New Year, Old Goals - The Balanced Scorecard

Senior executives understand that their organization’s measurement system strongly affects the behavior of managers and employees.

While we're not all senior executives, we can think of ourselves as CEOs of our lives. The buck stops with us. We are the boss and what we say goes. Therefore, it's only right we measure our performance to get the best out of ourselves.

If you haven't read the preceding New Year, Old Goals post, you can do so here. I recommend it for context.

Sahil Bloom recommends one goal for 'Step 3 - Work Backwards'. However, I believe one won't cover the bases needed to build the foundation I need to become a competent trader.

For this reason, I'm using the balanced scorecard approach to structure my medium-term goals.

Each goal will run for 3 months starting 1st February 2022. These quarterly goals will develop as we progress through the year.

What is the balanced scorecard?

I won't go into much detail about the ins and outs of the balanced scorecard but you can learn more about it in the original article published in 1992, if you'd like.

To summarize the balanced scorecard, it's a way of measuring performance in more than simple financial terms. There are four perspectives:

• Customer - in this case the customer would be myself, as I receive the PnL

• Internal Business - tends to be process related so imagine this as factors affecting trading capabilities outside of knowledge e.g. habits/trading setup

• Innovation and Learning - self explanatory i.e. a knowledge/creation goal

• Financial - self explanatory i.e. PnL, win rate etc.

The top three will ensure that any trading performance increase is sustainable and not just down to luck, or chasing trades that exhibit unfavorable characteristics in the long run.

Okay, let's get started...

Goal: Customer Perspective

The customer perspective is about seeing what the person who receives the product wants. In this context, I am my own customer. This seems like an odd situation to be in and it can be difficult to get the right perspective here so be careful if you're doing this for a goal in a different area.

The four aspects of customer perspective usually involve time, performance and service, cost and quality. I'll focus on cost.

There's a cost that a trader faces that's immediately obvious: exchange fees. This covers costs per trade and costs linked to deposits and withdrawals. Something else I'll consider RE exchanges is risk or security of funds.

The goal here then, is to choose an exchange that represents the best value for fees but also has the least risk.

​Quarter	Goal	Due Date
Q1	Select TWO exchanges that represent best value for fees and security of funds.	30th April 2022
Q2	TBC	31st July 2022
Q3	TBC	31st October 2022
Q4	TBC	31st January 2023

Goal: Internal Business Perspective

A key point in the article mentions "the critical technologies needed to ensure continued market leadership".

The goal here will relate to my computing setup. At the moment, my laptop regularly stalls on basic tasks and crashes easily. The goal:

​Quarter	Goal	Due Date
Q1	Purchase and install custom build PC suitable for trading and other intensive activities.	30th April 2022
Q2	TBC	31st July 2022
Q3	TBC	31st October 2022
Q4	TBC	31st January 2023

Goal: Innovation and Learning Perspective

This one is easy for Q1 as I've already started doing it. I'm currently making my way through 'The Successful Investor's Guide to Spotting Investment Trends and Turning Point - Technical Analysis Explained' by Martin J. Pring on recommendation from a trader I was once friendly with.

Quarter	Goal	Due Date
Q1	Complete study of Technical Analysis Explained by Martin J Pring.	30th April 2022
Q2	TBC	31st July 2022
Q3	TBC	31st October 2022
Q4	TBC	31st January 2023

Goal: Financial Perspective

Finally! The juicy perspective for a trader, with so much being about money. I could use PnL amounts per month or something similar but I'll keep it VERY simple to match my experience: survive.

This means no additional capital other than my initial investment. A loss is acceptable so long as I can demonstrate that my processes have rapidly improved. Ideally, of course, I'll end Q1 in profit!

Having been in and out of trades for a while I now know it's dangerous to target a specific $ amount to make. It puts unnecessary pressure to perform one oneself and this then becomes a huge point of failure as it's constantly on your mind.

Quarter	Goal	Due Date
Q1	Survive - by the end of this period of trading, initial investment should still exist in it's majority and no further capital should have been added.	30th April 2022
Q2	TBC	31st July 2022
Q3	TBC	31st October 2022
Q4	TBC	31st January 2023

Summary

The balanced scorecard is a useful tool for not only executives leading an organisation but also for a person, striving to achieve a complex goal.

It brings together ALL aspects that are needed to achieve the goal. This is valuable as the areas that are usually ignored but now incorporated, are what makes the process to achieving the goal sustainable.

There is no way that I'll be able to track these goals in the current format, so I will be putting a page dedicated to goals on the header menu within the next week or so!