Balanced Scorecard KPIs
When I first started my career in performance measurement, in the early 1990s, the Balanced Scorecard was the new thing. I was really excited at first: it was heralded as the best methodology for creating KPIs to monitor organisational performance that had ever been developed. But to this day, people still struggle to find meaningful Balanced Scorecard KPIs.
At the time that the Balanced Scorecard was published, I was the Measurement Consultant in a railway corporation. And my hope was that I’d found the guidance I’d been looking for to lead my colleagues to more meaningfully measure organisational performance.
But when I learned more about the Balanced Scorecard, I felt let down.
I found nothing at all in the literature about how exactly to design Balanced Scorecard KPIs.
The Balanced Scorecard literature explained why we need a scorecard of measures or KPIs that has balance. This reason was that financial KPIs alone are insufficient for managing the performance of organisations.
It explained a way to get that balance. This was through it’s four perspectives and the Strategy Map approach.
But I found no techniques for how exactly to choose or design the KPIs or performance measures themselves. I found no techniques for how to implement those measures. I found no techniques for how to report and interpret and use them to make business performance improve.
The Balanced Scorecard approach didn’t address the practical struggles I had trying to make performance measurement work.
That’s because Balanced Scorecard is a strategy design methodology. Not a performance measurement methodology.
I’ve found the same with many other so-called measurement methodologies and frameworks, in addition to the Balanced Scorecard. For example:
- Program Logic Model
- Results Based Accountability Framework
- Drivers Model
These methodologies and frameworks guide us to decide what aspects of performance are important. But they give no practical guidance on exactly how to choose and create and use the measures that are needed to monitor those aspects of performance. They are results frameworks, not measurement frameworks.
To build meaningful Balanced Scorecard KPIs, we need a deliberate performance measurement methodology.
And we need to integrate that deliberate measurement methodology into whatever results framework we’re using.
We do this by dovetailing in a measurement methodology, right at the point where we define what our performance results are. These performance results might be called objectives, goals, outcomes, or even inputs and outputs.
In the Balanced Scorecard, for example, this is the point at which strategic objectives are developed for the strategy map. And it’s before that strategy map is cascaded, and before initiatives are developed.
And in any other results framework, it’s the point where goals are written to describe the end states the strategy aims to make reality. We need to identify this step in whatever results framework we’re using, and insert into that point a true methodology for designing our measures.
We’re using measurement, at this point, to make the results specific and observable or detectable.
We need to make our goals or results or objectives measurable. The act of designing a measure for a result forces us to express that result clearly, so people can understand and recognise when we bring it into reality, as we make it happen.
We might have strategic objectives on our Strategy Map, or outcomes in our logic model, or goals for our critical success factors, like these:
- Enhance customer loyalty
- Foster a resilient and adaptable workforce
- Optimise environmental sustainability
I wish you luck trying to find meaningful measures for results like these, by following only the steps in your results framework!
Almost all results frameworks fail to produce measurable results statements, and consequently fail to guide us to meaningful performance measures. We need a true measurement methodology to support our results framework.
What’s a true measurement methodology?
A true measurement methodology, one that overcomes our common struggles to measure performance, is a set of deliberate instructions for exactly how to:
- design the most convincing evidence that our result is happening
- convert that evidence into quantitative measures
- define the exact details of how to calculate the measures and bring them to life
- report them in the right context and the right graphical presentation
- monitor their change over time and how far they are from target
- find the leverage that will close the gap between actual performance and target
This website is all about PuMP, one of – if not the – most deliberate and practical measurement methodology around today. PuMP blends almost seamlessly with the Balanced Scorecard, and with any other results framework you might be using.
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