The Business Dashboard

The business dashboard is a concept that has been around for quite some time. It is one of those business school buzzwords that can actually be very handy in the real world if properly implemented. This article explores what a business dashboard is, and things to take into consideration when building one.

What Is It?

Just like its automobile namesake, a business dashboard is a series of easily understood gauges that allow the operator to keep tabs on what is going on beneath the hood, without resorting to complex and time consuming diagnostics. Just like an automobile engine, your business has a lot of little interrelated processes that all contribute to the healthy function of the overall machine. The goal is to pay more attention than just "is the car still running?". You don't want your first indication that something is wrong to be a drop in revenue.

Chances are that your business didn't come with a user manual like your car did, so it is up to you to figure out which processes are most important to understanding the health of your business. Every business type (retail, wholesale, service, etc.) is going to have different indicators, and every business within a given type is going to be slightly different. Here are some examples:

Customer acquisition rates
Customer retention rates
Productivity per employee
Days outstanding for accounts receivable
Percentage of T&M Work

There are hundreds of things that might belong on a business dashboard. What they all have in common is a secondary relationship with revenue. However, you are not going to want a hundred different gauges on your dashboard.

Creating Your Own Dashboard

When you create a dashboard, it is important to strike a good balance between providing enough information to really understand what is going on and providing so much information that it is hard to interpret. Going back to the car analogy, you want it to be significantly simpler than popping the hood and observing directly, but more complex than an "idiot light" which just tells you when something has gone wrong.

Choose Your Factors
A good way to start is by breaking the problem down into cost factors and revenue factors. Go through your financial statements (or memory) to find out what your most expensive, or most unpredictable, cost factors are and put those on the list. They might be labor hours or materials or even advertising. Next, do the same thing for revenue factors. Revenue factors will be a little bit harder, because there usually isn't a nice neat number in your accounting system telling you what factors are your biggest revenue drivers. You are your own best source here, although an outside perspective can be helpful as well. Put your best guesses on the list. After observing your dashboard for a while, you might end up finding out that the revenue drivers you thought were important aren't as important as other things you were ignoring. If this happens, you've discovered a way to increase your profit.

Track Your Factors
Now that you have a list of the things you want to track, the next step is to figure out how to track them. Some of the things on your list might already be available in a system of some kind, such as your accounting system. Others might not be tracked at all. In those cases, there are a variety of ways to collect and store the information, such as commercially available software, manual entry, and custom solutions. Deciding how best to collect information that is currently going uncollected is an entire subject unto itself. To make it brief, the key is to remember that whatever collection method you choose needs to cost justify itself. It doesn't make much sense to spend more money collecting information than the information is worth. Each item that is being tracked needs to be examined for the following things:

Accuracy of information
Timeliness of information
Cost of gathering information

A business dashboard is only going to be as useful as the information that comprises it, so taking a good look at each metric before adding it to your dashboard is important.

Distribute Your Factors
The final step in creating a business dashboard is packaging and distribution. This is largely a technical task beyond the scope of this article. However, there are a few things to keep in mind when choosing or creating a packaging and distribution method. First, the information needs to be easily accessible. If you are using a "pull" model (the individual retrieves the information themselves), everything needs to be available in one place, even if the factors come from a variety of sources. Even conscientious users will have trouble going to six different places to review information on a regular basis. For this reason, a "push" model is preferable. Push delivery methods include fax, email, and memo. The next thing to consider is how often the information should be reviewed. As a general rule of thumb, the information should be reviewed on the same time resolution as the most volatile factor. In other words, if one of your factors changes in a meaningful way every day, the dashboard should probably be reviewed every day. There are limits to this, though. A dashboard is worthless if it is sent out or reviewed so often that the information is ignored. You will just have to be sensitive to how often it makes sense to review the dashboard metrics.

Now What?
Now that you have a business dashboard in place, you've already reaped quite a benefit. The process of deciding what your most important factors are and figuring out how to measure them will teach you quite a bit about your business that you might have missed in the day to day process of running your business. The business dashboard is a tool that you can now use to get ahead of the curve and see and correct problems before they ever affect your revenue. It is also a tool that you can use to allocate your resources to maximum effect. Spend a month focusing on improving a single factor and pay attention to how that affects your profits. After doing this with each factor that you've identified, you'll know which are most important, and which are least important.

Successful business is a combination of working hard and working smart. A business dashboard is one tool that will help you work smarter to make the most of all of that hard work.

-- EH

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