Creating Effective Dashboards: How Companies Can Improve Executive Decision Making and Board Oversight

By Ballou, Brian; Heitger, Dan L. et al. | Strategic Finance, March 2010 | Go to article overview

Creating Effective Dashboards: How Companies Can Improve Executive Decision Making and Board Oversight


Ballou, Brian, Heitger, Dan L., Donnell, Laura, Strategic Finance


Managing strategic risk is one of the most challenging aspects of an executive's job. Identifying and mitigating risk from a portfolio perspective is complicated and often resource intensive. As a result, risk-aware organizations continually work to improve risk identification metrics and measurement techniques. To better identify and measure risk factors, many companies use an executive dashboard or set of dashboards.

Dashboards display key performance metrics in a consolidated format. By presenting a company's position updated in real time, dashboards give high-level executives the most pertinent information related to the company's strategy and risks. Executives often access dashboards via a Web browser and customize them to fit their individual needs. The dashboard is designed to help an executive make better, more efficient decisions related to risks. Further, board members who oversee risk (e.g., audit or risk committee members, etc.) can use dashboards to monitor risk exposures between board or committee meetings. Table 1 summarizes the type of information executive dashboards often contain, the extent of the information, and the various formats for displaying information.

Table 1: Content and Format Considerations

TYPES AND CATEGORIES OF RISK INDICATORS

* Types of indicators

* Nonfinancial metrics

* Financial indicators

* Qualitative descriptions

* Categories of risk

* Strategic (e.g., leadership, management, and strategy)

* Operational (e.g., value chain business processes)

* Compliance and Legal (e.g., regulations and laws)

* Reporting (e.g., financial reporting, public relations, internal communications)

* Credit (e.g., asset recovery)

* Market (e.g., economic environment)

* Environmental (e.g., climate change, carbon emissions, energy use)

* Sociopolitical (e.g., workforce issues, stakeholder engagement)

* Technical (e.g., innovations, information technology)

SCOPE AND DETAIL OF DASHBOARDS

* Summary risk information (with/without drill-down capability to more detailed analyses)

* Existing risks only

* Emerging risks (including external force data)

DISPLAY OF INFORMATION (FORMAT)

* Charts

* Traffic lights (i.e., high/medium/low signals)

* Relative rankings within silos

* Top 10 lists across all risks (i.e., only most important risks)

* Absolute scores/metrics using key performance indicators and key risk information with no rankings within or across silos

TIMING OF DASHBOARD

* Real time

* Periodically

* Annually

* Quarterly

* Weekly

* Daily

Key Challenges

While many executives recognize the potential for dashboards to improve their decision making, they acknowledge that significant obstacles can dampen or eliminate a dashboard's value. For example, measurement error or misinterpretation of data can lead users to make worse decisions than if they hadn't used the dashboard. In late 2008, at the Council on Competitiveness in Delaware, we discussed how risk and resiliency managers determine what to place on their executive dashboards.We learned from the risk executives in attendance that major companies across a wide array of industries rarely use executive dashboards effectively--and, in some instances, don't even construct them in the first place.

Yet dashboards are promoted as good business intelligence tools. To help you sort through the hype and realities about dashboards, we'll describe the primary challenges organizations face when they plan to implement a dashboard or work with dashboards already in place and offer some ways to combat these challenges. A dashboard can be an excellent tool for identifying and managing key business risks, but executives should make sure that, if they are going to use one, it has been carefully designed for their specific organization. …

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