How to Pick KPIs for Management Dashboard Reporting
The business process perspective of the balanced scorecard and every operational dashboard in business reporting is a critical driver for the productivity in the organizations. This is true for every type of business – service operations, manufacturing companies, professional practices and small businesses.
This means that developing your operational dashboards and reports deserve special attention and initiative supported from the major stakeholders in the business. However, fact is that this is where most organizations go wrong.
The reason for making mistakes at this stage in your operational dashboard development process is simply because managers and decision makers see this as an exercise and simply conversion from one type of reporting to another. However creating effective operational dashboard reporting in any business is more than that.
Reality is that management will pick the same KPIs and operational metrics that they are used to and put them on the new dashboard or operations scorecard. The result is that the same old metrics are monitored by using new media for reporting. What you track on a daily basis will have a huge impact on the way you see the business, monitor your results and most importantly how you make decisions. The results of your operations will vary accordingly.
When executives and managers go through this stage they should see it as an excellent opportunity to redefine the business, review the strategy and business plan and identify areas for improvement in terms of what they will use to gauge the performance in the future. Just like the balances scorecard has been more than a reporting tool in organizations – it has been used to align operations and diversify metrics to achieve high performance.
Without proper planning regardless of how your new dashboard will look like you simply won’t be able to achieve better results in the future. Insteadpick the most relevant KPIs and metrics based on your business model, processes and specific objectives.
A good starting point is to outline the value add process of your business. This is a real representation of your business processes – how you create value for the customers and stakeholders.
The best way to validate your KPIs is to evaluate each of them on how actionable they are in terms of making improvements and changes to your bottom line. You’ll always have simple informational key performance indicators, reports and measures however the key metrics must be the real drivers of your business performances. Ideally, managers who will use the new operational scorecards will be able to act on the information and as a result make improvements to your processes. Brainstorm a list of metrics and experiment with different measures and see hypothetical scenarios to evaluate their usefulness and practicality.
Organizations with many processes should start by looking at the big picture by initially focusing on a few most important operational KPIs for each process. This is where you can create the overall organizational dashboard outline and later it will be very easy to go into more details for each process and create additional operational reports by using more metrics.
The initial dashboard should be focused on the executive dashboard view – most executives don’t need to see each and every operational metric on a daily basis but instead they should get a snapshot of the overall performance and alignment at a general organizational and strategic level. Process leaders, managers and decision makers can use additional reports to track more in depth measures.
Selecting the right (in many cases new) metrics may require different type of data input compared to what you use currently. This does not necessary means large investments and creating new information systems but in most cases simple reorganizing and planning will be enough.
Today most companies have already the operational and financial sources for the data they need for their dashboards.
Don’t be discouraged if you are not able to capture every piece of data at this time because many companies have started with what data they already have and the new data sources and metrics can follow later. Creating the dashboard way of management and decision making is as important as the metrics you use at this moment.
Whenever you introduce new metrics in your company you need to make sure everyone is on the same page in terms of understanding the measures. Many terms both operational and financial can have a different meaning and importance to different users. It is necessary to document and communicate your new metrics in terms of defining them and stressing the importance and the reason why they are used in monitoring the results.
Remember that fancy and expensive information systems don’t mean competitive advantage – the way you plan and monitor your performance measurement is the key to success. Many companies have been successful in developing operational dashboards and balanced scorecards by using Excel. The bottom line is that what you measure is what you manage.
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