COMMENT: In the Field

As Published In
Oracle Magazine
September/October 2010

  

Red Is the New Green!

By David Ferguson

 

Red dashboard indicators aren’t all bad.

Have you had an experience with a dashboard that continuously reports in the green? Month after month, the result is the same: all good here. You must be operating at a Six Sigma performance level! Do you really believe that there are no process problems in need of attention? Are your customers giving you the same read on your performance?

You feel good about all of the green until you are blindsided by an issue that never surfaced on your dashboard. Then it’s “all hands” to find it and fix it, a task made more difficult due to the lack of transparency. How often does this happen to you and your team?

Give me a measurement in the red any day. When I see red, I know I have a metric that is targeting and illuminating problems within the organization. It creates the opportunity for management to take action. If the measurement is constructed as a leading indicator, then taking the prescribed actions can prevent a pending problem from reaching critical mass. Warning: my opinion greatly discounts the generally accepted theory that we in management all live for the firefight.

Don’t get me wrong. I like to see a red metric go green. After a few reporting periods in the green, I know it is time to refocus attention and go after the next prioritized problem for the business. Naturally, the redirect can only occur when there are assurances that the proper controls are in place to hold the gains. Once the process improvements have established a regular cadence of acceptable performance, it’s time to find the next problem area and redirect the measurement tools to provide the appropriate level of scrutiny.

As you might have guessed by now, I am against an initial all-encompassing dashboard project. It is a better practice to build out from a foundation that is more manageable and smaller in scope. Look to start with the business processes where you are most vulnerable. Think about your current pain points, and challenge your developers to provide transparency to the surrounding mission-critical transactions. Where possible, design data dimensions with the future in mind.

Recalibration is another very important aspect of a high-quality measurement system but one that escapes our consideration most of the time. Think of the manufacturing floor and the calipers used to take critical dimensional measurements of a part used in the production flow. The instruments utilized for accuracy undergo recalibration at regularly scheduled intervals. The concept is no different for process measurements. Process measures need to be recalibrated as well. Consider that data collection requirements will shift as the business changes around the process.

Next Steps

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I have the same anxiety over a dashboard in the red that does not show a steady progression to green as I do for the always-green display. Reporting period after reporting period, you take the pulse and the patient is dead. As problems go, this can be more serious and systemic than the former, always-green scenario. Generally speaking, the always-red scenario indicates an overall failure in the original design that prevents proper interpretation and reaction to the problem.

An effective metric design will give the interpreter an understanding of all the factors contributing to the measurement. A well-crafted metric will identify the exact input to the process measure that controls a desired outcome for the user. There should not be any guesswork involved.

Operational definitions are a fundamental design component that will improve your organization’s understanding of the measurement system and reduce its reaction time. Proper definitions take all the ambiguity out of the metric. The construct is fairly simple. Each measurement has three elements: a criterion, a test, and a decision. The criterion establishes the standard you compare against or the benchmark. The test describes, in detail, the procedure for taking a measurement. The decision tells the interpreter how to compare the measurement against the standard or benchmark. A well-crafted operational definition will be simple and exact and leave little room for interpretation. Well-defined measurements provide clarity and understanding and will help you improve reporting throughout the organization.

Finally, you would not drive your car if the dashboard was inoperative. Similarly, you should not risk your business on misinformation from an ineffective dashboard. Measurement strategy takes time and consideration to produce results. Make the effort to identify an effective measurement approach that will uncover issues and allow you to take actions on the red indicators for the opportunities they present. You won’t regret it.

 


David Ferguson is president of the Oracle Applications Users Group (OAUG). He is a business process manager with more than 25 years of experience working with enterprise technologies and applications.

 

 

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