Friday, June 10, 2016

CIOs as "Chief Investment Officer": Three Aspects of IT Performance Measurement

IT leaders must keep in mind which KPIs best measure IT ability to deliver business value.

IT organizations today intend to reinvent the tarnished image since traditional IT is still being labeled as a cost center and support desk only. Because its business value hasn’t been conveyed in a structured or quantified way yet. And it only focuses on measuring internal value (cost efficiency, internal customer satisfaction), or the things only internal IT is interested in. The measures often do not reflect the full set of value IT can bring to accelerate business growth or delight end customers. If we can only manage what we measure, the issue here is how to measure IT performance effectively?

IT leaders must keep in mind which KPIs best measure IT ability to deliver business value: Continually accelerating changes in IT consumption and production requires faster responses and better performance metrics. It’s dangerous to impose metrics just because the focus on what’s measurable is manageable. IT Metrics has to evolve from being a cost center to becoming a revenue generator. The only way to do this is to show a clear link to top executives between IT efficiency and productivity/ top-line revenues. This is an important step to building IT reputation as a strategic business partner.

Present a methodology to acquire the “appropriate” contextual measurement items: Historically, performance measurement systems for most businesses have been financing driven. However, in many business situations, financial indicators only cover part of the story. Your measures should cover all areas that contribute to value creation including service quality, employee engagement, customer satisfaction and financial outcomes. Also, there’re always two sides of measurement. The measures to motivate teams to achieve more and the measures to distract management from the ultimate business goals. KPIs and the associated metrics drive priorities and behaviors, therefore, KPI setting should focus on achieving the ultimate goals of business as a whole. Contextually, the measurement method is to persuade management the progress of strategy execution. There are indeed qualitative objectives where the basis for rating performance is the set of criteria that address the question: “what does it mean to achieve this objective?” In some cases, these may also be action plans. Further, to populate the scorecard with too many metrics for the sake of measurement is also unproductive. Keep them focused on drivers of performance and, appropriately weighted.

Cost Optimization Metrics: Every new technology adopted must facilitate business but also bring down the incremental cost of growth and the time to market. That should be the true metric for the IT leaders – how have they been able to impact the top and bottom-line and facilitate growth and competitiveness. IT value is measured by optimization and consumption of IT assets in support of the business solutions that are identified within the organization's revenue producing streams. With the right set of metrics to measure the right things, IT leaders don't just need to stay in tune with the times, rather stay ahead of the curve, and be able to allocate/align their capabilities to what the business really needs.  

Define how you will measure success in meeting the business purpose and vision. Ensure that these measures are quantitative, and implement whatever mechanisms you need to be able to gather the data. Every measure selected should be part of a link of cause-and-effect relationships, and ultimately affect the growth and long-term perspective of the organization. Make IT organizational as a proven business partner via clear measurement and data-based persuasion.


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