Metrics, Scorecard, KPIs

Every business comes to a serious question that a certain time of its development.  This question is “What is next?” This means that the company should know what it will do in future and in what direction it will move?  There are many factors influencing well being of the company, both inside the company and outside.  Markets are volatile, and any changes in the market conditions should necessarily result in changes inside the company, of course if the company wants to be successful.  Strategic vision helps the company allocate Financial Resources in an efficient way.  As a rule, strategic goals cover global projects.  Earning a certain amount of money may not necessarily be a strategic goal.  For example, gaining and a larger market share or proper positioning of the company in the market may be considered typical examples of strategic goals.

Balanced Scorecard cycle

Any company should control and monitor the process of implementing strategic goals.  If the company management looks only at financial indicators it doesn’t get the full view.  Financial success he’s gained through effective production and operational management.  That’s why there are special systems to measure business performance and link strategic and operational management.

Balanced scorecard is known as one of the most effective systems that connects strategic goals with operational management, evaluates business performance and key performance indicators, visualizes strategic goals and creates strategy maps.  Balanced scorecard is an effective tool that helps company management and personnel better understand strategic goals.  However, there is often and misconception that balanced scorecard is a magic tool that can turn any business into a successful company.  This is not so.

When a company needs BSC

It is very important to understand whether not the company needs balanced scorecard.  There are several factors pointing to the necessity of using balanced scorecard, namely:

1. The company doesn’t have a comprehensive strategy
2. The company management does not the dissipating strategic planning of is a poor understanding of strategic plans
3. There is no operational control in the company
4. There is a poor communication system between departments of the company or between companies belonging to one holding

Of course this is not the full list of these factors vividly demonstrate that the company needs balanced scorecard.  It should be noted that implementation of balanced scorecard is an expensive and lengthy process.  So, any mistake may cause the entire system fail which will make balanced scorecard be useless pile of documents, datasheets, maps and graphs.

It is very important to run business in an efficient way in a highly competitive business environment.  In the post crisis economy, customers are unwilling to buy.  It is becoming increasingly difficult to attract new customers and satisfied high demands of the existing ones.  That’s why business performance needs to be constantly measured and evaluated.  Performance evaluation looks like an easy process at a first glance.  One should only select a number of indicators that represent performance of the company and communicate them with the strategic goals.  But in fact, the entire process is much complex as it seems.

4 perspectives of Balanced Scorecard system

Before introduction of Balanced Scorecard System performance management evaluated only financial indicators.  Company strategy and operational indicators were often ignored.  But how a company can achieve financial success?  Of course, through improvements in performance.  Thus, operational indicators are equally important for any business.

Balanced scorecard evaluates KPIs (key performance indicators) that can be split into four perspectives: financial, customer, internal processes, learning and growth.  Each perspective represents certain aspects in the work of the company.  In fact all these four perspectives cover all possible processes things happening to the company.

Moreover, these perspectives up interrelated.  For example, improvement in customer satisfaction is possible through learning and coaching of the company personnel.  Another example is gaining financial success through improvement of internal process is in the company (like saving, use of more efficient methods and techniques).  Of course, there are many more examples of how these perspectives are interrelated.

Key requirement for successful implementation of BSC

It should be noted that key performance indicators differ from business to business.  They also directly depend on the company strategy.  It is imperative for a company to have a comprehensive strategy otherwise balanced scorecard will appear useless.

It’s also very important to have a well educated and professional staff to work with balanced scorecard.  One of the main reasons why BSC implementation fails is lack of professional personnel.  Sometimes managers do not the dissipating strategic planning and thus are unaware of the company strategic goals.  In such a way implementation of balanced scorecard turns into a waste of money and time.

Before making the final decision on BSC implementation the company owners and top management need to agree on strategic goals.  Balanced scorecard communicates strategic goals with operational management.  This means that every employee in the company should be aware of his or her role in contribution to reaching of strategic goals.  In other words, the company personnel needs to understand why they need balanced scorecard.

Optimization of business Processes and linking operational management and strategic goals is one of the key tasks of Balanced Scorecard System.  This system has become extremely popular among companies working in various business spheres.  BSC is known as an effective tool.  However, it is very important that the system is properly implemented.  Indeed, there are many examples of companies failing to make an effective use of balanced scorecard just because company management or personnel does not understand company mission, the way balanced scorecard works or is just reluctant to properly implement BSC.

There are two main questions the company management should answer before using BSC.  The first one is “whether or not the company needs balanced scorecard”, and the second is “weather on not the company is ready to use BSC”.  Both questions are very important since if the company doesn’t need balanced scorecard and still uses it without proper knowledge, this may hurt company well being.  As known, balanced scorecard requires investments and human resources.

So, how can one determine if the company needs implementation of balanced scorecard?  There are four main points:

• The company management is not involved in strategic planning
• The company personnel does not understand strategic goals and mission of the company
• Companies belonging to holdings have poor communication and feedback system
• There is no operational control in the company

Thus, if the company still needs balanced scorecard its personnel and especially top management should be ready to use it.  How can one find out if he or she is ready to use balanced scorecard?  This is where experts from AKS-LABS can help.  Developers of BSC designer of our regularly releasing free and bait products aimed at educating users on balanced scorecard.

From now on, anyone can download free questionnaire on balanced scorecard.  With the help of this questionnaire it is possible to find out if the company top management or individual employees are ready to use balanced scorecard.  In other words, this is knowledge evaluation tool.

Benefits of BSC questionnaire

Questionnaire covers most important issues on balanced scorecard, starting from general knowledge on BSC and ending with strategic issues like strategy maps and strategic goals.  Having concert the questions, it is possible to evaluate knowledge on balanced scorecard and thus readiness to use this system in real business.

The questionnaire will certainly help both top management and ordinary employees to evaluate balanced scorecard knowledge.

Check your BSC knowledge

Download questionnaire here

Read more on BSC questionnaire here

The popularity of balanced scorecard is increasing with every coming day.  Indeed there is no other tool that can combine in so many perspectives in development of a company.  Balanced scorecard aims at designing a strategy maps and evaluation of KPIs in order to reach the company strategic goals.

The system seems simple at a first glance.  But this is the most common misconception.  Balanced scorecard is a complex system that requires systemic approach, clear management structure, comprehensive compensation and bomber system for employees and commitment from the entire personnel.  It is also very important to get a proper education and general knowledge on balanced scorecard.  The statistics shows that only 1/3 of managers are satisfied with the work of balanced scorecard when the system is implemented without professional assistance.

Developers of BSC designer know this perfectly well.  That’s why they offer a user’s continuous support.  AKS-LABS releases training courses and freed study materials from time to time.  This time, users can download free templates on balanced scorecard.

Download free templates on Balanced Scorecard

What will you find inside templates?  Having unpacked archive you will see several power find and pdf files with templates on balanced scorecard and KPIs.  First of all you will have at template for the company four perspectives.  The only thing you should do is to fill in the scheme with strategic goals of your company.

You’ll find the tables with objectives, measures, targets and initiatives for every of the four perspectives: financial, customer, internal processes, learning and growth.  Besides, there are cracks and tables for a set of KPIs for each perspective.

Free templates will make it possible to visualize company strategy goals and specify measures to be evaluated.  You’ll also find screen-shots from BSC designer and excel reports.

Templates are available for download from this page.

Enjoy free BSC templates from AKS-LABS

Implementation and maintain ends of balanced scorecard system is not as easy process as it might seem at a first glance.  If one fails to properly implement balanced scorecard, find relevant metrics and adequate response actions Balanced Scorecard System will turn out helpless, and thus it will be a waste of time and what is more important money.  Some users and businessmen view balanced scorecard as a magic tool that turns a mediocre company into a prosperous international business.  In fact, balanced scorecard is the tool that helps communicate company strategic goals and strategic vision with methods of implementing such a strategy.

Even creators of balanced scorecard note that only about 27% of managers and business owners are satisfied with implementation results of balanced scorecard without professional assistant and special training.  This is to say that balanced scorecard requires professional approach and commitment.

Learn more about BSC system

To assist business owners and top managers, developers of BSC Designer from AKS-LABS have released an audio course which covers the most controversial and difficult issues about implementation and maintenance of balanced scorecard.  The audio course is presented as a number of mp3 files grouped according to the stages of balanced scorecard implementation.

So, what will you learn from this course?  As set above, these files address issues and problems related to certain stages of balanced scorecard implementation.  Thus, you will learn general information on balanced scorecard, the design process, selection of KPIs, implementation of balanced scorecard, finding relevant response measures and establishment of a well organized management system.

You will learn how to choose the right key performance indicators for particular business.  It is also important to use the right number of KPIs.  How many KPIs is enough?  You can learn that from the course.

This training program also covers the issues of strategic maps and cascading balanced scorecard.  If you are to use balanced scorecard in a big company you’ll certainly come across the issues of cascading balanced scorecard and designing of strategy maps.

Of course, every user of the Balanced Scorecard System was to know how effectively this system was implemented in the organization.  It should be noted that such evaluation is also evaluation of the system itself as well as professional level of managers who participated in this process.

The training course is very easy to follow at the speaker uses very clear language, at the same time trying to explain complex things in simple terms.

Stages of BSC implementation

As known there is a tough competition in the market nowadays. No wonder! Customers are unwilling to buy, so companies have to be very creative to attract new customers and keep existing ones. It is not easy to run business if you have so many competitors ready to take advantages of your slightest mistake. Moreover, even if you do everything right but do not developed you smarter and quicker competitors will “eat” your business. You cannot stop in business. If you choose to stop your business or company will not survive for long.

Thus, to expand and develop a company you should certainly evaluate its current performance. It is not easy, taking into account the fact that a company may have a dozen of departments and hundreds of mechanisms in its complex structure. What should you start with? Is net revenue the only thing you need to pay attention? What factors influence business performance?

Design kpi to evaluate business

With Balanced Scorecard System you will find answers to all or most of your questions. First, and foremost you need to choose the right indicators. If you are focused on the average time employee spends for lunch, instead of analyzing more important figures, think about changing your approaches to business evaluation. Key performance indicators (or KPIs for short) represent overall performance of the company. But unlike general analysis, KPIs can point where to look for the root of the problem.

Design kpi that directly show business performance

Balanced Scorecard System is a tool that was specifically developed to measure business. But you may wonder if it supports your particular kind of business. Well, do not worry! In this age of information you can find ALL KPIs related to your business activity. It does not matter what kind of business you run (a call center or a logistics company), Balanced Scorecard System will measure performance of your firm. Moreover, you will be able to find out what hampers your business down.

Measurement with Balanced Scorecard System is not like traditional evaluation. Armed with graphs and figures you will be able to solve problems even before they emerge. If you regularly perform evaluation you may compare figures and track changes. Thus, you may take measures as soon as you noticed negative trend in certain KPIs.

Business metrics is widely used at all levels, from top management to ordinary employees who want to test their performance. By the way, use of Balanced Scorecard System positively affects employees since they learn about their problems and imperfections in work. Thus they know what needs to be improved.

Business is a complex structure with hundreds and sometimes thousands of elements that are interconnected and interrelated. If something is going wrong the entire structure can collapse. It is certainly not easy to run a successful business. Any company, large or small, should always do something to improve performance. More sales, better service, improved call center features…these are just a few features that can be improved in thousands of companies all over the world.

But in order to evaluate performance you need to know what exactly should be measured. Should you pay attention to net profit only? Or should you take into account customer satisfaction? The answer is – you should pay attention to ALL factors that directly or indirectly influence business performance. Of course, some of them are primary while others are less important.

Business evaluation is also necessary to plans business activity for future. A company with great problems cannot afford investing money in development. The money will be lost and the company will turn bankrupt. What happens to a person whose illness is untimely cured? He fells pretty sick or dies. The same principle works for business. If business problems are not time solved, they turn into really big troubles for the company.

Business scorecard is used to measure organization performance

Use Business scorecard to evaluate performance of a company

With Balanced Scorecard System you can feel sure that the problem of business evaluation is solved. The program is designed in such a way so that it is possible to evaluate individual indicators that show real company performance. For instance, your net profit may directly depend on customer satisfaction or quality of logistics. With business Balanced Scorecard System you will get answers to many of your questions regarding performance of your company.

The abovementioned indicators are known as key performance indicators of KPIs. It is a fact that different businesses have different KPIs. For instance a sales company should pa a special attention to such KPI as revenue per call (if products are sold via phone), while logistics department will try to reduce freight cost per unit or transit time. Everything depends on the business and its specific character.

KPIs may concern any aspect of business. Balanced Scorecard System will present you r evaluation result in such a form so that you will be able to see all weak and strong points in the work of a company.

With Balanced Scorecard System you will be able to measure such things as organization climate and employees loyalty, which at a first glance cannot be evaluated at all.

It is a difficult time for business now. The world has just recovered from the severe financial crisis, while customers are unwilling to buy. Under such conditions companies do everything possible and even impossible to survive in the market. That, the competition has become very tough. Any company should be constantly looking for ways to expand and develop. Moreover, the more creating and unusual these ways, the more chances for success such a company has.

In order to develop or correct mistakes one should first learn what problems a business is experiencing and what caused these problems. Making strategic plans without proper performance evaluation is a pretty stupid thing to do. Imagine that you have started cooking something and you made a mistake just at the first stage (for instance added the wrong ingredient). Would you continue cooking being aware of such a mistake? Of course, not! Your dish would be a disaster.

Business bsc is a great tool to measure performance of a company

The same concerns business. If you failed to solve small problems and decided to further develop you are risking to have really big problems. Thus, it is imperative for any manager to evaluate business performance of an organization before making any decision as to the further development.

Balanced Scorecard System is the best tool to use in measuring organization performance. Business is a complex structure, and there are many factors influencing well-being of any business. But what can show real performance of a company? There is a universal term used in business called KPI which stands for Key Performance Indicators. These are figures or percents that show how well your business is doing. Of course, different businesses would have different KPIs. At the same time, it is important to focus on major indicators. If you pay attention only to net revenue and do not think of the factors that influence this value, you are a short sighted manager.

Balanced Scorecard System is a reliable tool used by different businesses. It is possible to evaluate performance of a certain department or a branch of a large company. Sometimes, poor performance of one department can take the entire company down.

With Balanced Scorecard System you will be able to find the root of the problem but not fight its consequences. Besides, it is a good way to motivate your employees. It is always good if a person knows what he is doing wrong.

Balanced Scorecard System can also measure such things as organization climate or employee loyalty.

Evaluation of business performance is known as one of the major business processes in any organization. Why is evaluation so important? The problem is that markets are very unstable now, and there is a tough competition. Many businesses appeared on the verge of bankruptcy just because they were not able to respond to challenges of financial crisis. Besides, many companies did not have a comprehensive strategic development plan.

Balanced Scorecard System carries out analysis of performance

But what should one do before planning something for the future? Of course, you need to know how your business is doing now. If your business suffers serious problems you have no chances to be successful in future. Moreover, the problems with only grow and your company will be in jeopardy. For instance, you decide to expand sales department which has been unprofitable for the last quarter. What happens if you hire more managers and spend more money? Right! You will have bigger problems and suffer greater losses.

Analysis of performance is important for any business

With the help of Balanced Scorecard System you will be able to evaluate business performance of any company or department. One of the main advantages of Balanced Scorecard System is that it is able to evaluate individual indicators which represent different aspect in the work of a company/department. What are these indicators? Well, different businesses have different indicators. Everything depends of business goals and methods.

Evaluation process can be divided in several stages. First of all you need to choose the right indicators. We recommend using a set of KPIs (key performance indicators) relevant to each business type. It is important to focus on the main things and Balanced Scorecard System will help you out here.

Evaluation is also very important for employees. Sometimes even the best professionals can make mistakes. But when a person understands what he has done wrong he knows what to do in order to correct mistakes. So, use of a Balanced Scorecard System will certainly improve performance of employees and contribute to their motivation. Think of some kind of a bonus program for employees who manager to improve indicators.

Balanced Scorecard System will improve organization climate. Motivated employees who know what they need to do always work better and they change their attitude to company management. If your boss is yelling at you and you have no clue why, this is not a good situation.

Business metrics is widely used in all business spheres by a wide variety of managers.

There has always been competition in business. Now, after the most severe financial crisis since the Great Depression, this competition is even tougher. Companies have to take urgent measures to save business while competitors have just one goal – wipe all companies out. In order to save business, it needs to be always monitored and measured. This is like looking after a sick person – you never know when the illness can cause death.

Business evaluation is very important in all spheres and industries. It does not matter what your company does (sells slippers or develops software), but you need to be constantly keeping your nose to the wind. Moreover, strategic planning is a must for big companies. How can you run business if you do not know where to go? Being aware of business goals is imperative!

Analysis of measures is helpful in business evaluation

Business evaluation is performed using different methods and tools. But Balanced Scorecard system is perhaps the most popular and accurate measurement program. BSC system evaluates different indicators that altogether represent business performance of a company. Sometimes, managers make a very serious mistake of paying attention only to financial indicators like total revenue. Well, of course, making money is an ultimate goal of every business, but there are so many factors to be considered in the process of performance measurement.

Analysis of measures in business is a part of performance evaluation process

Since we have started talking about indicators, it needs saying that not all of them need to be measured. There is such a term as KPI which stands for Key Performance Indicators. These are figures that show how well your business is doing. KPI are not the same for different businesses. A sales company makes money by selling, while a logistics center makes money by delivering products and cargos. Of course, these companies will have different KPI that contribute to business success.

Balanced Scorecard system makes it possible to locate problems before they have serious consequences for a business. Finding the root of the problem is extremely important both for employees and business owners.

By the way, use of Balanced Scorecard system positively affects employees who will be aware of own mistakes. If an employee knows what he is doing wrong he will have enough motivation to correct mistakes. Besides, if you introduce special bonus system your personnel will have even additional motivation to perform better.

Use of Balanced Scorecard system is recommended before strategic planning. Results of evaluation must be carefully reviewed and analyzed.