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71-497: The Waffle House Index is a metric named after the ubiquitous Southern US restaurant chain Waffle House known for its 24-hour, 365-day service. Since this restaurant always remains open (except in extreme circumstances), it has given rise to an informal but useful metric to determine the severity of a storm and the likely scale of assistance required for disaster recovery. It was coined by former administrator Craig Fugate of

142-434: A competitive advantage . Suppliers have instant access to a user-friendly portal for submitting standardized cost savings templates. Suppliers and their customers exchange vital supply chain performance data while gaining visibility to the exact status of cost improvement projects and cost savings documentation. Any business, regardless of size, can better manage supplier performance and overall supply chain performance, with

213-415: A "four perspective" approach to identify what measures to use to track the implementation of strategy. The original four "perspectives" proposed were: The idea was that managers used these perspective headings to prompt the selection of a small number of measures that informed on that aspect of the organization's strategic performance. The perspective headings show that Kaplan and Norton were thinking about

284-466: A "third generation" design method for balanced scorecards. Design methods for balanced scorecards continue to evolve and adapt to reflect the deficiencies in the currently used methods, and the particular needs of communities of interest (e.g. NGOs and government departments have found the third generation methods embedded in results-based management more useful than first or second generation design methods). Third generation balanced scorecards improved

355-399: A 1992 article. Although Kaplan and Norton's article was not the only paper on the topic published in early 1992, it was a popular success, and was quickly followed by a second in 1993. In 1996, the two authors published The Balanced Scorecard . These articles and the first book spread knowledge of the concept of balanced scorecards, leading to Kaplan and Norton being seen as the creators of

426-434: A KPI) but leading KPIs are also used to indicate the amount of front end loading activities. Performance focuses on measuring a particular element of an activity . An activity can have four elements: input, output, control, and mechanism. At a minimum, activity is required to have at least an input and an output. Something goes into the activity as an input ; the activity transforms the input by changing its state , and

497-478: A book published the year before by Olve et al. in Scandinavia ) on the value of visually documenting the links between measures by proposing the "Strategic Linkage Model" or strategy map . As the title of Kaplan and Norton's second book highlights, even by 2000 the focus of attention among thought-leaders was moving from the design of balanced scorecards themselves, towards the use of the balanced scorecard as

568-491: A connection between the Waffle House Index and FEMA's National Business Emergency Operations Center. A Waffle House location may close in preparation for an incoming storm for the safety of its customers and employees, which is unrelated to actual storm damage. The intent of the Waffle House Index is to measure how quickly a location reopens after the storm passes. The quicker the reopening, the less overall damage

639-605: A consistent measure of the performance of NHS population screening activities, and publication of up to four main KPIs for the most important contracts outsourced by each UK government department is seen as a measure helping to increase transparency in the delivery of public services. Human Resource Management In practice, overseeing key performance indicators can prove expensive or difficult for organizations. Some indicators such as staff morale may be impossible to quantify. As such, dubious KPIs can be adopted that can be used as

710-402: A few strategic objectives within each of the perspectives, and then define the cause-effect chain among these objectives by drawing links between them to create a "strategic linkage model". A balanced scorecard of strategic performance measures is then derived directly by selecting one or two measures for each strategic objective. This type of approach provides greater contextual justification for

781-401: A focal point within a more comprehensive strategic management system. Subsequent writing on the balanced scorecard by Kaplan & Norton has focused on its uses, rather than its design (e.g. The Execution Premium in 2008, "Intelligent Design of Inclusive Growth Strategies" in 2019 ); many others also continue to refine the device itself (e.g. Abernethy et al. ). The characteristic feature of

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852-473: A machine used for production in a factory would output various signals indicating how the current machine status is (e.g., machine sensor signals). Some signals or signals as a result of processing the existing signals may represent the high-level machine performance. These representative signals can be KPI for the machine. Key performance indicators define a set of values against to which measure. These raw sets of values, which can be fed to systems that aggregate

923-477: A number of perspectives in a similar way to the balanced scorecard. Balanced scorecards have been implemented by government agencies, military units, business units and corporations as a whole, non-profit organizations, and schools. The balanced scorecard has been widely adopted, and consistently has been found to be the most popular performance management framework in a widely respected annual survey (e.g. see results from 2003 and 2013 ). Theorists have argued from

994-436: A performance management report used by a management team, and typically focused on managing the implementation of a strategy or operational activities. In a 2020 survey 88% of respondents reported using the balanced scorecard for strategy implementation management, and 63% for operational management. Although less common, the balanced scorecard is also used by individuals to track personal performance; only 17% of respondents in

1065-424: A recognition that different but equivalent headings would yield alternative sets of measures, and this represents the major design challenge faced with this type of balanced scorecard design: justifying the choice of measures made. "Of all the measures you could have chosen, why did you choose these?" These issues contribute to dis-satisfaction with early balanced scorecard designs, since if users are not confident that

1136-400: A result trigger improved performance within the part of the organization they lead. The original thinking behind a balanced scorecard was for it to be focused on information relating to the implementation of a strategy, and over time there has been a blurring of the boundaries between conventional strategic planning and control activities and those required to design a balanced scorecard. This

1207-498: A rough guide rather than a precise benchmark. Key performance indicators can also lead to perverse incentives and unintended consequences as a result of employees working to the specific measurements at the expense of the actual quality or value of their work. Sometimes, collecting statistics can become a substitute for a better understanding of the problems, so the use of dubious KPIs can result in progress in aims and measured effectiveness becoming different. For example, during

1278-464: A significant proportion of their business in the southern US where there is a frequent risk of hurricanes, have good risk management and disaster preparedness . Because of this, and the fact that a cut-down menu is prepared for times when there is no power or limited supplies, the Waffle House Index rarely reaches the red (closed) level. The "Waffle House Index" sits alongside more formal measures of wind, rainfall, and other weather information, such as

1349-701: A single intervention (such as introducing a balanced scorecard). However, such studies as have been done have typically found Balanced Scorecard to be useful. Consideration has been given to the effect of organization size on balanced scorecard effectiveness: The balanced scorecard by definition is not a complex thing – typically no more than about 20 measures spread across a mix of financial and non-financial topics, and easily reported manually (on paper, or using simple office software). The processes of collecting, reporting, and distributing balanced scorecard information can be labor-intensive and prone to procedural problems (for example, getting all relevant people to return

1420-492: A value of the KPI, the defined norms have to be A chievable, the improvement of a KPI has to be R elevant to the success of the organization, and finally it must be T ime phased, which means the value or outcomes are shown for a predefined and relevant period. KPIs should be set at a senior level within an organization and cascaded through all levels of management. In order to be evaluated, KPIs are linked to target values, so that

1491-463: A way that is understandable, meaningful, and measurable. They are rarely defined in such a way that their fulfillment would be hampered by factors seen as non-controllable by the organizations or individuals responsible. Such KPIs are usually ignored by organizations. KPIs should follow the SMART criteria . This means the measure has a S pecific purpose for the business, it is M easurable to really get

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1562-465: A wider range of organizational types) and more effective (as design methods have evolved to make them easier to design, and use). Since the balanced scorecard was popularized in the early 1990s, a large number of alternatives to the original 'four box' balanced scorecard promoted by Kaplan and Norton in their various articles and books have emerged. Most have very limited application, and are typically proposed either by academics as vehicles for expanding

1633-587: Is a competitive issue for most organizations. For example, businesses that have higher operational/credit risk (involving for example credit cards or wealth management) may want weekly or even daily availability of KPI analysis, facilitated by appropriate IT systems and tools. Overall equipment effectiveness (OEE) is a set of broadly accepted nonfinancial metrics that reflect manufacturing success. Most professional services firms (for example, management consultancies, systems integration firms, or digital marketing agencies) use three key performance indicators to track

1704-399: Is deemed important often depends on the department measuring the performance – e.g. the KPIs useful to finance will differ from the KPIs assigned to sales. Since there is a need to understand well what is important, various techniques to assess the present state of the business, and its key activities, are associated with the selection of performance indicators. These assessments often lead to

1775-424: Is determined (i.e., the design processes used to select the content) that most differentiates the various versions of the tool in circulation. The balanced scorecard indirectly also provides a useful insight into an organization's strategy – by requiring general strategic statements (e.g. mission, vision) to be precipitated into more specific/tangible forms. The first versions of Kaplan and Norton's interpretation of

1846-473: Is illustrated by the four steps required to design a balanced scorecard included in Kaplan & Norton's writing on the subject in the late 1990s: These steps go beyond the simple task of identifying a small number of financial and non-financial measures, but illustrate the requirement for whatever design process is used to fit within broader thinking about how the resulting balanced scorecard will integrate with

1917-451: Is not particularly suited to it. Design of a balanced scorecard is about the identification of a small number of financial and non-financial measures and attaching targets to them, so that when they are reviewed it is possible to determine whether current performance 'meets expectations'. By alerting managers to areas where performance deviates from expectations, they can be encouraged to focus their attention on these areas, and hopefully as

1988-553: The Federal Emergency Management Agency (FEMA). The metric is unofficially used by FEMA to inform disaster response . The index is based on Waffle House's reputation for having good disaster preparedness and staying open during extreme weather or reopening quickly afterwards. If you get there and the Waffle House is closed? That's really bad... The index consists of three levels, based on

2059-496: The Saffir–Simpson Hurricane Scale , which are used to indicate the intensity of a storm. Dan Stoneking, FEMA director of external affairs, wrote in a FEMA blog post: As Craig [Fugate] often says, the Waffle House test doesn't just tell us how quickly a business might rebound – it also tells us how the larger community is faring. The sooner restaurants, grocery and corner stores, or banks can re-open,

2130-584: The Vietnam War , US soldiers were shown to be effective in kill ratios and high body counts, but this was misleading when used to measure aims as it did not show the lack of progress towards the US goal of increasing South Vietnamese government control of its territory. Another example would be to measure the productivity of a software development team in terms of lines of source code written. This approach can easily add large amounts of dubious code, thereby inflating

2201-433: The "second generation" design approach described above was that the plotting of causal links amongst twenty or so medium-term strategic goals was still a relatively abstract activity. In practice it ignored the fact that opportunities to intervene to influence strategic goals are (and need to be) anchored in current and real management activity. Secondly, the need to "roll forward" and test the impact of these goals necessitated

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2272-401: The 3rd Generation Balanced Scorecard design approach. The balanced scorecard is also linked to quality management tools and activities. Although there are clear areas of cross-over and association, the two sets of tools are complementary rather than duplicative. The balanced scorecard is also used to support the payments of incentives, even though it was not designed for this purpose and

2343-538: The Balanced Scorecard concept, and to provide case study and validation information for the various design generations. There are relatively few reliable assessments of the effectiveness of the approaches embodied in the balanced scorecard, but some studies demonstrate a link between the use of balanced scorecards and better decision making or improved financial performance of companies. Broadcast surveys of usage have difficulties in this respect, due to

2414-584: The Performance Driver model of Olve, Roy & Wetter (first published in Swedish, 1997; English translation, 1999, ) constitute the 2nd Generation of Balanced Scorecard designs; and designs that augment the strategy map / strategic linkage model with a separate document describing the long-term outcomes sought from the strategy (the "destination statement" idea) comprise the 3rd generation balanced scorecard design. Variants that feature adaptations of

2485-438: The activity produces an output . An activity can also enable mechanisms that are typically separated into human and system mechanisms. It can also be constrained in some way by a control . Lastly, its actions can have a temporal construct of time . Performance indicators differ from business drivers and aims (or goals). A school might consider the failure rate of its students as a key performance indicator which might help

2556-488: The appropriate strategic activity and outcome objectives which if achieved would deliver it. Measures and targets could then be selected to track the achievement of these objectives. Design methods that incorporate a Destination Statement or equivalent (e.g. the results-based management method proposed by the UN in 2002) represent a tangibly different design approach to those that went before and so have been proposed as representing

2627-416: The area sustained in the storm. Performance indicator Often success is simply the repeated, periodic achievement of some levels of operational goal (e.g. zero defects , 10/10 customer satisfaction), and sometimes success is defined in terms of making progress toward strategic goals. Accordingly, choosing the right KPIs relies upon a good understanding of what is important to the organization. What

2698-421: The balanced scorecard and its derivatives is the presentation of a mixture of financial and non-financial measures each compared to a 'target' value within a single concise report. The report is not meant to be a replacement for traditional financial or operational reports but a succinct summary that captures the information most relevant to those reading it. It is the method by which this 'most relevant' information

2769-935: The balanced scorecard asserted that relevance should derive from the corporate strategy , and proposed design methods that focused on choosing measures and targets associated with the main activities required to implement the strategy. As the initial audience for this were the readers of the Harvard Business Review , the proposal was translated into a form that made sense to a typical reader of that journal – managers of US commercial businesses. Accordingly, initial designs were encouraged to measure three categories of non-financial measure in addition to financial outputs – those of "customer," "internal business processes" and "learning and growth." These categories were not so relevant to public sector or non-profit organizations, or units within complex organizations (which might have high degrees of internal specialization), and much of

2840-486: The balanced scorecard concept, and so the paper refers to these distinct types as "generations". Broadly, the original 'measures in four boxes' type design (as initially proposed by Kaplan & Norton ) constitutes the 1st generation balanced scorecard design; balanced scorecard designs that include a 'strategy map' or 'strategic linkage model' (e.g. the Performance Prism, later Kaplan & Norton designs, and

2911-436: The carrying cost of the inventory. The provincial government of Ontario, Canada has been using KPIs since 1998 to measure the performance of higher education institutions in the province. All post-secondary schools collect and report performance data in five areas – graduate satisfaction, student satisfaction, employer satisfaction, employment rate, and graduation rate. In England, Public Health England uses KPIs to provide

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2982-466: The concept. While the "corporate scorecard" terminology was coined by Schneiderman, the roots of performance management as an activity run deep in management literature and practice. Management historians such as Alfred Chandler suggest the origins of performance management can be seen in the emergence of the complex organization – most notably during the 19th Century in the USA. Other influences may include

3053-429: The data, are called indicators . There are two categories of measurements for KPIs. An 'indicator' can only measure what 'has' happened, in the past tense, so the only type of measurement is descriptive or lagging. Any KPI that attempts to measure something in a future state as predictive, diagnostic or prescriptive is no longer an 'indicator', it is a 'prognosticator' – at this point, it is analytics (possibly based on

3124-482: The dialogue beyond the financial bottom line – e.g. Brignall (2002) or consultants as an attempt at differentiation to promote sales of books and / or consultancy (e.g. Neely et al. (2002), Bourne (2002), Niven (2002) ). Many of the structural variations proposed are broadly similar, and a research paper published in 2004 attempted to identify a pattern in these alternatives – noting three distinct types of variation. The variations appeared to be part of an evolution of

3195-404: The earliest days of discussion of balanced scorecard usage that much of the benefit of it comes from the design process itself. Indeed, it is argued that many failures in the early days of the balanced scorecard could be attributed to this problem, in that early balanced scorecards were often designed remotely by consultants – it is suggested that because they were not being involved in the design

3266-435: The early literature on balanced scorecard focused on suggestions of alternative 'perspectives' that might have more relevance to these groups (e.g. Butler et al. (1997), Ahn (2001), Elefalke (2001), Brignall (2002), Irwin (2002), Radnor et al. (2003) ). Modern balanced scorecards have evolved since the initial ideas proposed in the late 1980s and early 1990s and are significantly improved – being both more flexible (to suit

3337-823: The extent of operations and service at the restaurant following a storm: The term was coined by FEMA Administrator Craig Fugate in May 2011 following the 2011 Joplin tornado , during which the two Waffle House restaurants in Joplin remained open. The measure is based on Waffle House's reputation for staying open during extreme weather and for reopening quickly, albeit sometimes with a limited menu, after very severe weather events such as tornadoes or hurricanes . The chain's disaster preparedness measures include assembling and training "Waffle House jump teams" to facilitate fast reopening after disasters. Waffle House, along with other chains (such as Home Depot , Walmart , and Lowe's ) which do

3408-534: The health of their businesses. They typically use professional services automation (PSA) software to keep track of and manage these metrics. Businesses can utilize supply chain KPIs to establish and monitor progress toward a variety of goals, including lean manufacturing objectives, minority business enterprise and diversity spending, environmental "green" initiatives, cost avoidance programs and low-cost country sourcing targets. Suppliers can implement KPIs to gain

3479-403: The help of KPIs' robust capabilities, which include: Main KPIs for supply chain management will detail the following processes: In a warehouse , the manager will use KPIs that target best use of the facility, like the receiving and put away KPIs to measure the receiving efficiency and the putaway cost per line. Storage KPIs can also be used to determine the efficiency of the storage space and

3550-470: The identification of potential improvements, so performance indicators are routinely associated with 'performance improvement' initiatives. A very common way to choose KPIs is to apply a management framework such as the balanced scorecard . The importance of such performance indicators is evident in the typical decision-making process (e.g. in management of organisations). When a decision-maker considers several options, they must be equipped to properly analyse

3621-487: The information required by the required date). The simplest mechanism to use is to delegate these activities to an individual, and many balanced scorecards are reported via ad hoc methods based around email, phone calls and office software. In more complex organizations, where there are multiple balanced scorecards to report and/or a need for co-ordination of results between balanced scorecards (for example, if one level of reports relies on information collected and reported at

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3692-466: The line count but adding little value in terms of systemic improvement. A similar problem arises when a footballer kicks a ball uselessly to build up their statistics. Balanced scorecard A balanced scorecard is a strategy performance management tool – a well-structured report used to keep track of the execution of activities by staff and to monitor the consequences arising from these actions. The term 'balanced scorecard' primarily refers to

3763-432: The managers who were intended to use the device did not trust its design (e.g. it measured the wrong things and used inappropriate targets) and so failed to engage with and use the devices. Academic criticism of the balanced scorecard can be broken into three distinct (but overlapping) areas of concern. In response to these concerns there have been many studies seeking to provide (retrospective) academic underpinnings for

3834-447: The measures chosen, and is generally easier for managers to work through. This style of balanced scorecard has been commonly used since 1996 or so: it is significantly different in approach to the methods originally proposed, and so can be thought of as representing the "2nd generation" of design approach adopted for the balanced scorecard since its introduction. In the late 1990s, the design approach had evolved yet again. One problem with

3905-415: The measures within the balanced scorecard are well chosen, they will have less confidence in the information it provides. Although less common, these early-style balanced scorecards are still designed and used today. In short, first generation balanced scorecards are hard to design in a way that builds confidence that they are well designed. Because of this, many are abandoned soon after completion. In

3976-462: The mid-1990s, an improved design method emerged. In the new method, measures are selected based on a set of "strategic objectives" plotted on a "strategic linkage model" or " strategy map ". With this modified approach, the strategic objectives are distributed across the four measurement perspectives, so as to "connect the dots" to form a visual presentation of strategy and measures. In this modified version of balanced scorecard design, managers select

4047-596: The needs of non-divisional commercial organizations in their initial design. These categories were not so relevant to public sector or non-profit organizations, or units within complex organizations (which might have high degrees of internal specialization), and much of the early literature on balanced scorecard focused on suggestions of alternative 'perspectives' that might have more relevance to these groups(e.g. Butler et al. (1997), Ahn (2001), Elefalke (2001), Brignall (2002), Irwin (2002), Flamholtz (2003), Radnor et al. (2003) ). These suggestions were notably triggered by

4118-848: The observer to intervene. Organizations have used systems consisting of a mix of financial and non-financial measures to track progress for quite some time. One such system, the Analog Devices Balanced Scorecard, was created by Art Schneiderman in 1987 at Analog Devices , a mid-sized semi-conductor company. Schneiderman's design was similar to what is now recognised as a "First Generation" balanced scorecard design. In 1990, Schneiderman participated in an unrelated research study led by Robert S. Kaplan in conjunction with US management consultancy Nolan-Norton, and during this study described his work on performance measurement. Subsequently, Kaplan and David P. Norton included anonymous details of this balanced scorecard design in

4189-415: The original descriptions of balanced scorecard by Schneiderman, Maisel, or Kaplan & Norton. Kaplan and Norton's first book remains their most popular. The book reflects the earliest incarnations of balanced scorecards – effectively restating the concept as described in the second Harvard Business Review article. Their second book, The Strategy Focused Organization , echoed work by others (particularly

4260-424: The pioneering work of General Electric on performance measurement reporting in the 1950s and the work of French process engineers (who created the tableau de bord – literally, a "dashboard" of performance measures) in the early part of the 20th century. The tool also draws strongly on the ideas of the 'resource based view of the firm' proposed by Edith Penrose . None of these influences is explicitly linked to in

4331-414: The reference to an additional design instrument: a statement of what "strategic success", or the "strategic end-state", looked like (which in turn would be related to the organization's Mission or Vision Statement). This reference point was called a Destination Statement . It was quickly realized that if a Destination Statement was created at the beginning of the design process then it became easier to select

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4402-423: The school understand its position in the educational community, whereas a business might consider the percentage of income from returning customers as a potential KPI. The key stages in identifying KPIs are: Key performance indicators (KPIs) are ways to periodically assess the performances of organizations, business units, and their division, departments and employees. Accordingly, KPIs are most commonly defined in

4473-407: The sooner local economies will start generating revenue again – signaling a stronger recovery for that community. The success of the private sector in preparing for and weathering disasters is essential to a community's ability to recover in the long run. A FOIA request response in 2017 included emails saying that the Waffle House Index was a personal project of Craig Fugate's, denying

4544-485: The status quo to predict the consequences of future actions. Should they make their analysis on the basis of faulty or incomplete information, the predictions will not be reliable and consequently the decision made might yield an unexpected result. Therefore, the proper usage of performance indicators is vital to avoid such mistakes and minimise the risk. KPIs are used not only for business organizations but also for technical aspects such as machine performance. For example,

4615-399: The structure of the balanced scorecard to suit better a particular viewpoint or agenda are numerous. Examples of the focus of such adaptations include the triple bottom line , decision support, public sector management, and health care management. The performance management elements of the UN's Results Based Management system have strong design and structural similarities to those used in

4686-428: The survey reported using balanced scorecards in this way. However it is clear from the same survey that a larger proportion (about 30%) use corporate balanced scorecard elements to inform personal goal setting and incentive calculations. The critical characteristics that define a balanced scorecard are: The balanced scorecard was initially proposed as a general purpose performance management system . Subsequently, it

4757-409: The utility of second generation of balanced scorecards, giving more relevance and functionality to strategic objectives. The major difference is the incorporation of Destination Statements. Other key components are strategic objectives, strategic linkage model and perspectives, measures and initiatives. In 1997, Kurtzman found that 64 percent of the companies questioned were measuring performance from

4828-452: The value of the measure can be assessed as meeting expectations or not. Key performance indicators are mostly the non-financial measures of a company's performance – they do not have a monetary value but in a business context they do contribute to the company's profitability. These are some of the examples: Many of these customer KPIs are developed and managed with customer relationship management software. Faster availability of data

4899-417: The wide variations in definition of 'what a balanced scorecard is' (making it hard to work out in a survey if you are comparing like with like). Single organization case studies suffer from the 'lack of a control' issue common to any study of organizational change – what the organization would have achieved if the change had not been made isn't known, so it is difficult to attribute changes observed over time to

4970-416: The wider business management process. Although it helps focus managers' attention on strategic issues and the management of the implementation of strategy, it is important to remember that the balanced scorecard itself has no role in the formation of strategy. In fact, balanced scorecards can co-exist with strategic planning systems and other tools. The first generation of balanced scorecard designs used

5041-399: Was promoted specifically as an approach to strategic performance management. The balanced scorecard has more recently become a key component of structured approaches to corporate strategic management. Two of the ideas that underpin modern balanced scorecard designs concern making it easier to select which data to observe, and ensuring that the choice of data is consistent with the ability of

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