We have plenty of data. How do we know which numbers actually matter?
Start with the decisions.
Organizations often build reporting in the opposite direction. They inventory the data they have, put the most interesting numbers on a dashboard, and then ask executives to monitor them.
That produces a lot of reporting.
It doesn’t necessarily produce much information.
A useful KPI exists because a change in the number means something to the person looking at it. It tells them that performance is changing, a risk is developing, an assumption may be wrong, or a decision may be required.
If nobody would do anything differently when the number changes, ask why it is taking up space on an executive report.
Start with the outcome, not the available data
Before choosing a KPI, ask what the organization is trying to accomplish.
If the objective is profitable growth, measuring new customers without understanding their value isn’t enough.
If the objective is customer retention, total customers tells you very little about who is leaving or why.
If the objective is operational efficiency, knowing total transaction volume doesn’t tell you whether the work required to process those transactions is improving.
The measure should connect to the outcome.
This sounds obvious, but reporting often begins with: “What data can we get?”
The better question is: “What do we need to know?”
Then determine whether the data exists to answer it.
Separate activity from performance
Activity measures tell you how much happened.
Applications received. Accounts opened. Calls answered. Transactions processed. Projects completed.
Those numbers can be useful, but activity is not necessarily performance.
If account openings increased 20%, what happened to balances, usage, retention, and profitability?
If calls were answered faster, were problems actually resolved?
If transaction volume increased, did revenue grow with it, or did operating expense and losses grow faster?
Executives need enough activity data to understand what is happening, but the reporting should continue to the outcome the activity was supposed to produce.
Otherwise, organizations become very good at measuring how busy they are.
Give every KPI context
A number by itself is rarely enough.
Revenue of $10 million might be excellent or terrible.
The executive needs context.
- How does it compare with the plan?
- How does it compare with last month or last year?
- Is the trend improving or deteriorating?
- Is there normal seasonality?
- Is the change concentrated in one product, geography, customer segment, or operating unit?
A useful executive report should make that context easy to see.
The objective isn’t to force the reader to perform the analysis while sitting in the meeting.
The analysis should already be there.
Measure the drivers, not only the result
Some of the most important executive metrics are lagging indicators.
Revenue tells you what has already happened. So does net income. So do losses after they have been booked.
Those numbers matter, but by the time they change materially, the underlying problem may have been developing for months.
Look for the measures that move earlier.
- If deposit balances are declining, what happened to acquisition, attrition, average balances, and customer behavior beforehand?
- If operating costs are increasing, are transaction volumes changing? Are exceptions increasing? Is manual work growing?
- If losses are rising, did approval patterns, customer behavior, fraud activity, or another underlying driver change first?
Executives need to know the result.
They also need enough information about the drivers to act before the result becomes the problem.
Use thresholds to distinguish information from noise
Not every movement deserves executive attention.
If a metric normally moves between 4.8% and 5.2%, a change from 5.0% to 5.1% may mean nothing.
A dashboard that treats every movement as important teaches people to ignore the dashboard.
Define what normal looks like.
Then determine what level of change deserves attention, what level requires explanation, and what level requires action.
Thresholds can come from budgets, risk tolerances, historical performance, service expectations, contractual requirements, or other meaningful boundaries.
The purpose is not to make everything red, yellow, or green.
It’s to help the reader distinguish normal variation from something worth discussing.
Show the trend before explaining the month
A single reporting period can create a misleading story.
One bad month may be noise. Three consecutive months moving in the same direction may be a trend.
Whenever possible, show enough history to let the reader see the direction of the metric.
Then explain material changes.
- What moved?
- Why did it move?
- Is the change expected to continue?
- Does anything need to be done?
That narrative can be as important as the chart.
An executive shouldn’t have to guess why a KPI changed or wait for the meeting to discover that everyone in the room has a different explanation.
Different audiences need different levels of detail
A board does not need the same report as an operating manager.
The operating manager may need daily transaction volumes, staffing levels, exception queues, and detailed service measures.
An executive team may need the trends and exceptions those operational measures are producing.
A board generally needs an even higher-level view of performance, risk, strategy, and material deviations from expectations.
Trying to make one dashboard serve all three audiences usually creates something that serves none of them particularly well.
The underlying data can be the same.
The level of information should not be.
A dashboard should lead to a conversation
The best executive reporting doesn’t answer every possible question.
It makes the important questions obvious.
- Why did this move?
- Is this temporary?
- What changed?
- Are we still comfortable with this risk?
- Do we need to change the plan?
Those are useful conversations.
A dashboard with 75 measures, 14 charts, and six pages of numbers can look impressive while making those conversations harder to have.
More information is not automatically better information.
The goal is to put the right information in front of the right people at the point when they can still do something with it.
The KPI should earn its place on the page
There isn’t a universal list of KPIs every executive team should track.
The right measures depend on the organization’s objectives, economics, operations, risks, and decisions.
Start with what leadership needs to understand. Define the outcomes. Identify the drivers. Establish meaningful context and thresholds. Then build the reporting around those questions.
Not the other way around.
An Executive Analytics engagement can help define the measures, organize the underlying data, and build executive or board reporting that explains what is happening and why it matters.
The goal isn’t a prettier dashboard.
It’s a better decision.