Over the years the idea of MBO has evolved while similar management systems or the ones which partly use its assumptions have appeared on the market. It causes conceptual chaos and misunderstanding in this area. Below we will try to introduce and explain three most common definitions connected with MBO:

Key Performance Indicator (KPI) – a type of performance measurement; business metric used to evaluate factors that are crucial to the success of an organization.

For example:

  • number of orders
  • average order size
  • number of claims
  • mean time to repair (MTTR)
  • Payroll Headcount Ratio

Objectives and Key Results (OKR) – a method of defining and monitoring objectives and their outcomes; objectives are what an employee and his organization want to accomplish and Key Results are indicators which show whether an objective has been accomplished successfully.

For example:

Objective:

Deliver exceptional customer support experience.

Key Results:

  • Implement new customer support platform
  • Average problem resolution time less than 12 hours
  • Customer satisfaction survey scores of more than 4

Balanced Scorecard (BSC) is a strategy performance management tool that is used extensively in business and industry, government, and non-profit organizations worldwide. It was originated by Drs. Robert Kaplan and David Norton as a performance measurement framework that added strategic non-financial performance measures to traditional financial metrics to give executives a more 'balanced’ view of organizational performance.

The balanced scorecard suggests that every organization should develop metrics, collect data and analyze it relative to each of four perspectives:

  • The Learning & Growth Perspective
  • The Business Process Perspective
  • The Customer Perspective
  • The Financial Perspective

Glossary:

  • partly – częściowo
  • crucial – kluczowy
  • mean – średni
  • claim – reklamacja
  • to accomplish – osiągnąć
  • survey – ankieta
  • framework – podstawy, ramy

Exercise:

After reading the text above which of the statements are true or false.

KPIs are only financial metrics.

The word „balance” in BSC comes from the balance between financial and non-financial assessment criteria of  organizational performance.

In OKR system Key Results are indicators of Objectives measurement.

Kaplan and Norton incorporated their changes into the original balanced scorecard methodology.

Clear and coherent terminology is used in MBO

BSC is the only solution which takes into account the customer perspective in an organization.