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Balanced Scorecard implementation starts with strategy development. However, one of the most important stages is development of KPIs set. Read on to find out more info on KPI development. Check additional information about create kpi.

Implementation of Balanced Scorecard is often associated with certain difficulties. Indeed, many Top Managers and business owners report face and with serious challenges when making their first steps in implementation of this fantastic and revolutionary performance evaluation and strategic management tool. Perhaps, the greatest advantage of Balanced Scorecard is inclusion of nonfinancial indicators to the list of measures that are continuously evaluated to assess current company performance. Balanced Scorecard creators, Norton and Kaplan, are the two business gurus who were the first assume that financial indicators are to be supplemented with nonfinancial ones. Why is it so? The point is that financial indicators are quite representative, however, they show past events and developments. Strategic management implies future vision. One of the most important strategic management tasks is to solve problems even before they evolved into business disasters. Of course, no one can give 100% guarantee as we don't know what happens in future. However, through evaluation of nonfinancial indicators which are also called leading indicators, have an excellent opportunity to make strategic plans and evaluate company progress on the way to implement strategic goals through evaluation of leading indicators.

Let's take a simple hypothetical example. For instance, company top management set the goal of gaining 25% market share. Of course, this cannot be a short term goal to get immediate cash. Implementation of such an ambitious goal will take several years. During this time company top management has to be aware how well the company is doing in terms of implementation of strategic goals. This is where evaluation of leading indicators of Balanced Scorecard can help. For example, evaluation of such KPIs as number of contacts with customers, sales proposal per customer, customer satisfaction and loyalty or even employee satisfaction can tell much about whether or not strategic goals will be implemented.

Leading indicators (most of them nonfinancial) have an exceptional importance for performance evaluation in terms of reaching adopted strategic goals. That is why choice of KPIs (key performance indicators) is extremely important. It should be also noted that every business is fairly individual and thus requires own set of key performance indicators. Many business owners and top managers love making one typical mistake: they use sets of key performance indicators that were designed and apply by some other companies. Of course, Balanced Scorecard experience is truly priceless. However, if one indicator is good for a certain company it may be harmful for the other. That's why, due attention should be given the process of developing and implementing key performance indicators in the company. Moreover, KPI discussion should precede the implementation process. Indicators have to be discussed with those people to whom they may concern. For example, if company top management is going to introduce such an indicator as number of contacts with customers, this KPI needs to be discussed with sales managers or whoever contacts customers so that these people understand why they use Balanced Scorecard and how they can improve this indicator. Involvement of ordinary personnel in KPI development is certainly a must!

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