5 Perspectives of BSC

Successful implementation of Balanced Scorecard and introduction of strategy maps concept of the
company very much depends on the right choice of key performance indicators (KPIs). Unfortunately,
it is impossible to develop a universal set of key performance indicators which will be effective for any
company. Every business is individual and that means that it requires individual approaches to
performance evaluation and strategy development. Much depends on the strategy itself and the
companys strategic goals. Every business has different key success factors and key performance
indicators should reflect relations to the success factors.

At the same time, it is possible to compile a general list of key performance indicators which are
divided into categories. This list should not be viewed as a must have set of indicators. In each case the
number of key performance indicators and KPIs themselves will vary. But the list of key performance
indicators which will be compiled below is based on the experiences of many companies and
researches related to strategic maps.

One look at the list is enough to understand that this list of key performance indicators includes
both final indicators and those KPIs that are characterized by key success factors. Youll find
both leading and lagging indicators. As known lagging indicators are mostly concerned with financial
issues, while KPIs related to customer relations, internal business processes and learning and growth will
tell much about what will happen to the company. Some indicators, like the number of received
patents, may be viewed as a result for learning and growth perspective. Most indicators, however,
combine final indicators and indicators characterizing certain activity aspects. For instance, such
indicators as time for placing an order characterizes one of key activity aspects, while customer loyalty is
a final result. At the same time, customer loyalty stimulates sales volumes, which is a vivid example of
how cause and effect ties work within the framework of strategy maps.




Financial Perspective


Total assets holdings
Asset value per one employee
Capital productivity ratio
Sales volumes for new products/services
Working efficiency of personnel
Profitability of assets
Revenue from new products/services
Revenue per employee
Market price per share
Profitability of net assets
Added value per one employee
Efficiency of assets
Profitability of investment
Efficiency of sales volumes
Ratio of marginal revenue
Marginal revenue per employee
Cash flow
Ratio of equity capital to total assess holdings
Profitability of investment
Total expenses

Of course, this is only a short list of indicators, and other key performance indicators may and must be
evaluated. You can find the full list of all possible indicators in specialized literature. But from the above
list it is evident that some business experts and authors (like Kaplan and Norton) tend to use markets
and customer oriented indicators in the financial category. Although such indicators characterize past
periods of company activity and can be obtained from financial and accounting reports, they have strong
relations to a customer perspective of the Balanced Scorecard.

Key performance indicators of the financial category make it possible to perform comparative
analysis of different departments of the company. It is recommended to contrast obtained results with
the average indicators for the industry and results obtained for the past periods. For example, the Volvo
company is effectively using graphs and time series to present its policy and strategy. Financial
perspective may include both static and dynamic indicators. This makes it possible to evaluate current
condition of the company and changes in performance and profitability.

Customer Perspective



Number of customers
Market share (%)
Average annual sales volume per customer
Number of lost customers
Average time of taking an order
Number of customers per employee
Specific weight of concluded agreements in the total number of contacts with customers
Customer satisfaction
Customer loyalty
Expenses per customer
Number of visits/contacts with customers
Number of advertising campaigns
Trademark index
Marketing expenses
Average contact duration with a customer
Average amount of products shipped to one customer
Number of customer visits to the company
Average time between first contact with the customer and signing of agreement
Average annual expenses to serve one customer

Some of the above mentioned indicators characterize customer perception of the company, including
customer satisfaction and different indicators on relations between customers and the company. They
may be decomposed to customer segments, sales channels, etc. Such indicators are simultaneously
reflecting current situation in relations of customers with the company (certain segment of customers or
customer group) and changes in customer relations over a certain period of time. In other words, these
indicators look like a balance of customer relations and report on revenue and losses. Experience shows
that in order to forecast sales volumes organization should monitor indirect indicators like recognition
rate of the brand and the like. Besides, there are even deeper indirect key performance indicators like
company marketing efforts or number of contacts/visits to potential customers. Such indicators are
sometimes included with learning and growth perspective especially if they reflect expenses related to
entering certain market segments or repositioning of the company.

Depending on the situation (strategy and key success factors) the company may require indicators
reflecting product share in total purchase volumes of customers, number of contacts with customers,
number of employees who regular contact customers, etc. You will find more information in specialized
marketing literature and studies.

Internal Business Processes

Specific weight of administered if expenses in total revenue
Ratio of timely completed orders
Average product labor-output ratio
Average development time of a new product
Average time from placing the order to its completion
Supplier frequency
Average decision-making time
Turnover of material assets
Labor productivity growth
Efficiency of information systems
Increasing number of IT Systems &Computer Equipment
Specific weight of expenses on IT Systems in the total amount of administrative expenses
Emission of hazardous substances to the environment
Influence of company products to the external environment
Expenses related to correction of mistakes in managerial decisions
Number of properly executive orders
Administrative expenses per employee

It is often reasonable to evaluate not only the efficiency of some production processes and operations at
a given moment, but also assess the potential of these indicators, and the opportunities
to improve them in order to increase production output and broaden production line. Similar to
customer perspective, indicators must evaluate current condition of the company and changes in
internal processes over a certain period of time. If the company decided not to single out a separate
perspective of human resource capital, it is possible to include indicators reflecting efficiency of human
resources and technologies to the internal processes perspective. It is very important to include
indicators on efficiency of IT Technologies use. In the age of information any company is interested to
evaluate indicators showing customer skills and efficiency of using IT systems, computer equipment
Internet and web based services, corporate customer database etc.

Learning and Growth Perspective

Expenses for research and innovation
Specific weight of expenses on research and innovation in the total amount of expenses
Specific weight of expenses on improvements in total amount of expenses related to IT technologies
Length of research and innovation projects
Resources allocated on research and innovation
Investment in training of personnel dedicated to customer relations
Investments in innovation and research
Expenses related to preparations and study of new products
Investments in exploration of new markets
Frequency of direct contacts with customers
Number of registered patents
Average time company patents are in force
Number of rational and creative ideas per employee
Average training cost per employee
Employee satisfaction index
Marketing expenses per customer
Employee trust rate to the company
Specific weight of employees who have not reached a certain age in the total number of employees
Non production expenses per customer
Specific weight of new products in the total amount of products

Similar to the previous category, the above mentioned indicators often reflect interaction of human
resources and technologies. Company management is often forced to use indicators that characterize
uncompleted processes contrary to final KPIs. As is known, high professional and education level of
strategic development department employees does not guarantee that the company will complete a
great number of successful innovation projects, as well as huge investments in business do not
guarantee success. Selected indicators should enable users to make own conclusions as to efficiency of
using certain resources or combination of resources.


Human Resources Perspective

Leadership index
Personnel motivation index
Number of employees
Personnel turnover rate
Average employment time in the company
Average employee age
Time spent for education and training of personnel
Ratio between temporary and permanent employees
Percentage of employees with college degree
Average employee absence time
Number of female managers
Number of job applications to the company
Personnel trust rate to the company
Ratio of employees under 40 y.o.
Annual expense for re-education of personnel
Number of fulltime employees who spend less than half of working time in office
Ratio of fulltime employees
Number of temporary fulltime employees
Number of part time employees
Number of employees with a per hour compensation system

Please note that if the company decides to create a separate human resources perspective then
indicators should fully reflect strategically important characteristics of personnel. One of these
characteristics is personnel competence. Besides, many human resource managers group employees by
age, sex, education, experience, nationality etc. Employee turnover rate and career chances have an
exceptional importance. As a result, selected indicators should have strong cause and effect ties with
indicators in other categories.

It should be repeated that the choice of key performance indicators solely depends on a companys
strategy, its organization structure, strategic goals, mission and values. A certain set of indicators which
proves to be effective for one company may turn out to be a failure for another. Thats why, most top
managers and scholars claim that successful choice of key performance indicators predetermine
successful implementation of Balanced Scorecard and strategy maps in the company.