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Timely information on operations and the competitive environment are essential for the successful implementation of a business strategy. Dashboards have become a popular tool for giving users better access to crucial information in a way that doesn’t overwhelm them. One trend is to implement dashboards to improve an entity’s performance reporting system at the strategic and operational levels.

Many different types of dashboards exist. Essentially, a dashboard focuses on a goal or objective, and it displays the most relevant information on a digital screen. An effective dashboard utilizes visualization techniques.  and cues to engage a user in the information processing experience. The visual techniques may include the use of colors, dials, buttons, graphs, and the positioning of information on the screen.

A user can perform a sensitivity analysis by manipulating the sliders to change the values of key financial inputs and test multiple scenarios. A dashboard should enhance a manager’s ability to process information and take action.  A good dash-board should include performance measures (key performance metrics) associated with strategic goals. Traffic light icons, for example, can be used on the dashboard to provide cues to signal variations from performance measure target values. A red light attracts the greatest attention for a significant undesirable deviation from target; the red queue will remain on the dashboard until the company is back on course. A yellow light indicates caution for smaller deviations, or a trend toward a significant deviation, from a target. The potential benefits of dashboards include improving the entity’s ability to quickly monitor progress in achieving goals, enhancing efficiency in responding to business events, and improving planning.

Some considerations in designing dashboards include:

  • Are managers dissatisfied with the current reporting system?
  • Is information overload a problem?
  • Is the current reporting system too complex
  • Do reports appear to be boring?
  • Have there been unexpected failures to meet performance targets?
  • Have executives been late in identifying opportunities because they do not use the information available?
  • The need to meet users needs and characteristics

Dashboards can use static or real-time data. The static data could come from periodic reports (daily, weekly, monthly) or Microsoft Excel spreadsheet models. Spreadsheets increasingly have better pre-built-in connectivity to corporate databases.

Microsoft Excel is an increasingly attractive tool for developing dashboards. It is a very cost-effective solution for many companies because their personnel may already have Excel skills. Excel also provides more flexibility than other dashboard tools; a dashboard administrator can make changes quickly in order to adapt to new situations. In larger businesses, it provides the flexibility to develop, implement, and maintain a dash-board without heavy reliance on support from the IT department. Excel’s graphics capabilities provide a wide range of display options, including tables, graphs, and pictures.

Data integrity is another important dash-board issue. An attractive dashboard with erroneous information is not useful. Excel has error-testing and error-finding capabilities. For example, users can search for missing values or unreasonable high or low values in Excel database files. Excel also has the capability to support the business analytics trend that is changing the competitive landscape.

Getting started involves defining what are the most important barometers that the management team needs to monitor to successfully run the business.  Most business owners need to and want to concentrate on sales.

For small business owners I usually recommend a combination of sales, gross profit, and 1-2 other important key performance indicators.  Larger companies may include some non-financial perspectives as well.  In any event, I recommend no more than 4-5 performance measures.

Sophisticated dashboards can be interactive and can drill down to detailed reports.

Companies should periodically review their dashboards to make sure that they meet the intended objectives.  My recommendation is that the initial review should be after six months.  One of the reasons for this is that in the design of the dashboard, there are certain assumptions of what the key performance measures are, which in hindsight may be biased at the development stage and should be replaced with other performance measures that capture more critical data needed to stay ahead of the competition and be more profitable.

Adopted from the July 2013 The CPA Journal writer Wayne G. Bremser, PhD.

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