I believe that the scorecard and dashboard components of commercial performance management software should have predefined key performance indicators (KPIs). However, for the integrated software component that reports measurements, my belief is the vendors software should deliberately come with a limited rather than a comprehensive selection of KPIs that are commonly used by each type of industry. The purpose of providing standard KPIs should only be to accelerate the implementation of an organizations construction of their scorecard/dashboard system with a jump-start.
The reason for not providing a comprehensive and exhaustive list of industry-specific measures is because caution is needed whenever an organization is identifying its measures. Measures drive employee behavior. Caution is needed for two major reasons:
- Measures should be tailored to an organizations unique needs.
- Organizations should understand the basic concepts that differentiate scorecards from dashboards and KPIs from performance indictors (PIs).
Scorecards and Dashboards Serve Different Purposes
In my December 2005 column on this topic titled Distinguishing Between Signal and Noise - KPIs Versus PIs. I expand on that column with this one.
The two terms scorecards and dashboards have a tendency to confuse, or rather get used interchangeably, but each brings a different set of capabilities. The sources of the confusion are:
- Both represent a way to track results.
- Both use traffic lights, dials, sliders and other visual aids.
- Both have targets, thresholds and alert messages.
- Both provide linkage or drill down to other metrics and reports.
The difference comes from the context in how they are applied. To provide some history, as busy executives and managers struggled to keep up with the amount of information being thrust at them, the concept of traffic lighting were applied to virtually any and all types of reporting. As technology has improved, more bells and whistles were added the ability to link to other reports and to drill down to finer levels of detail. The common denominator was the speed of being able to focus on something that required action or further investigation. The terminology evolved to reflect how technology vendors described the widgets that provided this capability dashboards. As a consequence, both dashboard and scorecard terms are being used interchangeably.
Figure 1 illustrates the difference between scorecards and dashboards using a taxonomy. Scorecards and dashboards are not contradictory; they are used for different purposes.
Figure 1: Difference between Scorecards and Dashboards Using Taxonomy
At the top portion of the figure is the realm of scorecards. Scorecards are intended to be strategic. They align the behavior of employees and partners with the strategic objectives formulated by the executive team. In contrast, dashboards, at the bottom portion of the figure, are intended to be operational.
Some refer to dashboards as dumb reporting and scorecards as intelligent reporting. The reason is dashboards are primarily for data visualization; they display what is happening during a time period. Most organizations begin with identifying what they are already measuring and construct a dashboard dial from there. However, dashboards do not communicate why something matters, why someone should care about the reported measure or what the impact may be if an undesirable declining measure continues. In short, dashboards report what you can measure.