How companies can improve executive decision making and board oversight

M a r c h 2 0 1 0 I S T R AT E G I C F I N A N C E 2 7


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How companies can improve executive decision making and board oversight

By Brian Ballou, Dan L. Heitger, and Laura Donnell

Managing strategic risk is one of the most challenging aspects of an executive’s job.

Identifying and mitigating risk from a portfolio perspective is complicated and often

resource intensive. As a result, risk-aware organizations continually work to improve

risk identification metrics and measurement techniques. To better identify and mea-

sure risk factors, many companies use an executive dashboard or set of dashboards.

Creating Effective


Dashboards display key performance metrics in a con-

solidated format. By presenting a company’s position

updated in real time, dashboards give high-level execu-

tives the most pertinent information related to the com-

pany’s strategy and risks. Executives often access

dashboards via a Web browser and customize them to fit

their individual needs. The dashboard is designed to help

an executive make better, more efficient decisions related

to risks. Further, board members who oversee risk (e.g.,

audit or risk committee members, etc.) can use dash-

boards to monitor risk exposures between board or com-

mittee meetings. Table 1 summarizes the type of

information executive dashboards often contain, the

extent of the information, and the various formats for

displaying information.

Key Challenges While many executives recognize the potential for dash-

boards to improve their decision making, they acknowl-

edge that significant obstacles can dampen or eliminate a

dashboard’s value. For example, measurement error or

misinterpretation of data can lead users to make worse

decisions than if they hadn’t used the dashboard. In late

2008, at the Council on Competitiveness in Delaware, we

discussed how risk and resiliency managers determine

what to place on their executive dashboards. We learned

from the risk executives in attendance that major compa-

nies across a wide array of industries rarely use executive

dashboards effectively—and, in some instances, don’t

even construct them in the first place.

Yet dashboards are promoted as good business intelli-

gence tools. To help you sort through the hype and reali-

ties about dashboards, we’ll describe the primary

challenges organizations face when they plan to imple-

ment a dashboard or work with dashboards already in

place and offer some ways to combat these challenges. A

dashboard can be an excellent tool for identifying and

managing key business risks, but executives should make

sure that, if they are going to use one, it has been careful-

ly designed for their specific organization. There are

many styles and formats available, and the best approach

for presenting them will vary across companies. Consult-

ing firms and software vendors actively promote dash-

boards, so executives and owners of risk management

and performance measurement systems should ensure

that the dashboards being created for their company are

developed using a careful filtering process that considers

their needs and challenges rather than being driven by

the capabilities of existing software.

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Table 1: Content and Format Considerations


◆ Types of indicators

• Nonfinancial metrics

• Financial indicators

• Qualitative descriptions

◆ Categories of risk

• Strategic (e.g., leadership, management, and strategy)

• Operational (e.g., value chain business processes)

• Compliance and Legal (e.g., regulations and laws)

• Reporting (e.g., financial reporting, public relations, internal communications)

• Credit (e.g., asset recovery)

• Market (e.g., economic environment)

• Environmental (e.g., climate change, carbon emissions, energy use)

• Sociopolitical (e.g., workforce issues, stakeholder engagement)

• Technical (e.g., innovations, information technology)


◆ Summary risk information (with/without drill-down capability to more detailed analyses)

◆ Existing risks only

◆ Emerging risks (including external force data)


◆ Charts

◆ Traffic lights (i.e., high/medium/low signals)

◆ Relative rankings within silos

◆ Top 10 lists across all risks (i.e., only most impor- tant risks)

◆ Absolute scores/metrics using key performance indicators and key risk information with no rank- ings within or across silos


◆ Real time

◆ Periodically

◆ Annually

◆ Quarterly

◆ Weekly

◆ Daily

Defining System Requirements

One of the biggest problems organizations face when

implementing a new information technology system is

inadequately or incorrectly defining their needs for the

system prior to buying it externally or developing it inter-

nally. When executives inaccurately define their purpose

and objectives for a dashboard, they’ll likely end up rely-

ing on irrelevant or extraneous data, which could lead to

poor decision making and limit the ability for the board

of directors to provide effective oversight.

To ensure that a dashboard improves decision making,

executives should identify their goals for the dashboard

before buying or developing it. For example, some execu-

tives use their dashboards to manage day-to-day opera-

tions. For this type of use, dashboards typically contain

many measures—hundreds in some cases—that range

from regulatory compliance to operations in nature. Oth-

er executives focus on the big picture and include mea-

sures that provide more of a 30,000-foot view of the key

risks facing their organizations.

Dashboards should be unique to each company to

properly account for differences in organizational struc-

ture and culture, and executive dashboards might even

need to vary from executive to executive within the same

organization to lead to improved decision making. Senior

management and board members should first determine

the nature and extent of information about performance

and risks desired for a dashboard. Then, companies

should investigate the feasibility and availability of appro-

priate metrics to include on the dashboard. Managers

who conduct this investigation should talk with those

responsible for strategy, risk and resiliency, accounting,

etc., as well as information technology experts.

Quantifying strategic risks in an organization can be

very challenging, especially when the risks span different

areas of the business that compound to create risks of

higher magnitude. If dashboards include inaccurate or

incorrect measures, they might cause more harm than

benefit because they could lead senior executives and

board members to make poorer decisions than before the

dashboard existed.

Input Assumptions

Another significant challenge is the inability or failure to

understand key assumptions and inputs that go into the

dashboard model. Information on a dashboard is only as

good as the data used to create it, so executives and other

key personnel using the dashboard should work closely

with IT experts prior to implementing the system to

ensure the database portrays data that’s most useful to

executives. Further, key personnel should carefully scruti-

nize critical assumptions involved in estimating metrics

contained on the dashboard. Stress testing, such as the

testing the Federal Reserve carried out in the banking

industry in which regulators performed a number of sen-

sitivity analyses surrounding risks such as credit, market,

and liquidity, help better inform executives about the

limitations surrounding the dashboard metrics.

Overrelying on the Numbers

Dashboards can provide a breadth of information quick-

ly, but overrelying on dashboard metrics without proper-

ly understanding their context can distort a senior

executive’s overall view of the company. Relying on dash-

boards without supplemental information can lead to

shortsighted judgments and unproductive decision mak-

ing. For example, executives benefit from detailed expla-

nations from managers responsible for specific metrics

M a r c h 2 0 1 0 I S T R AT E G I C F I N A N C E 2 9

Dashboards should be unique to

each company to properly account

for differences in organizational

structure and culture, and executive

dashboards might even need to vary

from executive to executive within

the same organization to lead to

improved decision making.

3 0 S T R AT E G I C F I N A N C E I M a r c h 2 0 1 0


Figure 1: Sample Dashboards Available in the Marketplace

There are a number of software providers of dashboards that can be designed and implemented as executive dashboards.

Here are publicly available samples from four of the industry leaders. Accounting and advisory firms often work with

organizations to select an appropriate tool that can be adapted to serve their information and information technology

needs. Most dashboards can be adapted for the executive and board of directors’ level or can be used at lower levels of

the organization for a variety of levels of management.

IBM (Cognos)

These dashboards use a variety of charts (crosstab,

bar/3D bar, pie/doughnut, line, gauge, funnel,

scatter, dot density, waterfall, etc.).

SAP (Business Objects/Pilot Software)

This software provides access to live operational views,

plus optional synching with business processes, and it

allows integrated drilldown. It delivers information

relevant to users and creates an unlimited number of

dashboards shared with all users or for limited access.

Actuate (PerformanceSoft)

Dashboards from Actuate offer an at-a-glance view

of the company’s overall performance and can

show strategic alignment as well as consolidation

across time and location with performance color-

coded. This software compares actual and planned

performance, trends, commentaries, and individual

area investigation.


This software features charts, 3D views, maps, and

animations. It also eliminates browser-compatibility


about why dashboard metrics might have changed from a

previous period or why new metrics have been added.

Input Accuracy

Another challenge with dashboards is the risk of having

inaccurate metrics or biased information input that can

mislead the decision maker. For example, if dashboard

metrics come from sales data that employees enter manu-

ally (vs. a system that captures data automatically), execu-

tives can’t be certain they’re receiving the most relevant

or reliable information (e.g., complete, up to date, accu-

rate, etc.). Additionally, employees could resist adding

data to dashboards if they think they’re being evaluated

or monitored unfairly. They could also falsify input data

if sufficient controls aren’t in place to protect the data’s

integrity. For example, if a company plans to use dash-

board measures to evaluate managerial performance, then

the company must take extra care to ensure that such

metrics are measured as accurately as possible. Further,

dashboard metrics should be at least somewhat control-

lable by the manager being evaluated to more transpar-

ently reflect the quality of their decisions or actions. It’s

also important to ensure that the manager can’t manipu-

late the data either before or after it’s captured within the

dashboard system.

Executives should know the limitations of dashboard

metrics. Working with owners of strategy, risk, and per-

formance measurement in the organization to supple-

ment dashboard metrics with proper context is critical to

having an overall perspective of the business.

Honoring Sunk Costs

One pitfall is placing too much emphasis on dashboard

metrics because the organization has invested consider-

able resources in information systems to produce the

dashboard (i.e., falling prey to the sunk-cost fallacy). This

overreliance is based on the assumption that the amount

spent on an information system correlates with the value

of the information it generates. This relationship isn’t

always strong (and may not even exist), and companies

should work proactively to design a system that’s both

helpful and cost effective.

Overreacting to Numbers

Dashboards inherently encourage short-term decision

making where executives identify a problem area or met-

ric in the red and immediately take action to fix it with-

out identifying how the action will affect long-term

performance. This error in thinking can be detrimental,

especially when the executive makes a string of reac-

tionary decisions based on individual data points rather

than focusing on the overall long-term organizational

strategy. In addition, actions taken to mitigate one partic-

ular risk often elevate exposures in other existing risks or

create new ones.

Working Through the Challenges If implementing effective executive dashboards has so

many challenges, why bother with them? Although

implementing an effective dashboard can be difficult,

executives can design a dashboard that creates value for

the organization using an internal transparency strategy.

With careful design and execution—and the under-

standing that a dashboard is a tool for providing infor-

mation to help make decisions and not the source of

information—executives and boards can reap significant

value from it.

Maintaining transparent communication with all levels

of employees (or other key stakeholders, such as board of

directors, alliance partners, labor unions, etc.) serves as

an effective strategy for ensuring that an executive dash-

M a r c h 2 0 1 0 I S T R AT E G I C F I N A N C E 3 1

Although implementing an effective

dashboard can be difficult,

executives can design a dashboard

that creates value for the

organization using an internal

transparency strategy.

board leads to more effective decision making inside

organizations. Transparency ensures that executives clear-

ly identify key risk factors at the strategic-entity level and

also at lower levels within business processes to better

understand the full array of business risks impacting the

organization. Therefore, effective dashboards should con-

tain important nonfinancial measures, such as customer

and employee satisfaction measures, production and sup-

ply chain efficiency, or defect rates that represent leading

indicators of future impacts (financial or otherwise) that

pose significant risks. Using dashboards to recognize

emerging risks relatively early—both from a top-down

and bottom-up perspective—creates a potential competi-

tive advantage by avoiding or limiting the impacts of risk

events. One idea is to include a metric on the dashboard

that captures employees’ perceptions of transparency.

Also, open communication with employees helps exec-

utives design a dashboard that reflects the big picture of

the company in a dynamic and accurate way. Executives

and IT experts should work together before implementa-

tion to ensure that executive and board member expecta-

tions are clearly understood and that the dashboard(s)

contains relevant information to meet those expectations.

Finally, executives should be aware of the tendency to

overrely on quantitative metrics and should have other

qualitative systems and measures in place to supplement

data on the dashboard.

Designing Effective Dashboards After identifying the challenges associated with dash-

boards, developers should identify the best way to capture

and display the risk information. There are many styles

and formats for dashboards, and the best approach for

presenting information probably will vary across organi-

zations. Further, there are a number of readily available

commercial products, and many accounting and other

advisory firms offer services for designing and imple-

menting dashboards.

Figure 1 provides four sample dashboard looks from

products currently available in the marketplace. For

example, executives might choose a single-page summary

format or a drill-down dashboard, which allows users to

click on specific metrics to access more detailed informa-

tion. Drill-down dashboards can be an effective way to

examine key risks because they often use real-time inter-

active data both at the overall organizational level and at

the business-segment level. Although drill-down func-

tionality is helpful in many situations, some executives

place limits on drill-down capabilities to keep their core

focus on the high-level objectives, strategies, and risks,

thereby avoiding the temptation to micromanage the


Additionally, executives should balance both current

and emerging risks as well as external-force metrics and

internal performance data within dashboards. Dash-

boards can include emerging risks that impact strategic

initiatives within an organization in a way that executives

can adequately evaluate key decisions that will be made

soon. Within the broad framework of the executive dash-

board, using drill-down features to help identify and

understand these risks can be helpful. Further, internal

performance data is generally considered more useful for

dashboards because it is updated real-time within inter-

nal databases. But especially for emerging risks it’s impor-

tant to incorporate external-force information into

dashboards. As the global economy becomes more inter-

connected, the effect of political, economic, social, tech-

nology, legal, and environmental risks on achieving

strategic objectives will become more pronounced.

A Helpful Tool Developing executive dashboards is challenging because

of the critical need to understand the type of informa-

tion, level of detail or access to drill-down data, and for-

mat for the display of information necessary for the tool

to effectively aid decision making. Although information

technology is readily available to capture, aggregate, and

display a vast amount of data, organizations should

acknowledge that providing too much information—or

worse, the wrong information—could reduce the quality

of executive decisions. If a company effectively addresses

the challenges, executive dashboards can be a helpful tool

to improve executive decision making across a number of

important strategic fronts. SF

Brian Ballou, Ph.D., is the Ernst & Young Professor of

Accountancy and codirector of the Center for Business

Excellence at Miami University. You can reach him at

(513) 529-6213 or

Dan L. Heitger, Ph.D., is an associate professor and codirec-

tor of the Center for Business Excellence at Miami University

and is an IMA Member-at-Large. You can reach him at

(513) 529-6208 or

Laura Donnell is a recent graduate of Miami University’s

Master of Accountancy and undergraduate accounting


3 2 S T R AT E G I C F I N A N C E I M a r c h 2 0 1 0


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