The Context for Performance Dashboards
The Power of Focus: Executives in Training
This summer I found my 11-year-old son Harry and his best pal Jake kneeling side by side in our driveway, peering intensely at the pavement. As I walked over to inspect this curious sight, I saw little puffs of smoke rising from their huddle. Each had a magnifying glass and was using it to set fire to clumps of dry grass as well as a few unfortunate ants that had wandered into their makeshift science experiment.
In this boyhood rite of passage, Harry and Jake learned an important lesson that escapes the attention of many organizations today: the power of focus. Light rays normally radiate harmlessly in all directions, bouncing off objects in the atmosphere and the earth's surface. The boys had discovered, however, that if they focused light rays onto a single point using a magnifying glass, they could generate enough energy to burn just about anything, and keep themselves entertained for hours!
By the time Harry and Jake enter the business world (if they do), they will probably have forgotten this simple lesson. They will have become steeped in corporate cultures that excel at losing focus and dissipating energy far and wide. Most organizations have multiple business units, divisions and departments, each with their own products, strategies, initiatives, applications and systems to support them. Good portions of these activities are redundant at best and conflicting at worst. The organization as a whole spins off in multiple directions at once without a clear strategy. Changes in leadership, mergers, acquisitions and reorganizations amplify the chaos.
Organizational Magnifying Glass
To rectify this problem, companies need an "organizational magnifying glass" - something that focuses the work of employees so everyone is going in the same direction. Strong leaders do this. However, even the voice of a charismatic executive is sometimes drowned out by organizational inertia.
Strong leaders need more than just the force of their personality and experience to focus an organization. They need an information system that helps them clearly and concisely communicate key strategies and goals to all employees on a personal basis every day. The system should focus workers on tasks and activities that best advance the organization's strategies and goals. It should measure performance, reward positive contributions and align efforts so that workers in every group and level of the organization are marching together toward the same destination.
Performance Management System
In short, what organizations really need is a performance dashboard that translates the organization's strategy into objectives, metrics, initiatives and tasks customized to each group and individual in the organization. A performance dashboard is really a performance management system. It communicates strategic objectives and enables businesspeople to measure, monitor and manage the key activities and processes needed to achieve their goals.
To work this magic, a performance dashboard provides three main sets of functionality, which I will describe in more detail later. Briefly, a performance dashboard lets business people:
- Monitor critical business processes and activities using metrics of business performance that trigger alerts when potential problems arise.
- Analyze the root cause of problems by exploring relevant and timely information from multiple perspectives and at various levels of detail.
- Manage people and processes to improve decisions, optimize performance and steer the organization in the right direction.
Agents of Organizational Change
A performance dashboard is a powerful agent of organizational change. When deployed properly, it can transform an underperforming organization into a high flyer. Like a magnifying glass, a performance dashboard can focus organizations on the key things it needs to do to succeed. It provides executives, managers and workers with timely and relevant information so they can measure, monitor and manage their progress toward achieving key strategic objectives.
One of the more popular types of performance dashboards today is the balanced scorecard, which adheres to a specific methodology for aligning organizations with corporate strategy. A balanced scorecard is a strategic application, but as we shall soon see, there are other types of performance dashboards that optimize operational and tactical processes that drive organizations on a weekly, daily or even hourly basis.
Executive Dashboards and Cockpits
Although dashboards have long been a fixture in automobiles and other vehicles, business, government and nonprofit organizations have only recently adopted the concept. The trend started among executives who became enamored with the idea of having an "executive dashboard" or "executive cockpit" with which to drive their companies from their boardroom perches. These executive information systems (EISs) actually date back to the 1980s, but they never gained much traction because the systems were geared to so few people in each company and were built on mainframes or minicomputers that made them costly to customize and maintain.
In the past 20 years, information technology has advanced at a rapid clip. Mainframes and minicomputers largely gave way to client/server systems, which in turn were supplanted by the Web as the preeminent platform for running applications and delivering information. Along the way, the economy turned global, squeezing revenues and profits and increasing competition for ever more demanding customers. Executives responded by reengineering processes, improving quality and cutting costs, but these efforts have only provided short-term relief, not lasting value.
During the 1990s, organizations began experimenting with ways to give business users direct and timely access to critical information, an emerging field known as business intelligence. At the same time, executives started turning to new performance management disciplines such as balanced scorecards, Six Sigma, economic value add and activity-based costing to harness the power of information to optimize performance and deliver greater value to the business.