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Key Success Factors for a Performance Dashboard

by Tom Kawamoto, Compass AmericaMonday, July 16, 2007

by Tom Kawamoto and Bob Mathers, Compass America

Summary: The keys to an effective dashboard initiative include proper definition of target audiences, well-designed metrics, simplicity, manageability and sustained leadership through a dashboard champion.

Performance dashboards are a commonly used management tool to gauge performance and progress toward business goals. Dashboards can be designed and developed to address a wide range of objectives, from monitoring the viability of a global organization's business strategy, to keeping a check on a department's ability to achieve service-level targets.

Despite their ubiquitous presence in business, dashboards can be difficult to design and implement, and often fail to achieve their objectives. Common problems include misalignment of dashboards with business goals, unrealistic or poorly defined objectives and organizational issues affecting design and implementation.

How can a business ensure that a dashboard meets expectations? Broadly speaking, the keys to an effective dashboard initiative include proper definition of target audiences and design of metrics, simplicity and manageability, and sustained leadership through a dashboard "champion." But meeting these criteria can be easier said than done.

Late last year, Compass analyzed dashboard initiatives at more than 30 global organizations in a wide range of industry sectors, including financial services, manufacturing, retail banking, pharmaceuticals, food services, utilities and logistics. Most of the organizations involved in the analysis are headquartered in North America; firms based in the United Kingdom, Germany, Australia and Spain were included.

In addition to reviewing the objectives and results of the initiatives, Compass conducted detailed interviews to assess what major stakeholders defined as the key success factors of their dashboard engagements. It is worth noting that these criteria represent what stakeholders believe should characterize an effective dashboard, rather than what actually characterized the particular initiative in question.

Key Success Factors: Observations

Ease and speed of implementation were identified as key success factors; respondents indicated that a dashboard should be easily designed with a minimum of effort. Beginning with the basics and a logical structure that quickly delivers results was seen as more effective than developing complex metrics trees.

Another key was defining metrics in relevant business terms that are meaningful to stakeholders; that deliver a mix of operational, financial and project -specific information; and that enable a repeatable review process.

Respondents also cited the dashboard's use as a facilitative management tool as essential. Rather than merely providing a report card on performance, the dashboard should generate actions toward specific goals.

Finally, the study participants emphasized that a dashboard should enable an iterative approach and be an "evolving" document that changes over time in response to new business conditions. This characteristic was also identified as one of the most difficult to achieve.

Tactical Dashboards Predominate

Compass defines four different levels of performance dashboards:

  • CEO/board level, comprised of about six high-level metrics;
  • Corporate vice president/director level, between 12 and 20 metrics;
  • IT strategic level, similar to above, but focused on IT; range of metrics, between 12 and 50; and
  • IT operational dashboards, commonly about 20 metrics each.

Of the dashboard initiatives examined, the majority (66 percent) were implemented for tactical or monitoring purposes within departments or for specific projects and operational areas. At the intermediate strategic level, dashboard initiatives were used to facilitate communication between IT departments and business units, to increase transparency of operations, to demonstrate innovation and to monitor external service providers.

Compass also observed a few instances of strategic, enterprise-wide dashboards. In most cases, strategic dashboards were deployed by organizations that have a culture of using dashboards in general. In addition, the strategic dashboards often evolve from established tactical initiatives.

The analysis focused on why strategic dashboards appeared to be so difficult to create and maintain. The most common reason cited is the challenge associated with defining metrics that address desired strategic objectives such as governance, ROI, knowledge management and internal cost of quality.

Tools Used in Dashboard Development

The analysis of dashboards focused on the tools used in creating the initiatives. The basic criteria most commonly applied to tool selection were utility (a tool that gets the job done) and the ability to create a framework that communicates basic findings at minimal expense. Given the focus on timeliness, most participants sought a tool that could deliver results in a reasonable time frame so that the project would not lose momentum and so that team members would stay focused and enthusiastic.

Although more than 50 software products are available, Microsoft Excel was the most commonly used tool to develop performance dashboards, accounting for close to three-quarters of the projects analyzed. In many respects, Excel met the criteria of implementing a dashboard initiative that is simple to design and that delivers results within a short time frame. Excel meets that standard as a readily available, nonproprietary solution that doesn't require a developer and that most team members are likely to be familiar with. Excel is also an ideal tool for a dashboard team seeking to implement a proof of concept, produce results quickly and tightly control expenses.

It's interesting to note that none of the stakeholders interviewed cited software tools as a critical success factor for an effective dashboard, suggesting the importance of focusing on business objectives rather than tactical issues such as tools. In other words, the dashboard analysis demonstrated the folly of putting the cart before the horse.

Three Keys to Developing an Effective Dashboard

Based on the review of dashboard engagements and stakeholder interviews, Compass defined a set of three guidelines to establish priorities when designing and implementing an effective dashboard initiative.

Proper metrics. An initial focus on business objectives enables definition of appropriate metrics - those that are meaningful to stakeholders and to the business. Effective metrics measure results in terms of defining action and improvement, rather than merely monitoring performance. A focus on defining proper metrics at the outset also avoids the problem of allowing available data or tools - rather than business objectives - to drive the process, rendering the initiative irrelevant to performance issues. By selecting a few key metrics to begin with, organizations can secure initial successes and add more strategic elements and complexity. As described, Excel is often an ideal tool for beginning a dashboard initiative; as the program evolves, a more sophisticated tool can be considered.

Executive support. Dashboard initiatives need a champion - a relatively senior executive who understands business challenges and wields sufficient authority to make things happen. Senior executives must stay involved to keep the initiative on the front burner. In many cases, initiatives start with great fanfare but then focus shifts to other priorities and teams lose interest. Without ongoing high-level sponsorship, dashboards risk fading into obscurity and irrelevance.

Simplicity. Dashboards should be easy to implement and use, actionable and provide a mix of operational, financial and project-specific information. While a "start small" approach is advisable, strategic dashboards that measure IT's contribution to business operations remain the holy grail of performance measurement and should be pursued. Dashboard initiatives often fail because of unrealistic expectations, lack of support and lack of relevance. Patience, planning and perspective are essential.

Tom Kawamoto is an executive consultant for Compass America. He may be reached at tom.kawamoto@compassmc.com.
Bob Mathers is a senior consultant for Compass America. He may be reached at bob.mathers@compassmc.com.

This article was originally published in the DM Review and has been republished with the permission of the authors.

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