If you’re looking to improve your company’s operational efficiency, one of the tools you can use is a performance dashboard.
A performance dashboard is a means to measure performance and generate continuous improvement feedback within your company. It’s a visual management tool that displays key performance indicators (KPIs). It helps focus your team on achieving goals and generate ideas on how to improve.
A performance dashboard is based on two long-standing management maxims—“what gets measured gets done” and “you cannot improve what you don’t measure.”
A simple example
An automobile dashboard is an example of a performance dashboard we can all relate to. Here, you have KPIs and warning lights to display not only speed and distance travelled, but also such things as fuel level and engine temperature.
If you’re a driver, you’ve made decisions using this real-time dashboard. Just as an automobile dashboard is a critical element for driving a car, a performance dashboard should be a critical element in managing your operation.
A good performance dashboard will display KPIs (or metrics), targets, results and the gap (or opportunity) between targets and results. For many businesses, an effective performance dashboard doesn’t need to be sophisticated or real-time; a simple Excel spreadsheet or whiteboard can do the job.
What makes a good key performance indicator?
While there are well-established scorecards and dashboards, as well as common functional metrics, the one basic question you should ask is: “Does this performance indicator really matter?” One of my clients responded immediately to this question. “In our business, we only get one chance to get the product quality right,” he said. “Quality is what differentiates us from the competition, so there has to be a key performance indicator on product quality.”
This discussion led us to the two types of KPIs—results indicators and process indicators. Results indicators are lagging and tell us something after it has happened and leading indicators are tracked at the process level and can be predictive.
In the case of this entrepreneur, the results indicators are the specific physical properties of the product after the manufacturing process is completed. A process indicator is a manufacturing process input parameter that directly affects this result.
Going back to our car dashboard analogy, the distance travelled displayed on the odometer is a lagging or result indicator. It’s important, but not sufficient to understand your car’s performance.
To get a fuller picture, you have to monitor some of the sub-processes happening as you drive your car. One of those sub-processes is fuel consumption. If the fuel gauge indicates the tank is almost empty, you will not achieve the result (distance travelled) without being forced to take the right action i.e., re-fuelling your car.
Balancing results and process KPIs
The fuel gauge then, is a leading process indicator on your automobile dashboard. A good performance dashboard should eventually strive to achieve a balance of results and process key performance indicators.
After you establish a dashboard and KPIs, it’s important to have regular meetings (ideally daily or weekly) to review and discuss performance with your team. You can also use the meeting to collect improvement ideas and make decisions.
Tips on dashboard implementation
Now that we have seen some basics of performance dashboards and KPIs, you should use these five additional guiding principles.
- KPIs have to be relevant to the employees who use them. Get your employees involved in establishing KPIs to ensure they remain simple and relevant. It is critical to obtain your employees’ consensus and buy-in.
- KPI targets have to be achievable and realistic. Remember the phrase “Don’t set the bar so high that the frog can’t jump over it.” While you need to stretch and challenge your team through challenging targets, creating targets the team cannot reach with extra effort in the given time is discouraging.
- The KPI data should be easy to obtain. The goal here is not to spend time in collecting and recording data, but to spend time responding to it!
- Every KPI should have an owner who is responsible for collecting the data, reporting on it and also an owner (supervisor or manager) who is accountable for it.
- Don’t assume that because you now have a performance dashboard and KPIs, it will automatically work. You need to train your employees on tracking the KPIs and using the dashboard. Structured periodic performance dashboard review meetings are very important.
A performance dashboard helps you understand if you are getting the right things done. A well-designed performance dashboard not only measures, but also ultimately motivates your team when you see positive results. This visual management tool goes hand in hand with other management tools such as employee performance reviews and incentives to ensure sustainable continuous improvement.
For more advice on how to improve your operational efficiency, please download your free copy of our eBook, Create a Leaner, More Profitable Business: A Guide for Entrepreneurs.