Sunday, November 12, 2017

CIOs as "Chief Improvement Officer": How to Set IT Performance Metrics to Lead Continuous Improvement

IT performance needs to well reflect the multidimensional business value in which IT can contribute both strategically and operationally, to capture both short-term gain and long-term win.

IT performance management is about how the IT organization manages performance such as strategic planning, program portfolio, metrics, and day-to-day operation structurally. A measurement system is a necessary foundation for continuous improvement. IT metrics need to evolve into something that matters to the business audience, at the same time that "business sentiment" needs to get put into something more tangible. So, what are guidelines to set IT performance metrics for leading continuous improvement?

IT metrics should help IT managers get some objective perspectives on what they are trying to manage: As for success metrics, any metrics, new or old, for success will be predicated on the strategy and sourcing model. The best IT leaders are focused on success at all levels, from the success of their own team to the success of their boss, the organization, and even the business sector. IT has to go beyond just keeping the lights on. Top IT performers are those who can understand the business requirement, leverage the right technologies, capture real-time information, they are astute at the tailored business solution with on-time delivery, and measure the right things for making continuous improvement. An effective CIO is a true business partner in placing a higher priority on the development needs and customer relationship management skills that align with the organization's strategy helps to drive engagement throughout the enterprise. Every IT organization is at a different stage of the business cycle, and every company has a different strategic focus. The good IT leader has to be prepared to constantly realign technology against the enterprise's business needs and measure things really matter to the business's success. For example, if the business strategy is an early adopter and rewards innovation, and then, the metrics have to accommodate IT performance outcomes that may have a higher level of contribution to the top line business growth. So, at the high level of IT maturity, the strategic values are realized through running a healthy IT portfolio, the business benefit and profitability can be achieved via IT innovation and optimization, and IT performance measurement should focus on these areas as well.   

IT leaders must keep in mind which KPIs best measure IT capabilities to deliver business value: IT is no longer just to support processes to enable businesses, it is the differentiated business capability builder. The first level of IT performance is related to functional size, a measurement of the software in terms of the amount of functionality it delivers. The second level of IT performance is related to business changeability. IT performance can be measured through how effectively IT effort is put to modify source codes, affecting time to market, and adapting to changes. The third level of IT performance is about digital transformability. It should be measured based on the progress made for digital transformation initiatives, and benefit/cost calculation. Continually accelerating changes in IT digitalization requires faster responses and better performance metrics. Continually accelerating changes in IT consumption and production require faster responses and better performance metrics. IT initiatives are not discrete from the business as a whole. Every new technology adopted must facilitate businesses but also bring down the incremental cost of growth and the time to market. CIOs know and make the 'scope' while the top IT performer makes an excellent work breakdown structure that results in an accurate cost, time and resource estimation. Top IT performers, just like top performers in any other discipline, seek a balance of their influence with other disciplines to effectively add value to the whole, through their specific knowledge and experience base. To make continuous improvement, ensure that IT measures are quantitative, and implement whatever mechanisms you need to be able to gather the data. Your measures should cover all areas that contribute to value creation including service quality, employee engagement, customer satisfaction, and financial outcomes.

Track the right metrics and know what to do with them to see improvement: Measurement is always the means to the end, not the end itself. Define how you will measure success in meeting that purpose and vision. The goal of IT measurement is to make continuous improvement and innovation. Tracking KPIs and benchmarking are essential to IT transformation. But you need to do it wisely, otherwise, it will consume a lot of energy, but decrease business effectiveness and efficiency as well. Selecting the right KPIs is one of the most important steps in IT measurement and performance management because the processes include to answering why you are choosing that, how you will use them and whether you have enough resources to manage data as well as present them persuasively. Digital IT is customer-centric, thus, IT metrics must get focused on the end-users. The end-user continues to be the key component of any bottom-line-driven business. This is where the metrics for a CIO should rest – the end-user experience. IT management scorecards could be a practical tool for improving IT performance effectiveness if it helps to consolidate and visualize IT performance data, and make it available for comparison with peers, to keep up with this rapid pace of change.

Assuming an organization believes that metrics can lead to continuous improvement, it won’t be just a matter of explicit communicating the intention behind metrics, but a matter of coaching and leadership to guide the team to understand the purpose of doing that and engaging on that. IT performance needs to well reflect the multidimensional business value in which IT can contribute both strategically and operationally, to capture both short-term gain and long-term win.


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