KPI vs. KGI vs. Balanced Scorecard | IT Passport Exam Prep

The Relationship Between KPI, KGI, and CSF

KGI (Key Goal Indicator) is a numerical representation of the ultimate goal a company aims to achieve. An example would be "annual sales of 10 billion yen." CSF (Critical Success Factor) refers to the essential factors required to achieve that KGI. KPI (Key Performance Indicator) is a metric that quantitatively measures the degree to which a CSF is being achieved. Thus, KGI, CSF, and KPI exist in a hierarchical relationship of "KGI ← CSF ← KPI," and this hierarchy is frequently tested on the IT Passport exam. In particular, be careful not to confuse KGI with KPI.

Concrete Example

For instance, suppose a company sets a KGI of 10 billion yen in annual sales. To achieve this goal, the CSFs might include acquiring new customers and improving the repeat purchase rate among existing customers. Then, to measure progress on each CSF, you might set KPIs such as 500 new contracts per month and a customer repeat rate of 60%. By managing with these specific numerical targets, you can track how well the strategy is being executed.

Balanced Scorecard (BSC)

The Balanced Scorecard (BSC) is a framework for managing business strategy from four perspectives that include not only financial metrics but also non-financial ones. Proposed by Kaplan and Norton in 1992, it is widely used as a tool for putting strategy into action. A key feature is that it enables a balanced evaluation from a long-term perspective.

The Four Perspectives of BSC

The Financial Perspective evaluates performance such as revenue and profit margins from the viewpoint of shareholders and investors. The Customer Perspective emphasizes customer evaluations, such as customer satisfaction and market share. The Internal Business Processes Perspective targets internal operational efficiency, quality, and innovation processes. The Learning and Growth Perspective focuses on improving employee skills and strengthening organizational capabilities. These four perspectives are interrelated, and their causal relationships are visualized in a strategy map.

Key Points for the IT Passport Exam

On the IT Passport exam, the hierarchical relationship between KGI, CSF, and KPI appears frequently as a trick question. You will also commonly see questions asking for the names and descriptions of the four BSC perspectives, as well as questions testing your understanding of strategy maps. To distinguish them properly, it is important to memorize the definitions of each term accurately. Be especially careful not to misunderstand the relationship between KGI and KPI.

Typical Past Exam Question Patterns

• "Which of the following best describes the relationship between KGI and KPI?" type
• "Which of the following is NOT one of the four perspectives of the BSC?" type

Related Terms

• Business Strategy Frameworks (Differences between SWOT, 3C, and PEST Analysis)
• Relationship with PDCA (PDCA Cycle and SDCA Cycle)

Study Tips

As a study tip, thinking of KGI as the final goal and KPI as an intermediate indicator makes them easier to distinguish. Memorizing the four BSC perspectives with a mnemonic like "Financial, Customer, Process, Learning & Growth" can be effective. Furthermore, trying to come up with a numerical example from an industry you are familiar with can help turn abstract concepts into concrete understanding, making them easier to remember.

Summary

Mastering the hierarchical structure of KGI, CSF, and KPI, along with the four perspectives of the BSC, will allow you to reliably score points on related questions. If you want to study the Strategy domain in more depth, check out the Strategy Summary. Also, if you want to try your hand at full-format questions, use the Practice Exam to test your skills.