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Posts Tagged ‘Balanced Scorecard’

Business Strategy: Choosing the Right Metrics

Monday, November 21st, 2011 by Troy Schrock

Strategic plans should always be linked to metrics.  Which metrics are best for your organization?  Those that are consistent with your specific strategy.  An organization whose business model depends on being the low-cost provider, for example, should track metrics that directly help them do that (e.g., on-time delivery, transaction costs).  An organization that focuses on providing highly customized solutions for customers might track metrics like share of customer or customer satisfaction.  Each of these metric examples might be applicable to either type of strategy, but each organization must select a few that are the most meaningful.  The strategy determines that.

Perhaps you have heard of the Balanced Scorecard approach.  The general idea behind the Balanced Scorecard is that an organization needs to view data from across four key domains: customers,
employees, operations, and financials.  Following is a short list of some key metrics in each of these domains:

  • Customer – delivery against the value proposition, responsiveness, delivery, market, and product profitability
  • Employees – employee engagement, teamwork, health of the culture, knowledge, and career development
  • Operations – performance of the key operations, efficiency, and productivity
  • Financial – historical financial performance, ratios, risk, forecasting, and value management

Most organization’s metrics are heavily oriented toward measures from the operational and financial domains and, accordingly, light on the customer and employee domains.  Perhaps your business is guilty of this.  Regardless, the specific metrics you choose should align with your strategy.  In fact, someone ought to be able to discern your strategy just by looking at your metrics.