Archive for March, 2010

smartKPIs.com Performance Architect update 12/2010

Red, yellow and green signaling in performance scorecards - Part 2 - Meaning of colors

The previous update explored the historic journey of using red, yellow and green for performance management signaling. It illustrated how red and green traffic lights were initially used in railway signaling and gradually adopted for road traffic management. Yellow was added to the traffic light in 1920, about 50 years after the first traffic light was introduced. William Potts, a Detroit Traffic Police Superintendent designed the first 4-way, 3 color traffic light.

Yellow was introduced to signal a “caution” interval, warning of an upcoming signal change from either red to green or green to red. It was required to command greater attention from motorists as speed in intersections increased and the breaking required more time and advance notice (Lamm, 2010). Yellow is a high visibility color that works well with road traffic signaling and is well positioned half way between the red and green light spectrum.

Gradually red, yellow and green signaling started to be used in business environments, to signal stock prices variances (red and green) and variations in performance reports. Besides their light wavelength properties, there are additional meanings and properties that popular culture and research associated with these colors.

* Red: glowing, energy, confidence, alive, purity, good luck, passion, desire, love, excitement, danger, warning, war, stop.
* Yellow: sunshine, warm, exciting, happy, hope, courage, unstable, spontaneous, attention getter.
* Green: peace, stillness, nature, growth, harmony, freshness, safety, restful, stability, endurance.

In performance management, the meaning of these colors are:

* Red: Results are under the established target and require urgent attention.

* Yellow: Results are under the established target, but within a tolerance interval. They need to be analyzed and monitored.

* Green: Results are on or over the established target.

When using such performance variance intervals, an important aspect that needs to be addressed before reporting is the values for each interval. What value of results “makes” them yellow or red? The steps to be followed are:

1. Establishment of the performance target for the measure.

2. Decision if a standardized variance interval will be used for all measures or if a customized variance interval will be used for each. An example for the first option is: all measures with results between 80-99% of the target are labeled as yellow. An example for the second option is: for measure a and be the tolerance interval is 90-99%, while for measure c and d it is 70-99%.

3. Establishment of tolerance intervals for each measure. This is a simple process if the same standard is adopted at step 2 or more time consuming if different tolerance intervals are established as part of step 2.

For qualitative measures, the performance variance intervals are defined by establishing what performance standards are required for each of the colors illustrating performance results.

The use of colors has thousands of years of tradition, however in terms of business and performance reporting, perhaps we are still in the early stages of working with color. Nevertheless, color enhances performance reports and with an increase emphasis on data visualization, it is just a matter of time until innovations in this area will start to emerge. After all it took over 50 years to add a new color to road traffic light signaling.

Stay smart! Enjoy smartKPIs.com!

Aurel Brudan
Performance Architect,
www.smartKPIs.com

References

Lamm W., 2010, History of Traffic Signal Design, available online at: http://www.kbrhorse.net/signals/history01.html Accessed on 26 March 2010.

smartKPIs.com Performance Architect update 11/2010

Red, yellow and green signaling in performance scorecards - Part 1 - A journey in history

As in all human communication, content and format go hand in hand to deliver a communication message. The content of performance reports only partially addresses communication requirements. Packaging quality content in well formatted reports ensures the message is not only delivered, but the process of receiving, interpreting and understanding is maximized.

Color plays an important part in performance reporting. It fulfills a signaling function, delivering key messages in an efficient and effective manner.

Red, yellow and green are the main colors used today for signaling variance from performance expectations. But it hasn’t always been this way.

Going back in history until the early 1800s, when the first performance appraisals started to be used by companies, we come across a different set of colors. Robert Owen is reported to have initiated the formal appraisals of individual performance management at his cotton mills in Scotland. His “silent monitors” were wooden blocks painted with different colors on each visible side and placed above the work station of each employee (George, 1972; Banner & Cooke, 1984). The color coding was as follows:

  • White indicated “excellent”
  • Yellow indicated “good”
  • Blue was used to indicate “indifferent”
  • Black indicates “bad”.

 

A key development in the history of color coding in performance management was the invention of traffic lights as traffic management systems. Not surprisingly, the industrial revolution and introduction of railways was the catalyst for this invention. John Peake Knight, an engineer working as railway manager is credited as the inventor of world’s first traffic lights, erected in the City of Westminster on the 9th of December 1868 (BBC, 2010). The exact location is reported to be at the intersection of George and Bridge Streets, near London’s House of Commons. The purpose of the traffic light was to direct the traffic of horse drawn carriages and pedestrians, as automobiles arrived in the United Kingdom towards the end of the 19th century. A railway semaphore system was used during the day – with an arm was placed in a horizontal or angled position signaling whether vehicles could pass or not. Gas powered red and green lights were used at night. The color selection was inspired by their use by the railway system.

Red and green signaling is still in use today in railways transportation, aviation and seafaring. It appears the reason for their selection as signaling colors is the wavelength of their light. In railways and shipping, detecting light color from the distance is important as stopping is not as fast as for cars or horse carriages. Lights with higher wavelength are preferred in signaling due to their high visibility.

“Visible light” corresponds to a wavelength range of 400 - 700 nanometers (nm). Outside of this spectrum we have ultraviolet radiation and infrared radiation. The white light is a mixture of the colors of the visible spectrum, while black is total absence of light.

Red light has the highest wavelength of any color: 650 nm. At sunrise and sunset, red or orange colors are present because the wavelengths associated with these colors are less efficiently scattered by the atmosphere than the shorter wavelength colors (e.g., blue and purple). (NASA, 2007). Due to its high wavelength, red is considered to be the color with the highest visibility from distance and the perfect candidate for signaling.

Orange light has a wavelength of 590 nm while yellow light 570 nm, both relatively close to red light, so they were eliminated due to the fact that they don’t offer a high enough contrast.

The next candidate was green light, with a wavelength of 510 nm. It provided the ideal alternative, due to its high wavelength and visibility. The interesting fact about green is that grass appears green because all of the colors in the visible part of the spectrum are absorbed into the leaves of the grass except green. Green is reflected, therefore grass appears green (NASA, 2007).

The Industrial Revolution generated the need for traffic signaling and requirements from the railway traffic management system were transferred to the road one. Gradually, signaling use in the industry transitioned to business.

Stay smart! Enjoy smartKPIs.com!

Aurel Brudan
Performance Architect,
www.smartKPIs.com

References

Banner, D.K., & Cooke, R.A. , 1982. Ethical dilemmas in performance appraisal. Journal of Business Ethics, 3, 327-333.

BBC, 2010, The man who gave us traffic lights available online at http://www.bbc.co.uk/nottingham/content/articles/2009/07/16/john_peake_knight_traffic_lights_feature.shtml Accessed on 20 March 2010.

George, C. S., Jr., The History of Management Thought, Prentice-Hall, Inc., Englewood Cliffs, N.J., 1972.

NASA, 2007, What Wavelength Goes With a Color? available online at http://eosweb.larc.nasa.gov/EDDOCS/Wavelengths_for_Colors.html Accessed on 20 March 2010.

smartKPIs.com Performance Architect update 10/2010

Microsoft Excel - the most popular Performance Management and Business Intelligence tool

Since its launch on a Windows platform in 1987, Microsoft Excel has gradually become omnipresent on business desktop environments. It is widely used in businesses of all sizes for data management, analysis and reporting. In a way, it can be considered the first Business Intelligence (BI) software product mass marketed.

Almost since its launch, Excel’s position in the market has been challenged by various products with advanced data integration and analysis functionality. Together, they formed the basis of the today’s BI market, by going through several successive phases:

  • 1987-1996 Formation – initial product launches
  • 1996-2005 Growth – product maturity and market formation
  • 2005-2010 Consolidation – by various mergers and acquisitions involving the major software producers in the world.

In recent years, a trend that starts to get wide acceptance in the market is the move from desktop installed products to online service delivery. Software as a Service (SaaS) is largely facilitated by technology advancements such as cloud computing.

There are indeed products in the market with more features, more robust and integrated. However, considering the estimated number of 500 million users, Microsoft Excel can still be considered the most popular performance management and business intelligence tool in use today.

So what makes it so popular?

It is not expensive, at under $350.
Most users are already familiar with its basic functionality.
It makes sharing of data easy due to its widespread use.

The main drawbacks of using Excel as a BI tool are:

Data reliability – spreadsheets are error prone due to human error
Lack of advanced collaboration features
Limited advanced reporting functionality

This is the traditional way of assessing Excel, by looking at its reporting functionality, through the BI lens. Some of the additional benefits of using Excel form a Performance Management perspective are:

Supports creativity, as it can be used as a canvas for developing visual constructs. While it doesn’t have advanced visualization options, it offers vast screen real-estate for structuring data.
Useful communication tool, as it provides a structured approach to presenting information. Reports can be structured by hyperlinking tabs and combining text with graphs and pictures.
It is easy to use, basic user functionality requiring no training. Configuration is straightforward and the visual interface relatively user-friendly.

Overall, due to its versatility, Microsoft Excel is here to stay. Its availability in an online format and the upcoming release of the 2010 version of the software are interesting new developments in this success story.

Stay smart! Enjoy smartKPIs.com!

Aurel Brudan
Performance Architect,
www.smartKPIs.com

smartKPIs.com Performance Architect update 9/2010

The Cinderella tool of Performance Management and Business Intelligence

One of the skills we have as humans is the ability to find, create and select the appropriate tools to assist us in our activity. One way of grouping tools is by their form: physical or conceptual.

Performance Management as a human activity concerned with the achievement of desired outcomes makes no exception. It uses both types of tools. Physical tools can be considered the plans, reports and software system used as a business intelligence tool. Conceptual tools are performance measures, grouping of measures in scorecards and dashboard and the structure of performance management systems. More often than not, these tools are used in combination, as they complement each other: you need reports to make performance measures relevant same as you need performance measures and scorecards to populate a business intelligence system otherwise empty of content.

Some of the more talked about tools in Performance Management are the business intelligence software tools. At a conceptual level, the most popular so far proved to be the Balanced Scorecard.

But there is a tool that doesn’t get the level of attention it deserves compared to its benefits and utility.

It doesn’t benefit from big advertising budgets of the software giants of the world. It doesn’t get much media coverage, the attention of research analysts or user conferences. It is not a recipient of worldwide executive management exposure through the publications of Harvard Business Publishing. It doesn’t support an industry of consultants. There are no training courses available for users and no user certification is available.

However, it is simple. It is cheap. It is easy to use. It has an impact. It works.

So who is this “Cinderella tool” of Performance Management and Business Intelligence?

Many years ago I worked as a recruiter for a small consulting company. One of the rituals we had each day was updating our scores on the whiteboard: number of active requisitions, preselected candidates, submitted candidates and placed candidates. A few months ago, while visiting an office I came across a similar table on a whiteboard: number of phone calls, number of meetings and number of sales completed. A few weeks ago, while taking to a friend, the whiteboard emerged again as a useful tool for keeping track of important performance measures.

What makes it so special?

It is beautiful in its simplicity and effectiveness. It achieves its purpose. It facilitates communication of performance data and it makes the information actionable.
It only has enough space for the most important data, so it filters through complexity.
It is noticeable by the entire team. Being in sight all day and available instantly, without the need to turn on a computer or logging in, it delivers its message more directly and frequently than any other tool.
It motivates. You see your targets and results every day, at least when you get to the office and when you leave the office. It makes performance real.
It provides value for money and utility for effort ratios that are difficult to match. Yet, it is almost ignored in Performance Management and Business Intelligence circles.

It doesn’t have the bells and whistles of the latest generation analytical software tools. But it does plenty with less. And considering the number of small businesses, the level of usage and sales at international level, whiteboards might also be some of the most used Performance Management tools.

Stay smart! Enjoy smartKPIs.com!

Aurel Brudan
Performance Architect,
www.smartKPIs.com