Dashboards have been an important part of business performance management (BPM) since its inception. While BPM consists of many components (relational databases, OLAP cubes, financial applications, reporting tools, etc.), it is the dashboard that actually delivers on the basic promise of performance management: helping a company measure and manage its performance against established goals. In some organizations, this has been the first element of BPM implemented. The problem with this approach is that some of the required plan data may not be in a usable form (often sitting in spreadsheets), and the strategic metrics that should be tracked by the dashboard are probably still to be determined. For this reason, the majority of companies often see the dashboard as an element that comes near the end of their core performance management implementation. Once the BPM technology foundation has been put in place and the strategic discussions have occurred, the performance management dashboard can complete the initial core performance management project phase.
Because BPM has been an important initiative for many organizations for several years, quite a few companies are now at the point of evaluating how to proceed with performance management dashboards. In my work with organizations implementing dashboards, it has become clear that there is still some confusion around the basics. The intent of this column is to bring clarity to the fundamentals.
The Difference between a Dashboard and a Scorecard
These terms have been used interchangeably by both end users and vendors for many years. However, they mean different things. When we talk about tracking our performance by looking at key measures, we are really talking about a scorecard. A scorecard is the collection of measures we use to determine how well we are executing on our strategy. In effect, it is a report card on the organizations performance. One common type is the balanced scorecard (which has never been called the balanced dashboard, to the best of my knowledge). These measures can be displayed numerically on a report; however, they are more effective when displayed graphically. That is where the dashboard comes into play. A dashboard is a graphical display, ideally suited to share the status of the various performance measures that make up the scorecard. Dashboards use familiar objects such as gauges, stoplights and graphs to make the performance information more intuitive to a wider audience. The term performance management dashboard indicates a dashboard tool that contains a scorecard of performance data.
The Difference between a Metric and a Key Performance Indicator
A metric is simply a measure of something. A performance metric is a measure of some activity related to a companys business performance. What, then, is a key performance indicator (KPI)? A KPI is a special kind of metric. It measures something that is strategically important to the business in question. In other words, a KPI is a metric that matters. The metrics that populate a companys scorecard are in fact KPIs, or they should be. You can have many metrics, but you should only have a handful of KPIs. Everything cant be considered key, or nothing will stand out from the pack and get the attention it deserves. In a typical performance system, there are an average of 12 to 25 KPIs and potentially hundreds of supporting metrics. An even more important concern is that your KPIs should be assigned to individuals with responsibility to address them, and a plan should be in place to take action if a KPI passes a certain threshold - but that is the subject of a separate article.
The Biggest Challenge
While companies spend lots of time deciding which dashboard technologies to use and figuring out how to clean, move and map the necessary data, the least amount of time is often devoted to the most important task. The biggest challenge in dashboard initiatives is not the technology or the data, but determining the measures or KPIs that count. In many cases, the IT group developing the dashboard will simply take key ratios and statistics from finance reports that have been in use for years and display them graphically on the dashboard. If you have been following along, you know that what should really be displayed is the companys scorecard. It is highly unlikely that those report items taken together will comprise the correct scorecard for the organization. Painful as it may be, a series of strategic business discussions needs to take place with senior management from across the company to develop the right scorecard. This involves reviewing the companys high-level strategy, short- and long-term goals, and business drivers involved in executing on that strategy. Out of these discussions will come the relevant metrics and KPIs that should then drive the technology and data aspects of the project. Developing the scorecard is obviously not something IT can tackle on its own.
There are, of course, many other things to know about dashboards. These three essential facts, though, should get you going in the right direction, get you asking the right questions and prepare you for the challenges ahead.
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