This was another Interesting question which was supposed to be by one of my workshop participants. Measurements and Business analysis are closely connected. If we cannot measure something, we actually do not know whether we performed well or something has to be improved. At exactly the exact same time, allow me to warn, everything which needs to be measured cannot be quantified, and same time that which we quantify, are not necessarily worth measuring. Today, allow me to attempt to explain these phrases associated with each other and in which to use what. The very first outer Universe which you could imagine is indicators. Everything which we are going to discuss now is basically a subset of indicators.
So what is an indicator? Essentially, an indicator suggests something that is of interest to stakeholders. We all understand traffic light indicator that informs you whether should proceed or you need to stop. Moving away from pure Indicator which does not have a numerical value, we could begin looking at offering a numerical value into the index. That is when we call it as a metrics. For example, we can State our profitability is 25%. This indicates that it is a healthy profit margin which the company is making. Metrics are quantifiable indicators. Next comes is among The metrics which ones are crucial indicators or key performance indicators. A company may have hundreds of metrics which it collects over a time period, but not all metrics are equivalent.
Some metrics are Critical to the performance of the company and have to be monitored very carefully. That is what we will call it as a key performance indicator. By way of instance, the money in the bank is an excellent KPI for any company to track. If you run very low on money, then your company can stop.
Now, what is a scorecard? A scorecard typically provides a joint performance index using many KPIs. We can create a performance scorecard for a department where we include key performance expectations which we are expecting from the organization.
Now, what is a balanced scorecard?
A balanced scorecard Is one that is balanced with respect to various viewpoints, such as financial standpoint, people perspective, process perspective and client perspective. Additionally it is balanced with respect to previous performances and probably future performances. In my personal ecba certification Adventures, most organizations construct balanced scorecard with an organization or business level than building it in the system level. Metrics and KP are usually used at the chip system level. But these are not iron cast and you might have the ability to use any of this at any level.