In-Depth

Dashboards and Scorecards Hail Rise of Performance Management

An increasing number of organizations are tapping full-fledged PM tools—including performance scorecards and dashboards.

• By Stephen Swoyer
• 11/15/2006

Even if many organizations are still trying to get their figurative heads around performance management (PM), others—especially organizations in customer-centric industries—have long been doing PM.

Far from shot-in-the-dark ad hoc querying or Excel-driven multidimensional analysis, these organizations are tapping full-fledged PM tools, including performance scorecards and dashboards.

That’s been the experience of Laura Gibbons, a BI professional with a prominent online travel specialist. Her company taps a bag of PM-oriented tricks, ranging from balanced scorecards to Six Sigma—all of which must be managed and tracked at the people, process, and technology levels.

“We are utilizing a combination of tools in our proverbial toolkit to manage and measure our performance. You manage what you measure, so measure what you manage, as they say. This includes but is not limited to… Balanced Scorecards, Six Sigma, process and operations excellence, segmentation of our customers and CEM [customer experience management],” she comments. “Retention of our existing customers has become as critical as obtaining new customers in the world of the travel consumer. With the competitive… changes over the last few years, it has become critical to understand our customer base and treat those customers with the… service [our company] is known for.”

On the technology front, Gibbons’ employer uses scorecards and dashboards. She says both have unique benefits. “Scorecards really give you the strategic view of how your business is doing. It is often high-level, comprised of only a handful of metrics that are meaningful and consistent to all layers of the organizational hierarchy,” she comments. “Dashboards, on the other hand, represent the more tactical view of the business, often utilized by the [business units] to drive their businesses,[for example the] Flights team.”

Even though PM should be a no-brainer in the cut-throat marketplace in which Gibbons’ employer is a power, it wasn’t always such an easy sell, she says. “I am the creator and evangelist for the scorecards throughout the company, having launched all perspectives of the balanced scorecard about 3.5 years ago. This was a manual initiative at first, though always with top level support and buy-in,” she indicates. “Once our process and standardization requirements were defined, we procured Microsoft's BSM tool to help us automate and scale this program to other lines of business and international subsidiaries. We measure everything from our financials [e.g., margins and profit], to our voice of the customer [surveys, CRM, & etc], to our website performance.”

When companies finally get down to the brass tacks of actually doing PM, they frequently find that identifying and codifying metrics—i.e., determining what to measure and how to measure it—is one of their most difficult problems. This was the case in Gibbons’ PM Odyssey, too. “This is the most complex and time-consuming part of developing a performance management system. We took our time with ours, as I mentioned above, developing them jointly with the business leaders to ensure the metrics were relevant and consistent across [lines-of-business] and [separate business units],” she confirms.

While the urge to leap into PM on the back of generic or canned metrics can be overwhelming, Gibbons counsels a more restrained approach. “This is the most important thing to take your time on, as many companies try to quickly throw some KPIs together and call them a collection of measures or Scorecard, when in fact, they overpopulate the end users’ view, thus, often clouding the decision-maker with analysis paralysis or data overflow.”

Similarly, Gibbons says, remember to Keep It Simple Smarty: more KPIs aren’t necessarily better. And remember, too, that no BI professional is an island unto herself, nor, for that matter, is BI as a technology an end unto itself. “You must keep your KPIs to a minimum and keep in mind that if you want to ensure high-level user adoption rates, think of this process as an interactive and collaborative effort between yourself as the facilitator and the executive leadership teams as the process owners [and] users,” Gibbons concludes. “If you build the measures in a vacuum on your own, you can be sure that your users will feel like you are pushing your own methodology for running their businesses, and turn them away from your initiative.”

Ditto for Wolfram Herz, an external consultant for a medium-sized IT infrastructure services provider in northern Germany. Herz says his company’s business model is premised on an “ambitious” outsourcing vision, and—as a result—was quick to seize upon the importance of PM to help it not only compete more effectively with rival players, but better manage its own development and growth.

For a company that’s still very much "under construction,” Herz says, that’s important. “My mission here is to create department-spanning transparency for the company by establishing a hierarchical balanced scorecard system. The scope of the system is dedicated to the overall company performance. So in my opinion, performance management and the Balanced Scorecard are tightly united, because the Balanced Scorecard method is the most fitting method to do performance management—for whatever you want to measure,” he comments.

Herz currently uses a browser-based scorecarding tool—Microsoft’s increasingly ubiquitous Business Scorecard Manager (BSM)—in conjunction with a host of different data sources, including monthly management reports (typically Excel-based), reports from a service management tools suite, and so on.

“What we measure depends on the process-based hierarchy of the scorecard system. In the top scorecard we have the typical perspectives—finance, customer, internal processes and human resources—with corresponding KPIs,” he explains. “In the subordinated scorecards we don't use structures by perspectives. For example in the HR scorecard our only KPIs [measure] the ‘ratio between external and internal employees.’”

Herz, too, says identifying and codifying KPIs can pose devilishly tricky problems. From his perspective, however, one approach in particular (namely, the balanced scorecard) already has a huge built-in knowledgebase of available KPIs. “A good way to develop metrics is to use the advice from the balanced scorecard inventors [Kaplan and Norton]—and to remember my words: the [balanced scorecard] method is optimal for any kind of performance management,” he concludes. “Try Google and you will find thousands of descriptions on how to develop a balanced scorecard based on a strategy map. It is no secret that the balanced scorecard is the method which prevailed against all other methods.”