(11) Exception reporting / RAG analysis

KPIs allow you to focus on what's important in your business. For each KPI you'll set a target, so you can monitor performance against it. For example a gross margin (GM) target of 28%.

To help you quickly identify any problems that need attention, it's useful to adopt "exception reporting". This is where shortfalls from target are highlighted, typically in red. Conversely KPIs that are better than target can be marked in green.

You may also want to set a "stretched target" which is that bit better than the basic target. For example if you aim for a GM of at least 30%, you are more likely to achieve at least 28%. A GM between 28% and 30% would then be regarded as acceptable, but of some concern. This can be marked in amber.

We therefore have a simple example of RAG analysis:
Red - GM under 28%
Amber - 28-30%
Green - over 30%

Looking at the three stages of the bid to revenue process (assuming a business where the target at each stage can be the same):

Furthermore, a good BI system will allow you to drill down to see the numbers with the relevant RAG flag:
(1) At the next level, which might be region or branch
(2) Or drill down to product group or product
(3) Or drill down to salesman

The drill down facility typically requires multi-dimensional analysis, so a form of OLAP tool is required (see posting 6a).