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What is Balance Score Card?

Balance Scorecard

What is difference the between Dimension and Measures?

In business intelligence (BI) there are two terms, Dimension and Measures. Dimension is something which can be used for filtering, grouping purpose like department name, employee name, location, severity, priority etc. Measure is something on which you can perform mathematical and statistical operations like average, sum, minimum, max etc. Like salary, delay, time to solve problem, number of tickets, travel expenses, fees, revenue etc.

What are the Metrics?

Everything, what can be measured will have metrics. Metrics is something which shows the status, progress, fact in terms of some number. Metrics will be calculated based on certain formula. It has associated unit.
For example
defect is .001 /thousand units. Formula for this can be -> Number of defects identified during quality test / Number of units tested.
Cost variance is 7.5 %. Formula for cost variance can be -> [Actual Variable cost + Actual Fixed Cost (only that is agreed with senior management)] / Planned Variable cost + Planned Fixed Cost (only that is agreed with senior management)

What is the KPI (Key Performance Indicator)?

KPI or Key performance metrics are attached to role or department. They are used to measure the performance of the function or role. KPIs are nothing but metrics but all the metrics are not KPI. Only key or selected metrics are used by the senior management to know the performance, so that time to time, if required they can give advice or direction to juniors or the owners of KPIs to improve the performance.

What are the Indicators?

KPIs are indicators. They indicates along with time or compare to last cycle either we are static (vertical line) or improving (upside) or going worse (downside). Indicators tell you that against the defined goal in what direction performance is going. Indicators may be positive like sales. More the value better it is and this means it is improving and going up. Indicators may be negative also like defects. More the value bad it is and this means performance is deteriorating over the time.

What is the Strategy map?

Why the performance is going up or down? KPI does not tell you that but strategy map can tell you. Strategy map shows the relationship between various KPIs. For example revenue (a KPI) indicates it is increasing but reason for that may be because input MRP (a KPI) has been increased or more unit sold (a KPI), a new products launched (a KPI), quality of existing product increased (a KPI) etc. These KPI are interrelated and mapped on a strategy map.

What is the Performance Measure?

Every KPI has three number called minimum, maximum and actual. This is required to know whether KPI is within control or not. Secondly before it goes out of control management come to know through the Indicators that in what direction it is going and what action plan or initiative need to taken. For example revenue min $ 2m from new product line, max $5m from new product line and actual is $4.5m from new product line. It indicates KPI is within control but at the same time we are doing more research and producing new product and getting lessor revenue from established product line.

Performance measure % (Negative KPI)= (Value- Min) / (Max-Min) *100%

Performance Measure  % (Positive KPI) = (Max – Val) / (Max-Min) * 100%

What is the Progress Measure?

When KPI get stabilized then management may focus to improve those. And for this purpose they define a baseline, i.e. minimum performance, and they define a goal, i.e. aspire to achieve in coming, lets say 2 month time. In this situation measure progress measure of the KPI. Progress measure of KPI is different from performance measure.

Progress Measure % = ((Value – Baseline) / (Target – Baseline)) * 100%

What is the Scorecard?

When you read these KPIs along with objectives then it gives more meaning. To meet one objective of the organization there may be multiple KPI. Objective can vary from one department to another department and similarly KPI can also be different. When you read the Score of KPI along with objective then you are reading scorecard and not KPI only. For example sales department objective : Be competitive in African. And one of the KPI they decide for this is reduce price (a KPI), increase sales (a KPI) from new innovating products in the African market.

What is the Balance Scorecard?

There are 4 perspectives of any business

  1. How our customer see us?
  2. How our stakeholders see us?
  3. How are our delivery capabilities and competencies?
  4. Are we learning and improving?

Every perspective can have many objective. Every objective can have many KPIs. KPIs may be interrelated to each others.
To sustain and survive in long run it is extremely important that every organization balance between these four perspective. In a particular financial year if you focus on any one aspect too much and ignore others then it will have reverse impact on the survival and sustainability of performance. Therefore to balance these 4 perspectives, top management uses a Balance Scorecard. Where they see overall progress of the organization over the period of time and take corrective actions or initiatives on timely manner.

 What is the Dashboard?

Dashboard is graphical representation of multiple KPI on the screen or wall to tell you whether KPI is within limit or not. Dashboard can show KPI information in the form of speedometer, dialer, gauge, trend chart etc.

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