Why the Software tail should not wag the Performance Management Dog.
Software is Just a Tool, Not the Solution
Results from Performance Management comes almost zero percent from the software itself. Software is just a data collection and display tool. That’s a fact. Results come from choosing the right metrics to watch, which are tied into the right Strategic Plan, to frame and focus employees and departments on the right results. Design of the dashboard by selecting the correct Key Performance Indicators (KPIs) is a business art that software people and accounting people are not practiced in and so generally do not know how to do this well. Like most, they do not know what they do not know either. That is where the trouble begins.
The problem is that most of the money in the dashboard industry (BI, PM, BPM etc.) is made by purchasing and deploying software. That means all the marketing, advertising, sales people and related services dominate the messages around Performance Management as if the software is the star. It is not. It is a tool that makes pretty graphs and if the software is not displaying the right metrics, all those pretty graphs are both expensive and useless. In fact they can even be harmful to a company’s performance.
The biggest problem is that all these “experts”, paid for by software purchases and related consulting and integration (IT, not business) are focused on collecting and displaying the data. They are IT people, accounting people and often project managers assigned to “purchase a solution” who have no experience in the complex art of management best practices. The best place to start is with an expert in management and metrics, not with a software comparison project.
Now don’t get me wrong, I used to be a Software Engineer, Software Architect and even a Vice President of Engineering who directed well over a couple hundred software engineers in my day. I still manage software developers sometimes, though it is mostly web development, not state-of-the-art R & D product development most recently. So I have a vast appreciation for the power and value of software. However, when I see the software evaluation driving the process of Business Intelligence and/or Performance Management I cannot help but picture a one pound tail wagging a proverbial 100 pound dog. This is a project designed to fail because it has already lost focus on what will make the project successful – ironically the purpose of Performance Management.
How to Avoid the Tail Wagging the Dog
Wow this is so simple I could do this in one sentence, but it needs to be supported. However, here is the one sentence:
Design the Key Performance Indicators (KPIs) first and implement dashboards using simple
spreadsheets for at least six months before you begin looking at software.
So why does this make far more sense and is far more likely to result in a good outcome that will positively impact the company’s performance? Oh where do I begin – This is like shooting fish in a barrel:
1. The design process to determine the best measures of success (KPIs) is a strategic business process that has nothing to do with the information technology used to automate data capture and display. The process will get totally overwhelmed by complex software requirements, sales people, hardware requirements and many unrelated issues distracting from the initial task at hand. The only task is to come up with the best metrics to frame success and training the team to use them.
2. No one will get all the metrics right on the first pass. Even an expert might get it 80% to 90% right in the first month. They must be tested and iterated through several months of use and develop and mature. Anyone that knows anything about software knows that changes are massively more expensive than getting it right the first time in early design. So essentially it is virtually guaranteed that you will waste, time, money and frustrate employees by redoing the software. Or worse, not redoing it because the budget is spent or people lose interest and the project dies a death by a hundred small failures and no successes. In the 1980s it became clear that “Reengineering the Corporation” and other large IT projects had huge failure rates.
3. You can get at least 80% of the benefit of Performance Management just using spreadsheets and for small businesses it is likely that is all you need anyway. Once you get larger, with over 150 employees or other complexity some automation will pay eventually but it is not a pressing ROI for smaller businesses.
4. The process is about change management and people more than numbers. The complexity, and excuses, that go with the information technology part of it will distract from the real changes that must be made to be accountable to keep goals and focus that is business driven. Software and IT work will so distract from the central goal (company performance) that there will be hundreds of excuses, delays and reasons things will slide sideways for months at a time. Like the project will fade away, never accomplishing the goal or just become a massive and expensive boondoggle that will cost literally ten times what it should.
5. The biggest challenge of any change management project is about the people. Training, selling and implementing a mind-shift in your staff is the part that needs resources and focus. Your goal is to get your staff to think differently and tie in their day-to-day decisions and activities with the corporate Strategic Plan. Connecting Strategy and tactics is done by selecting the correct metrics to watch daily, weekly, monthly and make adjustments to improve them constantly. The Japanese call this Kaizen and after World War II implemented Walter Deming’s principles to beat the U.S. handily for decades in automobiles and many other manufacturing industries. Of course, these principles apply to any business whether it is a service or product.
What Software Vendors Will Say
Now I know every software vendor will have kittens and want to tar and feather me because they want to sell their “value”, which is the sizzle on the steak, not the steak itself. They want to distract you with pretty pictures and convince you that those are what makes people perform better. Not! The fact is that people performance is not improved by pretty colored graphs, it is improved by watching the right numbers and mapping those numbers into key strategies (department and corporate) and operations (tactical level) across an organization. Data could be collected by hash marks on a blank sheet of paper and over 80% of the improvement would still come if the numbers being watched are the right ones. In many cases 100% of the improvement will come from simply measuring the right numbers and adjusting the business and processes accordingly on a monthly basis.
So what are the Four Keys to getting your company's dashboards right?
1. Hire a business dashboard expert, not software people or finance people to select the proper KPIs. This is small money for huge impact. At least eighty percent of the value comes from the right metrics. Dashboard design and KPI selection is an art that takes many years of experience to develop. No one can get it right doing it for the first time. The expert will discover the right metrics (KPIs) for your company quickly. Internal people will never be able to do this because the current metrics are burned into their brain so deeply. You must provide a balance of the right four types of numbers. Even most of our competitors do not understand this - so we won't put it here where they can see it - but we will tell real prospects about this on a free discovery call.
2. The best dashboard is 100% numbers and no graphs. That's right - ZERO graphs to start. The data to ink ratio (numbers on the page) should be as high as possible. Do not focus on the software or pretty graphs. That's comes later. Anyone trying to impress with a pretty graphics display misses the entire value of dashboards! That is the cherry on the sundae for later, when the numbers are correct. Dashboards turns data from into actionable information by relating cause and effect together on the same page – not by showing time-series graphs of a few numbers. KPIs not granular data is the key to using dashboard well. Ever notice most people selling dashboards are software vendors, not business experts? They make money from selling software, not your success in improving team and business performance. Dashboards are designed to relate cause and effect that are separated in time and location (department) by lining up all the numbers vertically together to easily see both trends and relationships over time. They create dense, summary information on one page to see the big picture. They are not reports (see our video training).
2. Include proper training in the use of dashboards for everyone participating. This must be done for everyone in the company to sell the value, so they understand the benefit to them and do not see it as a useless exercise, or something they can game. There are psychological factors that make this work. We provide training videos for all levels of employees as well as coaching a direct Q & A support to all staff. Giving staff a new tool with no training on how to use it properly is useless.
3. Use a custom designed dashboard, never an industry template! This is a convenience for the software vendors but every company's dashboard must be unique to fit to their strategy, niche, pricing, culture, industry and many other factors. This can only be determined by a proper discovery process which is done by an independent third party.
4. Develop your dashboard(s) in a spreadsheet and use spreadsheets only for the first three to six months to get the right KPIs tested and data collection working, even if on paper. Do not let the software tail wage the performance dog. Data should be collected manually, not automated, initially. After the metrics are proven, then automation can be looked at and the IT work done to collect and display the data in more ways. Getting the core KPIs right must be the first objective or all those complexities prevent it from ever getting done right.
In short: Just like any other complex art or skill where customization is the key you must hire an expert to get it right. Business management and dashboards are both complex arts. Don't do paint by numbers (templates) when you need custom, and don't go it alone either. Hire someone who has all the right expertise and has done it for ten years or more - never a software person, accountant or self-professed expert who has never run a business before. Would you try to fly a plane alone without using an instructor first?
Bob Norton has been a CEO since 1989 and consultant to hundreds companies on strategy, performance improvement and growth. He is the creator of AirTight Management, The CEO Boot Camp and author of many articles on management, leadership and entrepreneurship. Linked In Profile