefore new elements of Balance Scorecard for 2^nd decade of 21^st Century would be:

Bringing back the customer at the center of all organizational activities & strategies is very critical. ROI to shareholders, hefty bonus to senior management, salary to employees everything comes from customers. How can a company either improve performance or remain sustainable if customer is not at the center of all its actions & thinking.

Focus on these intangibles is important for tangible & strong balance sheet.

Having defined the strategies and goals on the above new perspectives companies can break those strategies into actionable and measurable plans. For example:

Balance Scorecard for Real Estate Companies

Perspectives	Strategies
Customer Experience	NPS from 10 to 25   No Misleading Ad or Mis-sell Educate , Guide and Support R & D & innovation for new products /ways for better experience Total end to end support from booking to shifting Fulfilling all Commitments , Total Transparency Going out of the way to support, add surprise and delight regularly
Financial	ROI of 40%   Minimum 1 lac sq feet projects Residential Only , clear land projects Leverage equity up to 3 times 5 Lacs sq feet delivery every year 2 and 3 tier cities , exploring options for higher ROI projects/financial engineering
People	Employee Happiness Index (EHI) up by 20%   Flexibility in choice of work and time Annual Happiness measurement Aggressive policies to enhance the EHI Scope for personal hobby and learning Preparing with skills for higher responsibilities, handle uncertain future
Internal	Improve TAT by 10%      Continues process mapping and eliminating redundancy Continues Kaizen and eliminate time and money waste Customer Focused Process rejuvenation Learning best practice from other industry and implementing Exposing people to best practice companies to learn hands on
Governance	Ratio of Fresh to Experience / Ratio of Multiple Discipline / Zero Tolerance to Unethical Conduct / Amount of Scholar Ships to Community and Housing Society Families   Must have two independent directors from diverse fields Internal Innovation team to work with senior board members Reward best ethical and moral behaviors Community Service to surrounding community , labor on site. Support to housing society for community living projects

Each of the above strategies can further be elaborated & broken down to make it actionable and measurable. 

The idea is to understand that financial statement is just a statement on how intangible & tangible assets are working but ignores intangible part in reporting. Now assuming from the financial statement that performance reported is from the assets reported is a great myth in present times.   Intangible assets like smarter business processes, delightful customer experiences, sound governance policies, great HR policies plays critical role in deciding how physical assets will perform. Balance Scorecard is to keep focus on all aspects of the business which drives financial performance.

Real Estate companies are poised for huge opportunities in the days to come in the form of residential and retail boom in the country. Companies have to expand in other geographies within India and even abroad. In order to leverage opportunities internal house in order and customer centric ethical culture are some of the prerequisite.  Working with balance score card will help companies to approach growth in business and organisation in much methodical and prepared way.   

It is relevant to all kinds of organizations irrespective whether small or large, start up or scaled up, for profit or not for profit, Govt or private, real estate or IT ,in India or Indonesia.

Moot question for every organisation is not whether to balance but, what aspects of the business they wish to balance in order to achieve their vision statement. 

What are the intangible aspects that influence your business outcome ? 

Buy my book on customer experience - The Bread is Moving.

Who Moved Your Cheese (Customers) ?

You need your customer more than they need you . Do you know this fact?  Many would reply – YES we know.

But real problem starts when we see our action  as far as customer experience is concerned. Our actions are not commensurate with the statement above.

How many companies have mission /vision statement?  Most company will answer in affirmative.

But again real problem starts once the statement is freezed and put up on website and reception area. Other than customers no one in the organisations reads and practice that.

How many of the entrepreneurs are aware that in an era of commoditisation of products and services , ease & delight in fulfilling customer needs is the real sustainable competitive advantage? Fair number of entrepreneurs have now started realising this.

But how many entrepreneurs have done anything to achieve this competitive advantage ?

Become your own customer – visit stores, call call centers , use after sales, talk to front line people , talk to back-end people (their action or inaction impact performance of front-line employees and customer experiences)  and realise – map competitive advantage your company enjoys.

Entrepreneurs and CEOs are talking & complaining about low sales, competitive pricing pressure, top-line growth issues, challenge of how to differentiate – but rare  number of entrepreneurs and CEOs are taking action in the space of bettering customer experience (CE) and most are just clueless , complaining and talking about ROI on customer experience initiatives.  

What is the ROI of life insurance policy? What is the ROI of medical treatment cost of a dying patient?  What is the ROI of cost of going to the Gym? No we do not see ROI on insurance policy or medical treatment as it is a MUST to protect our family from risk , survival or preventive health measures. CE initiatives are beyond ROI as these are MUST , not just to survive  but it is the cause of every business.It has to be a part of business strategy. (though ROI of better CE is obvious i.e. survival) 

Cheese has again moved and those focusing on bettering customer experience know who moved and how to remain with cheese , all remaining are questioning & complaining –  WHO MOVED MY CHEESE  (Customers) ?

Today's Organisations - Horses on Steroids

Present models of ONLY ROI driven businesses are not sustainable.  CFO of Narayana Hrudayalaya today quoted in ET- CD, " kind of returns PE players are asking is not possible in healthcare industry." 

Yes healthcare industry is not only PROFIT driven but PEOPLE driven. Number of people impacted while making some profit to take care of future investments. Mere ROI focus is not sustainable nor desirable.

Why only healthcare ? Every industry today is in severe cut throat competition. Ethical conduct is replaced by END only matters,  Q on Q and ROI, ROCE kind of performance matrix. 

Balance Scorecard approach by some of the corporate is welcome step but how much it has helped in stress reduction and happiness enhancement is a  matter of research. 

These PEs and their insatiable appetite for ROI is deciding ROI benchmarks world over.  

Huge ROI will drive happiness for a few at the cost of unhappiness and stress for many. 

Today's organisations are like Horses on steroids in race course. 

Huge bonus and extravagant packages at the top level makes the organisation look like a race course. Bets on the houses are so huge that they have to run and run and win at all cost. 

Fortunately horses run only in race course but ROI hungry Shareholders & CEOs run all across the society. Examples of Ranbaxys and Satyams and many more unearthed are the products of such rush for crazy ROIs.   

Why I lost my Customers ?

Recently a friend of mine told me that he has lost one of his customer for 9 years , for meager small price difference. 

All of us whether in business or profession face customer attrition. Yes they leave us. Those who are involved in customer acquisition know how difficult it is to get one. So many meetings , follow up , promises and discounts offers it takes to get a customer.

Therefore when we lose our customer its painful as well as loss making proposition. Retained customer is an income , acquired customer is an expense as it takes 5 to 7 times the money to acquire new customer than to retain a one. 

As the customer gets older cost of acquiring him gets written off over the period of time. It is always better and smarter to not only retain a customer but also get referral from him to get a new customer. 

A value of customer is = profit out of his repeat purchase + referral leads he offers (which saves 5 to 7 times of cost of acquiring a new customer) 

But if customer is so important to any businesses important question to think is why do businesses lose customers to competition ? 

1. - Better Price 
2. - Better Speed to Delivery
3. - Better Understanding of the customer
4. - Better Proximity
5. - Better Quality 

Most important are Better Relationship (Human aspect of dealing & not CRM) and Better Customer Experience (Emotional Connect). 

Sometime you may wonder why ever after focusing on the above 5 tangible aspects , your business is still losing customers ? 

It may ( MUST ) be because you are ignoring completely the two intangible but critical aspects of business - customer relationship and customer experience. 

Are you LIKABLE?

Are you as a person likable to fellow workers , fellow family members ? 

Are you as a company likable to employees , customers, suppliers, shareholders & community around ? 

People like to deal with what is likable. Therefore one of the parameters to evaluate the performance and target to be aim for is more likability. 

Impact being likable can have on individual and business is enormous. Sometimes its better   to evaluate this on unlikable parameters. 

Dave Kerpen author of the book Likable Business describes seven of the ten things in his presentation.  

• Listen - employees, customers and everyone 
• Surprise & Delight
• Story Telling 
• Transparency 
• Authenticity - Just be you 
• Team Play
• Gratefulness

Those who are further interested and have 55 minutes of time to invest may see this presentation by Dave Kerpen Video on How to be Likable Company

Social Media is either making companies aware why it is important to be likable or forcing them to react and change to become likable.  

Is your business making money?

Is your business making money? 

Answer may be NO but you may not KNOW. Yes many businesses are just managing cash flow and not making profit. 

Is it your money that you are splurging on ? 

It may be of your creditors or banks or government. 

Is your networth positive after you writes off dead stock , dead investments , difference between book value and scrap value of your assets and bad debts ? 

Is your ROI more than risk free rate market return ? 

You may have money in bank but do you have assets value more than your liabilities? 

Take a critical look at your MANAGED financials.You may cook the book to fool government and investors but be cautions about your uncooked real books that is fooling you and taking speedily you on the road to bankruptcy.   

Many companies survive before they burst merely on the basis of positive cash-flow. Cash flow is critical but at the same time it misleads. It makes us believe that our business is making money. But unless you are vigilant on the above aspects of profit and loss and Balance Sheet , only positive cash flow dependency can be a disaster.

First Impression is only the First Impression not the LAST

First impression is the last impression is highly overrated  and bias thinking. This mindset does not believe in any scope for improvements. 

Life is all about continues improvements and NO ONE can be perfect at the first time. We have in life and in business many instances of great first impression and lousy impressions thereafter and vice versa. 

Yes we have to give our best at the very first time but that is not all. We can always learn from mistakes, from others's experience , from customers feedback. First impression is not and can never be the last impression. 

Yes , not improving continuesly is a cause for concern. Worrying too much about the first impression will pull you back to create any impression at all.   

Try and create the great first impression and work to make it better at every next impressions. 

First is not the last , first is just the first. 

Lessons for Political Campaigners from Business Campaigners

When business campaigners i.e. advertisers talk they talk about qualities of their products and services and try to differentiate from the competition without referring to the bad qualities if any of the competitor. 

They don't criticize competition but communicates how they can make a difference in the lives of their users/consumers. 

Consumers by and large are smart and they know good and bad about the competing products. 

In contrast our political parties and leaders spent large part of their election speech in mud slinging on opposition and competitor.  Consumer & Voters wants to know HOW you are going to make a difference in their lives. They need your plan of action to bring the desired change, your case studies of past performance, your views on various problems and issues need resolution. 

Spending time on criticizing others is doing NO good to any one , neither to listeners nor to speakers. Leave listeners , views and voters to decide what is good for them without referring what is bad about your competitors. They just want your support in deciding in their selection and best way to do that is to demonstrate WHAT you can do to improve their lives. PERIOD.

Congress leaders going to Gujarat and doing negative campaign against the Govt will not work and similarly Modi going to Karnataka and do mud slinging against the Congress also will not work.

In Gujarat people know what Modi has done so they don't believe in Congress and in  Karnataka people are aware what BJP has done so they will not believe in negative campaign against Congress by Modi. In both campaigns parties had to demonstrate WHAT and HOW of changing lives for better of voters from present situation. Both have failed in that and so their campaigns have also failed. People are first interested in bettering their lives and they care about corruption only AFTER that.

Communication makes all the difference. FOCUS on positive campaigning.  Political campaigners may take some clue business campaigners. 

Leadership Vs Front-facing Candidates & Managers

Leaders can inspire but it is the local leader at  the voters touch points who can drives votes. Only leaders without right followers cant win elections. Mass leader with right candidate is the killer mix. 

Right Candidate (non corrupt , performing perception & great people skill)	Likely Win	Mostly Wins
Wrong Candidate (corrupt , non performing perception )	Mostly Loses	Likely Lose
Election Matrix (Qualities of candidates and leaders are in relation to its opponent)	Uninspiring  leader at the top ( Incapable, uninspiring, corrupt & ineffective & non inclusive image)	Inspiring Leader at the top ( Inspiring { thought leader , communicator} , capable, non corrupt, effective, executor, inclusive image  )

The above matrix is not only applicable to political parties  but also to all businesses. Howsoever strong leadership you may have at the top if your ground level customer focus managers are failing company will be in trouble.

People will become customers if they see Richard Bronson at the top but soon they will disappear if the touch point manager/staff is uninspiring.  Only dependency on right and inspiring leadership is not going to yield the desired result. 

Failed Communication !!!

I received birthday wishes from the only club I am a member of. I was pleased to see the envelope wishing me birthday in advance. 

When I further dwell into the communication my happiness doubled when I saw they will treat me with 1/2 kg of cake on that day. 

But ...

Yes there is a big BUT  towards the end. They asked me to intimate them in advance how many people will join me to a party which they assume I will offer on my birthday at their restaurant when they will serve me a free cake... 

I realised that this was not a birthday wish but only a sales letter in disguise. 

Companies must refrain their urge to sell every-time they communicate with customers. Sometimes a sincere wish can do wonders and more sales then these kind of letters. 

This letter at the end didn't serve any purpose. Birthday wish was to sell and sell will not happen when I see such selfish approach to wish me and lure me through 1/2 kg of cake.

Focus on genuine experience creation , genuine wish and then only genuine sales will happen automatically. Many a times focus on sales pitch is the reason for no sales. When  customers see ingenuity in communication and approach. 

Are you genuine when communicating with your customers?