In this article I combine well-known approaches to managing business basing the performance, using metrics and indicators. I will show the difference between Scorecard and KPI, I will talk about using Scorecard concept for benchmarking and performance-based management.
Find analysis possibility of usage Benchmarking with Scorecard in Balanced Scorecard Toolkit
Balanced Scorecard concept reefers to the theory of metrics linked by the specific rules, where the total value is calculated using specific formulas. Balanced Scorecard is talked a lot about, but there are some applications of Balanced Scorecard concept which are sometime overlooked.
For instance, combination of metrics, used in Balanced Scorecard can be easily used for benchmarking, e.g. comparing your product or service against competitors. What metrics should be used to compare your product to your rival's solution" There are many opinions, but the most reasonable answer sounds as: "Why should I reinvent something new, I can use the same metrics as I use for my business".
Learn more about using Balanced Scorecard for benchmarking purposes.
Actually, there is no need to create a specific metrics for benchmarking, when you already have some ready-to-use metrics. The metrics for benchmarking and metrics for evaluating the performance of your business should be the same.
A note about terminology: what we call Balanced Scorecard is also called "kpi". KPI is for "Key Performance Indicators". What is the difference between KPI and Balanced Scorecard" Actually there is no much difference. What we call "Indicator" is equal to what we call "Metric". What metrics does Balanced Scorecard include" The most important one - the "key" metrics. And finally, the goal of Balanced Scorecard is to measure, yes, the performance of your business, focusing on some specific aspects.
It's a time now to think about scorecards and kpi as a set of key metrics, which help you to measure the performance of your business. When we talk about benchmarking, we actually talk about comparing products' or businesses' performance, so benchmarking is also based on key metrics and their comparison.
How to use Balanced Scorecard concept to measure a business performance" It's actually easy. You will need to pass tree simple steps.
It's important to understand benefits and limitations of estimating business performance in this way.
People are often talking about different ways of business measurement
and control. The most popular approaches are KPI (Key Performance
Indicators) and Balanced Scorecard. While both concepts refer to the
business performance management, there is still a significant
Actually, we can think about KPI as a part of Balanced Scorecard. Balanced Scorecard measures business using several (usually 4 or 5) basic groups. Each group has indicators inside. What indicators should be there" Correct! Key Performance Indicators.
Is Balanced Scorecard a better approach" Actually, yes. It gives more flexibility. For instance, you're able to specify relative importance of indicators, e.g. balance them. When KPI will do its job better than Balanced Scorecard" When you are not interested in global view over the performance problems (this is what Balanced Scorecard provides), but need to focus on a very tight niche, more over on some certain aspect of this niche, for instance, "Finances".
Let's give some samples. Scorecard for HR will include various viewpoints on HR process, including financial aspect, management and educational aspects. All Balanced Scorecard groups will include several indicators that will help to measure business.
HR KPI will focus only on some certain aspects of HR. For instance, it may cover the most valuable (with bigger weights) indicators from scorecard. Or will have only indicators from certain group.
Is there any other value with Balanced Scorecard" Again, I"m happy to answer YES! The Balanced Scorecard concept suggests representing information about business performance in a four perspectives " Finance, Customer Relations, Education and Internal Processes. It is important as in this way you are able to cover all your business or all aspects of some business unit.
Finally, both approaches deal with metrics, e.g. some way to measure non-numeric values. For instance, to tell how good your customer support service is (non-numeric value), you will be able to specify several metrics, that will cover various aspects of customer support service. These metrics will give estimation about response quality so that the final result will be a performance in percents.
Read more about using Balanced Scorecard for Benchmarking in our Balanced Scorecard presentation toolkit.
1. Find KPIs that you need - use search or browse appropriate categories.
2. Read description carefully to find out if these KPIs are what you need.
3. Download trial version for free to get an idea about what is inside.
4. Buy the full version to have KPIs in Excel with formulas and BSC file.
BSC Designer helps to measure and control business performance using Scorecard and KPI tools.
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