KPIs: What Makes a Good Executive Dashboard?

An executive dashboard is a tool that gives an easy-to-absorb indicator of the important business metrics - also known as Key Performance Indicators (KPI) - for your business. A good dashboard should convey important information at a glance.

The business term derives from automobiles. You can tell from your car dashboard if you are running low on gas, running above the speed limit or if one of the sensors has detected a problem. You can glean this information from your car while driving. At a minimum, a good dashboard needs to meet the KISS Principal. When designing a dashboard, less is more.

Clearly, any business dashboard should meet this minimum criteria. But, what makes a really good dashboard? My experience is that 4 additional criteria are important.

Is it Visible - to the Right People?

Why do you think call centers keep real-time stats on scoreboards? So the reps can see how they are doing as a team and can compare their own performance against the other reps. For dashboards, the right people need to get the dashboards.

In Tom Davenport's HBR Blog "Data is Worthless if it is Not Communicated", he advises "never assume that the data will speak for itself". We've all seen the analyst that puts together fabulous data, emails it out to the management team and assumes his job is done. When the management team confronts the analyst months later about poor performance with a KPI, when it's too late to affect, the analyst responds with "didn't you read my email?"

That's not good enough. If the data is worth producing, it's worth the management team reviewing as a team and discussing what to do about the results. If the managers won't organize this themselves, it's a great leadership opportunity for the analyst.

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Can We Tell if We're Winning?

In "The 4 Disciplines of Execution", McChesney explains that a good business scorecard must be able to tell if the individual...and for a dashboard, the business... is winning. He advises that in 5 seconds, you should be able to tell if you're winning or losing. The same goes for the dashboard. Just like an automobile dashboard, a good business dashboard informs the reviewer of whether the business is winning or losing on their KPIs. This is why Green, Yellow & Red indicators are so important on dashboards.

A Good Dashboard Must be Designed

When I was getting my Land Rover (LR3) repaired, the mechanic was reflecting on how much better the LR3 & LR4 are from the older Discovery models. He quipped that on the older models, the dashboards were "lit up with red and green like a Christmas tree". Older Land Rover models were a Frankenstein of components from multiple manufacturers.

This is a good lesson for dashboard developers. If the dashboard is thrown together based on what data is currently available, it's probably not going to be very useful. Instead, it should be designed - just like a website - based on what KPIs the business needs. Once the dashboard is designed, figuring out where to get the data becomes clear.

The other thing to keep in mind is that Land Rover Discovery I & II models now find it difficult to get replacement parts. Business dashboard designers need to also consider how difficult it is to assemble the dashboard. If it's labor intensive and generating it requires analytical gymnastics from the analysts, it's going to be difficult to grow with the business.

Start with the end in mind and design a dashboard which can be easily derived from readily available data sources.

Answer the "So What" Question

The final consideration when designing a dashboard is whether each of the KPIs included is important enough to answer the "So What?" test. If a KPI is red, what will the managers do about it? If the "So What" test cannot be answered, then either the KPI is not important to include or there is another metric that will be a better indicator of that business area. Every KPI on the dashboard should be important enough where action will be taken if the indicator is red.

What's your best example of both a good and bad executive dashboard?

For more information on business leadership topics like succession planning, strategic planning, communication, and sales/growth, check out TAB's PULSE Survey on Business Leadership. This survey polled small business owners on hot-button topics related to leadership and ownership.