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Bernard Marr

Bernard Marr is a world-renowned futurist, influencer and thought leader in the fields of business and technology, with a passion for using technology for the good of humanity. He is a best-selling author of 20 books, writes a regular column for Forbes and advises and coaches many of the world’s best-known organisations. He has over 2 million social media followers, 1 million newsletter subscribers and was ranked by LinkedIn as one of the top 5 business influencers in the world and the No 1 influencer in the UK.

Bernard’s latest book is ‘Business Trends in Practice: The 25+ Trends That Are Redefining Organisations’

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Performance Reporting: How To Use Traffic Light Colours And RAG Ratings in Dashboards

2 July 2021

In performance reporting terms, the traffic light rating acts as a visual indicator of performance. Also known as RAG (because of the red, amber and green colours), traffic light icons are commonly used in dashboards and other kinds of performance reporting to tell us where performance is on track and where attention is needed.

With such a simple way of presenting information, you might think it’s hard to get it wrong. Unfortunately, that’s not the case. In my experience, traffic light ratings are commonly misused and misinterpreted.

Where companies go wrong with KPI traffic lights

There are three main ways traffic lights are misused in performance reporting. Firstly, what I see most often is massive overuse of traffic lights – whether on a dashboard or in a report, what’s presented is a long list of KPIs with traffic light colours next to them, displaying either red, amber or green. The trouble with listing so many RAG ratings on one page or screen is that people quickly suffer from information overload. If we’re being directed to 50 pieces of information at once, we feel stressed, we find it hard to identify the most important information, and we come away with no valuable insights.

Secondly, because the traffic light colours are seen as so intuitive, companies don’t always take the time to clarify what each of the RAG ratings mean. For example, when you see an amber icon, does that mean performance is not great but it’s okay? Or does it mean that attention is required in this area? Or does it act as an early warning that performance might be going off-track? Unless you clearly state the meaning for each colour, the traffic light ratings are open to interpretation.

And thirdly, I’ve learned over the years that people HATE seeing red on a dashboard or in a report when it relates to their area of responsibility. Red puts people on the defensive. They’d rather see green, green and more green. As a result of this instinct, people can be tempted to twist the interpretation of KPIs just so they can get that all-green screen. When you start doing that, performance reporting becomes meaningless. So I always stress to companies that it’s important to strike a balance between red and green in reporting – red shouldn’t be avoided like the plague. Red ratings are a great opportunity to flag up areas that require attention, attract resources where needed and, above all, improve performance.

Using traffic lights effectively in your performance reporting

Having looked at some of the biggest pitfalls of using traffic light colours in performance reporting, let’s look at how to avoid those issues and use traffic lights in a smart, effective and meaningful way. Here are my top tips: 

  • Don’t overuse traffic light colours. RAG ratings are at their most effective when they’re highlighting specific, vital measures. So rather than listing 50 RAG icons on your display, use one or two really carefully so you can draw people’s attention to the most important metrics.
  • Stick with the three RAG colours. I’m seeing more and more companies introduce a yellow colour as well as the amber, which, unless the difference between yellow and amber is crystal clear, is just confusing and pointless. I would always recommend sticking with the core colour conventions of red, amber and green. Occasionally, you might want a fourth colour to highlight where you’re exceeding a target by a long way. If you want to do this, blue is a good colour as it’s sufficiently different from the others.
  • Clearly define the colours. You want everyone viewing the metrics to clearly understand what the colours mean, so be sure to include a definition. Red commonly is used to highlight problem areas, where action is required to turn things around. (But it’s worth stressing to those in the organisation that red is an opportunity more than anything – an opportunity to improve performance.) Amber usually means there are some issues to address in this area. And green is used to show where things are on track.
  • Add symbols as well as RAG colours. There are 2.7 million colour blind people in the UK alone – people who can’t distinguish between red and green. So it’s always worth using symbols as well as colours. A thumb icon works well for this, pointing up (green), down (red) and sideways (amber) as appropriate.
  • Focus on the future, not the present or past. Earlier, I mentioned the temptation to avoid red icons like the plague, even if that means distorting the measurement itself. A neat trick to overcome this problem is to move the timeframe from the present or past into the future. So, instead of using traffic light KPIs to show what’s already happened (last quarter’s sales, for instance), use them as a predictor (i.e. next quarter’s sales). The KPI is no longer a reflection of past performance, which can make people very defensive, but is an indicator of where performance is likely to be in the future, which people are more likely to actively engage with.

Traffic light ratings can be a useful addition to KPI reporting, but only if they’re used carefully, and sparingly! Follow these tips for using traffic light colours effectively and you can better engage people in performance metrics, and help them to improve performance in the future.

Where to go from here

If you would like to know more about KPIs and performance management, check out my articles on:

Or browse the KPI Library to find the metrics that matter most to you.

Data Strategy Book | Bernard Marr

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