Wednesday, April 16, 2014

What’s the First Step in Building a Great Performance Dashboard

A performance dashboard is a practical tool to improve management effectiveness and efficiency, not just a pretty retrospective picture in the annual report.

A performance dashboard is a useful tool to improve management effectiveness and efficiency. But what’s the simple first step enables you to implement useful Performance Dashboards, that ‘ideally’ from day one delivers high-quality performance management information?

Start with the strategic plan of the organizationWhen you start discussing "how to measure," it often turns out that the strategy is not fully understood or accepted. Start with the big 'simple' questions and end with the key quality data - what are you aiming to achieve as an organization? How do you know whether you are achieving this? Although dashboard may not fit completely in an organization, the overall strategic aims should be aligned with the key to the output. Discussing strategy does not start with discussing KPIs. What can be of great help to clarify things is building - with group managers - a system dynamics model showing cause and effect relations? That helps to clarify differences in opinion between team members about the influence of events on the business and the strategy.

 KPIs should be derived from the strategic plan of the organizationAssuming that the strategy is already developed and widely accepted, the next thing is to identify what should be measured (what are the KPIs - the metrics that make the difference to implement the winning strategy). What are the views about the number of KPIs a manager effectively can handle? At all levels, the right KPIs which if correctly defined, create the right focus in the job on hand and be completely aligned with each other from strategic to operational levels. Having agreed on the KPIs, the data sources should be identified. Having group consensus on what the definition of a KPI is, and then what KPIs are required - Implementing #1 through #n, depending on time frame, resources, budget. The decision must be taken whether the KPI with source gap is so worth implementing to justify additional development (measured in time and cost). But in a lot of situations, neither strategy nor KPIs is clearly or rightly understood and support by everyone and discussing two unclear issues can create a lot of confusion. So starting with building a system dynamics model with C level can be of great help both to understand strategy and how different actions influence the outcome and to agree on KPIs.

Collect the quality dataThe interesting point is when there is a KPI, but the organization does not have appropriate systems in place to record source data. It is imperative to start such a consolidation process with a well thought out architecture and strategy on the data collection, integration and distribution side. This strategy, architecture and the process to realize it should be designed with only two things in mind "flexibility" (change is the norm) and "minimal time to market". The trick is that the more data you expect to include in your first launch of a dashboard, the more you risk, both in terms of delayed implementation and in terms of loss of buy-in from stakeholders if the data quality is low. The key to success is focusing on business-critical information at the start and not getting bogged down in the 'collect everything you can count/big data' trap.

So indeed, a good start of a performance dashboard is to clarify business strategy, determine the main KPIs, analyze if the data is available and of good quality. When these preconditions are met, then tooling can be investigated and not the other way around. The very reasons why many reporting tools fail to implementations is often these projects start with the selection of a flashy tool that is presenting dashboards with KPIs. However, during the implementation, it appears that essential data is not accessible or reliable and have to be solved during the implementation.

Last but not least, a great performance dashboard is about more than just the numbers - it should include key projects and risks too, but above all, it needs to be living real time tool adopted by all as a key driver for improvement and not just a pretty retrospective picture in the annual report.  


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