The choice of KPIs in BSC implementation
Balanced Scorecard is not just another managerial tool. This system has gained tremendous popularity among top managers and business owners in various business areas. Balanced scorecard concept is all about strategic development of the company. It is impossible to be idle in the business world. Once the company stops development or fails to adopt growth and development plan such a company is doomed to fail. It is impossible to drive a car with your eyes closed, and so it is impossible to run a business without understanding of where you’re going to.
Major characteristics of winning KPIs
The greatest advantage of balanced scorecard is its ability to connect strategic management and operational management. In other words, balanced scorecard puts strategy into action. Strategic plans are intentions and expectations of the company. But in order to achieve goals certain actions need to be taken. Balanced Scorecard is the kind of system that makes it possible to measure progress of the company on its way to implementation of strategic goals. This is possible you evaluation of key performance indicators. KPIs are those indicators that are most important for a company and that make key success factors.
The right choice of key performance indicators predetermines success in implementation of BSC. This is like building a house with a poorly built basement and foundation. Sooner or later, such house will collapse. The same implies to Balanced Scorecard. The wrong choice of indicators would lead to wrong conclusions and decisions. Besides, the wrong indicators would make balanced scorecard very difficult to use.
How BSC works
What a general tips to choosing indicators? Of course, every company every business has and individuals set of key performance indicators. The choice of KPIs primarily depends on company strategy and company success factors in particular business area. However, the wrong some universal tips for creation of key performance indicators applicable in many business areas.
- Key performance indicators should be not great in number. Up to a dozen of indicators each level will be enough.
- Key performance indicators should be measurable. One should clearly understand how to evaluate indicator or change its value.
- KPIs should be clear and comprehensive for the personnel. Complex system requires more time and effort and money.
- Key performance indicators should be up to date. It is necessary to review some indicators from time to time as business environment and internal processes may change.
