Streamline Training & Documentation: Scorecard vs. Dashboard

Saturday, January 27, 2007

Scorecard vs. Dashboard

As a follow-on to my earlier post concerning effective use of scorecard systems, I'd like to highlight the distinction between scorecards and dashboards. This is a topic that Raef Lawson, William Stratton, and Toby Hatch (LSH), the authors of the report on use of scorecards cited in my earlier post, bring into focus in another recent Management article.

LSH list several issues that managers face that are related to the choice of appropriate metrics for monitoring what's happening in a business. I'd emphasize these five:

Needing to respond faster to market changes and competitive pressures

Strategy having little or no impact on the day-to-day actions employees take

Little accountability for, or confidence in, long-term plans

The budget not being tied to the strategy

Needing to be able to do better at executing the strategy

Both scorecards and dashboards can play a role in addressing these issues, but only if their distinct purposes are kept straight. LSH offer these definitions:

(click on the image to see a larger version)
Scorecard — a strategic management tool that helps an organization measure, monitor, and communicate its strategic plan and goals throughout the organization, in a way that is understood by everyone.¹

(click on the image to see a larger version)
Dashboard — a style of user interface designed to deliver user-specific information relating to the health of the business, typically represented by key performance indicatiors (KPIs) and links to relevant reports. Provides visual cues and graphs and focuses user attention on important trends, changes, and exceptions.²

Drawing on the results of the International On-Line Scorecard Study, on a set of nine case studies in a variety of industries, and on personal experience, LSH enumerate these typical characteristics of a scorecard:

Data updated relatively infrequently, e.g., quarterly, semi-annually, or annually.

Data visualized in grids, maps, and trend charts, with all users seeing the same display.

Contains metrics explicitly related to the strategy, and used to monitor progress toward achieving strategic goals.

Focus on forward-looking, strategic information.

Supports collaboration and communication about strategic goals and progress in achieving them; does not drill down to transaction-level detail.

Provides textual explanations of results.

Focuses primarily on outcome measures (as opposed to output, or throughput, measures).

Dashboards are generally used to monitor the health and efficiency of an organization. Typical characteristics are:

Frequently updated data (some may be real-time).

Data displayed in graphs and dials with little or no textual description; visualizations can be customized by users.

Metrics that are either not related to strategy, or only implicitly related.

Focus on historical information and analyzing what has already happened.

Focus on results, and on comparisons to benchmarks.

Often allows drilling down to detail, sometimes to the transaction level.

Focuses primarily on input and output measures for processes, e.g., measures of efficiency and throughput.

The key in choosing when to use a scorecard, and when to use a dashboard, is to be clear about the purpose of monitoring and analysis in any given situation.

If the purpose is operational, i.e., to support day-to-day decision-making concerning the running of the business, a well-designed dashboard is appropriate. It provides data on KPIs that enable timely response to operational issues.

On the other hand, if the purpose is strategic, i.e., to support:

decision-making concerning how best to meet strategic objectives

development of a culture of customer focus and of accountability for meeting strategic objectives

a properly designed scorecard is appropriate. It provides data on KPIs that enable any needed adjustments to the strategy or to the actions being taken to execute the strategy.

In the case studies they reviewed, LSH found that "organizations had actually implemented a scorecard system for dashboard purposes." LSH go on to say,

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.

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.

In other words, scorecards and dashboards have distinct purposes, but both are powerful tools in helping an organization be successful. LSH suggest that ultimately, as software improves and organizations become more sophisticated in how they use metrics, the two tools may actually converge.
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¹ Originally taken from an article in the Financial Gazette, a publication in Zimbabwe that is not currently online.

² From a 2003 IDC (International Data Corporation) article.

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Labels: Decision-making, Management practices, Strategy

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