First, balanced scorecard is a holistic framework that covers multiple aspects of performance, while KPIs are individual metrics that focus on specific areas.
KPIs are indicators of success toward a desired performance result. KPIs could be thought of as synonymous with the measures in a BSC, as good KPIs are normally indicative of achieving strategic objectives.
Key Performance Indicators (KPIs) are the critical (key) indicators of progress toward and intended result. They are performance measures that help you understand if you are achieving your goals. KPIs create an analytical basis for decision making and help focus attention on what matters most.
Focus on the high-level most important KPIs to put on your balanced scorecard. Typically balanced scorecards have about a dozen KPIs, or 2-5 for each category (i.e., financial performance, customer, internal processes, and organizational capacity) of the balanced scorecard.
The four perspectives of a traditional balanced scorecard are Financial, Customer, Internal Process, and Learning and Growth.
This popular acronym stands for Specific, Measurable, Attainable, Realistic, and Time-bound. This is a useful touchstone whenever you're considering whether a metric should be a key performance indicator. SMART KPI examples are KPIs such as “revenue per region per month” or “new customers per quarter”.
Therefore, an example of Balanced Scorecard description can be defined as follows: A tool for monitoring the strategic decisions taken by the company based on indicators previously established and that should permeate through at least four aspects – financial, customer, internal processes and learning & growth.
These KPIs always exhibit three key aspects: relevance, measurability and simplicity. Let's see what that means in practice.
A KPI should be simple, straightforward and easy to measure. Business analytics expert Jay Liebowitz says that an effective KPI is one that “prompts decisions, not additional questions.” For example, “How many customers did we add this quarter?” is clear and simple.
Most organizations track KPIs through business analytics and reporting tools. These tools collect data and present the information in the form of reports that include numerical representations of the measured performance levels.
“KPI scorecards help a business focus on what is important by measuring progress towards specific goals. They allow a company to track performance, identify areas of improvement, and make changes in order to improve overall performance.
The name “balanced scorecard” comes from the idea of looking at strategic measures in addition to traditional financial measures to get a more “balanced” view of performance. The concept of balanced scorecard has evolved beyond the simple use of perspectives and it is now a holistic system for managing strategy.
Define your KPIs
Arguably the most important step to creating a successful KPI scorecard is to define the metrics you will use to measure your performance. There are many KPIs available in all key areas of a business, however, only specific ones will actually tell you the insights you need to measure your goals.
KFC Balanced Scorecard include: • Team Member and Management Turnover. • Actual number of Team Members and Managers versus required number of. Team Members and Managers.
Types of KPIs include: Quantitative indicators that can be presented with a number. Qualitative indicators that can't be presented as a number. Leading indicators that can predict the outcome of a process.
There are three main types of business scorecards: strategic, operational, and financial.
The two types of objectives included in the balanced scorecard are financial and strategic objectives.
Most of the time balanced scorecards require managers and team members to report information, which means logging data. Many don't like this because they find it tedious and also, it can get in the way of doing the work required to meet objectives.
Balanced Scorecard. The SWOT Analysis is primarily used for strategic planning and to assess the competitive landscape based on the strengths, weaknesses, opportunities, and threats. The balanced scorecard is a goal-setting and management tool to achieve the strategic goals set by the organization.