T he alignment of KPIs with organization vision/mission/ strategies/objectives is the key to realizing bottom-line impact. The challenge is to develop KPIs that provide a holistic and balanced view of the business. Faced with potentially hundreds (if not thousands) of candidate metrics, how does one select those that are most meaningful? One potential approach is to think of individual KPIs not just as a singular metric, but as a balanced metric that incorporates several alternative dimensions. These dimensions include business perspectives (customer, financial, process and development), measurement families (cost, productivity, quality) and measurement categories (direct, additive, composite). By overlaying these various dimensions, one can create a framework for building KPIs that succinctly captures the most critical business drivers.
Since the early 1990s when Robert Kaplan and David Norton introduced the balanced scorecard methodology for performance management, the conceptual framework has been enthusiastically embraced by corporate America. As a performance management tool, the balanced scorecard is designed to assist management in aligning, communicating and tracking progress against ongoing business strategies, objectives and targets. The balanced scorecard is unique in that it combines traditional financial measures with non-financial measures to measure the health of the company from four equally important perspectives:
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