If you’re like me, you’ve probably read countless books, articles, and blog posts on the best ways to measure and improve performance. You’ve probably looked into, or even participated in, programs like Balanced Scorecard (BSC), Great Game of Business (GGOB), Entrepreneurial Operating System (EOS), Objectives & Key Results (OKRs), and more. A common thread you’ll find through almost every concept is the idea of a dashboard, scorecard, or KPI. And while these three terms are often used interchangeably, they’re not synonymous. In fact, each of these tools provide different information and offer varying levels of value. Below, I break down my experience with these three tools, their benefits, and their shortcomings.
Dashboards give you at-a-glance, time-bound status of your performance. Think of the dashboard on your car. It displays your current speed (speedometer), fuel level, working speed of the engine (tachometer), and more. It provides you with real-time, or at a particular point in time, status of your vehicle as you are operating it. It does not tell you your goals, your route, or trends. It simply gives you the data on your current operating condition. This is the goal of a dashboard.
Business Leaders: cash in bank, receivables balance, open orders, projects in motion, etc.
Marketers: users on website, social media followers, email list size, impressions, etc.
What You Gain
- Get all the key insights you need on the status of your business, project, team, etc. at a given point in time
- Consolidated or aggregated report of important data that can help you make decisions
- No context and needs good interpretation
- If it’s the only tool you use, it can lead to reactive and dramatic decision making
A Scorecard gives you at-a-glance status on the activity and progress toward your goals. A scorecard identifies your goals and displays how close you are to achieving them. Think of a scorecard used for golf. For each hole, at every course, you’re given the standard: par. At each hole, you track your golf game performance relative to par (if you’re like me, you usually just take the double par to keep your score down).
A scorecard can also help you easily identify trends, because there’s some type of repetitive or historical nature to it. For example, as a salesman, your scorecard may indicate your goal of making 20 cold calls per week and you track your results weekly. Over time, you’ll begin to see trends in the number of calls you make. This data becomes even more powerful when you discover correlations between data sets. For example, when making 20 cold calls per week, you notice you also generate about 5 opportunities per week, and 2 of those (on average) turn into sales. You’ve now discovered a lead indicator for your business (see KPI below).
Business Leaders: revenue and expenses to budget, cold calls made to goal, customer complaints to goal, etc.
Marketers: people reached to goal, leads generated to goal, content pieces developed to goal
*Key difference between a dashboard and scorecard: a scorecard measures a metric against a goal.
What You Gain
- Clarity of expectations: everyone knows what the goals are and what they need to achieve to meet expectations. This means you get the outcomes you want.
- Know when you’re on track and if not, the opportunity to get things back on track.
- Metrics for their own sake are exhausting and add little value. A good scorecard should measure the right things.
- If you and/or your team are spending more than an hour a week on metrics, you’re tracking too many and/or the wrong things (IMO).
KPI stands for Key Performance Indicator. It’s a data point, or an indicator, of whether or not your business, project, team, etc. is on track. It’s a key indicator of your performance. So it must be the most important and highest-level metrics you track. You must also find that they actually have an impact on your business in some way, otherwise it’s just noise. You should have a handful of KPIs, but not too many. Remember, if everything is important, nothing is important.
A KPI can be found on a Dashboard or Scorecard, or you can have an entirely separate report just for your KPIs. They can be lead indicators and lag indicators, but make sure you have a mixture of both. I’ve found that many people are good at identifying lag indicators, which show results (sales, profit, orders shipped, etc.), but few are able to identify lead indicators, which are predictive. They’re the levers you pull that impact your results. KPIs should also have a goal attached.
Business Leaders: new products released (lead indicator), revenue (lag indicator)
Marketers: content pieces developed (lead indicator), new leads (lag indicator)
What You Gain
- Visibility on the highest-level performance of your business, project, team, etc.
- Identify the predictive activities that bring future results.
- Because KPIs are high level, they can overlook the granularity of goal achievement. For example, it’s easy to say your KPI goal is 3 new products this fiscal year. It’s harder to commit to, and measure, the sustained activity over time that’s necessary to develop a new product.
- KPIs take time to develop and refine. They require research and a good understanding of the business landscape you operate in.