Mark McDonald

If you are what you measure, then many IT organizations tell their business peers that IT is a non-strategic back office function.   Metrics such as systems availability, project status and help desk backlogs re-enforce the separation of IT form the rest of the enterprise.

The lack of business relevant metrics and measures that communicate the business value of IT is one of the hottest issues among CIOs.  In fact when CIOs were asked to choose among 20 different initiatives in the 2010 Gartner CIO Survey they ranked gave two initiatives the lion’s share of importance.  They were:

• Positioning the IT organization to be perceived as partners with the business
• Demonstrating IT’s value proposition to the business

The importance CIOs attribute to these priorities illustrates the degree to which CIOs feel a gap between them and the business.  Plugging that gap requires changing how IT communicates its contribution with the rest of the enterprise and that starts with changing IT metrics.

CIOs and IT executives need to remember that the metrics you reportdo more than communicate data; they tell other what you think is important, what you view as a risk or a concern.

When IT metrics and scorecards concentrate on proving that IT is doing its job, like in the figure below, then its natural to see IT as at risk, potentially underperforming and something that needs to remain in the back office rather than becoming an integral part of strategic implementation and growth

The sample IT scorecard above concentrates on things that business leaders assume that IT knows how to do.  IT shows how IT is not wasting resources rather than showing the value IT can be creating.  This creates a gap as resources that are not wasting money are quite different from resources that are creating results.

If technically oriented metrics separates IT from the business, then CIOs and IT executives need to replace those metrics with ones that connect IT with the business.  Here are some characteristics of such metrics:

• They measure IT’s performance across time rather than at a point in time.  This is necessary to capture IT’s actual contribution to changing bsuienss performance.  Here is a link that describes this point in greater detail.

• They measure IT’s production of future business value through execution of the investment portfolio.   This does not measure resource based measures such as project progress and cost – which are meaningless to the business who is only concerned with the value potential of the solution.  That makes reporting business value produced in the period more important than interim project progress.  Business value produced can be thought of as the sum of the  business cases for the projects completed in that month, quarter and year to date.

• They recognize the contribution of IT infrastructure and operations in protecting the company’s EBITDA margins.  This comes from reporting the impact of decreasing the average cost of transactions on increasing transaction volumes.  This type of metrics seeks to show that there is value in the scale efficiences of IT infratructure.  The margin protected is the differnence between handling that increased trnasction volume at last years higher average costs.

Of all the things that create gaps between business and IT, metrics and measurement are among the most powerful because they command executive attention and metrics are an integral part of formal management processes.  Often CIOs ask about how they can start to close these gaps and make the IT organization more business centric and connected.  There are many ways to do that, some of which we have talked about in these posts, however the single thing that I would suggest you do is change your metrics from proving that you are not wasting resources to demonstrate that you are creating results.

Metrics tell people what you think is important.  They tell your boss what you want to be accountable for.  They tell your staff what you are watching. They are the means by which you measure success.  Changing metrics is a start at closing the gap.

This is part of a series on the ways in which IT separates itself from the rest of the enterprise.  The first/keystone post can be found at this link

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Category: Leadership Strategy Tools     Tags: 2010, 2010 planning, Business Leadership, Business Management, CIO Leadership, Finance, IT and Business, IT management, product innovation, Strategy and Planning, Tools

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