How to develop scorecard, metrics or KPI?

The Balanced Scorecard concept is just few minutes to read, but actually, it is not so easy to understand. One of the most important aspects is how to develop good scorecard.

Why does one need to develop scorecard?

Balanced Scorecard is a performance management concept which might be very useful when the goal is to measure and control values associated with business performance. The concept is simple, but the main problem behind the scorecard is that people don’t know how to develop it, where to start and what results should be expected.

As long as this concept focuses on performance measurement, the most important are performance measurement indicators, e.g. metrics. So the goal of developing scorecard is actually the goal of developing correct metrics.

Once metrics were developed they should be grouped into categories, which should cover all possible business situations and aspects.

How to develop metrics and group them into scorecard

First, the number of metrics in each category should be about 3-4 metrics. If you have just 1, then this category is not balanced. If you have more, then probably you might think about grouping metrics into sub-category.

Actually, any complex balanced scorecard will contain sub-categories. It is not an easy task to maintain large number of metrics, especially grouped in sub-categories, so consider using some balanced scorecard software for this purpose.

Second, metrics should be descriptive. E.g. metrics should describe the way you or your employee could measure something.

Third, all parameters of the metric must be measurable, and you should know the rules of measurement. Perfect, if this rules are written in scorecard.

Let me give you some sample metrics (this is how metric is represented in Balanced Scorecard Designer). For instance, we deal with one of the HR metrics, here is a data from BSC Designer:

1. Indicator name: Time to Fill

2. Description: The period from job requisition approval to new hire start date

3. Measure units: Weeks

4. Min value: 0, Max value: 12

It is good indicator. What indicator would be “bad”? Indicator will be bad, if you will use as a description something like "the evaluation of the position fill efficiency", that is the bad indicator, because description doesn't really give any idea about how to measure  "time to fill" indicator.

Key aspects of developing KPI or Scorecard

• Make sure all indicators are measurable;
• Control the number of indicators, create sub-categories if necessary;
• Describe your indicator so that you and your employees will understand how to use it;

What you will have once good scorecard is developed?

You will have an easy to use performance measurement system, which will not only answer your questions about what is performance smoothly and what should be improved, but will help to control and increase efficiency of most business processes in your company.

Please, find below balanced scorecard metrics from our commercial library which you might use for devloping your own scorecards and KPIs: