Friday, May 17, 2019

Taking a Logical Scenario for Measuring IT Performance

Organizations rely more and more on information and technology. IT is a key enabler to build almost all differentiated business digital capabilities nowadays. IT needs to be run as a business in the business. IT performance has to be clearly linked with business performance and IT should work with stakeholders to develop the right set of measurements that shows how IT is improving business execution and enforcing business capabilities. It’s important to take a logical scenario for managing IT performance by measuring right, adjusting plans, understanding results dynamic, and making business decisions to ensure the strategic goals are on the right track to achieve.

Establish a good root question - Do you know why you are collecting the metrics: As the saying goes: You can only manage what you measure. Metrics help you get some objective perspectives on what you are trying to manage, also help various stakeholders understand what is going on in IT from the outside-in business lens. The right metric is requested in the right context, clarify the big why of the performance measurement is requested, and discover whether there is a better or easier way to gather metric that achieves the business goals. IT metrics need to evolve to something that matters to the business audience. Without well-defined measurement, it’s hard to tell whether attempted improvements make the situation better or worse. IT value needs to be measured by the optimization and consumption of IT assets in delivering business products or services that are identified within the organization’s producing revenue streams. Ensure that IT performance measures are quantitative and implement the necessary mechanisms you need to be able to gather the data. These metrics should increasingly put emphasis on measuring things the business care and making IT function as a clear value-adding partner in the company, in addition to an ever greater strategic element to the business.

Identify the purpose of the information and the stakeholders who will use it: The well-selected set of metrics are those used to inform the business of multidimensional IT performance and value. In order to demonstrate IT value, organizations need to first know wherein lies the IT value. The best way to demonstrate the value of IT is to know who you are showing the value to. Ask whether the metrics can reveal anything meaningful for the identified business purpose and the stakeholders who will use the metrics. If you understand upfront by doing the right strategic questioning, you can later go back and ask if you achieved the purpose of the information that had been set out to attain. To improve IT maturity, it’s important to show a clear link to the top executives between IT performance and business productivity/top-line business growth includes improving IT system effectiveness, efficiency and ROIs of those business services or solutions delivered by IT. IT metrics have to evolve from being a cost center to becoming a revenue generator. Thus, it’s important to select the right set of business indicators and leverage metrics to demonstrate business results that the business care.

Ensure management buy-in for the metrics collection process: Executive management needs to make data-based decisions, thus, senior management should always respond to “data.” Contextually, the measurement management is to persuade the management of the progress of strategy execution. Consequently, the most effective way to confirm senior management buy-in is to show how the pieces of measurement data directly or indirectly affect business productivity, performance, and profitability. IT should continue to review the ROI of existing IT investment, whether the depreciated life cycle is completed or not; or whether new technologies/products mature enough in the business market to adopt. Keep in mind, IT performance is part of the overall business performance; one of the biggest pitfalls for IT performance measurement is about measuring the “part,” but ignoring the “whole.” For example, the board or business management will buy-in when the metrics can clearly present the tangible business result from IT investment and persuade them that IT is a strategic asset and differentiated business advantage.

Use metrics as pointers to areas requiring further investigation: The goal of performance measurement is to diagnose problems and make continuous improvement. Thus, it’s not the measurement that is important; it’s what you do with the data obtained from that measurement. With tangible data, there are quantifiable elements such as process inefficiencies which can be brought to light and qualitative elements such as ineffectiveness caused by IT- business disconnect which can draw some attention. The data-oriented metrics-wise engagement is leading IT to become much more proactive in problem-solving (both diagnosing the problems and coming up with premium solutions), proposing, as opposed to responding to ideas, accelerating the business speed and improving customer satisfaction. The right metrics can be helpful to track progress in business improvement initiatives or the digital transformation.

Don't collect metrics for the sake of collecting metrics: Measurement is the means to the end, not the end itself. Performance measurement can easily go wrong. Irrelevant measurement indicator will waste time, add the other layer of management complexity, and decrease the business effectiveness. In practice, there are people obsessed with metrics who end up creating a large and complicated set of meanless metrics which perhaps waste business resources and time without bringing up data-based performance result with clarity. In the other case, the incomplete assessment of measurement variables would mislead the management making ineffective decisions or focus on short-term business results only. Therefore, the management should make the right choice for picking the right metrics by asking themselves and others: Why are you choosing them? How will you use them and, do you have enough resources to manage data and present them persuasively. In fact, selecting the Key Performance Indicators is one of the most important steps in IT measurement and performance management.

To improve IT management maturity, IT metrics have to evolve from being a cost center to becoming a revenue generator. A measurement system is a necessary foundation for continuous improvement. To refine IT reputation, "business sentiment" needs to get put into something more tangible, such as optimizing processes, increasing productivity, or improving customer retention/satisfaction. "Measuring up" is intriguing but it is crucial for IT to be perceived as a strategic business partner. CIOs need to understand how to measure IT performance with the right reasons, identify the right measurement and measure them in the right way to drive IT transformation smoothly.


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