A board pack often arrives with forty KPIs, eighty pages and one hour on the agenda. The board reads the summary, approves the minutes and moves on. Nothing in the pack changes a decision.
I lead strategic planning at ITHCA Group. I also serve as Secretary to the Board of DataOm (my career). This essay is about one simple idea: a KPI belongs on a board scorecard only if the board would act on it.
The test for every KPI
Ask four questions of each KPI before it goes to the board:
- Does it measure a result, or only an activity? "Number of meetings held" is activity. "Revenue from new markets" is a result.
- Does the board own the decision it informs? If only management can act on it, it belongs in the management report.
- Is there a target and a date? A number with no target is a fact, not a KPI.
- Would a red result change what the board does next? If not, it is decoration.
A KPI that fails two of these questions leaves the board scorecard. It can stay in the management report.
Fewer KPIs, with weights
A board can follow eight to twelve KPIs well. Beyond that, attention spreads thin. Give each KPI a weight, so the total score reflects what matters most. Weights also force the hard conversation early: is growth worth more than margin this year?
Separate the board view from the management view
Management needs detail: weekly sales, staffing, project milestones. The board needs direction: are we on track for the strategy, and where must we step in? Two documents, two levels. When the two are mixed, the board starts to manage and management starts to wait for the board.
Show the trend, not only the number
A single quarter tells you little. Show each KPI over the last four to eight quarters, with the target line. A board can see in two seconds whether a red result is new or old.
Write the action next to the red
Every red KPI needs one line: what management will do, by when, and what the board must decide, if anything. This turns the scorecard into an agenda.
The same rules work for small companies
At BHD Group we use the same idea at a smaller scale. Each company has a short list of results that the group follows every month. We also build board software, Mithaq. It keeps board papers, decisions and actions in one place.
A good scorecard is short, weighted and tied to decisions.
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