Scorecards and dashboards partners in

of 10 Home Contacts Editorial Advertising Subscribe Archives Search CMA Canada Current Print Edition Features Table of Contents Printer Friendly Scorecards and dashboards partners in performance The line between these management tools is often blurred. Understanding the goal of each, however, can clarify and enrich an organization s approach to performance tracking December/January 2007 By Raef Lawson, William Stratton and Toby Hatch Over the years, organizations of all sizes have struggled to measure and manage performance to achieve success, but the nature of the struggle has changed. Now there are sophisticated approaches and applications available to help with these tasks that, sometimes, can add to the confusion of selecting the right tool for the job. This is especially true when trying to manage performance and track organizational metrics. Now that systems have become automated and sophisticated, many feel the need to track and monitor not only key measures of an organization s health but the organization s strategy as well. The question remains, which approach is right for which job? The point of view Perhaps it depends on your point of view. There are many views of measurement within an

of 10 Ads by Goooooogle organization. These views include the following: Measuring & Evaluating Government Performance April 10-13, 2007 - Earn 24 CPE's www.performanceweb.org Operational: This information is collected and reported frequently and, in some cases, in real time. Manufacturing and service industries use this information for staffing, estimations, and maintaining efficiency. Customer: Order information, customer satisfaction, and shipping information are also typically collected on a more frequent basis. Ensuring that customer satisfaction remains high requires staying on top of the customer s requirements. Call Center Metrics Learn about contact center data integration, metrics, and strategy. www.avaya.com Balanced Scorecard (BSC) Intranet Dashboards with KPI's Download free White Papers now! www.qpr.com Balanced Scorecard Thought and Process Leaders in Performance Management solutions www.costechnology.com Advertise on this site Financial: Typically, this is historic information and is collected and reported somewhat infrequently, such as quarterly, monthly or perhaps weekly. Strategic: Typically, this information is collected less frequently. Progress toward strategic objectives isn t something that happens on an hourly or even weekly basis, and therefore monitoring is more often done monthly, quarterly or semi-annually. Organizational: Information about the human assets including their satisfaction, training level, readiness for their position and turnover are collected less frequently perhaps quarterly. Can a single management method satisfy all of these points of view? Once the data collection and reporting requirements are defined, shouldn t it be easy to decide on which type of method to use? The answer to the second question should be yes but this isn t usually the case. Perhaps a better understanding of the business issues involved may help to answer both of these questions. Measuring and managing performance has changed in the last few years. The technology is there to collect accurate information, but it s a challenge now to make sense of the data collected, comparing it to historical data, and learning from it to make good business decisions for the future. The new, widely-held concerns for managers now are: Tracking too many metrics; Having a lot of data, but not getting management information from it; Having trouble delivering on long-term strategy; Needing to respond faster to market changes and competitive pressures; Strategy having little or no impact on the day-to-day actions of the organization; Little accountability or confidence being placed in long- term plans; The budget not being tied to strategy; and Needing to be able to better execute strategy.

of 10 Scorecards and dashboards to the rescue Two approaches used more and more frequently to address these concerns are scorecards and dashboards. That s the good news. The bad news is that there is no clear consensus on defining them. To make matters worse, organizations will use one term to label the approach they are using (or that they want to implement) when they are actually using the other. For example, an organization may use a scorecard approach, but the features and reasons for implementation describe a dashboard approach. There is a great deal of literature out there by different software vendors and consulting companies that define what their methods are and what their products do, but they also use inconsistent definitions, adding to the confusion. For the purposes of this article, we will use the following definitions of scorecards and dashboards, offered by more neutral sources: Dashboards are... a style of user interface designed to deliver user-specific information relating to the health of the business, typically represented by key performance indicators (KPIs) and links to relevant reports. Dashboards provide visual cues and graphs, focus user attention on important trends, changes, and exceptions. 1 Scorecards are...a strategic management tool that helps you measure, monitor, and communicate your strategic plan and goals throughout the organization, in a way that is understood by everyone. 2 For the purposes of this article, we used information gathered from two main sources as well as personal experience. The first of these sources is the International On-Line Scorecard Study, a study that was designed to investigate the use and adoption of scorecard systems worldwide in the public and private sectors. Available on the Web in eight languages, the survey is sponsored by professional and consulting organizations 3 from around the world. The role of these non-financial sponsors is to solicit the participation of their members and clients in the survey. (For more information or to participate in the study, go to www.graziadio.pepperdine.edu/shaps. ) The second source is a series of case studies written about organizations that currently use scorecards, dashboards or both. From these two sources the following list of attributes was created for each to help distinguish each from the other. Keep in mind there is some overlap between the two. Dashboards Dashboards are most often used to monitor data that is measured frequently and is especially related to the health and efficiency of an organization. This isn t a requirement, but rather an observation. Typical attributes of a dashboard are that they:

of 10 Contain frequently updated data (often hourly, daily, and/or weekly); Have data displayed in graphs and dials with little or no textual descriptions; Have visualizations that are very personalized and highly customized; Contain metrics that are either not related to strategy, or are only implicitly related to strategy; Typically focus on historic information (looking backwards) and analyzing what happened in the past; Focus on results and visually comparing results to other results; Often provide drill down to detail, in some cases to transaction level detail; and Focus more on input and output measures to processes (including efficiency and throughput) not exclusively but primarily. Scorecards Typically, scorecards are more focused on monitoring progress toward achieving strategic goals. Typical attributes of a scorecard are that they: Have data that are not updated frequently (strategic reviews are not usually done more frequently than quarterly); Have data that are typically visualized in scorecards (grids) and maps, and include some trend charts; Contain metrics related to explicitly stated strategy; Monitor and track progress of actions related to improving strategic outcomes; Typically focus on forward looking, strategic information rather than analyzing historic information; Focus more on collaboration and communication about strategic goals and progress towards them; Focus on textual explanations of results as well as the results themselves; Focus on strategic level discussions. Drilling down to more detailed data is limited to measure dimensions or elements of an index. Typically, drilling down to transactional level data is not required from a scorecard system; and Focus more on outcome measures rather than output (or throughput) measures not exclusively but primarily. Comparisons To help clarify the distinction between these two management tools, nine case studies were examined. These case studies were of organizations from different industries using scorecards and

of 10 dashboards. They included organizations in banking, petrochemicals, telecommunications, pharmaceuticals, manufacturing, food processing, and an airline. Common attributes of these organizations included that they had: Multiple locations and many people trying to view current and/or historical data; Current reporting systems that involved manual input, were time-consuming, and static; Multiple-source systems providing data to a single source of accurate information; and Key performance indicators (both operational and strategic) that needed to be monitored, analyzed and acted upon but for different purposes. Also, these organizations indicated that they preferred Web-based reporting to provide up-to-date, accurate information that could be analyzed quickly, and that reducing the dependency on IT departments to get current reports was also high on their list of must haves. Figure 1 explains the terminology used to describe the systems used by the organizations, the purpose of the systems, who was using the systems within the organization, and the main benefits of the systems to the organization.

of 10 The most distinct differences shown here are related to operational needs versus strategic needs. Dashboards are more relevant to the day-to-day running of the business, whereas scorecards are more relevant to the overall culture of the organization and its strategic direction. Although both scorecards and dashboards were required to provide current and accurate information on KPIs, again the use of metrics were distinctly different. Dashboard KPI information enabled fast reaction to operational issues. Scorecard KPI information enabled adjustments to the strategy or initiatives in place to ensure the strategy is executed. Figure 2 shows that dashboards are more widely used in organizations than scorecards. While scorecards are often used by executives and mid-level management, in our broader experience they aren t limited to these groups. This figure also shows that the benefits each approach provides are necessary to the success of an organization. Dashboards appear to provide short-term and more immediate operational and financial benefits, while scorecards provide longer term benefits that ensure longevity for the organization. Blurring lines We have tried to differentiate scorecards and dashboards. However, commercially available dashboard and scorecard software have features that aren t so neatly categorized. For example, it s common to find that both have the ability to:

of 10 Track many types of metrics; Present the results graphically; Provide trending of both results and targets; Display traffic lighting for results and/or targets; and Alert users about the status of results. Therefore scorecards do have some capabilities typically attributed to dashboards, and dashboards often do have some capabilities typically attributed to scorecards. From a software point of view, then, the line between them is blurred. The International On-Line Scorecard Study provided some interesting results with respect to blurring the line. After studying the general population of respondents employing scorecard systems, it was found that there was a continuum of scorecard features and reasons for implementing those systems. When analyzing features implemented in those scorecard systems, it was discovered that there was a significant number of organizations that had implemented a scorecard system that possessed few or none of the key attributes of scorecard systems mentioned above, and that their systems weren t implemented for reasons typical of scorecard systems. Organizations had actually implemented a scorecard system for dashboard purposes. By the same token, based on our experience, organizations that implement dashboards often push the functionality to help align the organization with their strategy and measure progress towards it. To these organizations, functionality is key. This makes sense. A well run and successful organization really requires aspects of both scorecards and dashboards to be truly successful in the short and long term. Choosing one over the other limits an organization. Complementary tools Dashboards and scorecards overlap and complement each other. Consider trying to run a business efficiently, effectively and profitably: you need to be able to frequently review and analyze operational results to evaluate efficiencies and overall effectiveness. Dashboards are very good at this. You also need to be able to understand your operational and financial targets to ensure you are profitable. Again dashboards will provide very useful reporting in this regard. But to remain efficient, effective, and profitable, you need to look forward. Having a strategy for future performance means creating objectives and initiatives to support the objectives, accountability for the strategy, and targets for all strategic objects. A scorecard approach facilitates this type of activity and reporting. In the end, scorecards and dashboards each have their own distinct purpose, but a well run

of 10 organization needs both. The line between the approaches may be blurred, but the benefits of having both clearly defined is crystal clear. As vendors improve software and continue to add more functionality, and as organizations become more sophisticated and require even more control over measuring and monitoring performance, the end result will likely be not just a blurring of the line, but a convergence of the two management tools. Raef A. Lawson, PhD, CMA (IMA), CPA (rlawson@imanet.org) is director of research for the Institute of Management Accountants. William O. Stratton, Ph.D., CMA (IMA) (stratton@dixie.edu ) is a professor of accounting at Dixie State College. Toby Hatch (toby_hatch@hyperion.com ) is a domain leader for Business Modeling and Performance Scorecard with Hyperion Solutions. The authors would like to thank Denis Desroches of Hyperion Solutions for his valuable contribution to this article. 1 Scorecards vs. Dashboards: More Than a Pretty Interface (Dec 2003). Henry Morris (IDC) Retrieved August, 2004 from http://www.idc.com/getdoc.jsp? containerid=vwp000188 2 Balanced Scorecard approach to public, non-profit management. (2003, July 3) the Financial Gazette. Retrieved December 27, 2004 from http://www.fingaz.co.zw/fingaz/2003/july/july3/4263.shtml 3 Sponsors include CMA Canada, AICPA, Balanced Scorecard Netherlands, CAM-I, CIMA, www.competitivescotland.com, Deloitte Germany, Hyperion Solutions, IMA, Van der Leer, and Yacsa.com. The dashboard in action a case study Mount Saint Vincent University (MSVU) is in the midst of an aggressive capital expansion plan. The $40 million plan will see the development of leading-edge research space, an increase in the number of classrooms, an enhancement of student space and the construction a new residence. Helping drive the University toward this change are two important documents the business case and its accompanying dashboard. Hand-in-hand, the two documents lay a course for a 30-year, long-term capital plan. The business case provided an outline for why the expansion was necessary, and set out the parameters that would make it sustainable over the next 15-30 years. Although the business case was well received by the Board of Governors, the members also believed that it would be beneficial to see all elements of the case working together a dashboard that could show the business case and how its assumptions changed over time; one dynamic visual to explain everything at particular moment in time.

of 10 Amanda Whitewood, FCMA and VP of administration at the school, was set the challenge of taking a 30-page report and giving it life on one handout. In the end, she took the Board s suggestion on its most literal level creating a dashboard in the form of a car s dashboard. To create the ideal visual to explain the University s development plans, Whitewood brought in MSVU s public affairs department and promptly took one of the team out to photograph the inside of her car. As in most organizations, MSVU s dashboard was developed based on the University s needs. It is essentially a radar screen that describes the performance on a number of key variables over time, says Whitewood. All information presented on the dashboard fits into three categories: aspects of the expansion plan that can be controlled, aspects that can t be controlled, and those that are a blend of the two. For example, the University s bottom line is depicted inside the steering wheel. Elsewhere, faculty recruitment (a blend of controllable/uncontrollable) is pictured. While MSVU can project a target number of faculty to be recruited, success depends partially on the supply of Ph.Ds available. Other uncontrollable aspects include inflation rates and long-term borrowing rates. While tools like the Balanced Scorecard focus on controllable performance measures, we wanted to move beyond ours and present the Board of Governors with a view of MSVU s reality be it within our ability to influence or beyond. Both the business case and the dashboard are very dynamic. For instance, with the dashboard, there also exists a dashboard presentation, which captures the essence of the dashboard using moving dials that interactively communicates the campus planning information presented on the dashboard. MSVU s innovative dashboard is in fact being used as an illustration of the dashboard as a performance measurement tool in the curriculum of The Directors College, established in 2003 by The Conference Board of Canada and McMaster University s Michael G. DeGroote School of Business. The gold standard for director education in Canada, The Directors College offers professional development programs designed to address both the structural and behavioral skills required to be an effective board and committee member or chair. The college offers specialized programs and The Chartered Director Program, leading to the Chartered Director (C.Dir.) designation, Canada s first and only designation for corporate directors. We re using MSVU s dashboard in module 3 of the Chartered Director Program, which focuses on oversight and finance, said David Brown, Executive Director, Brown Governance and a faculty member in The Directors College. The dashboard provides an excellent real-life example of how directors in a particular organization visualize financial and non-financial indicators to effectively

of 10 measure corporate performance. It fits in nicely with the College s mandate of providing fresh perspectives in achieving good governance.