Tuesday, March 5, 2013

Four Aspects to Measure the Success of a CIO

Measure CIOs' success in value creation, and you'll get the kind of performance you need out of IT. 

As IT now like organization’s nervous system, touches every part of enterprise body, that’s why CIO's jobs are now getting harder and more interesting because it is inevitably connected with various people and processes in and outside of the organizations. For measurement, though modern tools and processes have made it easier to achieve albeit the people factor is still the hardest to track according to CIOs.

The success of a CIO can be measured in four ways: do peers see them as an integral member of the executive team? Are internal users net promoters of the function? Are the objectives the CIO drives bringing value to the business and are those deliverables being met? Are the operational measures of performance a reflection of the world-class use of IT? Here are four "ARE" Q& As:

1. Value-Added: Are We Doing the Right Things? 

What CIO has enabled add value to the company? How you measure business success should be based on what drives value for the business. Measure CIO success on value creation, and you'll get the kind of performance you need out of IT. Measure them on something else, and executives will question the connection between IT investment and business value...and eventually, they will question the value of the CIO. Ultimately, every executive has to deliver results. And those results must contribute value to the business.

A successful CIO ensures deliveries of agreed IT enablement to the business goals: The underpinnings of this success are providing vision and development of strategy, driving the business process to an IT optimized state, management of expectations, development of relationships up, down and sideward, implementation of the process to ensure predictability, and development of talent within the organization.
The CIO must be the change agent and be a good catalyst for a business to differentiate by leveraging of IT: Be it internal or not: Sustainability and blueprint for proper execution and vision are vital. Good CIOs deliver incremental milestone values to business and is charismatic to align well with people to execute. 
A proactive approach towards suggesting the best approach for handling risks/constraints: Aligning IT goals with business goals and well-defined and scalable systems in place to meet future business growth. Communicate and educate business groups on governance, risk management practices.

3.   Strategy Alignment: Are We Doing Them in the Right Way                               

Has CIOs aligned business strategy with IT strategy? Overly focus on internal IT delivery and value measurement misses the most important contribution of strategic IT - the power to provide a greater range of options to the business as a whole. Anecdotally, some CIOs who create "options for the business" that the business cannot monetize or focus on. Meanwhile, the things the business needs...faster product innovation cycles, lower transformation costs, better information management, etc., go unaddressed and the business suffers. Therefore:

All parts of the CIOs' strategic plan for IT should be focused on business outcomes: For example, if the 5-year business strategic plan is to grow revenues by 50% and margins by 30%, then it's the CIO's job to understand what is needed in order for that to happen: do the service delivery teams need to change the way they work with customers? Are product transformation costs too high? Are the product teams able to innovate quickly enough in order to get new goods out into the market? Can HR see across the resource pool and ensure enough of the right people are brought on board at the right time in order to deliver the plan? Is cash tied up in the business such that the company has very little flexibility? Are cycle times for critical processes to slow or cumbersome to scale efficiently? Do the marketing teams have the right tools to know what drives customer value? etc. 
A higher standard, not even simple 'value' or effectiveness: When you are looking at creating digital options, about giving the organization the ability to explore new business models, then it is not the value of the investment which matters, rather it is the breadth of vision. There are intangible elements in organizational relationships that defy measurement but play a role in the future “contributions” of the CIO. Depending on the culture of the organization, these elements can take an elevated priority over productivity numbers, to the so-called politics that currently existing in a high percentage of organizations. Call them Departmental Silos, Turf-wars or whatever, but the phenomenon does in fact exist, hidden in nature.

3. Are We Doing them Well: IT KPI Metrics on Service Levels and Productivity

CIOs are uniquely positioned to provide organizational flexibility and agility. This focus on 'perception management is ultimately about communicating the value, CIOs might need to be resisting the urge to explain or even to 'defend' IT investment. For a CIO, the issue of balancing delivery and discovery means that success is based on enabling the organization to be both efficient and flexible to change. To be successful, you need to be consciously switching - in a word "ambidextrous."

Managing and utilizing IT budget for achieving better Return on Investment. Effectively IT exists within a business to increase revenue, reduce costs, improve service, manage/mitigate risk and/or assist with statutory/corporate compliance. Certainly, operational elements are important KPIs, achieving SLAs, managing budgets etc. However, if the focus is on IT as a value proposition rather than a cost center, then CIO can be considered as successful.
Did the CIO do what he/she said he/she would do? While success can be a fuzzy word, any effort to quantify achievements and/or related projects to organizational/divisional/unit goals is beneficial. Scorecards, OLAs, SLAs, and other tools are helpful, also the data and measurement criteria should be defined, negotiated and contracted in the planning process, coincident with defining scope and goals, to streamline operations with existing infrastructure and systems to minimize costs. Net promoter score provides an excellent measurement of user perceptions based on their experience with something. In fact, you could use that as a measurement with peers as easily as you could with users.

4. Are We Getting Benefit from IT: Ability to Quantify, Qualify, and Deliver Tangible and Intangible Business Benefits

Many CIOs create "options for the business" that the business cannot monetize or focus on. Meanwhile, the things the business needs...faster product innovation cycles, lower transformation costs, better information management, etc....go unaddressed and the business suffers. Thus: 
  • Running IT as a business: The CIO should treat IT division like his/her own business, as a start-up and requiring venture capital (buy-in from other divisions), be it mature and sustainable and hence shows ROI and a profit back to the organization. This can be measured via many different means, including the business realization of delivery to market, achieving key SLAs and growing the business through increased work and increased the confidence of being able to solve complex organization-wide issues.  
  • The qualified result is more important than quantified measurement: The CIO should be developing an IT strategy and delivering on that plan. Having too many metrics focused outcomes means the CIO might spend too much time measuring and trying to quantify the benefits - which is very difficult. IT delivers value, but that value is sometimes within a context, and difficult to quantify.
  • A CIO = Catalyst: In organizations, the KPIs that have been set for each CxO, need to be measured effectively, but without dwelling too much on this issue, as there are conflicting KPIs between CxOs, that being an obstacle to achieving the corporate KPIs. For example, where IT shows all lights as green and yet the business is stalled or innovation has slowed or production costs are too high.
In summary, since each company is different, the measurement criteria in each area is, of course, specific to the company requirements. Generally speaking, the success of the CIO is based on how he/she is personally gratified with his/her performance, how his/her departmental KPIs are performing and how aligned he/she has been with his/her contribution to the corporate KPIs.


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