Companies use data for a variety of reasons and in today’s data driven digital world the amount of data available can be voluminous. As data levels increased companies began to rely more and more upon data summaries. Managers and business leaders wanted to see the results of data analysis, not the data itself. This led to a quicker understanding of the data, and therefore quicker decisions based upon the data. Soon we started hearing about the use of dashboards. The early dashboards were reports that summarized the summaries. The perspective or interpretation from the data was taken to a higher level in order for management to understand various directions and correlations of company activity.
This evolution is why many companies aren’t using dashboards to their full capacity when it comes to understanding the direction of the company and implementing appropriate course corrections. Many of them are still just data summaries. As data analysts know, a single data point, without reference or relevance is virtually meaningless. Useful and functional dashboards need to incorporate reference and relevance. Here’s a better way to build and use dashboards more effectively.
Start with goals. While some dashboards are designed to monitor activity, top management needs to understand results. The most important results for the organization are represented in the goals they’ve established. These are the top priorities business owners and leaders need to focus on. Well defined goals should be established as SMART goals (Specific, Measurable, Attainable, Relevant, and Time Bound). This allows for a comprehensive and effective development for a dashboard.
Target, Tolerance, and Threshold
Identify the measurable component for each goal. Then identify your (T3) Target, Tolerance, and Threshold for each one. The Target is the actual measurement component of the goal itself. Let’s say, the goal is for new customer annual sales of $2,000,000. The Target is $2,000,000. Since we seldom achieve the goal exactly, consider your Tolerance level that would trigger the need for minor course corrections. If you’re willing to tolerate a 10% reduction from goals before requiring minor course corrections, your tolerance level would be $1,800,000. Then consider your Threshold. This is the critical point where significant changes need to be initiated and, if breached would be considered a failure. If this were set at 20% from Target your Threshold level would be $1,600,000. Therefore, your dashboard would report the Target, Tolerance, Threshold levels as:
These can be broken down to match the frequency of reporting. (monthly, quarterly, etc.) If the report indicates that you are between the Tolerance and Threshold levels, develop and initiate course corrections. If you are at or below the Threshold level immediately pull the team together and develop a strong course correction and work aggressively to regain the necessary momentum to achieve the goal.
Status, Position, and Trend
Additionally, for each goal the dashboard should indicate the Status, Position, and Trend of the goal measurement. The Status would be represented by the actual result at the time of reporting. The mid-year report might indicate that the actual new customer sales were at $1,200,000, versus a mid-year expectation of $1,000,000, thereby indicating that we are ahead of goal for that point in time.
The Position refers to general alignment with the T3. Position is typically referenced as Excellent, Satisfactory, Needs Improvement, or Unsatisfactory. Set the ranges for these position indicators to align with the T3 and color code the dashboard accordingly. For example, Excellent would be at a level beyond the goal and represented in Blue, Satisfactory would be between Tolerance and Target and shown in Green, Needs Improvement would be between Tolerance and Threshold indicated in Yellow, and Unsatisfactory would be at Threshold or below shown in Red.
The last component a dashboard should represent is the Trend. If our Status as indicated above is $1,200,000 at midyear it may be represented as $1,200,000 with a green highlight. But if we had a large sale in the first month of the year and declining sales every month thereafter, a Trend indicator helps us quickly understand the result at a manageable level. The trend can be simply referenced by a directional arrow. An improving Trend is shown with an arrow pointing up, a stable Trend is represented by a sideways arrow, and a declining Trend represented by a downward arrow.
If each of your goals has a Target, Tolerance, and Threshold definition they can be quickly reference with Status, Position, and Trend in your dashboard. This allows the management team to quickly focus on where they stand at any given time in regard to achieving goals. This allows them to encourage the team to continue current efforts, make minor course corrections, or establishing a more aggressive course correction action.
Simple effective dashboards drive conversations on achievement that maintain focus and accountability at the forefront. That, in turn, accelerates the achievement of goals. Dashboards that just summarize data turn your management team into data analysts and inhibits their ability to truly lead the organization.