Friday, December 2, 2016

IT Performance Measurement Pitfalls


Today’s IT organization intends to become the business’s growth engine, rather than just a maintenance back-office, the problem is that the IT folks tend to see IT value in things that aren't as important to the business. Performance Indicators for IT need to be defined in keeping the view of the corporate objectives and put into a mix of other performance measures. Poor defined IT performance measurement will mislead strategy management. More specifically, what are IT performance measurement pitfalls, and how to avoid them?

Only measure the part of the story from finance perspective: Keep in mind performance measures are stories, not just data. Historically, performance measurement systems for most businesses have been financing driven. However, in many business situations, financial indicators only cover part of the story. IT must contribute to or facilitate and accelerate organizational performance, not just IT efficiency, your measures should cover all areas that contribute to value creation including service quality, employee engagement, customer satisfaction and financial outcomes. IT needs to measure performance from a customer perspective. How IT manage customer and vendor relationship has become the key to delivering the right solution at the right time. The efficiency and effectiveness of the end user are crucial in this, it includes the enhanced communication with business customers, iterative interaction with end users, and strategic relationship with vendors. The set of questions or measurement such as:
--Does IT create a revenue opportunity?
--Does IT create competitive advantage?
--Does IT solve a business need or meet customers’ expectation?
--Is IT priority and business priority consistent?
--Does IT help to attract new customers or retain current customers?

Assume the collective IT performance is equal to the sum of pieces - individual’s performance, or unit performance, which is not always the case: There are always two sides of measurement. The measures to motivate teams to achieve more and the measures to distract management from the ultimate business goals. The performance measure setting should focus on achieving the ultimate goals of the organization as a whole, not just the individual or the team’s performance. Performance management, when used in an individual context, tends to focus on all that is good that has been achieved by the individual. it is rare that an individual emphasizes what they haven't achieved. When the managers changed the focus of the organization after poor company results, they asked people to explain why if the overall performance was so good, was the company failing? Top executives asked the managers to start explaining what they had not achieved and why? Because often PEOPLE DO WHAT YOU INSPECT, NOT WHAT YOU EXPECT! Don’t just scratch the surface to manage the numbers. Always understand the story behind the scene, and ensure the business as the whole is superior to the sum of pieces. So the measurement and incentive should serve the ultimate business goals. Celebrating success is important, but understanding what’s blocking overall business achievements, targets and performance are paramount.

Wrong selection of key performance setting could get the devastating effect to the business: Evaluate the potential risks from performance measurement setting. The most dangerous part is when performance system is connected with motivation system on an operational level, but disconnected from the strategy management. The one way to find out that the performance measurement setting is ineffective is by looking at the behavior and culture the KPI is driving. If behavior and culture are off, and politics is becoming more and more dominant, then you know that performance indicators are perhaps just not the right one. Build an intuitive dashboard to monitor the performance. IT performance management dashboard usually includes:
(1) Well selected metrics and performance measure data
(2) IT Departmental P & L
(3) Employee Turnover/ Attrition percentage
(4) Key challenges and relevant data
(5) Top accomplishments for strategy execution

Your measures should cover all areas that contribute to the business success. Hence, don’t just play the number game, but connect the contextual dots and focus on the overall business objectives. Ensure that IT performance measures are both qualitative and quantitative, and implement whatever mechanisms you need to be able to gather the data. Even if you choose the right KPIs, you must change them from time to time accordingly. Otherwise, your business is going to be driven by that specific set of KPI. You are going to focus on them only, but ignoring the bigger picture of the dynamic business reality. Always attempt to identify areas in which measurable improvements can be realized, providing demonstrable value is essential, in some instances, these areas have been low-hanging fruit.


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