Executives measure what's important
It's no secret that IS and business folk speak totally different languages. And without the benefit of Henry Kissinger's backroom deals, the resulting misunderstandings can often generate hostilities and suspicion.
If you, the CIO, lack your own Henry Kissinger, another way to bridge the equivalent of your company's Gaza Strip, is through the use of IS scorecards. IS scorecards might be an old idea, but some new tactics being deployed by Gartner EXP CIOs are generating great results.
IS typically measures hundreds of its activities - like server availability and network uptime - and most have limited meaning to the business. Businesspeople need this data translated into services they understand, such as orders processed and e-mails delivered.
A scorecard requires IS management to be explicit about business objectives and their link to IS activities. The result? Both the business and IS are measured on how well they deliver against the same goals and understand each is supporting the other. There's another benefit too. This type of scorecard becomes a great vehicle for communicating direction to the IS organization itself. After all, those business strategy documents can be pretty rarefied stuff. Scorecards help translate strategy into something a lot more tangible.
IS organizations do many things of value for their business colleagues, from providing a reliable technology infrastructure to supporting business strategy implementation. Which elements of value should an IS scorecard focus on?
All of the CIOs we interviewed about this for a recent Gartner EXP study had one thing in common. They all used a small number of measures. "Our scorecard reports on 45 metrics," said the CIO from a leading financial services firm, "but that's too many for a CEO-level discussion. So we've devised a single metric, which we call a performance index, that shows immediately and clearly to the CEO how well we are doing in relation to plans."
A scorecard can also help make the trade-offs between different priorities for IS explicit. For example, it can show how cuts in the IS budget can come from lowering service levels or reducing capability, and vice versa. Michelin makes such trade-offs explicit by using two layers of metrics in its scorecard, one for the business and one for IS.
The Michelin scorecard has two layers: key goal indicators (KGIs) and key performance indicators (KPIs). The KGIs are high-level targets for discussing IS with the business. They are synchronized with strategy. At the lower level, KPIs translate what the business wants into what IS can do. They are based on benchmarks so that Michelin IS knows what to aim for.
A scorecard forces executives and their stakeholders to define and agree on the dimensions of IS performance that contribute most to business objectives. IS management can then use these decisions to set performance levels, and allocate resources and raise targets when appropriate to improve performance.
BT Wholesale demonstrates the use of a scorecard to improve IS performance where there is a mix of internal and external resources. The CIO sees an integrated IS scorecard as a means to document the business priorities and allow the IS organization to gauge its own performance against these objectives.
"We need to steer IS in a more strategic direction, rather than be reactive, as we have been," the CIO said. "The scorecard will be used at the monthly IS council meetings - comprising the half-dozen IS directors across the business - to help us assess how we are doing against important objectives. Within IS, the scorecard will help us manage. We'll use it to help our staff understand what matters about what they do, so that we can democratize decision-making. But we won't use it to assess individuals' performance. For the business units, we'll use the scorecard to show we're delivering value."
The way to improve performance is to set the bar higher as time goes on. A scorecard presents those stretch targets and monitors results.
"Search for ways to change measures so they don't end up green all the time," said John Sheridan, the assistant secretary information architecture and management at the Australian Department of Defence. "Looking at an 'all-green' scorecard just makes you fat, dumb and happy. It stops telling you things. You're never going to improve."
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