The KPI Scorecard Performance Tracking Guide - With Downloadable Template
Productivity - it’s a fundamental element of economics in determining our standard of living. But how do you measure productivity? One common device has historically been a KPI scorecard.
Productivity in economics is a measurement of efficiency, describing the relationship between the output of a process and the input required. Increasing productivity can therefore create various benefits for society: lower prices, higher wages, or a decrease in consumption of raw materials.
In business, productivity is measured on a micro-level, with the productivity of individual processes being monitored and optimized with the goal of maximizing profits.
To this end, companies use Key Performance Indicators (KPIs) to measure critical metrics that determine productivity. These KPIs can be measured via methods such as a KPI scorecard or a performance dashboard.
The KPI scorecard has been around for almost as long as the KPI itself, and whilst there might be better options for tracking KPIs today, these scorecards are still fit for purpose...
What is a KPI Scorecard?
A KPI scorecard is a device used to monitor metrics related to the input and output of business processes. By measuring these KPIs, the KPI scorecard tracks an organization’s progress towards a set goal.
The KPI scorecard can be used to aggregate information from different aspects of the business, providing relevant stakeholders with an overview of their performance.
An operations scorecard therefore empowers decision-makers within a business to make better-informed, strategic decisions, thereby increasing productivity.
The KPI scorecard represents one of the first attempts by business leaders to incorporate data and statistical analysis into their decisions.
By collecting data from various areas of an organization into a single KPI scorecard, a practical understanding of the KPIs is provided. This allows data to be analyzed more effectively and additional value to be derived from business processes or functions.
Data analytics and the KPI scorecard thus acts as a data-driven tool to aid in the continuous improvement of business processes towards optimal performance and productivity.
And whilst a project scorecard has proved effective to this end, it is not without criticism. One key area in which scorecard analytics are lacking is data visualization.
This lack of clear visual representation of KPIs over time means that the data often lacks context, leading many to consider the operations scorecard outdated in lieu of more modern digital dashboards.
In a sense, a ‘scorecard dashboard’ represents the evolution of the traditional KPI scorecard.
One such scorecard dashboard is GoSimplo, which provides greater perspective into financial and performance metrics by aggregating data onto a single screen and presenting it in a clear and concise format. Use GoSimplo for free today.
Types of KPI Scorecard
There are two fundamental types of operations scorecard - think of them as a ‘standard’ version, and a slightly more advanced ‘balanced’ KPI scorecard. We’ll start by discussing the differences between the two:
Standard KPI Scorecard
The standard KPI scorecard performs the same basic functions as all other scorecards:
- Groups KPIs, qualifying them under meaningful and descriptive headings.
- Presents KPIs in a straight-forward way that is easy to interpret.
- Facilitates decision-making by presenting business critical data for analysis.
The at-a-glance data of a traditional KPI scorecard provides a general overview of a given team, department, or organization.
The broad nature of these devices allows for an equally broad range of use cases. This type of scorecard generally has the following features:
- Comparisons: allowing stakeholders to compare the performance of entire business units or individual employees.
- Benchmarking: facilitating the measurement of performance against established goals, and the setting of new goals or budgets.
- Time-based objectives: as the KPI scorecard measures progress towards a specific goal, deadlines are required to maximize their effectiveness.
Due to its simplicity, the standard KPI scorecard is often used as an introductory measure. This is in order to establish a data-driven culture both within a business and during processes such as data collection and analysis.
Once this has been achieved, they are often replaced by digital dashboards or a balanced KPI scorecard.
Balanced KPI Scorecard
The balanced KPI scorecard provides a more holistic and comprehensive overview of the different elements of a business’s operations.
More disparate data is collected into a single KPI scorecard, including data related to both internal and external functions, going beyond metrics strictly related to financial performance.
Introduced in 1992, the purpose of the balanced scorecard was to collect and aggregate data into 4 separate perspectives, all on a single KPI scorecard:
- Learning & growth - data analysis of the knowledge resources of a business. These metrics measure the efficacy of information collection by an organization and how well this information is used to educate or instruct employees in order to create a competitive advantage.
- Business processes - analysis of the production/manufacturing processes of a company. These KPIs often indicate where shortages, delays, or bottlenecks are occuring/will likely occur in the future. They also provide insight into inefficient practices and areas of high wastage.
- Customer perspectives - this external data affords a business an understanding of customer satisfaction in relation to the price, quality, and range of products or services. This data has traditionally been difficult to collect, however the advent of eCommerce has facilitated collection significantly.
- Financial data - analysis of data related to sales, costs, salaries, and any other monetary values that may indicate financial performance.
A balanced scorecard includes clearly defined objectives, as well as targets with numerical values. This provides a platform to make comparisons between target values and the current situation, providing several benefits.
The balanced project scorecard affords decision-makers the ability to make better, data-driven decisions by establishing quantitative goals and monitoring progress towards them. This provides an improved quality of information when considering key organizational decisions.
Another benefit of the balanced KPI scorecard is improved strategic planning. Implementation of data analytics via the scorecard can often shed light on the causal relationships between input and output. Advanced strategic planning is therefore better supported having identified these correlations.
Performance reporting is also improved via the structured approach that the balanced KPI scorecard affords. By highlighting relationships between performance metrics, general (as well as individual) performance can be reported more accurately.
By bringing together metrics from divergent areas of a business, a balanced KPI scorecard facilitates transparency between departments within an organization.
Stakeholders are able to assess the interconnectedness of different departments, and how efficiently they collaborate, and can connote how best to optimize the effectiveness of such collaborations by highlighting particular problem areas.
If this information is disseminated throughout the organization, this transparency can lead to improved communication and cohesion. The result? Internal productivity and innovation can increase.
By way of the above benefits, the intended purpose of the balanced KPI scorecard is to maximize the value of your data by providing actionable insights that help to optimize performance and maximize productivity.
KPI Dashboard vs KPI Scorecard
Given that the ‘scorecard dashboard’ represents the evolution of the balanced KPI scorecard, it is understandable that for many, scorecards and dashboards are interchangeable terms.
At this point, it may be useful to more clearly define exactly what a KPI dashboard is: Dashboards collect data and aggregate it onto a single screen.
The key difference here is that a dashboard is a platform for data visualization, presenting information in a visually clear and concise way that allows users to compare data against future goals, or past performance.
Take, for example, the GoSimplo dashboard. Financial and performance data is presented in a format that allows users with limited technical expertise to interpret these metrics and draw conclusions from them. Use GoSimplo for free today.
Despite the similarities, the key differences between dashboards and scorecards imply situations when one should be used over the other.
Let’s explore the differences between the two platforms in greater detail...
Dashboards are designed to monitor performance, whereas a KPI scorecard focuses on simply managing performance.
To this end, dashboards can be integrated with data sources to provide updates in real-time, whereas a KPI scorecard is updated periodically.
This means that dashboards can be used to track progress towards both short- and long-term goals, whereas the static nature of a project scorecard limits its use to managing performance in relation to long-term goals.
Dashboards can therefore be used to notify stakeholders immediately once a KPI is reached, exceeded, or otherwise. However, an operations scorecard will only reveal this information once it is updated.
Proponents of the KPI scorecard argue that this allows stakeholders to focus on long-term strategy without the distraction of day-to-day ‘digital clutter’, whereas their detractors would say that the KPI dashboard limits stakeholder responsiveness when compared to a dashboard.
Due to the long-term, strategic perspective of the KPI scorecard, and the organization-wide scope of the data collected (which can often also be sensitive in nature), the audience for an operations scorecard can be relatively limited.
Stakeholders using the KPI scorecard are typically C-level executives tasked with optimizing the productivity of an entire organization, whereas dashboard use is much more varied.
Data presented on a KPI dashboard can include KPIs related to day-to-day operations within a single department, or equally, data collected from across an organization.
Additionally, dashboards can be programmed with security parameters that limit the information that different users within an organization have access to.
This allows an entire organization to access a single dashboard if necessary, with sensitive information limited to those with clearance. As such, they are appropriate for specific use cases within a business, or organization-wide rollout.
Scope of data collection
As previously stated, the scope of a balanced KPI scorecard is organization-wide, measuring metrics relating to finances, business processes, the customer, and knowledge resources.
This provides stakeholders with indications about how financial performance is affected by metrics beyond simply those associated with money.
As such, balanced KPI scorecards may contain information related to a wide range of business operations and beyond.
Alternatively, data dashboards true value lies in data visualization, with a focus on user experience. Dashboards typically display no more than 5 metrics on a single screen, allowing stakeholders to analyze KPIs, without overcrowding the dashboard with distracting information.
Measures and targets
The periodical nature of data collection for a balanced KPI scorecard means that they are often preferred for BI reporting in relation to overarching organizational goals.
However, the snapshot this provides can lack the context that real-time data dashboards supply in explaining the trends in the data.
This often makes goals equally static, and limits the ability of decision-makers to modify these targets in response to changing circumstances.
For this reason, many argue that dashboards afford businesses the access required to make the best informed data-driven decisions.
Conversely, proponents of the KPI scorecard argue that by providing periodical updates, the scorecard evens out anomalies in data, thereby providing them more accurate data.
What to Consider Before Implementing a KPI Scorecard
It’s clear that dashboards and scorecards have some distinct differences. Perhaps the most significant is the long-term, almost “slow-release” nature of the KPI scorecard.
While it is possible to extract some real-time information from a project scorecard, they are primarily designed for developing innovative long-term strategies that will ultimately make your business more adaptable to change.
Key differences between a KPI scorecard and KPI dashboard
We have established the definition, general characteristics, benefits, and the difference between a scorecard and a dashboard. But perhaps you’re still struggling to identify which is most applicable for your unique use-case.
Let’s take a look at some different questions you need to answer before implementing a KPI scorecard.
- Is there sufficient demand from C-level executives for implementation?
- Is the organization prepared to engage in more involved performance management processes?
- Is there managerial urge for the organisational change required for implementation?
- What are the costs and benefits of making these changes?
- Is there sufficient capacity to accommodate the organizational change a KPI scorecard may suggest?
- What are we already doing that we can incorporate into a KPI scorecard scorecard?
If the answer to some or many of these questions is “No”, it may be worth considering performance monitoring and management initiatives that are less all-encompassing or organization-wide.
There is substantial buy-in required to implement a balanced KPI scorecard, as many data sources must be pooled in order to maximize its effectiveness.
An alternative to the KPI scorecard is the KPI dashboard, which can be easily integrated with data sources the company has already established, providing additional insight into areas of the business that may need to be optimized.
The KPI scorecard was designed to facilitate the optimization of productivity within an organization by identifying underperforming business functions and allowing data analysis that suggests how to improve said functions.
Perhaps this is an over-simplification, as the KPI scorecard can be used to provide actionable insights on many aspects of a business related to numerical targets and long-term goals.
Whilst some question the relevance of a project scorecard in today's fast-paced business environment, there are many for whom it is still a go-to tool when optimizing operations.
Considering the advances in computing technology since the balanced scorecard was introduced, it’s little surprise that the initial concept has been incorporated into business services software such as the scorecard dashboard.
But are you still wondering whether you’re ready to make the switch from KPI scorecard to dashboard?
If you’re looking for a simple and easy way to integrate a dashboard with your data, integration with GoSimplo takes no longer than 5 minutes, and the platform is free forever.