One of the greatest advances in business management is the presence of BI dashboards to display business performance metrics at a glance, and often in real time. Dashboards are a versatile, mobile, and visual method to convey the KPIs—key performance indicators—that organizations can use to monitor their progress towards achieving business objectives on a variety of fronts.
Dashboards be found at virtually all levels of organizations, helping executives, managers and other stakeholders monitor progress and performance towards reaching individual, department, and business goals. For example, high-level executives typically use them to keep an eye on organizational competitiveness, effectiveness, and success. Managers and department heads on the other hand, find value in using dashboards to manage processes, production or employees within their departments by monitoring the KPIs relevant to those efforts.
With so much at stake with these metrics, let’s look more closely at what KPIs are and how to make them as effective as possible.
In simple terms, KPIs provide a bird’s eye view of the performance metrics that are most important to a company, a business unit, or an individual. Especially when delivered on real-time-enabled BI dashboards, KPIs can keep stakeholders’ fingers on the pulse of virtually all aspects business performance in unprecedented fashion.
But KPIs are more than just a barometer of success and performance. At their best, KPIs inspire direction and action for decision-makers to take to increase profitability and performance, to lower costs, and to take advantage of emerging opportunities—often as quickly as they arise. Well-thought out use of KPIs offer opportunities to course correct more quickly if the outcomes aren’t up to expectations or if the rate of change is too slow. As quantifiable metrics, KPIs are invaluable to keep data-driven enterprises on track to staying competitive, improving processes, being more efficient and cost-effective, and otherwise on course for success.
KPIs vs. Business Goals
Since they measure performance, KPIs are directly correlated to an organization’s business goals. But don’t make the mistake of thinking that business targets can be directly translated into KPI metrics. KPIs are not goals or targets. Companies set up short and long-term business goals and objectives to drive their business; KPIs are simply the metrics that help them monitor, recognize, and act on how well they are achieving those results.
For example, if an organization wants to increase sales by 10% in the next quarter, it might use KPIs that include daily sales, conversion rates and site traffic. If it wants to reduce customer service calls by 50% in a certain time period, it might choose KPIs such as customer satisfaction ratings, technician performance returns, and events that triggered the call. KPIs are only metrics that allow stakeholders and decision-makers to monitor the factors that contribute to the goals and objectives of the individual, the department, or the organization as a whole.
Questions to Get Started
Too often, organizations blindly adopt industry-related KPIs and then are disappointed that they don’t accurately reflect their business goals or that their use doesn’t generate much in the way of positive results. For dashboards to make the most of KPIs and provide truly actionable insights and usable solutions to your user, you’ll need to customize the set of KPIs for that user.
Defining KPIs can be a complex process if they are to be effective. Begin to define KPIs by answering the following questions to clarify how they will be used, their purpose, and their intended results. In this way, you can begin to identify the practical, usable, and actionable metrics and insights that serve your users best.
1) What are the goals that the user is seeking to achieve?
What is their desired outcome and why does it matter? How will they know they’ve achieved the outcome? Who is responsible for it? The goals of an individual, team, or department will point you in the direction of the metrics that will be most valuable to them on dashboards. The goals of a marketing department will likely have to do with campaign performance, lead generation, market share, return on marketing investment, among others. A sales department, on the other hand, will probably want to focus on revenue profitability, win/loss ratios, upsell rates, and the like. For the C-suite, revenues are typically one of the most important KPI to measure, analyze and review regularly.
2) Who will actually be using the dashboard?
To make a dashboard most usable and valuable to its users, you need to begin by determining exactly who will be using them. Is it a person, group, or department? What are their roles and responsibilities in the company? Create a profile of your target user to help you define and refine the metrics you put on the dashboard in front of them.
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3) What tasks are essential to their job?
Every position within an organization has a different set of tasks, responsibilities, and outcomes that they’re accountable for. Together, they define a unique set of objectives and a unique collection of KPIs that they’ll want to monitor. Begin by identifying the most frequent and most imperative data-driven tasks that they need to accomplish on a daily or weekly basis.
4) What is their relationship to the data?
Developing an understanding of the user’s processes and relationship to the data will provide key insights to choose the right KPIs for them.
- What decisions do they want to be able to make based on the data at hand?
- How familiar are they with the data?
- How much context do they understand?
- Which contextual data will help them make the decisions they need to make?
- What level of depth into the data will serve them best?
5) What are the metrics most predictive of success?
To come up with the most effective dashboard for your user, consider what are the measures that are most predictive of success for your user. Start by determining which data sets are even relevant to their needs. Then decide which ones would give them the most insightful and accurate feedback about their progress towards their goals.
Answers to these questions will help you hone in on the key measurements to help your user monitor progress towards their business goals, make smarter business decisions, and ultimately be more profitable.
Finally, it serves everyone to remember that dashboards and their KPIs are communication tools that convey key metrics for business success. For your dashboards to be as useful and practical as possible, utilize a few simple communication tactics to make them as accessible and transparent as possible. Here are some ideas towards that end:
Some dashboard designers make the mistake of displaying a key performance metric, accompanied by the narrative of the metric, and consider their job complete. For example, a metric might report “24%” as a percentage of sales. But what does “percentage of sales” actually refer to? On first glance, it could be interpreted in a number of ways. Does it mean:
1. 24% of budgeted sales for the year?
2. 24% of actual sales for the year?
3. 24% of sales from a single department or company-wide?
Adding interactive ToolTips lets the viewer review the exact meaning, context, or even history of the metric for themselves. Add a formula, a comment, or other explanation so that the new user can learn exactly what they are looking at.
ToolTips can be useful to highlight benchmarks, highs, and lows in graphs and charts but they can become unwieldy and obtrusive if trying to cover too much territory. Remember to use the margins of your charts for explanatory text like formulas and other contextual information.
- Glossary of terms and formulas
When you’re building a portfolio of dashboards with multiple metrics and widgets, it can be extremely valuable to Include a page simply dedicated to defining commonly-used terms and KPI formulas. Having such a resource to will not only provide a quick refresher for those that need it, but it can also be helpful to those new to the team who may not be completely familiar with your organization’s definitions of terms. It can help virtually everyone become more efficient at using the dashboard.
You’ve heard it before, but only because it’s sage advice. Especially when it comes to data analysis tools like dashboards, simpler is better. If give your user too many KPIs to track at one time, you will lose them by virtue of burying the message.
Creating a KPI dashboard is an iterative process that requires a fair amount of inquiry to make them most effective. KPIs are very different from industry to industry and from one business model to the next; creating customized solutions is the best way to make the most of them. Using the suggestions described here will put you on the road to dashboard success.