I get asked this question all the time, “what should my dashboard look like?” The answer is, it depends. Most dashboards should have the basic financial key indicators for your business, revenue, gross profit and net profit but those seldom tell the whole story. What really matters for your dashboard is what are your leading key indicators? What will tell you how you might do in the future?
When I had my own business I tracked everything but could not predict how we would do in the future, except as a guess based on what we had done in previous years. Yet I knew that good businesses and good leaders were able to predict. My mentor at the time kept challenging me to dig for the right financial key indicators, not by looking at what had already happened, but looking at which metrics were predictive. I kept looking harder but still wasn’t seeing them. Then I came across Kraig Kramers’ CEO Toolkit which explained how to create trailing average charts. Aha! I was finally on to something. I took our numbers and created 3, 12 and 18 month trailing averages for the metrics that I tracked and finally saw trend lines. Instead of comparing how I did from one month to the next or the same period last year, I was able to see an actual trend!
From there I was able to identify the key indicators that were most important for my business at the time. In Chapter 8 of my book, (click link for *free* download), I have a list of possible Key Indicators for your business and all can be measured with trending 12, 18, and 36 month averages. It’s important not to get carried away with these as you can start tracking everything, (which will drive your financial team crazy and doesn’t really move the needle forward). Pick 2-4 key indicators that will tell you if your new initiatives are working, or things you’re working on are improving. These are in addition to your basic financial key indicators. Once you get a good handle on some of these variable indicators, such as Revenue per Employee perhaps, you can change it up and track something else that will have an impact on top or bottom line performance.
The key to success with a dashboard is succinct, specific, one page and regular. This means make time for the discipline to get it done, report out, and have your senior team use it to make decisions. With one quick glance, you should be able to see if you’re on track, against goal, or off. It’s not just a nice report, it should be a working tool. At CEO Global Network we require a dashboard of all of our members that they bring to each meeting. This gives the other group members a window into a company’s performance and creates a common language with which to help one another with their businesses.
Remember, flying a plane without a functional dashboard will not end well, neither will it be successful for your business.
Nice summary of an effective dashboard, Mary. As you point out, if we can track the leading indicators we can MANAGE the work that causes revenue or other indicators that show results.
Your newsletter continues to be one of my favorites!