Measuring and Improving Corporate IT Performance through the

Measuring and Improving Corporate IT Performance through the Balanced Scorecard (Part 2)

Contents IT BALANCED SCORECARD AND BUSINESS BALANCED SCORECARD IT BALANCED SCORECARD PRACTICE

IT Balanced Scorecard and Business Balanced Scorecard l IT has to focus more on creating business value l IT has to shift from the efficiency and cost cutting concern to a better support of today's and future business needs l an IT balanced scorecard has to address IT operational and business strategic concerns l operational: monitoring within the IT department (IT manager) l strategic: IT's contribution to the business (CIO) l Included IT-Based Capabilities in a Balanced Business Scorecard (Nolan Norton Institute) l Strategic IT Balanced Scorecard (Gartner. Group)

IT Balanced Scorecard and Business Balanced Scorecard CEO CIO Systems Development Manager Data Center Manager Department 1 Department 2 Business Balanced Scorecard IT Balanced Scorecard

IT Balanced Scorecard and Business Balanced Scorecard (Nolan Norton) Relationship between IT and business scorecards BALANCED BUSINESS SCORECARD Business planning Senior management Business value of IT STRATEGIC IT BALANCED SCORECARD IT planning IT management (CIO) Effectiveness of IT OPERATIONAL IT BALANCED SCORECARD IT supply planning IT supply management (IT manager) IT supply Effectiveness and efficiency of

IT Balanced Scorecard and Business Balanced Scorecard (Nolan Norton) A bank included IT-based capabilities in it's balanced business scorecard Financial perspective Customer perspective Net income growth Improve "low cost" perception of potential & current clients Internal perspective Learning and growth perspective Operating costs down Sales growth Make products more accessible through new and old distribution channels Start up call centers and automated electronic distribution channels for internet Learn employees to use productivity tools Increase employee productivity through ubiquitous capabilities Reduce costs by designing IT enabled processes Improve awareness about IT opportunities in the context of business activities

IT Balanced Scorecard and Business Balanced Scorecard (Nolan Norton) A retailer included IT-based capabilities in it's balanced business scorecard Financial perspective Increase sales by internal growth Customer perspective Increase sales with current clients through higher client satisfaction, minimize out-of-stock Internal perspective Lower costs of staff and materials by using more efficient planning models Learning and growth perspective Win new clients through excellence in service and products Automated planning of supplies by integrating POS with external suppliers to distribution centers Train employees in use of IT sales forecasting tools New marking effort by introduction of client loyalty card linked to direct marketing systems Train employees in service and selling skills

IT Balanced Scorecard and Business Balanced Scorecard (Gartner Group) Cascade of Business and IT balanced scorecards Financial Customer 1. EPS 1. Retention 2. Wallet share Internal 1. Service delivery 2. New services Innovation 1. Customer profiles 2. Web interface BUSINESS SCORECARD Customer 1. Web interface 2. Customer profiles Technology 1. Web tools 2. Data warehouse 1. Rapid prototyping IT SCORECARD Process 2. Data mgmt People 1. Recruitment 2. Training

Key Goal Indicators Definitions l l l Describe the outcome of the process (i. e. , measurable after the fact); are measures of “what, ” and may describe the impact of not reaching the process goal Are indicators of the success of the process and its business contribution Focus on the customer and financial dimensions of the balanced scorecard

Key Goal Indicators Examples l l l Increased level of service delivery Number of customers and cost per customer served Availability of systems and services Absence of integrity and confidentiality risks Cost-efficiency of processes and operations Confirmation of reliability and effectiveness Adherence to development cost and schedule Cost-efficiency of the process Staff productivity and morale Number of timely changes to processes and systems Improved productivity (e. g. , delivery of value per employee)

Key Performance Indicators Definitions l l l Are measures of “how well” the process is performing Predict the probability of success or failure Focus on the process and learning dimensions of the balanced scorecard Are expressed in precise, measurable terms Should help in improving the IT process

Key Performance Indicators Examples Financial F • Number of IT • • Customer • • Level of service • • • delivery Satisfaction of existing customers Number of new customers reached Number of new service delivery channels customers Cost per IT customer Cost-efficiency of IT processes up Delivery of IT value per employee Information Process • Availability of • • Learning • Staff productivity • • • and morale Number of staff trained in new techno/services Value delivery per employee Increased availability knowledge • systems and services Developments on schedule and budget Throughput and response times Amount of errors and rework

Critical Success Factors Definitions l l l Are the most important things to do to increase the probability of success of the process Are observable—usually measurable—characteristics of the organisation and process Focus on obtaining, maintaining and leveraging capability, skills and behaviour

Critical Success Factors • Used to interpret business objectives in terms of actions required to achieve them • Defined as “areas in which satisfactory results will ensure successful competitive performance” • Typically 5 -8 CSFs per objective • Key Performance Indicators (KPIs) used to measure attainment of CSFs

Determining Critical Success Factors • Identify objectives • Identify CSFs against each objective • Consolidate recurring CSFs across objectives • IT CSF Questions - How can IT help attain the CSFs? - How do existing systems inhibit attainment of CSFs?

Problems/Concerns with CSFs • Focus primarily on management control • Tends to be internally focused & analytical instead of creative • Reflect executive management style • Often ‘critical’ is not adequately differentiated from ‘important’

Consolidated BSC & CSF • Critical Success Factors can be linked to Balanced Scorecard • Determine CSF from BSC Objective & Measures by identifying actions that would allow objectives to be met • Model may extend one step further to IT/IS needs to carry out Actions/CSFs

Maturity Models Definitions l Refer to business requirements (KGIs) and the enabling aspects (KPIs) at the different levels l Are a scale that lend themselves to pragmatic comparison, where the difference can be made measurable in an easy manner l Are recognisable as a profile of the enterprise in relation to IT governance and control l Assist in determining as-is and to-be positions relative to IT governance and control maturity and analyse the gap l Are not industry-specific nor generally applicable. The nature of the business determines what is an appropriate level.