There are many personal qualities and traits that distinguish successful business owners—but they all share one thing in common: Through whatever means possible, they can understand at any point in time how their business is performing based on growth projections, execution, profitability and capacity.
If you’re running a business, are you able to achieve these insights with the tools at your disposal?
If the answer is no, your business may be headed down a dangerous path—and you may not even know it. What to do? A first step is to consider the executive dashboard. If you currently use one, does it deliver broad insight on these areas? If you don’t have one, you should take immediate steps to put one in place.
An optimal executive dashboard should give you the information you need to answer four primary questions:
- Are you growing?
- Are you profitable?
- Are you executing for your clients or customers?
- Are you retaining and growing your client base?
Today, businesses are swimming in data both inside and outside the enterprise. While lots of it can be used intelligently, it’s difficult to cull valuable nuggets from the pile and assemble it in ways that deliver useful insights.
Moreover, much of the data available to your business looks backward (e.g., last month, last quarter, last year) at performance and other important metrics. As a result, you as an executive can’t plan for growth, monitor current progress or intervene to prevent the ship from going off course.
In our work with businesses of all sizes and scopes, we’ve defined four crucial elements of an effective executive dashboard:1) Client/market-related data. This includes insight such as:
- Client churn – to what extent are you retaining, and keeping clients happy? It’s six times more expensive to acquire a new client than to keep an existing client. Most clients will never tell you of their concerns; rather, they almost always vote with their feet. Nearly all businesses are well served to build and nurture existing client relationships. Your ability to do so – as evidenced by client churn data – should by itself provide a valuable assessment of your business’ current performance.
- Average purchase size – say, for example, that an average sale for your company is $10,000. Recently, though, that figure has started to drop off. Including this metric on your dashboard is vital; first and foremost, it alerts you to the issue, and by extension, may provide insight on why that is happening. From this, you can plan remedial actions or be better informed when it comes time to forecast things like raw material purchases.
- Shift(s) in products purchased – this can help you understand if your clients’/customers’ needs are changing. Maybe someone is buying steel components from you today, but what they really need is wires to connect those things together. Or, perhaps the volume of steel purchases is declining, and complementary products – nails, screws, grease, wire – is increasing. This could mean customers have over-ordered, or even found an outside supplier that’s cheaper for consumables. If volumes change, or what they buy from you changes, this metric alerts you to it.
People make purchasing decisions on three primary drivers: price, quality and relationship. Price is the first thing they’ll switch on, they will start to sample next on quality, and finally, relationships. If sales of your products are decreasing, that may be a sign that someone has undercut your prices.
3) Execution. Companies run in transactional ways with associated transactional activities. Dashboard metrics that track execution on key activities – e.g., product launches, lead generation/pipeline initiatives, product and service launches – offer both quantitative and qualitative measures of progress and success. Take lead generation, for example. An effective dashboard should quantify the number of active leads, measure that volume against established criteria, specify which deals are closing and so on. Some of these measures may need to be manually collected and are more subjective—but they still provide valuable insight into what’s working.
4) Talent. We include this last, but it’s far from the least important. Companies of all sizes and scopes face talent challenges—and meeting these challenges is in many ways an existential necessity. Talent metrics on an executive dashboard are crucial in helping you determine whether you have the capacity to deliver against your client commitments. They help you answer important questions such as:
- Do we have enough people to meet our commitments?
- Can we deliver on time and to the right level of quality?
- Do we have the right skill sets?
- Are our people producing effectively?
- What does our hiring pipeline look like?
- What is our “win rate” on hiring?
- What is our staff churn rate (and what may be causing a higher churn rate)?
- If we have vacancies, can we fill those in a timely manner with highly qualified people? If not, what does that do to our production backlogs?
Again, a properly designed executive dashboard should enable you to accurately gauge the effectiveness of the core drivers of your business at any given point in time, draw intelligent conclusions and determine the right course of action for you and your team. If you have an existing dashboard in place, I recommend that it includes measures for each element described above. If you’re looking to develop one, it’s best to consult an experienced business professional with data analytics capabilities.
Freed Maxick Can Help
Do you have questions about designing and deploying executive dashboards, or other business advisory issues? Please contact Freed Maxick at 716.847.2651, or click on the button for a contact form.View full article