Metrics are important because they provide organizational direction, help align employees around common goals, ensure accountability, and support decision making and resource allocation.
Effective Balanced Scorecard measures have the following characteristics:*A link to strategy: All Balanced Scorecard measures should be faithful translations of objectives that have been derived from the organization’s strategy.
*Quantitative: Most measures are quantitative in nature and reflect objectivity as much as possible.
*Accessible: Research has found that when organizations launch their Balanced Scorecards, they often do not have access to as much as 30 percent of the necessary performance data. However, a Balanced Scorecard is still usable. It is preferable to move forward with a mostly complete scorecard than to wait months or years to compile all the necessary data.
*Frequently updated: Balanced Scorecard measures should be updated monthly or at least quarterly. If updates are done less frequently than that, it will be difficult to make mid-course corrections.
*Counterbalanced: If a Balanced Scorecard measure has the potential to drive unintended consequences, it is a good idea to add counterbalanced measures.
*Relevant: Balanced Scorecard measures should accurately portray the objective that the organization wants to evaluate. An effective test is whether measured results are actionable measures.
*A mix of lag and lead indicators: Lagging indicators are measures that track past events, while leading indicators have predictive power.
*Simple: The design of measures should be simple and measures should also be easy to understand by all employees. The ideal situation is to track a small number of simple items, discuss them often, analyze them thoroughly, and track progress toward the mission.
Anubha Walia 🙂