Chapter 7

Spreading the Word: Reporting and Communicating KPIs Effectively

In This Chapter

Making sure the people who need the information get the information

Displaying the KPIs for maximum impact and understanding

Creating performance dashboards

Creating the right culture, organising your KPIs, developing the right set of KPIs for your business and extracting meaningful insights from the data won’t count for anything unless your organization reports and communicates the KPIs to others effectively.

Often the focus on KPIs can concentrate on data collection and creating reports rather than really communicating the findings to the right people.

KPIs are rarely reported and communicated in a way that gives people enough information and puts it in context. The resulting ambiguity and confusion creates doubt which makes decision-making and learning almost impossible.

According to a global research study conducted by the Advanced Performance Institute, of which I am the founder, the most popular format for communicating performance information is with tables and spreadsheets, complemented by graphs and charts. The second most popular was purely numeric without the graphs and charts. The least popular way to communicate KPIs was through narrative commentary with supporting numeric data, and verbal communications of performance information. Over one-third of respondents felt that their current communication formats were not appropriate for the audience. Finding a more appropriate way to convey information is clearly important for the success of any performance improvement initiative.

Ultimately your KPIs are just signposts on the way to your stated destination and markers on the road to confirm your current location. What really matters is the picture of reality that the KPIs allow you to create so you can make better evidence based decisions. This reality is always more complete when words, numbers and pictures are used to paint that picture and they are put in the proper context.

Getting the Attention of the Decision Maker

Most business leaders, executives and decision makers are already drowning in a daily Tsunami of important, useful or potentially meaningful data. Only for the most part the nuggets of really important information that could genuinely impact the business and make the decisions easier and more accurate are lost in 30-page reports.

The best way to get the decision maker’s attention is to make sure the KPI data is easily accessible. Don’t make managers and executives wade through reams of needless information to get to what they need in order to make better decisions and improve performance.

Make the KPI reports short, to-the-point, accessible and visually compelling. Blocks of dense text are off-putting so mix narrative with visual representations of the data to make the report more engaging. The report must also put the information in context at the very start and remind the reader what questions the data is seeking to address.

A picture paints a thousand words.

The importance of communicating

Reporting and communicating performance findings is obviously a critical component of any effective performance management strategy. It doesn’t matter how mission critical the outputs and data turn out to be if the right decision makers don’t have access to that information. The whole point of KPIs as a performance management tool is to provide executives with evidence that allows them to fine-tune the way they and the people around them operate.

Disseminating the right information, in the right format to the right people is therefore extremely important. Manager and staff deserve to understand the “so what” implications of the KPIs they are involved in monitoring.

KPIs will only come to life and become a permanent part of their decision making repertoire when everyone involved can answer the questions, ‘How does this affect me?’, ‘What unanswered question does this help me answer?’ and ‘What do I/we need to do differently in the future as a result of this information?’

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How losing sight of key facts cost lives

When NASA was planning to launch the Challenger space shuttle, some of the engineers at base had some serious concerns. Their calculations and tests showed that there was a serious problem with one of the components (an O-ring), which could potentially fail. Prior to the launch, the engineers reported all the detailed results of their tests to decision-makers in NASA with the assumption that they would take one look at the data and abandon the launch. The problem was that the messages were not clear: Key facts were hidden in the detail and long reports, and as a consequence the Challenger was launched, leading to a devastating disaster and the death of seven crew members.

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Keeping in mind the target audience

Making sure the KPI reports get the attention of the decision makers also comes down to target audience. One report does not fit all.

For KPI reports to be used as intended and used by the decision makers that receive them they must be customised to meet the specific requirements of each decision maker. It is therefore essential that whoever creates the report considers each recipient in turn and asks themselves five key questions:

1. Who is going to read this report?
2. What do they know about the issues in the report?
3. What do they expect to see?
4. What do they want to know?
5. What will they do with the information?

The answers to these five questions should then guide the customisation of the report so that each recipient gets exactly what he or she needs, not exactly what the analyst wants to provide, or what is most convenient or easiest to create.

When you create a single report that seeks to be all things to all decision makers it immediately loses its impact and usefulness. The result is always a longer report which is off-putting to time-pressed managers. In addition, this approach increases the chance of key distinctions and insights for one group being lost or missed amongst data that is useful for another group.

Using best practice performance reports

KPI reporting and communication can’t be left to chance. It’s unrealistic to expect busy executives to sift through mountains of data, umpteen email attachments and screeds of spreadsheets in order to figure out the key messages. In addition, this approach leaves the interpretation to the individual, so the data is open to misunderstanding or ‘spin’, where the person looking at the information can effectively pick and choose the bits that confirm his or her preferred decision. This, of course, negates the whole purpose of KPIs as evidence-based decision making tools.

Best practise performance reports create context and impose uniform interpretation, which helps to prevent this type of data hijacking. They also provide strategically relevant insights presented through a mix of visual displays and written narrative.

To make sure your KPI reports are engaging and useful follow the following five step process:

1. Include the strategy map at the start of the report to re-iterate the connection between the subsequent data and the stated strategy. This helps to put the KPIs in a big picture context.
2. Frame the report with a key performance question (KPQ) to remind the reader which of their unanswered question(s) the data is seeking to answer. Again, this helps to put the KPIs in even greater context, increase the relevance and turn ‘interesting’ into ‘valuable’ and therefore engaging the target audience.
3. Support the KPQ with appropriate and meaningful graphs and charts. Placing a visual representation of the data directly after a KPQ is a great way of quickly illustrating KPQ progress.
4. Use headings to capture the salient points or key insights of the report. This allows the reader to scan the document and get the crux of the information very quickly.
5. Explain the data in words to add depth to the story and contextualise the graphics. Numbers and charts will only give a snapshot – add narrative to embellish on key points, observations or implications.

Publishing analogy

When it comes to ensuring reports get and keep decision makers’ attention, we can learn a lot from the publishing industry. Although we are encouraged not to ‘judge a book by its cover’, we do! In magazine publishing, for example, the cover is critical. Publishers spend a huge amount of time and energy deciding on the cover and arranging the content for maximum impact, interest and engagement.

Go into any newsagent or hop online to look at magazine subscription sites, and you will probably be overwhelmed at the choice – even in the same subject category or genre. The way the magazines look has a profound and instant influence on what your eye is drawn to and therefore what you are most likely to buy.

To grab would-be readers’ attention, the publisher will use bright and vivid colour, high-resolution, attractive photographs or graphics and smart, interesting or curious headings to encourage the browser to look inside and hopefully buy the magazine. Only when a customer quickly flicks through the magazine to confirm that the inside lives up to the cover’s promise are they likely to buy.

In the same way, creating a key performance indicator report that people will pick up and read requires the smart combination of presentation, aesthetics and meaningful, useful content.

Great content is as useless as terrible content if the reader never reaches it!

You need to ensure your information is presented in an attractive and visually compelling way. A bunch of spreadsheets, the odd black and white chart and a blank cover page titled, ‘Quarterly Sales Forecast’ isn’t very appealing. And it’s certainly not going to stand out in a sea of equally uninspiring data dumps currently stacked on the decision maker’s desk!

The data does not speak for itself. The report needs to speak – clearly, succinctly and loudly, if necessary, so that executives can use what the report tells them in order to improve performance.

Headline, photo and narrative

Use some of the tricks of the publishing trade to communicate your KPI reports effectively and get the decision makers’ attention.

Getting the headline right

If you think of any front page newspaper story or major magazine article, you’ll understand that they follow a similar format that includes a headline, a photo or graphic and narrative. If you use this approach as your standard KPI reporting methodology, you’ll increase engagement and maintain interest.

Create a report title or headline that grabs the reader’s attention from the start. Obviously if the report is the Quarterly Sales Forecast then you need to say exactly what the report is but you could also add a subheading to increase interest and/or curiosity.

Business reporting doesn’t have to be drab or dull, or put readers to sleep. Follow the lead of publishing and use more creative and inventive headlines to initiate early interest.

Using arresting images

A high-quality colour photograph or graphic is also a staple in publishing because an image can convey a lot of information very quickly. Pictures don’t tell the whole story, but they are a brilliant way to increase interest and put the report in context. The whole story is then expanded with a short executive summary and additional, more in-depth narrative to provide as much or as little information as the reader wants.

Organising your material effectively

Don’t be tempted to miss out the narrative either. A picture or graphic can improve and speed up understanding but is not a total substitute for words. Looking pretty but incomprehensible is as futile as looking terrible and easy to understand.

To maintain engagement throughout the report, make continuous use of both headings and visual displays. Headings break up blocks of text and make the page much more inviting, and they help the reader to navigate the report easily and find the nuggets of information they need most. This type of layout also allows the reader to go back to the report and find what they need easily without having to read through information in which they are not that interested.

Never disseminate parts of the report to different people. It’s not uncommon, for example, for one large report to be created and certain pages pulled out and sent to different managers. This is unacceptable. Customise the reports to the recipients and only include what they need to know, putting the information into a context that is relevant or meaningful to them.

Visualising KPIs: Using Graphs and Charts

The ultimate aim of a KPI report is to disseminate valuable information that looks great and is easy to understand and use. Using graphs and charts can certainly facilitate that outcome.

The most common visual display tools for reporting purposes are graphs and charts. There are many different types of graphs and charts to choose from, each with a different purpose – and some are more effective than others.

Bar graph

Bar graphs, also known as bar charts, display rectangular bars (hence the name) of varying lengths representing different values. The bars are positioned either vertically or horizontally, with one axis showing the specific category being compared and the other representing the discrete value each bar represents. Because the information is displayed side by side, this type of graph makes comparison between adjacent values particularly easy.

In Figure 7-1 the example is of customer satisfaction with different products. Satisfaction here can take any number between 0 = not satisfied at all to 100 = completely satisfied.

Figure 7-1: Example of a bar graph or bar chart

The bar graph is particularly useful for nominal (a categorisation e.g. men, or women) or ordinal (ordered or ranked) scales. Stick with horizontal bar graphs, where the data is presented left to right because the labels are easier to read (they can be as long as you want and still be readable, while in vertical bar graphs there is a space limit) and order them in size for easy interpretation (instead of a random order, put the longest bar either at the top or bottom and put the rest in descending order).

Some bar graphs, known as grouped bar graphs, can illustrate more than one category being measured (see Figure 7-2, which shows profit margins of different products across four regions). A stacked bar graph shows the bars divided into sections to illustrate cumulative effect (see Figure 7-3, which shows the relative proportion of three different products across four regions)

Figure 7-2: Example of a grouped bar graph

Figure 7-3: Example of a stacked bar graph

Line graph

Line graphs are ideal for displaying time-related data, such as variations in share price over time or sales made over a certain time period.

What a line graph does well is illustrate trends, fluctuations, cycles, rates of change, and the comparison of two data sets over time. For example, Figure 7-4 illustrates how orders of one product fluctuate across the year, with sales peaking in the winter and summer months, showing seasonal dips in spring and autumn.

Figure 7-4: Example of a line graph

Pie chart

Pie charts display various segments that represent the data as a percentage of the total data. In business, pie charts are overused. In most cases, bar graphs are the better choice. Pie charts are best when there are fewer than six segments to illustrate, otherwise it can become too difficult to distinguish between the values. For example, Figure 7-5 illustrates that one quarter (25 per cent) of all votes were ‘no’ votes, while 75 per cent were ‘yes’ votes.

Figure 7-5: Example of a pie chart

Scatter chart

Scatter charts, also known as scatter plots, are particularly useful for showing or indicating the correlation between two sets of data and illustrating the strength and direction of that relationship. For example, Figure 7-6 illustrates the positive correlation between income and spending – that is, that people with more income tend to spend more. Each data point here represents an individual that is placed across the income axis and the spend axis. Viewed together, the distribution shows a trend.

Figure 7-6: Example of a scatter chart

Bullet graph

The bullet graph is better version of a speedometer dial (see the next section) that looks a little like a horizontal thermometer. It was developed by data visualisation expert Stephen Few, and is more space efficient, making it easier to read and compare across a number of graphs. However, it only displays a single measure in relation to target performance.

For example the bullet graph in Figure 7-7 illustrates revenue for the year 2014 (in millions). The black bar in the centre shows the current value, here $250m. This value sits relative to the colour coding (0–150m = red, 150–250m yellow, 250–300m = green) as well as a benchmark (the vertical line at 200m). This display can have multiple benchmarks and performance thresholds.

Figure 7-7: Example of a bullet graph

Speedometer dials or gauges

I often see speedometer dials in KPI reports and dashboards, but in most cases they have no place there, and are the wrong type of display. They have been designed to represent a dashboard on a car, where the needle is constantly moving round. That’s fine in a car, because we can it helps us to monitor our speed at any given point in time. However, KPIs tend to be much more static and don’t move up or down all the time. Speedometer dials are also not very space efficient and can be difficult to compare. Furthermore, they only provide a view of performance at a particular point in time, maybe in comparison to a target, but can’t show trends. Overall, my advice would be to avoid them altogether wherever possible. Figure 7-8 shows a typical speedometer dial.

Figure 7-8: Example of a speedometer dial

Using innovative ways to visualise data

Helping decision makers to read, understand and use the data that you report to them is just as important as providing the data in the first place. Seeking new and novel ways to present the data in an engaging and visually appealing way will always increase the likelihood of the data being used.

Graphs, charts, images and diagrams get the important facts across to the reader very quickly. A visual depiction of the data can often make it easier to understand and give a deeper and broader insight into the findings. Plus graphics are often easier to recall. The problem is that these significant benefits can result in their overuse. Most word processing packages come with graphic capabilities fully installed. Report writers no longer need to hire specialist graphic designers – they can just add the graphs and charts themselves. So they do so, often at the expense of the information the graphics are seeking to present.

The secret is knowing when and how to use graphics to visualise data appropriately. Here are some ideas to keep you on the right track:

• Keep visuals simple and make sure they are relevant and deliver information that your target audience wants. Just because it looks funky doesn’t mean it should be added. And don’t feel the need to fill every corner of the report – too much clutter makes it harder to find the important information.
• The person reading the report should be drawn to the most important pieces of information first. Make sure the key messages stand out.
• Use colour sparingly and only when you want to highlight specific issues or when it’s necessary to clearly differentiate between elements on a graph or chart. Often business reports are only in black and white which can make differentiating between data sets very difficult especially if similar shades of grey or patterns are used.
• Be mindful of the colours you use as they often come with unconscious meaning. For example, red is considered a warning or danger colour. Also, 10 per cent of men and 1 per cent of women are colour-blind, so choose colours that are not affected by colour blindness.
• Avoid three-dimensional graphs: These can make a report look like a high school geography project and are harder to read!
• Don’t use too many different types of graph, chart or graphic. If it’s going to be useful to compare various graphs with each other then make sure you use the same type of graph to illustrate the data so that comparison is as easy as possible.
• Avoid unnecessary decorations, background colours, fancy fonts, coloured paper and so on. Aim for clean, attractive but functional reports.
• Graphs are only useful if they show something meaningful. Don’t use them if there is so much data the visual is a mess, or too little data that the findings are statistically insignificant.

Developing Management Dashboards

A performance dashboard is simply the concise visual display of the most important information that decision makers need to help them achieve one or more stated objectives.

When you are driving your car, a single glance at the instruments, dials and gauges on your dashboard can tell you all you need to know about whether or not you are going to get to your destination on time and in one piece. For example, you can immediately tell whether you have enough fuel, how fast you are travelling and whether the engine is coping well with your driving. Most cars also come with warning lights that flash or turn red when your car is in trouble or needing a service. A performance dashboard should do the same for your business.

Management dashboards are best considered from an operational and strategic perspective. Your operational dashboard allows you to check the day-to-day processes and outputs of your business to make sure everything is running smoothly. They provide information that allows you to fix issues before they become problems and affect performance. Your strategic dashboard on the other hand looks to the future and seeks to identify obstacles and challenges that you may face on the way to your new strategic destination. Both are important to develop.

When properly developed management dashboards allow decision makers quick access to the critical indicators or instruments of the business, and help them to decide whether they are on track or not.

Seven dashboard design tips

In a frenetic, information-rich corporate environment, a management dashboard is an extremely useful tool. The dashboard clusters all the mission critical data in one place so that managers and decision makers can access it quickly and know exactly where they are and what they need to do. Here are seven tips for designing a dashboard that delivers on that promise:

1. Keep your dashboard to a single screen or single page of paper. The whole point of a dashboard is that you get a succinct overview of the business and potential red flags in a few minutes. It’s a snapshot, so don’t include excessive detail. If it takes you half a day to look through your dashboard then it’s not a dashboard! Forcing yourself to rein in the dashboard to a single screen or page will also force you to really engage with the most important information your reader needs to know.
2. Put the data in context by including the KPQ the metric seeks to answer.
3. Only include the most critical, insightful KPIs necessary for achieving your operational and strategic objectives.
4. Choose an appropriate and accessible way to display the dashboard. For example if you use software make sure that everyone that needs to dashboard has access to the software.
5. Make the dashboard easy to look at, navigate and understand. Don’t cram as much information onto one page as you possibly can – arrange the data aesthetically.
6. Focus on information delivery and understanding. Avoid excessive design, and don’t introduce meaningless variety just to make the dashboard appear more interesting.
7. Keep the dashboard clean and clear. Don’t include decoration or excessive use of colour – everything on the dashboard should serve a purpose, or it shouldn’t be there.

Making use of software tools

Software tools can be a great performance management enabler and can greatly assist in the reporting and communication of performance data – including through the creation of automated dashboards.

However, the key word in that last sentence was enabler. Software is not a blanket solution. You still need to go through the process of executive discussion to work out what you want the software to tell you. You still need to design and develop the right KPIs for your business and you need to understand what information you need in order to answer specific unanswered questions that could improve performance. So you still need to do all the front-end work around creating a performance management framework in order to get the most out of any software tool you may then chose to buy.

That said, software can bring the data and information to life through powerful communication and collaboration features. Visually rich, colour coded, intuitive dashboards can be created in minutes, so users can understand information at a glance and update that information with a click of a button any time they want. In addition, most of the tools available today are web-based, which means you can access the information via your internet browser at any time. Software can therefore make the ongoing data crunching, reporting and communication much easier.

Some of the leading software products are sold by vendors including:

• ActiveStrategy
• Actuate
• Corporater
• Cubus
• Covalent
• Dundas
• IBM
• Infor
• Klipfolio
• KPIFix
• Microsoft
• Microstrategy
• Oracle
• Procos
• QlickTech
• QPR
• SAP
• SAS
• SpiderStrategies
• Rocket Software
• Tableau
• 4GHI