Number Five – Lack of Compensation for Non-Financial Measures

This is the continuation of the transcript on "Top Ten Business Intelligence Mistakes” hosted by InetSoft. The speaker is Christopher Wren, Principal Consultant at TFI Consulting.

Integrity of Non-Financial Measures

So part of why compensation is not linked to these measures is a lot of the measures lack integrity in the first place, but if they have good integrity, if they measure them, themselves, they can't be cheated on very easily.  Things like customer loyalty it's a little harder to cheat on that. Employee loyalty, it’s a little harder to cheat on that. Then I think you should pay for that. 

Companies like FedEx have been paying form for a long time. FedEx has this philosophy that you need to take care of the shareholders, employees, and customers. You have to do all three and if you don’t get a good score on all three, you get zero bonuses. It doesn’t matter how much money he made last year. If your employees think you are a lousy boss, you get zero bonuses because a big part of your job is being a good boss.

So that creates this balance as to say yeah, I can cut my staff and I can do this and that while making the financials look really good but then what’s that going to do my morale over here? What’s that going to do to my customers? You think about this balance if your pay is tied to it. If it’s not, you are just going to focus on this one thing.

From working with an electric power company, they had a really good balanced scorecard. I was pretty impressed they had a good leading and lagging measure, customer measure, and even some good measure of diversity and other things you don’t typically see. The thing is though, their executive’s compensation is tied to stock price, growth, and profit. That’s it. So do you think the executives pay much attention to those other things? No. Why bother right? We’re not paid for that so they don’t even pay attention to it. So that’s number five.

KPIs for an Electric Power Company’s Balanced Scorecard

An electric power company’s balanced scorecard tracks Key Performance Indicators (KPIs) across financial, customer, internal processes, and learning and growth perspectives to ensure alignment with strategic goals. These metrics focus on reliability, sustainability, customer satisfaction, and operational efficiency while meeting regulatory and financial objectives. Below are key KPIs commonly included on a balanced scorecard for an electric power company.

• Financial Perspective

  • Return on Investment (ROI)

    Measures the financial return on capital investments in infrastructure, such as grid upgrades or renewable energy projects. A higher ROI indicates efficient use of resources and profitability. Typically tracked as a percentage, it ensures fiscal responsibility for stakeholders.

  • Operating Cost per kWh

    Calculates the cost of producing and delivering one kilowatt-hour of electricity. Lower costs reflect operational efficiency and competitiveness. This KPI helps optimize expenses while maintaining service quality.

• Customer Perspective

  • Customer Satisfaction Score

    Gauges customer satisfaction through surveys, measuring perceptions of service reliability and billing accuracy. High scores (e.g., above 80%) indicate strong customer loyalty and trust. This KPI drives improvements in customer experience.

  • Service Reliability (SAIDI)

    Tracks the System Average Interruption Duration Index, measuring the average outage duration per customer annually. Lower SAIDI values (e.g., under 100 minutes) reflect reliable power delivery. This is critical for customer trust and regulatory compliance.

• Internal Processes Perspective

  • Power Plant Availability

    Measures the percentage of time power plants are operational and available to generate electricity. High availability (e.g., above 95%) ensures consistent supply and minimizes disruptions. This KPI optimizes maintenance schedules and operational efficiency.

  • Renewable Energy Integration

    Tracks the percentage of energy sourced from renewables, such as solar or wind, in the total energy mix. Increasing renewable integration (e.g., targeting 30% by 2030) supports sustainability goals. This KPI aligns with environmental regulations and public expectations.

  • Maintenance Schedule Adherence

    Evaluates the percentage of maintenance tasks completed on time for infrastructure like transformers or lines. High adherence (e.g., 98%) reduces outage risks and extends asset life. This ensures operational reliability and cost control.

• Learning and Growth Perspective

  • Employee Training Hours

    Measures the average hours of training per employee annually to enhance skills in areas like smart grid technology or safety protocols. Higher training hours (e.g., 40 hours per employee) improve workforce competency. This supports innovation and operational excellence.

  • Safety Incident Rate

    Tracks the number of safety incidents (e.g., injuries or accidents) per 100 employees annually. A low rate (e.g., below 1%) reflects effective safety programs and employee well-being. This KPI is critical for regulatory compliance and workforce morale.

  • Innovation Adoption Rate

    Measures the implementation of new technologies, such as AI for grid management or energy storage systems, as a percentage of planned initiatives. A high rate (e.g., 80% of planned projects) drives modernization and efficiency. This supports long-term sustainability and competitiveness.

These KPIs on a balanced scorecard provide a comprehensive framework for an electric power company to monitor financial health, customer satisfaction, operational efficiency, and workforce development. Tools like InetSoft’s StyleBI can enhance tracking by integrating data sources and providing real-time visualizations for these metrics. Regular review ensures alignment with strategic objectives, regulatory requirements, and sustainability goals.

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