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10 Keep Score
11 Deal with Culture
3 This measurement capability must
12 Char t the Path to Implementation
include business-related measures
13 Define What™s Next
that can be connected to business
activities and are relevant to busi- 14 Answer the “So What?” Question
ness managers.

Measurement and management are two sides of the same coin. See Exhibit
10.1. Presumably, all organizations manage IT, albeit with varying levels of qual-
ity and effectiveness. By extension, presumably, all organizations also measure
IT via some combination of explicit and implicit measures. The question for IT,
then, is rarely whether to measure but rather what and how to measure.
Measurements are a manager™s as well as an organization™s navigational sys-
tem providing them with information regarding location (where are we?), des-
tination (where are we going?), direction (are we going the right way?), and
speed (how fast are we getting there?). To be useful, the attributes or measures
used to describe location must necessarily also be used to define destination.
That is, our navigational system is of little use if we describe our location as “the
corner of State and Main” but we define our destination as 40N60W .

199
200 KEEP SCORE


EXHIBIT 10.1 Performance Measurement in the Value Chain
Strategic IT Planning Annual IT Planning
Business The Business Enterprise: Lines of Business, Departments
Strategic
Business
Intentions
Plan Projects
Strategic
(Strategic Budget
IT Agenda Strategic
Business Plan)
Proj- Projects
Action
IT Require-
ects Plan
ments
Assessed Strategic Lights-On
Portfolios IT Plan Budget
IT Plan
(Alignment,
Service/Quality,
The IT Enterprise: Four “Lights-On” Asset Pools
Technology)
Performance Measurement Metrics




Performance Measurement




This is the situation in which many IT organizations currently find them-
selves. The measures or attributes that an IT organization uses to describe its
current performance (i.e., IT™s location) might be cost efficiency, infrastructure
availability, and on-schedule delivery of projects. However, the enterprise uses
attributes like business impact, agility, and innovation to describe expected per-
formance (i.e., IT™s destination). Without reconciling the terms used to define
location and destination, appropriate action cannot be taken. In the terms of
the previous example, we cannot effectively navigate from State and Main to
40N60W without adding latitude/longitude measures to our description of loca-
tion. The key point here is that IT™s measurement framework needs to be con-
sistent with IT™s role.
As IT™s role develops and evolves, its management processes and measure-
ments also need to evolve and develop. The management culture needs to change
at the same pace as the organizational role for IT. For many organizations, this
is an unrealistic expectation. IT™s role is subject to abrupt changes due to rapid
changes in technology and the business environment. Management processes
and culture change at a more glacial pace. Consequently, management processes
and measurements become out of phase with IT™s role. See Exhibit 10.2.
The challenge for these IT organizations is to accelerate the evolution of
their IT management processes, which includes developing appropriate meas-
ures for guiding and evaluating IT performance within the context of its chang-
ing role. Many CIOs have abundant operational metrics in the areas of systems
development and infrastructure operations. These metrics typically focus on
internal IT processes, such as up-time, development milestones, and function
points per programmer. Our interest within the NIE Performance Measurement
practice, however, is in performance measurements that can help bridge the
IT/business gap ” that is, a Performance Measurement practice that focuses on
managing the impact IT has on the business.
201
Management Issues


EXHIBIT 10.2 Performance Measurement Context

The IT Management (and Measurement) Challenge

IT must master the art of managing to
Reporting
measures that matter to the business:
Communicate outward
• Business Process Measures about IT™s contribution

• Product/Service Innovation
• Value for Money

By addressing these issues, IT can increase IT Management
System
its value proposition:
• Elevate the strategic importance of IT
• Improve ability to serve customer segments
Communicate inward
• Proactively manage the IT agenda
to direct and manage
IT performance
• Enhance key stakeholder relationships
Managing
• Align performance objectives with IT
strategy




MANAGEMENT ISSUES
As stated above, the key management issue around Performance Measurement
is having a measurement capability that brings attention and focus to the activ-
ities and behaviors that best support and improve IT™s contribution to the busi-
ness. The measurements must be connected to business activities and be relevant
to business managers. These issues can be restated in the form of the following
management questions:


Is IT doing things right? Are IT™s capabilities and services being delivered with
appropriate efficiency and effectiveness?


Most IT organizations have existing cost-efficiency metrics. These measures
historically reflect the need to manage IT as a cost center. However, these met-
rics focus on IT™s internal operation and do not connect to the needs of the busi-
ness. Many of these efficiency measures, and even most customer satisfaction
surveys, look only at outcomes (lagging measures) rather than at the activities
and processes that drive those results (leading measures). Lagging measures are
useful for signaling a problem but cannot point to a solution. These organiza-
tions need to balance efficiency metrics with process measures and an increased
focus on customer-oriented measures like alignment, service level, and quality.
202 KEEP SCORE


It is necessary to continually match the right measures to the right purpose
within the right context.


Is IT doing the right things? Are IT resources allocated to the right set of business
activities and initiatives?


This question is primarily a question about alignment. An IT organization
is exposed to many conflicting demands. Legacy applications require emergency
maintenance; new system development timelines shift as requirements evolve;
and demands on the infrastructure expand in unexpected ways. IT managers need
to have tools that allow them to continually reassign and reallocate resources
to the “right” activities and projects. Consequently, IT managers need consis-
tent information about a system™s impact on the business to support rational
allocation decisions that involve that system.
Importantly, the question of “doing the right things” is a question for both
IT and business management. Adequately answering the question is dependent
upon fully understanding the strategic and operational goals of the business
while also knowing how IT™s resources are being deployed.


Is IT implementing its strategy? Is IT achieving its own goals for improvement
and change?


In addition to business-oriented projects and services, IT will have its own
set of strategic initiatives that are also linked to business requirements. For
example, IT™s strategy for the development of infrastructure ” standards, com-
mon services, and functional robustness ” exists because the business requires,
or will require, the resulting capabilities. The Performance Measurement prac-
tice needs to have a framework for tracking and reporting progress on the
implementation of IT™s own strategic agenda. This measurement capability is
important because it indicates IT™s readiness to fulfill business requirements and
IT™s readiness to provide (and anticipate) future technical capabilities. This issue
is not a doing things right issue. Rather, it is about getting the technical desti-
nation right and succeeding in getting there.


FRAMEWORKS AND PROCESS OVERVIEW

Portfolios
The IT Portfolios form the foundation of the Performance Measurement frame-
work. Two types of portfolios are used. The first are resource portfolios that
203
Frameworks and Process Overview


contain and describe IT systems, projects, and services. Examples of resource
portfolios are application portfolios and infrastructure portfolios. Attributes of
line items within these portfolios include class, cost, service level, quality, and
alignment. The second type of portfolio is the process portfolio that contains and
describes IT management and delivery processes. Examples of process portfolios
include Planning/Organization and Delivery/Support. SEI/CMM1 and COBIT2
serve as useful models for process portfolio items. Attributes of processes include
maturity factors, key performance goals, and key performance indicators.

Strategic Alignment
To address the question of whether IT is doing the right things, the Performance
Measurement practice framework uses a strategic alignment3 assessment process
that evaluates the connection between elements of the IT portfolio and the
strategic intentions of the company. An important aspect of the strategic align-
ment assessment is that it actively involves business management in the evalua-
tion and ratings of IT™s connections to business goals. See Exhibit 10.3.


EXHIBIT 10.3 Strategic Alignment Gaps

Wgt. 20 10 10 10 20 10 5 10
Targeted Market Growth


Acquisition Capability




Standards and Best
Supplier of Choice




Capacity Increase




Unweighted Total
Cost Reduction




Customer Cost




Weighted Total
Optimization
Product Mix
Practices
Weight




Alignment Gaps
Customer 10 200
Information System 20 1 3 3 0 2 0 -1 2
Supplier Quality 9 135
Monitoring 15 -1 2 0 0 2 2 2 2
Financial 4 140
Information System 35 0 0 0 1 1 1 1 0
CORBIT Materials 14 210
System 15 2 3 2 0 2 3 3 -1
Alignment Gaps
Product Planning 5 2 1 1 1 0 0 -2 -1 2 10
Manufacturing -7 -70
Expansion Control 10 1 -1 -2 0 -3 2 -1 -3
Unweighted Total 5 8 4 2 4 8 2 -1
Weighted Total 100 80 40 20 80 80 10 -10

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