Red Yellow Green Rating Scale in Scorecards: What should the colors mean?

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A fresh look at a red yellow green rating scale for scorecard colors can provide a better expected behavior than target tracking of individual numbers against an objective.

You will find a lot of complaints about Red/Yellow/Green (RYG) scorecards on this Blog and in the writings of Forrest Breyfogle. Most of the complaints relate to the decision to set the color based on an arbitrary set of goals. The adoption of the RYG format implies a stop sign type behavior: Stop if Red, Warning if Yellow, and Good is Green.

 

When most RYG scorecards are introduced they are built with Microsoft Excel and use the conditional formatting of a cell. Setting the colors to change automatically based on the  conditions based on the value in the cell. This works fine if you are using this on a metric that has a true specification, but falls short with there is not specification. If you do not believe me, look at the RYG scorecards in most organizations that are full of red metrics that are continuing to operate normally. What message does it give the workforce? Ignore the scorecard? I think of it like setting a curfew rule for my children at 10pm and then not doing anything if they come in after that time, as long as they are safe. If I acted like that with my children, do you think that they would respect the curfew or any other rule I set for them. NO WAY.

 

So what should a company do with their score cards? The RYG format is so compelling, but how can we implement it so that it leads to the right behavior of the workforce? Well Smarter Solutions has developed a set of rules that we believe will make the RYG formatted scorecard a driver of positive behavior in an organization. It involves two aspects of the RYG coding:
Behavior expectations and the type of metric.

 

The behavior expectations are based on the required actions taken by different levels in the management. This aspect of the red yellow green rating scale is important to accept, because one goal of a scorecard is that you provide the workforce a consistent set of rules for all of the monitored metrics.

 

Red Yellow Green Rating Scale for Scorecards and Management Behavior
RYG Management Behavior

 

The second part of the RYG scorecard is the metric specific treatment.  Of course an organization will not want to treat all metrics the same, but the differences should be rule based and consistent. In our model, the three categories of metric rules are for: financial metrics, Final quality metrics, and internal process metrics. This differentiation is based on the type of performance goals and the ability to directly change the performance.

 

The financial metrics are unique in that the organization has limited ability to change them due to the market forces that impact the financials. The customer final quality metrics have negotiated specifications that clearly define good and bad performance. The internal metrics generally have internally set goals and targets that do not define a clear good and bad condition. An organization may choose to accept the failing of an internal requirement as long as the final quality metrics are acceptable.

 

Red Yellow Green Rating Scale for Scorecards and Metric Type
RYG Metric Types

 

Given these two sets of rules for RYG, organization can provide an a RYG scorecard if the colors are used to indicate actions or non-actions relative to the process overall, not individual points. The Integrated Enterprise Excellence (IEE) business management system provides the system for accomplishing this objective.

 

Red-Yellow Green Rating Issues and Resolution

Red-yellow-green scorecard and dashboard reporting can lead to much organizational waste.  The following video describes these issues (and common place status reporting issues in general) and what to do to resolve the problems.

 

 

 

Red Yellow Green Rating Scale Scorecards as Part of an Overall Enhanced Business Management System

 

Two novel-written books that provide the details for accomplishing this process-assessment RYG scorecard practice as part of an overall enhance business management system, business process management (BPM) implementation, and Management Information System (MIS) deployment [all at one time] are Management 2.0: Discovery of Integrated Enterprise Excellence & Leadership System 2.0: Implementing Integrated Enterprise Excellence.

 

 

Red Yellow Green Rating Scale Book

In Chapter 7 Management 2.0, there is discussion why traditional red-yellow-green scorecards (such as that shown in the following e-book screen shot) can lead to unhealthy, if not destructive, behaviors.
In Chapter 6 of Leadership System, a figure illustrates how a RYG color is assigned to an overall metric; i.e., its 30,000-foot-level metric predicted metric statement is undesirable and process improvement is needed to improve the metric’s response. A screen shot from the e-book page that has this figure is:

Application of IEE to Creation of a Long-lasting Business Process Management (BPM) and Management Information System (MIS) Implementation

 

How to benefit from the IEE system in organizations with its Enterprise Performance Reporting System (EPRS) software (which provides predictive scorecard reporting and a process improvement system so the big picture benefits) is described in:

 

 

business management system meeting

 

Contact Us through an e-mail or telephone call to set up a time for a discussion on how your organization might gain much from an Integrated Enterprise Excellence Business Process Management system. Or, a Zoom meeting can be schedule directly:

E-mail ([email protected]) or call us (+1.512.918.0280), if you encounter difficulties setting up a Zoom session directly or want to schedule another time that is not available in the Zoom-meeting calendar.