Thursday, April 13, 2017

Three Questions to Define IT Key Performance Indicator

Broadly speaking, the KPIs of the organization need to be the KPIs of the IT function.

Today’s IT organization intends to become the business’s growth engine, rather than just a maintenance back-office; a value center, not just a cost center; be proactive rather than reactive., etc. How to measure IT performance can be the right step to improve IT maturity. So, what are the important key performance questions and related KPIs for IT today?
Q1: Are you delivering the value demanded by customers? Broadly speaking, the KPIs of the organization need to be the KPIs of the IT function. If this is not already the case then the IT function is doing its own thing. That said, IT customers include both end customers and internal users. The related KPIs include such as:
-Net Promoter Score (a measure of customer loyalty derived from responses to the question, on a scale of 0-10)
-Recommendation Rate: How do you rate the probability you will recommend firm/product/service to a family member, friend or colleague?
-A number of Satisfied Users: A lot of users have a low opinion of their IT function. Thus, how to change their perceptions as a strategic priority if the IT functions are going to break free from its operations-focused branding.
Q2. How effective in achieving the strategic goals set by the firm's executives?  
The firm's C-Level reports establish the firm's vision, true north direction, strategic goals and the key strategies are needed to deliver the desired outcome. Each of the key strategies becomes the responsibility of a specific C-Level executive. As the strategies are invariably cross-functionally, the executives must work with cross-functional teams to ensure their strategy is implemented. Related KPIs include:
-Schedule: Are tasks being completed on time?
-Cost and budget: Are the project expenses occurring as expected?
-Issue management: Are issues being resolved appropriately?
-Portfolio management: Are the right projects being done for the right cost?
-Risk management: Are risks being managed, mitigated and addressed/
-Quality: Are defects being found as expected?

Q3. Is Business Sustainable? The KPIs include the firm's balance sheets and profit & loss Accounts with respect to all of the 'Five Capitals, that is financial capital; physical capital (physical assets & IT systems), human capital (intellectual property & know-how); social capital (morale, esprit de corps, community collaboration, etc); and natural capital (renewable & nonrenewable resources).  In addition to the "IT" measures, there should be KPIs linked to some of the key business outcomes to key business projects
-Execution versus plan (budget, time, resources).
-User community satisfaction (SLAs).
-Contribution to the firm’s business bottom line (ROIs).
-IT community development (personnel, tools, research)

Therefore, IT leaders must keep in mind which KPIs best measure IT ability to deliver business value. You want to have KPIs, at a high level, related to effectiveness, resource utilization, productivity and error rates. Track the right metrics and know what to do with them to see improvement. And you need to do it wisely.


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