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How are Balanced Scorecards and Dashboards Different?

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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 vendor’s 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 organization’s 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 organization’s 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.

 

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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.

 

In contrast, a scorecard does provide the information lacking in dashboards. A scorecard additionally answers questions by providing deeper analysis, drill-down capabilities, traffic light alert messaging, and forecasting for inferences of performance potential to determine motivational targets. Scorecards do not start with the existing data, but rather they begin with identifying what strategic projects to complete and core processes to improve and excel in. The selection and validation of the correct or best KPIs is a constant debate. Statistical correlation interaction analysis among KPIs can determine the degree of influence and “lift” that various cascaded KPIs have on the higher level enterprisewide KPIs – hence this analysis validates or improves the KPI selection. In addition, this type of analysis can automatically uncover previously unknown statistical relationships that may suggest cause-and-effects and can be used for predictive power. In short, scorecards report what you should measure.

 

Here are some guidelines for understanding the differences:

  • Scorecards chart progress toward strategic objectives. A scorecard displays periodic snapshots of performance associated with an organization’s strategic objectives and plans.1 It measures organizational activity at a summary level against pre-defined targets to see if performance is within acceptable ranges. Its selection of KPIs helps executives communicate strategy to employees and focuses users on the highest priority projects, initiatives, actions and tasks required to execute plans. The adjective “key” differentiates KPIs from the PIs reported in dashboards.

    Scorecard KPIs ideally should be derived from a strategy map rather than just a list of important measures that the executives have requested to be reported. Regardless of whether the Kaplan & Norton suggested four perspectives are used or some variant, scorecard KPIs should have cause-and-effect linkages (e.g., statistical correlations). Directionally the employee-centric innovation, learning and growth perspectives, the KPIs should reveal the cumulative build of potential to realized economic value.

     

    There are two key distinctions of scorecards: 1) Each KPI must require a predefined target measure; and 2) KPIs should be comprised of both project-based KPIs (e.g., milestones, progress percentage of completion) and process-based KPIs (e.g., percent on-time delivery against customer promise dates).

     

  • Dashboards monitor and measure processes. A dashboard, on the other hand, is operational and reports information typically more frequently than scorecards and usually with measures.2 Each dashboard measure is reported with little regard to its relationship to other dashboard measures. Dashboard measures do not directly reflect the context of strategic objectives.

     

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