Thursday, March 16, 2017

CIOs as “Chief Improvement Office”: IT Performance Quadrants

Performance metrics are numbers in context, results related to your strategic GOALS.

Forward-looking IT organizations are transforming from a cost center to a value creator, from a support desk to the “digital brain” of the business, and from a back office function to an innovation engine. IT should also shift from inside-out IT lens to measure performance to an outside-in business and customer lens to manage the stakeholders’ expectation which is the key to the success of IT. So, depending on which stakeholder and what the role of the CIO is to your organization, metrics can be created that show effectiveness, efficiency, and maturity of IT. Plus, IT measurement should be focused on what is relevant to the target audience with a clear purpose as to what is being measured and why. Here are the IT performance Quadrants which help IT move up its maturity and demonstrate multidimensional business values.

A: Provide transparency into IT: Digital technology makes the world more open and transparent than ever, at both individual and organizational level, businesses are always on and hyperconnected, there is no shortcut, transparency is a must. Hence, transparency with LOB leaders is a must and non-negotiable if the CIO needs to be successful. From IT performance perspective, transparency can help IT leaders tell a story of the journey from the current state to the future state, of improvements, of accomplishments, of enablement with business strategies, etc. It's definitely a great core competency to leverage. And at the strategic level, the well set of IT metrics need to be available to present at the big table for business communication performance. The intent behind transparency should always be connected to business performance. CIOs will spend time with executives one on one to explain the shift in thinking and ask for their help and guidance. IT should understand the main KPIs that the business uses to measure their performance. While these are not IT metrics, understanding them will enable IT to have a better business conversation about what we are doing and how it will drive business.

B: Aid setting direction for IT: The performance metrics are not just number but tell stories, and the good measurement aids setting direction for IT. Digital is the age of customers. The end-user continues to be the key component of any customer-centric business. IT metrics should get focused on the end-users. This is where the metrics for a CIO should rest – the end-user experience. Digital is the age of innovation, to measure innovation, you choose those KPIs by deciding which are seen as critical to making progress in order to deliver more innovations. An effective CIO is a true business partner! Placing a higher priority on the development needs and customer relationship management skills that align with the organization's strategy helps to drive people (customers, employees) engagement throughout the enterprise. Once the KPIs are selected and finalized, decision-making based on the results of the KPIs is of utmost importance. It is not the measurement that is important; it is what you do with the data obtained from the measurement. If the decisions are not made correctly, the performance metrics do not contribute to set directions for IT or help in improving the ultimate business result.

C: Drive performance of IT: It is important to track the right metrics and know what to do with them to see improvement. Tracking KPIs and benchmarking are essential to IT transformation. But you need to do it wisely. 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. The performance measurement-setting should focus on achieving the ultimate goals of the organization as a whole, not just the individual or the one team’s performance or even IT performance only, to ensure the business as a whole is superior to the sum of pieces.IT needs to expand the capacity and capability by improving operation efficiency & effectiveness with the KPIs to resolve problems, increase in the number of problems successfully resolved and increase the project success rate. IT’s scalability and change capability will directly impact business growth.  

D: Communicate the business value of IT: IT Metrics have 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 the top leadership team between IT efficiency and either productivity or top-line revenues. Historically, performance measurement systems for most businesses have been financing driven. However, in many business situations, financial indicators only cover part of the story. The right sets of metrics are those used to inform the business of IT value and performance. These should all be presented in business terms such that they are directly aligned with operational factors. Your measures should cover all areas that contribute to value creation including service quality, employee engagement, customer satisfaction, and financial outcomes. CIOs need to be trusted experts who understand a lot about the performance dynamics of the tech sector to be seen as value added participants in conversations regarding the need to increase profit, market penetration, reduce risk, and to increase the velocity/effectiveness of every dollar spent. Hence, measure what it matters, to reflect the business value, also make sure IT and business are always on the same page.

Performance metrics are numbers in context, results related to your strategic GOALS. The fewer the better, but they have to be credible and relevant also in the eyes of the stakeholders. IT needs to build measurable metrics around these key focus areas. The CIO's metrics should clearly define how they are contributing to the overall business success. Always keep in mind, people matter, achieve progresses by measuring the key objectives. The metrics have to accommodate IT investment outcomes that have a higher level of business value for the long run, IT must contribute or facilitate and accelerate organizational performance and speed up digital transformation.


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