Question

Balanced Scorecard

a. List the four areas of a balanced scorecard. Describe each area clearly and concisely.

b. Define a KPI

c. Pick a real world company and give an example of a KPI for each balanced scorecard area for that company.

Answer 1

1. Balanced Scorecard Perspectives:

i) Traditional For-Profit Perspectives

• Finance: “How will we expand our revenue and keep our costs down?”
• Customer: “What are the key differentiators between our organization and our competition that we can showcase for our customers?”
• Internal: “What are we doing inside our organization to contribute to making customers happier and gaining more profit?”
• People (or “learning and growth”): “How do we nurture our staff’s culture, capabilities, and skills

ii) Nonprofits, Charities, & Non-Governmental Organization Perspectives

Mission: “How will we achieve our mission?”

• Beneficiaries or recipients—tied with finance: “What are the needs that we are servicing?” and “How will our financial sustainability strategy allow us to provide the most benefits?”
• Internal processes: “What are we doing inside our organization to service our clients and contribute to our financial sustainability?”
• People: “How do we nurture our staff or volunteer culture, capabilities, and skills?”

iii) Miscellaneous Perspective Changes To Keep In Mind

• Learning and growth (“L&G”): This is what Norton and Kaplan use to describe the “people” perspective we have listed above. This doesn’t make sense to a lot of people, so many change it to “employees,” “people and capabilities,” or “skills and culture.”
• Customer: As mentioned above, customers are sometimes “stakeholders,” “beneficiaries,” or “clients.”
• Internal processes: These are occasionally referred to as “do wells”—as in, “the things we need to do well.”
• Regulated organizations: Some regulated organizations have an entirely separate perspective called “regulatory.” Others just make sure they have a theme in their internal processes called “regulatory.”

b) A Key Performance Indicator is a measurable value that demonstrates how effectively a company is achieving key business objectives. Organizations use KPIs at multiple levels to evaluate their success at reaching targets. High-level KPIs may focus on the overall performance of the enterprise, while low-level KPIs may focus on processes in departments such as sales, marketing or a call center.

c) What KPIs does Amazon monitor on a daily basis?

1. I'm sure they have a sophisticated flash reporting that updates sales by category by the second, minute, hour, and time of day. And I'm sure that sales data is comparative to the prior week, month, and year. Related to sales, they'll have the margins for these sales too.
2. Related to the above, I'm sure they track the number of transactions and average order size by category.
3. They've absolutely nailed e-mail. So I'm sure they track click-through rates and sales by e-mail.
4. I mentioned PRIME up above. We all know they are tracking number of new PRIME members per day.
5. Inventory, inventory, inventory ... daily, they are probably checking turnover rates, GMROI, and other related inventory metrics.

Those are the biggies. Here are a few more:

• Cost per order (to measure throughput)
• Average time to pick an order
• Related to reverse logistics, number of returns, cost of return, and time to re=stock a return

As a customer, here are some potential KPIs ...

• Number of ratings
• Number of reviews listed
• Average number of pages viewed