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. 

 

1. Financial Perspective - ask yourself, “How is Shareholder value created? The answer to this is normally answered with KPIs that address
   1. Financial Growth
   2. Financial Efficiency
   3. Optimized usage of their funds which includes generating cash, not consuming it
2. Customer Perspective - ask yourself, “What valued our Customer expect from us?” They are normally seeking
   1. Quality Products and Services
   2. Meeting due dates
   3. A competitive price
   4. Good relationships or partnerships
   5. Product leadership and Brand could be important
3. Internal Perspective- ask yourself “to satisfy our shareholders and customers, what internal processes do we need to excel at?” This will typically talk to
   1. Quality processes
   2. Efficiencies continuously improving the cost to produce outputs 
   3. Reducing cycle times of processes
   4. Ensuring good governance
   5. Executing projects on time, in scope and within budget

 

4. 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
   1. Building the capabilities of your people
   2. Optimising IT systems 
   3. 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. 

 

Tip 

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.