Using Scorecards With Your Board

KPI (key performance indicators) scorecards are essential in managing a company and communication with a board. KPI’s are the key metrics that capture the specific performance of each key area of the company. These vary both by industry and by company within each industry. Most companies seem to by-pass Scorecards. 

In selecting KPI’s, they should be clearly defined & quantifiable, tie directly to key drivers of your business, be moderate in number (don’t drop 100 KPI’s, 20 should work) and be assigned to specific managers. They should also be easily captured without a lot of work so that the creation of the weekly report is not a time sync. Usually, the CFO has the job of corralling the numbers. Each of the key team members should have their 3-5 KPI’s that they are responsible for in their area. They should be targeted at the efficiency, efficacy and profitability of your firm.

I generally break KPI’s into two categories: those that tied to the financial model and those tied to intangibles.

Metrics tied to your financial model are straight forward. What drives your revenue (P*Q) and what drives your cost. If you are an e-commerce company, these include traffic to your site, conversion, average basket size and such. Costs include cost by channel (total search cost divided by search revenue, total affiliate cost divided by affiliate revenue, etc), call center costs, etc. If you run a call center, these would include call volumes, average hold time, % resolution on first try, up sale %, etc.

Intangible metrics are those items that effect your brand and define your culture. These include metrics around employee satisfaction, customer satisfaction and such.

I would break out your sales pipeline analysis into a separate tool. This is a much more complex animal and not covered well in a scorecard. I gave an example of a tool we use in a separate post, Pipeline Management.

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