Updated: 06/12/21
The KPI's are each of the performance indicators that are analysed in the management of a company, as we will see in more detail below, and which are used when carrying out a scorecard to find out whether the objectives set are being met.
Which KPIs to include in a scorecard?
A balanced scorecard analyses whether objectives have been achieved by means of specific management indicators. It is an instrument that ultimately facilitates the implementation of a strategy, and its subsequent success, by the organisation. The KPIs of a balanced scorecard can be grouped into four categories of analysis or general objectives.
Finance
Meeting the financial needs of a company is basic; there are essential aspects that are common to any company such as having cashflow (cash flow). It may be aimed at the survival of the company, covering its debts or seeking the benefit of owners and investors.
Clients
Customers are the protagonists of the company, without them a business cannot be profitable. It is necessary to know their needs and to understand why they choose a certain company over the competition, i.e. you must knowing the tastes and characteristics of your target audience. We can measure it at different stages of the process, from the moment the contact is initiated as a lead until they close, and from different dimensions, such as average ticket, number of customers who have made at least one purchase, etc.
Internal processes
Controlling internal processes is related to obtaining the highest quality in the production of products or services. The internal processes of a company affect the satisfaction of customer needs and help to achieve the financial objectives previously set by others. indicators.
Innovation and learning
The innovation and learning make it possible to growth and improvement of the company in the short, medium or long term. Markets change and with them competitors and customers, so it is essential to develop new capabilities and processes that we will need in the future; that which will differentiate the company from the competition.
How to transform KPIs into a business strategy?
In order to be able to establish a successful business strategy The objectives need to be translated into indicators in each of the above categories, the KPIs, as these will measure the achievement of a given objective.
It is important that the scorecard does not set too many objectives for each category of analysis, as too many will make the measurement process more difficult, as will selecting objectives that are too easy to achieve or too difficult; they must be realistic or they will be detrimental to the business strategy.
These are some of the examples you can analyse for each objective or category of analysis:
- Financial targetEconomic profitability, analysis of short-term debt, long-term debt or total debt, total working capital at a given point in time, profit per employee, net profit for a given period, etc.
- Target customersThe following are some of the key indicators: total number of customer complaints, number of visits to the website by customers, analysis of a desired market share, average sales per customer, customer loyalty rate, sales and customer service satisfaction rate, lost customers, profit per customer, etc.
- Objective of internal processesAudit compliance, evaluation of wasted materials and time, downtime, transport costs, net production, number of suppliers, etc.
- Innovation-learning objectiveThe following indicators can be used: employee training quality indices, training costs, overall employee satisfaction, drop-out rate, etc.
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