Performance Dashboards
Posted By Rob Millard - 0 Comments -
What key performance areas do you measure in your firm? How certain are you that they are giving you the information that you need, to track strategy execution and to change the strategy when this is required?
Imagine flying a modern jetliner, where the only metric being measured is billable hours. (Maybe the equivalent of speed in the aircraft.) Not oil pressure, or fuel levels, or the temperature in the passenger cabin aft, just speed. Yet how many firms do fly with their pilots focused mainly on just one gauge?
Here are ten challenges or issues that I think always need to be considered when designing a flight control instrument panel for a professional service firm:
1. Linked to Strategy. The metrics that are selected must be directly linked to and between strategy, budget, performance and compensation. This may require careful thought about what the truly key indicators are that will give the best possible indication of how well the strategy is being executed, what's happening out in the market with clients and competitors in particular, the performance of the firm's people and systems, what strategic fine-tuning is needed, and general corporate health.
2. Cost Effectiveness. A balance is needed between the effort and investment required to collect data, and the value of that data. Some firms waste time, effort and money collecting data of limited value, usually simply because of corporate inertia or because they haven't really thought it through. Conversely, some extremely valuable data can be collected, processed and transformed into highly valuable management intelligence at surprisingly low cost or effort.
3. Balancing Financial and other Metrics. Financial and other quantitative metrics are easy. Qualitative metrics such as the likelihood of clients continuing to use the firm and to expand their use of the firm (somewhat more comprehensive than mere "satisfaction") and staff attitudes are less easy to measure objectively. Systems like the Balanced Scorecard help to balance this.
4. Future Focus. Making sure that the metrics are focused on future rather than past performance. Accounting records are particularly notorious for their bias towards the past, and generally do not take into account the likely effect of current trends on future performance.
5. Driving Desired Behaviour. Making sure that measurement drives desired behaviour. This means linking the metrics to individual and group performance measurement, making sure that they are understood and accepted, and that they are transparent and open.
6. Fair Process. If the performance measurement system is going to impact on compensation and reward systems, then both the metrics and the way that they are measured need to be determined with due regard to fairness and transparency. Fair process also implies that the same standards are applied to all, with no favourites or scapegoats.
7. Alignment across Levels. A common problem that we often encounter in firms, is where monitoring and measurement is focused differently at different levels in the firm. In extreme cases, they may even be in conflict with each other at different levels. This causes breakdowns in the data being fed back to management.
8. Simultaneous Internal and External Focus. Management needs accurate, relevant and timely data on trends, events and performance both inside (business performance) and outside the firm (competitive intelligence.)
9. Focus on Both Individual and Group. Measurement should encourage performance at both individual and group level. If only individual performance is measured and rewarded (or punished) then it stands to reason that people will behave as individuals and groups will probably be dysfunctional. If only group performance is measured, it sometimes allows for individual poor performance to slip through the net.
10. Produce Useful Management Information. Data must be presented in a format that is useful to the end user, usually management. It is pointless collecting data, if it cannot be used by management to drive the firm forward. Many firms are still playing catch-up on utilizing the data that they collect to the full, to finetune their strategies and improve their agility, resilience and efficiency.
