Each indicator must have a strong correlation to your ability to effect change
In my last post I laid out 3 practical and compelling questions in developing your dashboarding program:
- How should my company be using a dashboard(s)?
- What is the basic process for choosing my KPI’s?
- What are some common mistakes I should avoid in my dashboarding?
Today I conclude with Questions 2 and 3.
Selection of KPI’s
KPI’s are dictated by the strategy of each business against the backdrop of standards or benchmarks for its industry, so every dashboard is different. Your KPI’s are singular to you and your business. While you can look to examples for general guidance, you need to work through the process of defining KPI’s for your own business.
These questions may help you start your KPI identification and selection process:
- At what level of responsibility is the dashboard being used?
- What are the strategies and objectives that are driving the data requirements?
- What data provide the best indicators of performance for these requirements?
- How can this data be portrayed to maximize readability and minimize response time?
- What is the strength of the correlation between the data and your ability to influence change?
The first two questions presume that you have already completed other required steps, such as developing a strategic plan and defining the related goals and objectives. Data points floating against dark space are meaningless. They must be oriented against your goals and industry/competitor benchmarks. The last three questions address the qualitative aspects of KPI’s.
Perhaps the most basic consideration is reflected in the last question. Each indicator must have a strong correlation to your ability to effect change. Stated more simply, the whole purpose of dashboarding is built on the assumption that you have the ability to quickly influence outcomes as you respond to information from key indicators.
For example, daily magazine advertising dollars spent is probably meaningless because display advertising doesn’t move sales on a daily basis and the lead time to place such ad sales is at least 6 months. You lose on both counts – sales and costs.
Common Mistakes in Dashboarding
These are some of the most common and harmful mistakes in dashboarding:
- Overloading the dashboard – This is the most common mistake. Getting the most from the least is your goal. Loading every metric about your company onto a dashboard will only confuse and delay your response; equals damage to the company.
- Expecting too much – Dashboarding has a very specific purpose and value. It does not replace regular reporting. Don’t try to manage your business entirely from the dashboard. This will push you to put too much onto it and you will tend to lose sight of longer term trends.
- Misreading the data – You can minimize the risk of misreading data in the KPI definition process. Choose data that is easy to interpret and consistently reliable.
Responding incorrectly – Lives have been lost more than once from a pilot pulling up the nose when the warning system is telling him to increase altitude. He should have first put the nose down for speed to create lift needed for altitude. He thought “up,” pulled the stick and stalled the plane. Know how you are going to respond to an indicator before going live.
There are books, classes, and careers dedicated to the practice of dashboarding. It is a very important business practice and can become an invaluable business tool to make your life easier and your business more successful. Spend the time needed to do it right.
Mike Duncan is Partner and co-founder of Bizzeness, LLC. Mike began his career with KPMG and Deloitte. He has been a business owner and advisor for over 30 years serving over 300 businesses in various capacities. Mike focuses on SMB’s with concept development, business modeling, start-up, market adaption, strategy and succession. Mike lives in the Kansas City area. You can contact Mike at firstname.lastname@example.org.