A performance scorecard is a graphical representation of the progress over time of some entity, such as an enterprise, an employee or a business unit, toward some specified goal or goals. Performance scorecards are widely used in many industries throughout both the public and private sectors. The performance scorecard is an essential component of the balanced scorecard methodology.
Performance scorecards are also used independently of the balanced scorecard methodology to monitor the progress of any organizational goal. The integral concepts of scorecards are targets and key performance indicators (KPIs). KPIs are metrics used to evaluate factors that are crucial to the success of an organization; targets are specific goals for those indicators.
KPIs differ from one organization to another. Net revenue is a typical enterprise KPI; unemployment rate is a typical government KPI. In the scorecard, KPIs are represented by icons. For example, the vice president of manufacturing might be interested in such items as:
- The number of units produced
- The number items that fail quality control
- The amount of byproduct generated
- Inventory levels
- Raw materials inventory levels
- The current price of raw materials
Each KPI is typically displayed as a symbol indicating the health of that particular number. For example, the number of items failing quality control might be 50. If the company is making two million items a day, this is a low percentage and might be acceptable. If, on the other hand, the company is producing only 75 expensive products a day, 50 failed products probably indicate a serious issue that must be addressed. A KPI icon may use colored indicators (green/yellow/red), smiley faces, gauges, dials, and so forth. This way, at a glance, an individual can determine whether things are good for each particular KPI without having to see the exact number or translate a number into an indicator of overall health.
Here's one example of a scorecard created in Microsoft PerformancePoint Server:
The performance scorecard is often confused with the dashboard. The main difference between the two is that a dashboard, like the dashboard of a car, indicates the status at a specific point in time; a scorecard, on the other hand, displays progress over time.
Performance scorecards are often said to be a visual answer to the question, "How are we doing?"
This was last updated in May 2010
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What are performance scorecards? ›
A performance scorecard is a graphical representation of the progress over time of some entity, such as an enterprise, an employee or a business unit, toward some specified goal or goals. Performance scorecards are widely used in many industries throughout both the public and private sectors.What is the purpose of a scorecard? ›
Scorecards are the performance management tool that compares strategic goals with results. This tool allows management to implement its strategy by aligning performance with goals.How is scorecard used in performance management? ›
A balanced scorecard is a strategic management performance metric that helps companies identify and improve their internal operations to help their external outcomes. It measures past performance data and provides organizations with feedback on how to make better decisions in the future.What are the 4 typical components of the balanced scorecard? ›
The four perspectives of a traditional balanced scorecard are Financial, Customer, Internal Process, and Learning and Growth.How do performance scorecards improve performance? ›
The scorecard allows your business to increase growth and improve day-to-day operations through a data-driven culture and communication. The balanced scorecard provides shared goals that are grounded in a shared understanding, and helps you focus on driving stakeholder alignment.How do you create a performance scorecard? ›
- Identify your strategic objectives. The first step to building your balanced scorecard is to identify your strategic objectives for each business perspective: learning and growth, internal business processes, customer, and financial. ...
- Create a strategy map. ...
- Outline the measures.
Usually, an effective scorecard will have between 30-35 KPIs at the top level. But it's important to find a balance that works for your organisation and its strategic objectives. There needs to be enough KPIs to fully track the business's progression towards strategic goals.What are the types of scorecard? ›
You can create three kinds of scorecards: Primary—The most important scorecard out of multiple scorecards associated with an employee, strategy element, or accountability element.What is a scorecard process? ›
The balanced scorecard is a management system aimed at translating an organization's strategic goals into a set of organizational performance objectives that, in turn, are measured, monitored and changed if necessary to ensure that an organization's strategic goals are met.What is the scorecard method? ›
The Scorecard Method is used for comparing target companies to similar startups, such as business sector, stage of development and geographic location. You compare your target company to the norm for several factors and then adjust the median by your appraisal of the target.
How do you write a scorecard? ›
- Outline your purpose. ...
- Create specific objectives and performance measures. ...
- Strategically map each perspective. ...
- Analyze performance. ...
- Share and communicate results. ...
- Develop strategic changes and initiatives. ...
- Implement the changes. ...
- Improving strategic planning.
Therefore, an example of Balanced Scorecard description can be defined as follows: A tool for monitoring the strategic decisions taken by the company based on indicators previously established and that should permeate through at least four aspects – financial, customer, internal processes and learning & growth.What is the purpose of using a balanced scorecard for companies? ›
This ensures that the management reporting focuses on the most important strategic issues and helps companies monitor the execution of their plan. The Balanced Scorecard enables companies to better align their organisational structure with the strategic objectives.What are three 3 benefits that are associated with performance measurement? ›
- Identifying weak points for improvement. ...
- Understanding your cost-efficiency (ROI). ...
- Specifying and evaluating goal performance. ...
- Motivating employees. ...
- Rebalancing your team.
- Lead With Your Goals. The thing about lagging indicators is that they're always responding to a past state. ...
- Go Weekly. So many meetings have a monthly focus. ...
- Connect Indicators and Employees.
All five component processes (i.e., planning, monitoring, developing, rating, rewarding) work together and support each other, resulting in natural, effective performance management.What are the 3 key performance measures? ›
These types of indicators include: employee engagement, satisfaction and turnover.What is another word for scorecard? ›
KPI is actually a measure to do the performance. ScoreCard is basically use to display graphic indicators that visually convey the overall success or failure of any item in its efforts to achieve a particular goal.What is the difference between a scorecard and dashboard? ›
Remember, a dashboard helps you visualize large sets of data and showcase your company's progress on a project or goal. A scorecard helps you align your strategy with your objectives and highlights how your organization is working towards your strategy.
What elements does a performance scorecard contain? ›
- The Learning and Growth Perspective.
- The Business Process Perspective.
- The Customer Perspective.
- The Financial Perspective.
A dashboard is a business tool that provides a visual overview of the most important KPIs and metrics in a company and updates them in real-time. A scorecard is a framework that analyzes the current strategies and compares them with the company's overall objectives.What are the 5 key performance indicators? ›
- Revenue growth.
- Revenue per client.
- Profit margin.
- Client retention rate.
- Customer satisfaction.
What is a Scorecard? Scorecards offer organizations a snapshot of their current performance when compared to their goals. They are useful tools for organizations which need to manage performance and make strategic decisions better based on the distance between current performance and the goal.Why do companies use scorecards? ›
Why would a company use a Balanced Scorecard? While financial measures tell part of the story, the Balanced Scorecard offers an overarching view a business's strategic plan from the executive perspective. This, in turn, provides a framework for the entire organization in terms of guiding performance.