Theory dashboards. Scorecards and Dashboard.

In a previous blog entry ( 2.3. EIS (Executive Information System). Balanced Scorecard. DSS (decission Support System). ) made ​​an approach to the theory of control panels and systems to support decision-making ( EIS / DSS). Let's dig a little deeper before we see how to construct these elements using Microstrategy, through the Report Services documents.

Dashboards Theory (Norton and Kaplan)

The theory of the balanced, driven by Robert S. Kaplan and David P. Norton in the 90's emerged in response to the need to analyze the organizations from a different perspective to the financial, which was becoming obsolete.They sought to establish a new model of measures within companies to generate value added in the future and also to better understand organizations.

For this, the Nolan Norton Institute, sponsored a one-year study involving several companies, from all sectors (industry, services, high technology, etc.) with the aim of defining a "Corporate Scorecard" or control cuandro corporate, which would contain, besides the traditional financial indicators, measures relating to the time of customer service, quality, time of manufacture or development of new products. During the study, were added to other measures of productivity or quality, which were expanded to include items in this scorecard.

Thus arose the concept of "Balanced Scorecard", which organized the indicators or measures in four major categories or perspectives: financial, customer, internal and innovation and learning.Balanced name reflects that the indicators are intended to be a balance between short-and long-term, the financial measures and nonfinancial indicators entered late or leadership, and between internal and external perspectives.

During the study, several companies built prototypes of a "Balanced Scorecard" within their companies and were giving back to the studio with the benefits, opportunities or inconveniences that arose during implementation.One of the most important things described was the fact that this system was something more than a set of measures, but an alignment of organizations with their strategies, based on historical information and the company, with the aim of generating new opportunities business or added value. The indicators were also to be aligned with the strategic plan of the company, it would be important to select appropriate indicators for each organization.

The experiments show that with 20 or 25 steps through the 4 perspectives described could implement a strategia simple, although the choice of appropriate measures may be somewhat complex, and the fact of seeing the cause-effect relationships between different indicators (eg, how to determine that the increased training of employees, investment in technology or innovation in products may cause an increase in the company's financial ratios in the future).

The results of the study and later experiences of the authors were published in the book "Translating Strategy Into Action: The Balanced Scorecard, which we will try to do a little summary.

Need for control panels in the information age

The authors open the book with a comparison between an aircraft and a company, including a pilot and manager of companies.In a modern airplane, we all would be surprised if you walk into the cabin, and we see a simple control panel with one instrumental. Would think, what measure this instrumental?, Is the level of gas or air speed, is it sufficient for the case of problems? And altitude?. It is clear that a modern airplane requires many indicators that a pilot is able to analyze prepared to handle the aircraft properly. In the case of companies, a manager will need the appropriate instruments to monitor from the current situation to the future situation.

This is what has to provide the control panel or the Balanced Scorecard.This has to translate corporate strategy into a comprehensive set of performance measures that provide the framework for strategic measurement and management system. Dashboards will continue to include traditional financial objectives, but also will include the elements to achieve those financial goals, on a balance across the four perspectives listed.

This should be added that companies need a tool to be competitive in today's business environment, high competition, where it is necessary to the management of intangible assets that are essential to compete successfully.Some of these assets can be customer relationships, product and service innovation in different market niches, products of high quality and low cost with shorter development times, development of information technologies, databases or systems, mobilization of employee skills and motivation for continuous process improvement, quality or timing of ANSWERS, etc.

In the traditional financial accounting model, all new programs, initiatives and change management processes were implemented in an environment governed by the quarterly and annual financial reports, anchored in an accounting model defined for centuries. This model is still used in all companies, but it would be ideal to complement incorporating information from the intangible assets of which we spoke earlier.

The collision between these two elements there is a new sintexis, the Balanced Scorecard.But financial measures tell the story of the past, but not seen as critical relationships with clients or investing in long-term capacity. And those measures are inadequate for the changes to be made by the company with the objective of creating value in the environment of relations with customers and suppliers, employees, processes, technology and innovation.

The Balanced Scorecard complements financial measures of the past with measures of future performance indicators, expanding business objectives beyond financial measures.With a system like this, executives can measure the business units that create value for current and future customers and how they should improve their internal capabilities and investment in employees, systems or procedures, capturing the critical activities of value creation. While retaining the short-term financial outlook, including long-term vision that reveals the financial and long-term competitiveness.

In addition, it must be something more than a measurement system.Level of organization requires the establishment of strategic objectives that include the strategic objectives of each business unit. With these overall objectives both financial and established customer, the company identified its objectives and actions at the internal processes that must be properly communicated throughout the organization to involve all participants in the internal processes. Finally, those objectives must be translated at the operational level in every area of ​​the company. We can see that this can either mean a change of direction within the organization, based on the BS in a common scenario of 3 or 5 years.

The 4 perspectives of the Balanced Scorecard.

Let us look in that consists the 4 perspectives of the Balanced Scorecard:

The financial perspective is still maintained because it is a measure of the economic consequences of actions taken in organizations.Incorporates the vision of the shareholders and measures the value creation of the company. Normally refer to measures such as the profitability measured by operating income, return on capital employed or on the economic value added. Goals from this perspective could be an increase in sales or cash flow generation. Answer the question: What indicators should be fine for the efforts of the company really be transformed into value? This perspective appreciates one of the most important objectives for-profit organizations, which is precisely to create value for society.

The customer's perspective reflects the company's positioning in the market or, more specifically, in market segments where they want to compete.Here we have measured such as customer satisfaction, retention and new customer acquisition, profitability, market share in specific segments, level of prices compared to competitors. Objectives of this approach might be to improve delivery times, develop new products or to anticipate the needs of customers.The customer perspective will allow the unit managers to articulate the customer-level measures and market strategies to achieve better results financerios in the future.

The internal perspective aims to explain the internal variables considered critical and define the value chain generated by internal business processes. It will be necessary to carry out the analysis of innovation, so that starting from the identification of needs and customer demands, develop appropriate solutions to their satisfaction. Business processes, from customer order receipt to delivery of the product itself, are controlled by the indicators of quality, cycle time, cost and variance analysis.This view ends with the customer service that ensures appropriate customer care and maintenance. The internal perspective also affects the financial outlook for its impact on expenditure items.

The learning and growth perspective identifies the infrastructure that the organization must build to create growth and long-term value. The customer perspective and internal identify most critical values ​​for current and future success. But do not get done if the use of appropriate technologies and capabilities.Material resources and people will be the key to success. But without a proper business model, it is often difficult to appreciate the importance of investing, and in times of crisis the first thing that stands out is precisely the primary source of value creation: it cut investments in the improvement and development of resources .

To analyze the ability of workers to carry out continuous improvement processes, the performance of information systems and organizational climate that facilitates the motivation, delegation of responsibilities, coordination of decision-making process and consistency internal targets. The worker satisfaction and loyalty are the indispensable prerequisites for increasing productivity and continual improvement.The activities and expectations of staff are to be aligned with overall business objectives, so that the achievement of personal goals set for employees will parallel the degree of achievement of the strategy.

Table prospects Scorecard

The Balanced Scorecard translates the vision and strategy into objectives and measures across a balanced set of perspectives. The four perspectives have been shown to be sufficient for most businesses and industries.But we only see this as a model, not a rigid pattern. There may be companies that do not use them all and others that add new perspectives to the characteristics of your business or organization (eg, the perspective of suppliers, employees or community only, which may in some cases already be included in the other perspectives).

Also include a collection of critical indicators or key success factors, should be also as a flight simulator, incorporating the complex set of cause-effect relationships between critical variables.For, after all, a strategy is nothing more than a set of hypotheses about cause and effect. And the measurement system should establish relationships and hypotheses between the objectives and measures that can be managed and measured. This chain of cause and effect should pervade every perspective of Balanced Scorecard.

To enable us to track the achievement of the objectives, the WCC must include a set of performance measures and indicators, which we indicate to what extent it is meeting the established strategy. Also, be taken into cuentaq that CMI is primarily a mechanism to implement or develop strategies, but not for formulating them.Even if it will be a wonderful mechanism to translate the strategy into specific objectives, measures and targets, and as an element for monitoring which is being carried out properly in future periods. The comparison of results derived from the action on targets also allow us to establish the improvement or corrective actions that will be needed to redirect or adjust the situation.

The proper selection of indicators is particularly important, since these have to explain the reasons for success or failure of the company as well as the impact of variables on the results. They should also serve as a warning to implement immediate remedial actions identified certain changes to it, the indicators must be affordable and easy to measure.

Measures of business strategies.WCC Building

Companies that use the IMC will have two tasks to implement a system of this type in their organizations. On the one hand, we must build the control panel. Secondly, we must make use of it, in what would be the follow up and control. The two phases are not independent, because when you start to use, it also began its redesign and adjustment, for example, measures that do not work, which should be modified or that should be added.

1.Design Scorecard. Design objectives.

The development of Balanced Scorecard starts with the proper planning of the strategic objectives and adequate definition of the key factors that will shape the pattern of action and control in the medium and long term. Must be parallel and in fact often be an alignment of strategic objectives posed to those who represent the highest aspiration of the company. Thus the primary objective fan out through the approach of another series of priority objectives of the second rank, and which in turn correlates with the partial objectives for specific departments or areas of activity.

The development of cause-effect diagrams can initially bind the framework of objectives aimed at the ultimate goal and then develop the system of indicators linked to those.The lens system must show the extent feasible the causal link of the same.

The objectives vary depending on the state in which a company is, it is not the same thing over building products company with great growth potential (for which will require large initial investments) that an established company in a mature industry, where maybe the goal will be to maintain or increase market share (with the main objective of profitability for shareholders).

The most common objectives in the perspective can be:

• Financial perspective, revenue growth, cost reduction / productivity improvement, with assets / return on investment and risk management.
• Customer Perspective: Identification of customers and market segments, definition of products and services, customer retention, acquisition or satisfaction, customer benefits.Image and reputation.
• Internal perspective: Identification of processes that are most critical to attract customers and to meet the objectives, improvements in the internal value chain (innovation, operations, customer service)
• Learning and growth perspective: Identification of investments to improve staff capacity, systems and processes of the organization, without considering them from the financial point of view of expenditure

2.Design of the indicator system.

Once you are clear about the objectives of each perspective, it is necessary to define the indicators used for tracking. To do this, we must consider several criteria: the first is that the number of indicators does not exceed seven per view, and if less, the better. The reason is that too many indicators blur the message conveyed by the WCC and as a result, efforts are scattered trying to pursue too many goals at once.It may be advisable for the design begin with a more extensive list of indicators. But we need a synthesis process to have all the power of this tool.

The selection of indicators adopted a set of strategic objectives previously established is a laborious process, since the indicator has to pick the exact content of the goal looking for the cause-effect relationship between them. The indicators, in addition to measuring the results should facilitate the search for causes of inefficiency and point the direction to follow to resolve problems.Moreover, the sources of information required for processing must be available and easily accessible.

The following lists some of the most outstanding in relation to the prospects discussed above. Dashboards have to adapt to the level of decision for which they are designed, being different, as might be expected, the general direction of the company, who serves as decision support for a specific department or entity. Each department should pay special attention to the indicators that are related to their business.Not to be missed at any time the company's global vision, showing as the most important indicators are aligned with the overall strategy of it.

Financial Perspective

• S sales growth: sales growth rates or market share by region, markets and customers. Growth by product segments or new services / products introduced at any given time. Percentage of unprofitable customers.
• Cost reduction / productivity improvement, revenue per employee, unit costs, cost comparisons with competitors, the percentage reduction in costs, overhead, etc..
• And capital asset utilization, asset utilization ratios, capital ratios generation, return on investment, etc.
• Treasury: cash cycle, cash flow, etc.

Customer Perspective.

• Market share: ratio of business in a specific market (in terms of number of customers, revenue or units sold).
• Market segmentation.
• Customer Acquisition </ Strong>: measures, in absolute terms and relative percentages of customers gained by a particular business unit.
• Customer satisfaction: measurement of customer satisfaction according to specific criteria.
• Customer retention: percentage in absolute terms and relative retention or continuation of customer relationships.
• Customer profitability: profitability indicators of customers (may be referred to markets, segments, classification of these, etc).

They are also important indicators for:

• Attributes of products and services: pricesdelivery time, quality.
• Customer relationship.
• The image and prestige of the company.
• The creation of customer value.

Internal process perspective.

• Innovation and basic research or applied rates of sales of new products or proprietary products, introduction of new products compared to competitors, development time of new generation of products, etc.
• Operational processes: costs, service or production time, cost, inventory, quality control (defect ratios, ratios of right products at retion to products manufactured, returns).
• After sales service: maintenance costs, failure rate.

Internal Perspective - Value Chain Model

Perspective of the formation and growth.

Training

• Wage level / average wage
• Degree of qualification of personnel
• Employee satisfaction
• Level of employee absenteeism
• Worker productivity
• Level of safety and health at work (number of accidents)
• Workforce stability
• Worker skills.Training.
• Motivation level of suggestions and improvements. Measures of team development.

Growth

• Designs new products and product improvements
• Treatment System Information
• Systems of information distribution
• Investment in research and development
• Hours spent on research and development
• Results of research and development
• Percentage of new products launched
• Actions to protect the environment

Exploitation of the WCC.The control system (monitoring).

A good control system of the correct definition of budgets linked to each of the variables previously defined as variable under specific control. The collection of information has to be done quickly, easily and in a timely manner, so that the analysis of deviations and their causes and possible corrective actions can be deployed effectively. Similarly, it is necessary to establish a monitoring of the effectiveness of changes implemented.

An integrated control system has to takeconsideration the following aspects:

• Definition of variables analyzed in each area (key factors and indicators).
• Quantification of variables.
• Comparison of actual values ​​obtained with the provisions and objectives.
• Analysis of the causes of deviations.
• Solution of the deviations.

The integrated management control, by using the balanced scorecard facilitates the search for products with higher added value, achieving the objectives of increased efficiency, productivity and profitability, performance optimization and production process factors as a whole, the attainment of total quality, particularly with regard to customer service and performance evaluation of individuals.

Conclusions

The balanced scorecard is not a single document be developed various tables tailored to each of the departments or levels of company decision.The balanced scorecard is not a static model, dynamic character evidence when questioning the validity of the current strategy, comes another, which can respond more quickly to new situations that originates in their environment. The adoption of the WCC should be supported in management control systems (including accounting and budgeting) because by itself may not promote the necessary changes to its feasibility.

The contribution to the WCC has become one of the most significant of recent years is that it rests on a business model.Its successful implementation is that the management team involved and spend time developing their own business model.

Integral Control Box

Benefits of implementinga Balanced Scorecard

• Defines and clarifies the strategy.
• Provides a picture of the future showing the path leading to it.
• Communicate the strategy throughout the organization.
• Align personal goals with the department.
• Facilitates the linkage between short and long term.
• Allows us to formulate clearly and simply the most important variables under scrutiny.
• Is a management tool.
• The explicit force a business model and translate it into indicators facilitates consensus across the enterprise.
• Once the MIC is running, you can use to communicate plans of the company, join forces in one direction and prevent sprawl.In this case, the CMI acts as a system of control by exception.
• Automatically to detect deviations in the strategic or operational plan, and even dig into the operational data of the company to find the root cause that gave rise to such deviations.

Risks of implementing a Balanced Scorecard:

• A recently developed model and the collaboration of the management is worthless, and the effort will be wasted.
• If the indicators are not chosen carefully, the WCC loses much of its virtues, because it conveys the message to be transmitted.
• When the strategy andompany is still evolving, it is counterproductive to the CMI is used as a classical control system and by exception, rather than use it as a learning tool.
• There is a risk that the best the enemy of the good, the WCC is perfect, but outdated and useless.

Scorecards and Dashboard.

Based on analysis of specific aspects of an area of activity of the company or a particular business process, we can discuss the Operational Dashboards (CMO) is a management tool aimed at monitoring operating variables, ie variables belonging to areas, activities or specific departments within the company. The frequency of CMO can be daily, weekly or monthly and focuses on indicators generally represent processes, so its implementation and operation is easier and faster.A CMO should always be linked to a DSS (Decision Support System) to further investigate the data.

Under this consideration, and focus on areas more specific, we talk about the Dashboard control panels or the documents that show in a unified way the key elements of information that the components of an organization need to perform their work management in a graphical environment and highly intuitive and interactive. For example, a sales manager will have one or several control panels which reflect the sales information by various criteria (geographical, temporal, profitability).Control panels are within the scope of the techniques of Business Intelligence systems.

Example of Control Panel (Dashboard)

In addition, dashboards can take advantage of other elements of Business Intelligence systems, such as data warehouse or OLAP functionality. Although we could use the Dashboard autonomously, have more sense in the scope of a BI solution. They may also be part of the strategy Scorecard (as seen above), as tools for control and monitoring of planning as a tool for reporting or analysis tool in the field to discover trends, opportunities, etc.

A balanced scorecard can combine business indicators, values ​​and graphics components to help manage or improve the performance of employees and managers making decisions.

The advantages of a well-built control panels are clear and obvious, such as:

• Improved decision making and performance: easy to identify and correct negative trends, ability to carry out unplanned analysis, better decisions based on information collected in a BI system, etc.
• Improved employee efficiency, increase productivity, but reduced analysis times to merge multiple reports into one, reduced learning time, reducing the need to create new reports.
• Employee Motivation: The user can create new reports according to new trends, is more pleasant to work with graphics that the old reports, you use more time on analysis and less on information processing.You can be a tool to share strategies, tactics and operational data from systems that allow the employee a better understanding of objectives and better decision-making.

Using the Dashboard has become increasingly popular in organizations and now includes all areas of businesses and organizations. We can distinguish three main types of dashboard, which would be:

• Strategy: support organizational alignment with the strategic objectives of an organization (as we saw in the WCC).Reports are often highly aggregated, including performance indicators aligned with the strategic objectives of the company (eg, reduced back produtos 2% increase in retencionde employees or improving cash flow).
• Tactical: support the measure the progress of a particular project or initiative. Allow us to track these projects and the validation of compliance to specific initiatives with respect to a target. The commonly used high-level executives or medium (eg, monitoring the project to implement a new system of quality control, increased sales in the area X by 20% through promotional measures, etc).
• Operational monitoring support specific business activities.They are normally used by middle managers or department managers. It is often used frequently in daily work and daily life within the scope set (for example, sales by department and month compared with the previous month, tables of employee satisfaction, number of calls handled by the call center in the period, etc. .)

In the next blog entry we'll work to build our scorecards or dashboards (Dashboard) using Microstrategy, specifically using the Report Services documents.

Scorecard with Microstrategy

Bibliography:

The Balanced Scorecard: Translating Strategy Into Action.

Kaplan, Robert S. Norton, David P.
ISBN: 978-0-87584-65 1-3

Monograph: The Balanced Scorecard as a management tool.

Martinez Fernandez, Francisco (dro-command-gestion.shtml "> link to the publication).

Business dashboards: a visual catalog for design and deployment.

Rasmussen, Nils Chen, Claire Bansal, Manish
ISBN 978-0-470-41347-0