The management dashboard
Objective, indicator, target, variance and alert threshold: choosing the right indicators, computing a variance, reading a dashboard and tracing a variance back to its cause.
- 26 cards
- 6 topics
- Free
The outline, topic by topic
Each topic is weighted the way the exam weighs it.
- Concepts
- Questions
- Sort and link
- The numbers
- Scenarios
- Understand
A few cards from the deck
Indicator: what is it?
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A numerical measure tied to an objective, which a manager can act on and which is computed the same way every period.
A measure without an objective is just a statistic; a measure no one can influence is of no use.
The monthly churn rate is 4.5% against a target of 3%. How should the variance be described?
- Unfavourable: the rate exceeds its target
- Favourable: since the variance is positive
- Neutral: 1.5 points is too small a gap
- Impossible without knowing sales
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Unfavourable: the rate exceeds its target
For an indicator to be minimised, actual above target is bad, even though the variance is arithmetically positive. The relative variance here is +50%.
Variance in value = … − planned; relative variance = variance ÷ ….
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Variance in value = actual − planned; relative variance = variance ÷ planned.
The percentage is always taken on the reference, the plan, not on actual: 60 against a planned 50 is +20%, not +17%.
Target value: what is it?
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The level of an indicator one wants to reach over the period, set in advance.
Without a target, a figure is neither good nor bad: it is the comparison with the target that gives the variance.