Defining an operational and financial management dashboard

How can you have an operational and financial dashboard that is effective in steering the performance of a company, its departments, services and teams? How can we ensure that it is actually used for management purposes by the teams that produce it, and that it is not just a reporting tool?

 

What is an operational and financial dashboard? What kind of dashboard are we talking about?

An operational and financial dashboard is a management tool that facilitates monitoring, control and decision-making within a company or a specific department: management dashboard, sales dashboard.... It is essentially a summary visualisation of various key data and information that can help managers understand the performance of their organisation.

We are focusing here on the operational and financial dashboard of a team, and not the one that might be used by a manager.

The former is a management dashboard that is used by a team and disseminated to its members, or even to a wider audience, including the whole company. "Used" here means that the management dashboard is reviewed at team steering meetings and that it is used to take actions or decisions at team level, not at individual level.

A manager's dashboard can be exactly the same. However, a manager can also use a more detailed, or customised, version, according to his or her own needs, and in particular to carry out more detailed analyses.

In the remainder of this document, the term dashboard will be reserved for a team's management dashboard unless otherwise specified. Similarly, the term "team" may be used to refer to the company's management team or any other management team, at any level of the company.

 

What are the objectives of an operational and financial dashboard?

The two key objectives of an operational and financial dashboard are to

• To provide a clear picture of the team's performance in relation to its strategic, financial or operational objectives
• To enable the best actions and decisions to be taken to achieve the team's objectives.

 

We could add a third objective. To use it to communicate to staff in the wider organisation (all staff reporting to the team, and even beyond the team) in order to promote their understanding of the performance and decisions taken, and to strengthen their commitment. However, this objective is rather that of an action following on from the use of the dashboard; it does not always directly use the management dashboard in its raw format. So we don't explicitly include it in the list of dashboard objectives. However, it is just as important.


 

What are the quality criteria for a management dashboard?

How can we judge whether the management dashboard is a 'good' operational and financial dashboard, and whether it is effective?

Obviously, the first two criteria are that it enables the two essential objectives to be achieved.

However, our observations of thousands of management meetings have led us to identify three other important criteria: 

1. Minimise the meeting time needed to take decisions and actions.
2. Make each team member responsible for his or her own area.
3. Encourage a shared commitment by the team to the solutions to be implemented.

The first two criteria are fairly obvious, but the third requires some explanation. It is based on several observations:

• Too much time is spent discussing problems without actually discussing possible solutions. With the risk of taking inappropriate, short-term action, or having to hold an extra meeting.
• Too many meetings are a succession of bilateral meetings between the team manager and each member. With discussions that only concern one member of the team. All the other members are then irrelevant and waste their time.
• "Problems bring people together, solutions divide". There is often agreement on the nature of the problem (or else we don't know what it is... and everyone agrees on that too). However, solutions, particularly when they involve the resources of several team members, are more open to debate... than there is agreement on them.

This is why the operational and financial dashboard should encourage this debate about solutions, with the team working together and reaching agreement. Of course, this debate depends very much on the way the meeting is run and how well the participants are prepared (to analyse the problem and present solutions for discussion). But we will see that the dashboard itself can encourage this debate.  

So how should an operational and financial dashboard be organised?

Given the objectives of the management dashboard and the quality criteria set out above, here's how a dashboard should be constructed and what elements it should contain.

 

A management dashboard in a single document

Whatever the format of the management dashboard or the origins of the data it contains, everything must be grouped together in a single document.  This can be in an online document (dedicated software, website, etc.), in an electronic document (Powerpoint, Excel, etc.), in a printed paper document or even on a display panel (e.g. in a production workshop).

This makes it easy to find everything, so you don't have to juggle between different formats...

It seems obvious. However, we have observed many cases where several documents from different sources made up a team dashboard (including email extracts, etc.).

 

A single-page overview

The operational and financial dashboard may have several pages. However, all the main objectives and indicators must be clearly visible on a single page. They should give an instant overview of performance in relation to the team's key objectives.

Some managers think that this isn't possible because they have so many objectives or indicators. But the problem is that there are probably too many. Or that they are not sufficiently prioritised between the main objectives and the secondary objectives.

The other pages may have secondary objectives, explanatory graphics, actions... and so on. But they should only be referred to if necessary to support the discussion when using the scorecard in a team meeting.

In the case of a management dashboard on a web page (dedicated software, service in saas mode, etc.), then the spirit of the "summary page" must be preserved, for example by being able to display this summary part on a different screen size.

 

A limited number of objectives and indicators

The number of objectives for a team is an eternal debate. We have defined the 3-7-10 rule: three key objectives and up to 7 objectives that support the 3 key objectives. In other words, they are secondary and only help to identify why the first 3 are achieved or not.

This allows the team to focus on what's most important and to force the prioritisation process... And also to achieve the previous criterion of a synthetic vision in one page...

 

SMART, balanced, leading and lagging objectives

As far as possible, objectives and indicators should

• Be SMART
• Be balanced according to the dimensions of the Balanced Scorecard
• Have a mix of lagging and leading indicators. 
• For more details on these three rules, see our detailed viewpoint "How to define the right performance objectives".

No indicator without an objective

Each indicator in the management dashboard must have an objective.

This criterion is sometimes criticised with the argument that "this indicator helps us to understand the achievement of this other objective".

Admittedly, this indicator is probably important. But it has no place in the management dashboard. The dashboard is used to manage, particularly in a team meeting. In a team meeting, priority should be given to discussion/validation of proposed actions. And the indicator in question is actually a piece of analysis data. It must be studied before the meeting, by the manager concerned, who must draw up proposals for action.

 

A visual management dashboard

For each Objective/KPI pairing, it should be clear whether performance has been achieved and in what proportion. A colour code of red, yellow and green is often the best way of visualising this. You can also use symbols such as smiley or non-smiley emoticons.

This allows you to see performance immediately and clearly, without wasting time.


 

Trend indicators

Management needs to understand quickly whether the trend is towards improvement or not. In particular, this enables them to see whether the improvement actions taken are effective. Should they be continued, reinforced or modified?

These trend indicators should be included on the summary page. Simple upward, stable or downward arrows. It is not necessary to have the full historical charts. They can be on another page of the management dashboard.

 

A summary of major actions/projects in progress and their status

This is the most significant part of the team's action orientation. And unfortunately the least present part of all the management dashboards we have observed.

We're not talking about the action log, which lists all the actions in progress. This is not necessarily integrated into the dashboard, even though it should also be reviewed at meetings. 

We are talking about the major actions, groups of actions (or projects) underway to significantly and permanently improve an under-performing area. These actions are not necessarily going to be 'transformation' type projects or programmes (possibly led by dedicated or even external teams).

In that case, a reduced number of them (because we need to focus on the most important priorities and sub-performances) should be included in the dashboard.

This clearly shows that there are important actions (and not a myriad of actions) that are under control.

If there are "transformation" type projects/programmes, the same rule should be applied. This also ensures that the programme is aligned with operational life.

A regularly updated and communicated management dashboard

The team's operational and financial dashboard must be regularly updated and communicated to ALL team members. At least before each meeting that it supports.

If it is an online dashboard (with implicit and permanent communication), the update dates must be clear to everyone.

 

An evolving operational and financial dashboard

The environment is changing, performance is changing and the company needs to adapt. So must the management dashboard.

The obvious case is when the scope of the organisation changes. But even when the scope remains constant, it must evolve. For example, certain 'secondary' indicators may be added or removed from the management dashboard. This is because certain others become more important to monitor in order to improve the performance measured by the key indicators.

 

 

Conclusion

An effective operational and financial dashboard is one that is actually used by management. To monitor performance, to align actions and priorities with strategy, to communicate and unite teams. Every month, every week, even every day. It must be more than just a set of data stored in a database or a Business Intelligence application.