In a short, but insightful, piece called ‘What’s Missing from Your Scorecard?’ Mark Graham Brown suggests eight categories of metrics which should be better represented on a balanced scorecard:
- Customer aggravation
- External factors
- Employee satisfaction
- Brand image
- Customer attractiveness and relationships
- Communication effectiveness
- Employee health and safety
Mark’s issue with employee satisfaction is most companies measure it annually which provides little opportunity to take action on the findings. While I agree, I also worry about organizations that use proxy measures of satisfaction like average length of service or retention. To make matters worse, as I discovered in my own career, many employee satisfaction surveys suffer from the Coke vs Pepsi problem.
I also like Mark’s suggestion on brand image. Instead of the traditional brand surveys (which are also measured annually), use a sentiment analysis tool to listen to the voice of the customer. This can provide an early warning radar for topics or regions might have pending issues.
From my point of view, the other thing missing from most balanced scorecards is focus. Too many scorecards are littered with metrics with little strategic value that appear largely because they are easy to measure, rather than because they provide insight into an organization’s performance. As I frequently remind people, “not everything that counts can be counted and not everything that can be counted, counts.”
There may be metrics missing from your scorecard but you don’t want too many of them. My advice: twenty is plenty.
(Note: Mark’s article provides a great example of measurement missteps at a fried chicken franchise. By focusing on an efficiency metric at the expense of customer satisfaction, one store owner came out looking like a turkey.)
It can be deceptively easy to merely pick best practices or use the measures that are benchmarked for your industry. It can be very tricky to design objectives and KPIs that tells the true story about the organization.
All the more difficult, when using that Balanced Scorecard to communicate the health and attractiveness of your organization to the wide variety of stakeholders. Attractive and truth are too often at odds, as we so clearly learned with the financial industry.
When attention is merely on the output from the KPIs, the KPI becomes the goal, not the indication that the goal is being acheived. When the focus is on the goals, people are encouraged to make a difference, instead of just making a number.
Great post and associated article (“What’s Missing from your Scorecard”). One additional thought about the 8 often overlooked metrics is that while the SAP BusinessObjects Strategy Management (SM) solution clearly supports managing all eight types of metrics, the integration between SAP BusinessObjects Strategy and Risk Management (RM) solutions adds significant depth in how users can and should measure External Factors and Employee Health and Safety. Both of these metric types could easily be Key Risk Indicators that are managed and mitigated in RM and also used to drive the status/score of SM strategic objectives.
William, you make a good point that I haven’t covered enough in this blog. Strategy and risk management are interlinked (http://alignment.wordpress.com/2008/12/01/dilbert-on-risk-management/) — you shouldn’t have one without the other.
Bob, completely agree with your point of view. KPIs are how you monitor progress towards objectives, not something that you try to achieve on their own.
In this website they have given eight areas which are better represented on a balanced scorecard and some information about the same.
The “new” balanced scorecard transforms an organization’s strategic plan from an attractive but passive document into the “marching orders” for the organization on a daily basis.