Balancing Generic and Specific KPIs on your Business Dashboard and Scorecards
Every effective business scorecard should give a nice balance between both general metrics (directly referring to the success of your organizational goals and objectives) and specific business metrics (mostly KPIs related to a department or organizational function measuring a very specific performance).
General business metrics help us measure how the organizational performance achieves the overall goals and strategies. Strategy here means direction and goals mean concrete results.
For example, your strategy might be growing your market share (direction) while the goal might be 5% market share growth this year. Another example of a general business measurement might be training.
The strategy of your organization is to improve employee skills through more training on critical skills. Here the training is the direction or strategy to improve employee skills while the goal might be an average number of hours of training per employee.
General business metrics give only general answers to the general questions however expressed with clear measurement like number, percentage, ratio, share…
However while general business KPIs can give you a good business insight, they might be insufficient and they don’t tell you the entire story so you can easily miss important pieces of the puzzle or they can hide very important information and create a better or worse scenario of your business success.
This is why and where you need very specific business measurements, KPIs or metrics for your business organization. Now, let’s use the same two examples we used for explaining the generic metrics: market share growth and improved training.
In the first example (market share growth) the general metrics might show good progress and everything seams ok to you however by adding specific metrics you would be able to uncover many details and see the real picture.
For example by adding specific metrics like market share by product or market share by location or market share growth by advertising media you might be surprised to see that while on average the market share growth is good, there are many products loosing market share, some of your locations have also lost their revenues, and while some advertising media is profitable there are some campaigns that are loosing money…
Now you are not that excited about your market share growth in general as you were before looking at the specific metrics.
In the second example with “improving employee skills through training”, you could have invested in more training however the average number of training hours per employee is not enough for you to determine if you are achieving your goal of improving your employee skills. You definitely need to add a few specific metrics here to better understand the results of your training initiatives.
For example, you can measure employee performance through specific results like number of delivery errors or number of customer complaints and compare them with the performance before the training. This will answer the question whether your investment in training is a smart investment or in other words what is your ROI on training. While in many cases it is impossible to measure the exact ROI because there are always many other factors changing as well, you can definitely quantify and at least estimate your ROI. Start with general estimates first and as you use your metrics on an ongoing basis you'll learn how to better understand them and make better and better predictions based on your scorecard.
Follow these 3 simple steps to define your metrics and design your scorecard to really measure and report what is important for your organization and reflect the reality:
- Define the overall organizational goals and quantify the desired results / objectives (for example: 7% sales growth)
- Define the general metrics you need to calculate and measure the actual results (for example: you need monthly sales numbers to calculate the growth or decline in sales month after month)
- Identify the specific metrics that will explain the generic metrics trend (for example: understanding the trend in sales growth requires specific metrics like sales per branch, sales per sales rep…)
As a conclusion, as your business or organization changes, strategies change as well as expectations from you and from your business, so it is good to step back periodically and audit your scorecard and reports. Ask yourself if they show all you need to really understand the business and manage it better or you need more.
Maybe some of the metrics you track are not really relevant anymore… or maybe you should completely redesign your scorecard and focus on different perspectives.