CASE STUDY 3:
BNSF Railway uses the Balanced Scorecard to prove IT's value and to create synergy with business strategy.
Before Jeff Campbell took over the CIO post at BNSF Railway (BNSF) in September 2002, the IT department was viewed as a mystery. Business executives understood the potential of technology to improve efficiency and increase profitability on an intellectual level, but, says Campbell, "they didn't have anything concrete they could put their hands on that showed the value IT brought to BNSF". As a result, Campbell says, executives questioned whether the company would be better off outsourcing IT. (They outsourced some of their infrastructure to IBM in August 2002.) And Matt Rose, the CEO, didn't understand why demand for computing resources was increasing at a time when business was flat. In short, executives had no idea how IT operated. Campbell had to provide some answers.
So he turned to the Balanced Scorecard to monitor strategic IT metrics and to bring transparency to IT's financial and operational performance for the business. Craig Hill, BNSF's vice president of mechanical and value engineering, had introduced Campbell to the Scorecard, which is used in various departments throughout the rail company. Hill uses his Scorecard to track productivity, quality and cost control.
Balanced Scorecards became a popular management tool in the mid-1990s for helping companies improve their performance by translating their strategic visions into actions and by focusing on metrics that drive organizational change. While they're difficult to develop, require long-term commitments from everyone in the organization, and take months of planning and fine-tuning, Balanced Scorecards are profoundly effective when well-conceived and carefully implemented. By taking the time to develop metrics relevant to both the business and IT, and to make sure that IT staff didn't view the Scorecard as yet another management tool for hammering them, Campbell got critical buy-in from the IT staff and launched a Scorecard team that tightly couples IT's goals with the business's.
Because of the way the Scorecard communicates the connection between IT initiatives and the corporate strategy, BNSF's IT staff now clearly understands the impact of their work on business goals. The Balanced Scorecard has also given the entire company - not just the IT department - a singular view into just how much their business applications cost to run, leading to a more prudent use of IT resources. Since Campbell rolled out the Balanced Scorecard in June 2003, IT has managed to keep costs flat while delivering increased service. For example, BNSF's cost per million instructions per second (MIPS) is now just $US29 per MIPS, compared with $US42 five years ago. Campbell says the reduction is partly a result of a Balanced Scorecard goal around cost control and partly a result of the financial provisions in BNSF's contract with IBM Global Services.
"With the Balanced Scorecard, we have more transparency into IT investments today than we've ever had before," says Campbell. That financial clarity gives him insight into where he needs to shift technical and human resources so that he can stay on top of the business's needs without incurring extra costs, which is so important to the railway business.
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