Here is 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, but it is based on the experiences of many companies and researches related to scorecards.
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.
- Total assets holdings
- Profitability of assets
- Profitability of net assets
- Ratio of equity capital to total assets holdings
- Capital productivity ratio
- Efficiency of assets
- Profitability of investment
- Market price per share
- Sales volumes for new products/services
- Asset value per one employee
- Working efficiency of personnel
- Marginal revenue per employee
- Added value per one employee
- Revenue per employee
- Revenue from new products/services
- Efficiency of sales volumes
- Ratio of marginal revenue
- Cash flow
- Total expenses
From the above list it is evident that some business experts and authors 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.
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We have imported the KPIs from this article in .BSC file (BSC Designer project file). Users of BSC Designer or those who are trying the trial version can download this project.
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.
- 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.
Internal business processes
Similar to customer perspective, indicators must evaluate current condition of the company and changes in internal processes over a certain period of time.
- 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.
Learning and growth perspective
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.
- 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.
Human resources perspective
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.
- 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
Employee turnover rate and career chances have an exceptional importance. Selected indicators should have strong cause and effect ties with indicators in other categories.
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Successful implementation of KPIs into Business Scorecard
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 company’s strategic goals. Every business has different key success factors and key performance indicators should reflect relations to the success factors.
- If you need to have some ready-to-use Key Performance Indicators for your specific niche, then check out the commercial library of KPIs at www.strategy2act.com where you will find useful metrics and KPIs together with best practice articles about KPI.
Align KPIs with the strategy
Having a list of ready-to-use KPIs is really helpful and in the article below you will find some suggestions for KPIs for the 4 perspectives of the Balanced Scorecard. The problem with these KPIs is that they are taken out of the business context.
The majority of them can be used for measurements, but they will hardly help you with acquiring the ultimate business performance. KPIs works effectively only if they are aligned with some business objectives and strategies. Check out the presentation slide below. This example is a great illustration of how one can use KPIs to actually improve business strategy and ultimate business performance:
What if your business is different?
It’s great to have a list of ready-to-use KPIs, but what if your business is different? In most cases you cannot take the KPIs out of the box and start using them. The best KPIs are not on the list above and only appear as a result of careful analysis.
We hear the question “Why KPIs don’t work?” so often that we decided to prepare a separate report called “Why most KPIs don’t work and what to do about this.”
I’m sure you have a lot of questions after reading this article. Feel free to contact us or simply ask your question in the comments below. We’ll be happy to help.