Keeping Score

Information Management Magazine, September 2006

Colin Snow

With business spread around the world and changing constantly, those who plan and execute performance strategies need the latest information as soon as it becomes available. Advances in technology helped create these conditions, and new developments can assist businesspeople in dealing with them. In particular, three related technologies - scorecards, dashboards and performance alerts - establish meaningful contexts that enable users to analyze, measure, share and act on information quickly.

Scorecards, dashboards and alerts all support performance management but differ significantly in how they do so. A dashboard is an application that helps you monitor an organization's performance, whereas a scorecard helps you manage performance. Performance alerts are notifications of key trends or business events that tie to either scorecard or dashboard goals.

With business spread around the world and changing constantly, those who plan and execute performance strategies need the latest information as soon as it becomes available. Advances in technology helped create these conditions, and new developments can assist businesspeople in dealing with them. In particular, three related technologies - scorecards, dashboards and performance alerts - establish meaningful contexts that enable users to analyze, measure, share and act on information quickly.

Scorecards, dashboards and alerts all support performance management but differ significantly in how they do so. A dashboard is an application that helps you monitor an organization's performance, whereas a scorecard helps you manage performance. Performance alerts are notifications of key trends or business events that tie to either scorecard or dashboard goals.

For example, a typical manufacturing business would use a corporate scorecard to manage its overall progress toward a yearly strategic goal, such as expanding market share in Asia, by mapping its operational, financial, customer and organizational expansion initiatives to specific scorecard measures. The scorecard then would show not only progress toward the goal but also where imbalances exist and where action needs to be taken.

Dashboards, on the other hand, are a way to display and monitor progress on organizational business process and individuals' measures, such as sales quotas and product quality. Users can then set performance alerts to monitor dashboard or scorecard measures that notify them of actual or potential goal shortfalls, such as a poor regional revenue outlook or rising complaint calls at the contact center.

Survey Parameters

As part of Ventana Research's ongoing primary research, we set out to learn how extensively companies are employing these tools and to determine trends and priorities in their use. In January and February 2006, we conducted a survey of 590 managers and analysts in companies that use scorecards, dashboards and performance alerts. Nearly half (45 percent) of the respondents came from the lines of business, followed by 41 percent from the IT function. Finance accounted for 11 percent of respondents, and the remaining three percent work in HR. The survey participants are from a variety of industries, none of which contributed more than 14 percent of the respondents.

Our analysis of the survey results yielded a wealth of data about how these organizations are using the tools. From encouraging trends to inhibiting limitations, from expressions of satisfaction to complaints about functionality, they showed that scorecards, dashboards and performance alerts carry great potential as business tools, although most companies have yet to apply their full capabilities. We hope that the following highlights of the study will add to general awareness of what these tools are and are not being used for and how they may help other businesses in meeting the incessant challenges of change.

Reasons for Adoption

Ventana sought to learn why companies are deploying scorecards, dashboards and performance alerts. The top business driver that respondents cited for adopting them is to align operations with corporate strategy and goals. Approximately one-third of companies identified this as the most significant reason for their initiative. It was most prevalent for scorecards (36 percent), not quite as much for dashboards (29 percent) and least so for alerts (24 percent) (see Figure 1). We consider this significant because alignment is a step toward performance management, which links strategy with corporate objectives in ways that make the best use of a company's resources by coordinating the efforts of every member of the organization.

Figure 1: Why do companies adopt scorecards, dashboards and performance alerts?

The similarity of responses regarding scorecards and dashboards is one indication that there is not a clear distinction between the two in the marketplace and that companies use the terms interchangeably. Other responses confirmed this conclusion. In theory, scorecards follow a management methodology; there is no such requirement for dashboards. But when scorecards are deployed without a clear underlying methodology, the line between the two gets blurred.

Following closely behind alignment as a business driver for adoption were improvement in decision-making, business process performance and use of company resources. These suggest that many companies do not currently use these tools to drive strategy developed at the executive level throughout the organization.

Respondents ranked supporting better decision-making as the second most important deployment reason for scorecards and dashboards, but for performance alerts it came fourth, at 10 percent, behind both improved business process performance (19 percent) and better use of company resources (18 percent). We were not surprised by this finding because alerts are often used to monitor business processes and events in order to reallocate resources in response to changing needs.

Deployment Size and Frequency

Today, deployments of scorecards, dashboards and performance alerts are small: the majority of companies (60 percent) have fewer than 100 users. Nevertheless, the results show that IT departments plan to considerably increase the number of users these applications serve. Over the next 12 months or at full deployment, the number of projects having more than 100 users will increase in more than 20 percent of the companies surveyed.

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