Abraham Lincoln (from the movie "Lincoln", 2012) said: "A compass, I learnt when I was surveying, it'll... it'll point you True North from where you're standing, but it's got no advice about the swamps and desert and chasm that you'll encounter along the way. If in pursuit of your destination, you plunge ahead, heedless of obstacles, and achieve nothing more than to sink in a swamp... what's the use of knowing True North?"
Is this moral lesson not true in managing businesses too? Well yes, these days almost all companies are managed based on a collection of measures. Financial performance, customer satisfaction, process efficiencies and employee loyalty are measured, among many other aspects. People live by clich'es, such as: "If you can't measure it, you can't manage it." However, are all of these being measured for the sake of measuring, or for the sake of managing?
In other words, do key performance indicators (KPIs) get measured and published in a given context that enables companies to effectively make decisions towards successful strategic achievement, or are the KPI dashboards merely showing the company True North?
On track?
When tracking actual values of KPIs, it gives companies an indication of the current position, and adding the context of a set target, which will show position in relation to True North; yet companies lack context regarding the magnitude of the measure, the historic trend and relation to internal and external benchmarks, such as improvements since last year, or improvements in relation to competitors. In fact, a key important context-principle that is often forgotten on most dashboards and scorecards is the one of leading and lagging indicators, the primary notion of Kaplan and Norton's Strategy Map.
So then, considering this, what are the critical success factors for each business management dashboard?
1. Actual performance is clearly published in relation to a chosen benchmark - this benchmark should ideally be a set target or goal, however, can also be an industry standard, an indication of a direct competitor's performance, or a benchmark based on parallel historic periods' results.
2. A gauge is provided to assist with assessing the level of achievement - these are the traditional red-yellow-green colour ranges that assist the dashboard viewer to interpret just how good or bad the performance is in relation to the chosen benchmark.
3. There is a clear indication of historic trend - a company can see its KPI is still slightly off target, and the assessment gauge may show that performance is still in the "acceptable" range; however, if the company has the knowledge that its performance was consistently dropping over the last four months, it may well be spurred to proactive corrective action.
4. The context of cause-and-effect relationship between KPIs is evident - it is one thing to know all the KPIs and how a company is performing on each one independently; however, it gives a whole new level of insight and power to management if the relationships between KPIs are clearly illustrated. A tip here is to find simple ways to indicate that one KPI may be impacting another through visualisation.
5. The hidden problem areas or exceptions are exposed - clearly highlight second-level problem areas that may get lost in the high-level aggregated KPIs, such as the worst performing product per region, or even the problem-child sub-region in a region that seems to be performing well.
6. The real problem areas are very explicitly brought to one's attention - don't crowd the dashboard so much with quantity of content or quantity of embellishment that is the problem.
A visualisation technique that will ensure the critical success factors listed as number one and two above are met is the bullet graph by Stephen Few. The bullet graph provides a rich display of data in a small space with the actual performance indicated as a bar, a benchmark (or two) shown as data points on the same scale for effective comparison, and qualitative assessment criteria shown in shaded ranges in the background.
Are the KPI dashboards merely showing the company True North?
Historical trends in the critical success factors listed as number three are traditionally indicated on dashboards with a simple arrow indicating up or down; however, this is not necessarily straightforward to interpret. Edward Tufte created the "sparkline" visualisation that resembles a trend-line that gives much clearer and richer insight with regards to the trend.
Cause-and-effect relationships can subtly be made evident in various ways on a dashboard. One could leverage link-lines to connect KPIs visually in a way that could represent the workflow or value chain. Another way could be to calculate a predicted value of the lagging indicator based on the leading indicator's current trend. This predicted value could then be added onto the lagging indicator's KPI visualisation as a second benchmark in some fashion, while the cause-and-effect relationship is indicated through line visualisation akin to a strategy map.
Exceptions hidden in the KPI totals can also be highlighted in various ways. One could accompany a KPI with a bar graph showing the 10 worst performing categories sliced by any given dimension. However, a more space-efficient way that provides the richest insight is to show the distribution of the 'problem-children' using a simplified box-plot on the same scale. The box-plot is a visualisation element that shows the quartile distribution in a bar-graph fashion, yet one can easily pick up outliers and skewness caused by outliers.
The final critical success factor is achieved through fundamental design techniques when considering the overall design of a dashboard. Layout or location of dashboard items, chosen colour schemes, and carefully chosen embellishments - with such embellishments reserved only for drawing the manager's attention to his real problem areas that require his attention.
Dashboard design is no longer just a matter of throwing together a bunch of KPI gauges. A carefully designed dashboard can be a goldmine of rich information that shows a company where it is and where it ought to be, as well as aiding in planning the route and guiding the company on its journey to achieving strategic success. It has matured passed the art of making a beautiful gold-engraved compass that shows True North, to the science of providing rich information of a current state in a given context, akin to the best GPS available on the road today.
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