SBP022: How to Balance your KPIs Part 3 of 3
Roger Knocker • January 22, 2024
SBP022: How to Balance your KPIs Part 3 of 3
In previous podcasts, we spoke about the importance of balancing KPIs to avoid getting distorted results.
When looking at the selection of KPIs for a team or for the overall business, there is another level of balancing to be added.
The idea was first documented by Robert Kaplan & David Norton who Identified 4 perspectives that KPIs can be grouped by.
1. Financial Perspective – ask yourself, “How is Shareholder value created? The answer to this is normally answered with KPIs that address
2. Customer Perspective – ask yourself, “What valued our Customer expect from us?” They are normally seeking
3. Internal Perspective - ask yourself “to satisfy our shareholders and customers, what internal processes do we need to excel at?” This will typically talk to
4. Learning and Growth – ask yourself “how will we sustain and improve the business long term?” This perspective does not address customer-facing activities but rather activities that are behind the scenes such as
Within each of the above 4 perspectives, you also need to balance between efficiency and effectiveness otherwise you may be driving one at the expense of the other.
Group your business and Team KPIs into the 4 perspectives to ensure you have sufficient balance in your KPIs to execute on your strategic goals.
Resources mentioned in the podcast
www.kpims.co.za/kpis
Www.kpims.co.za/training
If you enjoyed this episode of the Smart Business Performance Podcast, then make sure to subscribe to our podcast.
When looking at the selection of KPIs for a team or for the overall business, there is another level of balancing to be added.
The idea was first documented by Robert Kaplan & David Norton who Identified 4 perspectives that KPIs can be grouped by.
1. Financial Perspective – ask yourself, “How is Shareholder value created? The answer to this is normally answered with KPIs that address
- Financial Growth
- Financial Efficiency
- Optimized usage of their funds which includes generating cash, not consuming it
2. Customer Perspective – ask yourself, “What valued our Customer expect from us?” They are normally seeking
- Quality Products and Services
- Meeting due dates
- A competitive price
- Good relationships or partnerships
- Product leadership and Brand could be important
3. Internal Perspective - ask yourself “to satisfy our shareholders and customers, what internal processes do we need to excel at?” This will typically talk to
- Quality processes
- Efficiencies continuously improving the cost to produce outputs
- Reducing cycle times of processes
- Ensuring good governance
- Executing projects on time, in scope and within budget
4. Learning and Growth – ask yourself “how will we sustain and improve the business long term?” This perspective does not address customer-facing activities but rather activities that are behind the scenes such as
- Building the capabilities of your people
- Optimising IT systems
- Building the environment and culture that is needed
Within each of the above 4 perspectives, you also need to balance between efficiency and effectiveness otherwise you may be driving one at the expense of the other.
Tip
Group your business and Team KPIs into the 4 perspectives to ensure you have sufficient balance in your KPIs to execute on your strategic goals.
Resources mentioned in the podcast
Visit
www.kpims.co.za/kpis
Www.kpims.co.za/training
If you enjoyed this episode of the Smart Business Performance Podcast, then make sure to subscribe to our podcast.
Running a business in South Africa can feel like riding a rollercoaster. The ups and downs of the economy, changes in regulations, and unexpected challenges make it tough to stay on track. But there's a way to turn these challenges into opportunities: smart financial planning and analysis (FP&A). Think of FP&A as your business's GPS. It helps you see what's coming, plan for it, and stay on course. In South Africa, where things can change quickly, having a strong FP&A process is not just helpful—it's crucial. This guide will show you where to start and what to keep in mind when it comes to your company's finances. Anthony Wilson, Operations Director of KPI Management Solutions weighed in with tips to help your business become more resilient and help you grow, no matter what comes your way.
Finance creates value when it shows up weekly. Discover how finance teams move from compliance reporting to operational partnership.
