SBP022 How to Balance your KPIs Part 3 of 3
In previous podcasts, we spoke about the importance of balancing KPIs to avoid getting distorted results.
When looking at the selection of KPIs for a team or for the overall business, there is another level of balancing to be added.
The idea was first documented by Robert Kaplan & David Norton who Identified 4 perspectives that KPIs can be grouped by.
- Financial Perspective – ask yourself, “How is Shareholder value created? The answer to this is normally answered with KPIs that address
- Financial Growth
- Financial Efficiency
- Optimized usage of their funds which includes generating cash, not consuming it
- Customer Perspective – ask yourself, “What valued our Customer expect from us?” They are normally seeking
- Quality Products and Services
- Meeting due dates
- A competitive price
- Good relationships or partnerships
- Product leadership and Brand could be important
- Internal Perspective- ask yourself “to satisfy our shareholders and customers, what internal processes do we need to excel at?” This will typically talk to
- Quality processes
- Efficiencies continuously improving the cost to produce outputs
- Reducing cycle times of processes
- Ensuring good governance
- Executing projects on time, in scope and within budget
- Learning and Growth – ask yourself “how will we sustain and improve the business long term?” This perspective does not address customer-facing activities but rather activities that are behind the scenes such as
- Building the capabilities of your people
- Optimising IT systems
- Building the environment and culture that is needed
Within each of the above 4 perspectives, you also need to balance between efficiency and effectiveness otherwise you may be driving one at the expense of the other.
Group your business and Team KPIs into the 4 perspectives to ensure you have sufficient balance in your KPIs to execute on your strategic goals.
Resources mentioned in the podcast
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