INDICATORS USED IN THE BUSINESS DASHBOARD

1  Introduction

Indicator is a piece of information helps the decision maker to take a correct decision.  In the business scenario, it may be an Economic Indicator (Macro / Micro Economic Indicator), Financial Indicator, Sales Indicator, Production Indicator, etc.  These indicators help to judge the overall performance of a Business Unit.  The indicators may be classified as follows.

• Key Performance Indicators (KPIs)
• Key Control Indictors (KCIs)
• Key Risk Indicators KRIs)
• Key Lead Indicators (KLIs)
• Key Management Indicators (KMIs)
• Key Activity Indicators (KAIs)

2  Different Types of Indicators

Let us explore the different types of Key Indicators used in the Business Dashboard in detail with suitable examples.

2.1  Key Performance Indicators (KPIs)

• Key Performance Indicators broadly called as KPIs are playing a key role in the Construction of Dashboards.
• KPIs will help us to concentrate and improve the Operational Efficiency of a Company or Division or Department or Group or Person or Process.
• KPIs are dynamic and measurable in nature.
• Non measurable items cannot be considered as KPIs.
• It clearly communicates how effectively a Company or Person or Process attaining their SMART Objectives.
• It can be used to evaluate the endeavours initiate for attaining the goals.
• Example of KPIs for a Retail Outlet;
  • Per Square Feet Sales in a Year
  • Per Customer Average Spending
  • Per Salesperson Average Sales
  • Customer Retention Rate
  • Per Rupee Profit Margin
  • Average Sales Per Day
  • Average Sales during Holidays
  • Average Sales during the Weekends
  • Average Sales during Festivals

2.2   Key Control Indictors (KCIs)

• It is a monitoring and control mechanism.
• Desired tolerance level helps us to exercise the control mechanism.
• Verification is a key component of a KCI, and it is usually done by daily / weekly / monthly / quarterly / half yearly / yearly reports.
• Auditing, Quality Assurance and Improvement Programs, etc. are often used to exercise the monitoring and control mechanism.
• Example of KCIs for a Product Unit;
  • Direct Cost Variance
    • Direct Material Cost Variance
    • Direct Labour Hour / Cost Variance
    • Direct Expenditure Cost Variance
  • In-Direct Cost Variance
    • In-Direct Material Cost Variance
    • In-Direct Labour Hour / Cost Variance
    • In-Direct Expenditure Cost Variance

2.3   Key Risk Indicators (KRIs)

• According to Risk IT framework by ISACA (Information Systems Audit and Control Association), “key risk indicators are metrics capable of showing that the organization is subject or has a high probability of being subject to a risk that exceed the defined risk appetite”.
• KRIs are usually contain predicted / forecasted information.
• KRIs are an early warning mechanism.
• It helps to identify any potential incident that may interrupt the continuity of the activities in the long run.
• It is related to Systemic Problems or Specific Problems.
• Some of the Financial KRIs examples;
  • Forecasted Short-term and Long-term Solvency Ratios
    • Acid Test Ratio
    • Liquid Ratio
    • Debt Equity Ratio
    • Fixed Assets Ratio

2.4   Key Activity Indicators (KAIs)

• KAI is related to activities that must be done according to the KPIs defined.
• In other words, it is a set of activities to be performed for the attainment of Key Performance Indicators.
• It is a dynamic in nature.
• Let us take an example of KPI “Number of New Supply Contracts Signed Per Period”.
• For the above said KPI the following set KAI may be identified.
  • Preparing and updating the list of potential customers.
  • Identifying the Lead from the above list.
  • Contact and follow-up of the Lead.
  • Signing the Contract.

2.5   Key Lead Indicators (KLIs)

• In the Macro Economic scenario, Leading indicators help market predictors / observers and policymakers predict significant changes in the economy.
• Example of Macro Economic Lead Indicators:
  • Inflation Rate
  • Interest Rate
  • Unemployment Rate
  • Purchasing Managers’ Index (PMI)Gross Domestic Product (GDP)
  • Stock Market Movements, etc.
• At the company level, the lead indicators may be a Micro Economic Indicators.
• Example of Micro Economic Indicators;
  • Level of Competition
  • Introduction of New Technology
  • Price Changes
  • Past Sales growth of a Company
  • Supply and Demand of the Product, etc.

2.6   Key Management Indicators (KMIs)

• Comprehensive set of various Indicators are called as Key Management Indicators.

3  An Example of Car Dashboard

In the Car Dashboard, we may find the following indicators.

1. Mileage Per Litre of Diesel / Petrol from the last refill (KPI).
2. Driver Rating Indicator (KPI)
3. RPM Meter (KCI)
4. An Indicator shows kilometre can drive with the remaining fuel (KRI)
5. Low Fuel / Fuel Reserve Light, Air Filter Indicator (KLI)
6. All the above indicators in the Car Dashboard is called as (KMI)

4  Dupont Dashboard

Dupont is an American Company long back developed this idea to visualize ROI and ROE.  ROI and ROE both are Key Performance Indicators for any type Company.  The ROI and ROE is determined by the various activities of the Company.  All activities have an impact on the KPI indicators are considered for developing KAIs, KCIs, KRIs and KLIs.   Finally, if we are combining the KPIs, KAIs, KCIs, KRIs and KLIs, it will result in KMI.  A sample Dashboard has been presented below for an birds eye view.  Monitoring and reviewing the various indicators really will help the company to achieve the desired results.

5  Conclusion

While constructing the Dashboard, we may use any combination of indicators to take a correct and quick decision.  The Indicators and Dashboard can be applied in different field of activities like, production, marketing, human resource, supply chain, purchase, warehouse management, etc.  The crux of successful construction of Dashboard predominantly depends on the choice of appropriate indicators.  The choice of indicators may vary over a period.  Therefore, we must keep on update / bring the new indicators in the dashboard and eliminate the indicators, which are not appropriate in the current scenario.