The fact is, most users have difficulty identifying critical metrics within the reports they receive. This is a major problem. It is important to clearly convey performance activity to decision-makers of organizations in order to help them make data-driven, actionable decisions.
Are users at fault for their difficulty identifying critical metrics? Not necessarily. If most students are failing a test, maybe something within the test is the cause of the problem rather than the knowledge of the students. Similarly, maybe the metrics are not clearly communicated.
So, the question is, how can the metrics be communicated more effectively? Words and numbers may have failed in relaying actionable messages, but this is where effective dashboards are useful. A dashboard is an interface that presents information in an easy-to-understand and easy-to-relate, often graphical way, providing users with a lot of meaningful information at a glance. Dashboards can be an incredibly valuable and empowering tool for understanding critical business data in the metrics.
The metrics used in the dashboard vary by industry and business function, as well as by the type of decision-maker and level of skill and tool used. They can be used for many functions, including planning, resource allocation, budgeting/forecasting, reporting, monitoring, and analyzing as well as strategy setting.
Dashboard Components
Dashboards are made up of two main components:
Key performance indicators: An enterprise performance scorecard (see below) and dashboard are based on meaningful and well-defined KPIs, which show whether an organization is meeting its stated objectives. They apply to the performance of the organization as a whole, so if there are multiple divisions, it should be determined whether each division will also need a scorecard and a dashboard.
KPIs can be financial, customer, internal process and employee-related. Many KPIs are interrelated - they don’t stand alone. For instance, common examples of KPIs include debt to equity ratio, asset turnover, and profit margin - and all the three are interrelated. The nonfinancial KPIs should have a cause-and-effect relationship with the financial indicators.
Scorecards: A scorecard is a set metrics (or KPIs) that presents current performance data for a business process or for a strategic goal toward a target value. These indicators direct the business on key tactical objectives and goals. This will ultimately shape the vision and strategy for the organization for that particular time period.
Challenges and Pitfalls
There are many potential challenges of implementing scorecards and KPIs. These include maintaining balance across multiple perspectives; determining and developing a few, solid important objectives and metrics; ensuring a mix of cause-and-effect and decomposition metrics; and combining the multiple dimensions of a matrix organization (such as business units, functions, processes).
Dashboard implementations are considered faulty if the following conditions exist:
- Data has to be entered manually or “refreshing” the data proves very time consuming.
- Calculating and/or aggregating data is tedious.
- The user has to navigate multiple tools in order to answer a question.
- The dashboard design is poor (not user-friendly).
- Multiple logins are required to get to the right dashboard.
- It needs an extensive amount of user training. The software tool has to be intuitive, resulting into almost zero necessary training.
- It lacks executive sponsorship and funding.
- The user must wait 10 seconds or longer to retrieve information.
Types of Dashboards
There are several different types of dashboards, including strategic, tactical and operational.
Strategic dashboards can reflect enterprise-wide strategic goals, as well as corresponding KPIs. Features on this type of dashboard include global, external, trends and growth measures, all of which are related to or based on the Balanced Scorecard Methodology (see Figure 1). The data on these dashboards is highly summarized and presented graphically, without too many details. However, details should be available when someone wants to drill down. This type of dashboard requires updates less frequently.
Tactical (also called analytical) dashboards measure the business’s progress according to related trends, in accordance with each strategic initiative. Progress is measured against a preset goal, such as a budget or a certain target. Drilldowns reveal details and break down data for analysis. For example, they help determine why certain targets were not met and where a potential problem might be.
Operational dashboards monitor specific business processes, such as order processing and shipping. They are mainly used at the departmental level, where operations take place. Updates are tracked daily or weekly using real-time charts and reports, and detailed data is presented with strong analytical functionality in order to perform a root-cause analysis.
