What’s on Your Company’s Dashboards?
As is the case in any service industry, the best advisory firms focus their efforts primarily on (1) client service and satisfaction, (2) employee development, utilization, and organization, and (3) the efficient, profitable operation of their businesses in a manner that promotes a sustained pattern of growth in that order of priority.
Those same firms establish clear, universally understood goals for their efforts and equally clear, universally understood strategic plans to achieve those goals. Yet, while many advisory firms can declare that they adhere to these rudimentary, common-sense business principles, most eventually fail to execute effectively on their plans and goals, primarily because they do not adequately and regularly measure their progress and hold themselves accountable against those plans and goals.
For this reason, those advisory firms that truly seek to distinguish themselves as strong, sustainable businesses should be utilizing a business tool that already has saturated most other industries: the dashboard. In simple terms, the term dashboard, as used in this context, refers to an easily presented record that can be updated regularly to display, measure, and provide insight into the vital functions of the business. Much like a vehicles dashboard measures the operation of the vehicles critical systems, a companys dashboard measures the operation of the companys critical systems.
Business Dashboards
Business dashboards may be created and maintained using internally generated spreadsheets, or they may be purchased in the form of standardized or customized software. Regardless of the platform underlying the dashboard, it must be updated regularly and viewable by all who are accountable for the functions being measured.
For an advisory firm, a company-wide dashboard should be created and maintained to track the vital information in Exhibit A, all of which ultimately should measure the success of the company in achieving its goals relative to the central priorities described at the beginning of this article. In each case, current results should be compared to the companys corresponding budgets and goals.
Exhibit A:
- Revenue
- Expenses
- Profit before owners compensation
- Profit after owners compensation
- Profit margin
- Assets under management
- New assets from new clients
- New assets from existing clients
- Lost assets from client terminations
- Lost assets from client withdrawals
- Total clients
- New clients
- Lost clients
- Total prospective clients
- Total employees
- New employees
- Lost employees
- Revenue and profit per client
- Revenue and profit per employee
- Average client AUM
Functional Dashboards
In addition to the company dashboard, which should be updated and monitored regularly by management, an advisory firm also should maintain dashboards that monitor some of the more vital sub-functions of the company. Examples include investment performance, which should be updated and monitored regularly by the investment team, and business development results, which should be updated and monitored regularly by the business development team. In all cases, however, these functional dashboards must also be reviewed regularly by company management, whose responsibility it is to hold the appropriate people accountable for their performance against the companys goals and plans.
Individual Dashboards
Even the minority of advisory companies that already have adopted at least some use of dashboards frequently have missed the opportunity to create dashboards for their individual employees. In cases where an employees performance can readily be measured, at least in part, through the use of a dashboard, it generally should be so measured.
For example, it may be helpful for a wealth management professional to have a personal dashboard that measures the key metrics in Exhibit B as applicable to the clients for which the individual has primary or even secondary responsibility.
An investment professional, such as an analyst or portfolio manager, might also have a personal dashboard that measures investment performance attributable in whole or in part to the efforts of that individual. See Exhibit C.
Exhibit B:
- Revenue
- Assets under management
- New assets from new clients
- New assets from existing clients
- Lost assets from client terminations
- Lost assets from client withdrawals
- Total clients
- New clients
- Lost clients
- Total prospective clients
- Revenue per client
- Average client AUM
Exhibit C:
- Assets under management
- Gross and net performance of any applicable strategies or securities
- Relative performance of any applicable strategies or securities
- Volatility of any applicable strategies or securities
- Watch lists maintained
- Securities analyzed
Using Dashboards to Measure Performance and Ensure Accountability
Ultimately, maintaining dashboards will only be effective if they are updated regularly, monitored by all of the appropriate personnel, and used to measure performance honestly and objectively in the context of the companys goals and plans. An effective dashboard should never be overly complex because excessive complexity will make maintenance impractical and may even obfuscate the ultimate underlying message inherent in the dashboard. Additionally, a dashboard will be most effective if, in addition to containing the appropriate information, it displays that information in a visually appealing and interesting manner. Charts and graphs often are far more efficient and effective (especially when they incorporate color, such as red for underperformance and green for outperformance) than mere numbers when analyzing information.
Using Dashboards in Conjunction with Other Traditional Tools
While dashboards can be highly effective, they should not be used out of context, and they should not be used in an absolute manner that suggests that an advisory business can be understood solely by reference to a set or series of numbers. While the metrics discussed above are excellent indicators of how an advisory company is performing, it is also important to acknowledge that advisory businesses are business centered on personal services and relationships. Therefore, subjective judgment will always be a part of evaluating the real performance of such companies, including through employee performance reviews, client satisfaction surveys, and all of the more traditional ways of measuring performance. Nevertheless, an advisory company that seeks to maximize its effectiveness and efficiency in an increasingly competitive environment would be wise to incorporate the use of dashboards into its business practices.