Key performance indicators (KPIs) are an integral part of balanced scorecards in strategic management. KPIs allow management to track employee performance, and visualize how that performance affects the long-term strategic goals of the company so that changes can be made where necessary.
Key performance indicators assist managers in developing resource management strategies by focusing on four perspectives:
- Internal Processes
In balanced scorecards, these perspectives work together to ensure organizational growth, allowing managers to understand the areas that need improvement in order to reach company goals. When using balanced scorecards to gauge these perspectives, each requires the evaluation of four distinct areas:
- Current Objectives
- Current Measures
These four areas work together within each KPI perspective to answer the questions that will allow management to refine their current strategic management processes to drive organizational success.
The financial KPI answers the question of how the company looks to current shareholders. This perspective allows management to gauge current financial progress, as well as what needs to be done for further financial success.
The customer perspective provides insight into how current customers view the organization. These answers allow management to come up with the necessary goals and objectives that will ensure that the organization achieves their current vision.
Internal Business Processes Perspective
Internal business processes are responsible for the overall success of the company. This perspective allows management to understand the performance of the current processes, allowing them to determine which ones require the most focus to ensure the satisfaction of customers and shareholders.
The innovation perspective promotes a better understanding of the requirements necessary for education and growth. All organizations must be able to learn the effects of training, capital, information systems, and other intangibles in order to see continued growth. The innovation perspective allows management to gauge the overall ability of the organization to change and improve, which are required for future success.
These balanced scorecard key performance indicators provide a detailed view of the success of current strategic management practices. Once these indicators are understood, they provide the framework needed to ensure that the organizational goals can be met. Management can then use this information to educate their employees on the required objectives to ensure that the goals of the organization are in line with the goals of the employees.