Print Page   |   Contact Us   |   Report Abuse   |   Sign In   |   Register
Journal2011Spr-3.DevelopingAnITPerformanceManagementFramework

ITFMA Journal

Developing an IT Performance Management Framework

Robert A. Ryan
IBM Global Business Services


The capability of IT organizations to develop, and successfully adopt, a meaningful performance management framework is increasing, but the alignment of IT performance measures to organizational strategies and related measures often proves elusive. Determining what to measure is the first critical step for your IT organization, but requires a systemic approach to ensure that your IT organization measures the following:

• Meaningful performance management that can be used to continually improve your IT operations

• Activities that align to the overall strategy of your organization and achieve key business objectives

• Activities that assist senior IT leaders, managers and staff in continuously improving your IT activities to achieve key business impacts

• Activities that determine the level of customer satisfaction related to your IT products and services to enable for ongoing course corrections to your customer activities

• Activities that determine the level of satisfaction of your IT managers and staff in your IT organization

From their initial work in the development of the Balanced Scorecard (BSC) Framework, Kaplan and Norton evolved the BSC to include cascading scorecards to be used to measure performance at different levels of the organization. Kaplan and Norton use the term "cascading” to link scorecards at different levels of your organization. The term cascading indicates that organizational direction is determined by senior leadership, and their direction provides the basis "cascading” down the organization for development of scorecards that link up to the organization’s overall strategy. IT organizations are currently adapting the basic BSC framework and ways you can leverage these approaches for your IT organization, while focusing on making an IT Scorecard that is conformant with the ITIL V3 framework.

One of the biggest challenges in the development of an effective IT scorecard is the development of measures appropriate to each level of your organization. The measures developed to determine organizational performance at a strategic level are different than the detailed measures used at a lower level in your organization. Consistent with ITIL V3’s perspective on measuring the ROI of an IT project, performance measures developed are:

• Strategic

• Tactical

• Operational

All performance measures must ultimately support the strategy or mission of the organization. Kaplan and Norton have used the term "cascading” scorecards to capture the criticality to organizations of measuring performance at multiple levels within the organization, but ensuring that measures are linked, or cascade, between organizational levels. Organizational goals are often referred to as the business objectives.

An unlimited number of performance measures are available for any organization to adopt at all levels of the organization. One of the critical success factors for any organization desiring to utilize performance measures for effective decision making is the ability to select a limited set of meaningful performance measures in use at all levels of your organization. Balance – achieving a set of performance measures at each level of your organization that assists your organization’s senior leadership, managers, and staff to measure and adapt performance to achieve the strategy or mission of your organization – has proved to be an elusive goal for achieving organizational success. This occurs primarily because organizations do not spend enough time when first developing performance measures to determine what performance measures will provide meaningful information, on a timely basis, to decision makers in their organization.

BSC Applied to IT Performance Management

A common way to achieve this balance through the BSC is to focus on developing a balanced set of measures, which includes the measurement of internal processes using ITIL. This element of performance measurement is growing in importance as ITIL adoption increases in IT organizations worldwide. As IT functions and organizations re-organize around ITIL, their performance measures must adapt to these best practice processes. As ITIL and other best practice process frameworks have defined, standardized processes can be used to effectively drive continually improving performance for your IT organization. Many available performance measurement systems are "ITIL-compliant,” or accepted as common measures in use in IT organizations.

The most basic, fundamental failures of implementation and ongoing adoption of performance measurement scorecards are a result of failing to:

• Create appropriate, meaningful measures at differing levels of an organization to continually improve organizational performance, and

• Link measures from the employee, up to the unit, up to the division, and ultimately up to the highest, strategic level of an organization

To avoid these two mistakes, all levels and departments of your organization and your IT department must be willing to be measured. Your organization must embrace the discipline that comes with a properly developed, implemented, and periodically adjusted system of measures that you will use to adapt the performance of your organization in executing your organization strategy or mission. Performance measurement must be integrated into the culture of your organization. Your senior leadership, managers, and staff must see the value of performance measurement to both their individual success, and the success of the organization, for performance measurement to yield the incredible benefits to the organization that can be obtained by a disciplined, consistent measurement approach.

Your IT Scorecard must include a clear link with your overall strategy and direction. Your IT Scorecard must also cascade down to the scorecards of each organizational component of your IT organization. Performance Management is at its most powerful as an enabler of organizational success when each individual in your organization, and specifically your IT organization, can see how their individual performance goals cascade directly down from the overall organizational strategy.

Balanced IT Scorecard

In 1992, Kaplan and Norton first published their work on the Balanced Scorecard (BSC). While including financial measures as a portion of the BSC, Kaplan and Norton expanded their basic measurement scorecard to include measures across four focus areas, or perspectives, including:

• The financial perspective

• The customer perspective

• The internal business process perspective, and

• The innovation, learning and growth perspective

Although it is commonplace now across organizations to measure performance in a number of focus areas, the original BSC was groundbreaking in broadening the measurement of organizational performance beyond traditional financial measures.

This construct of four focus areas for measurement of organizational performance has been adopted by many organizations, but it must be specifically tailored to the unique operating environment, and customers, of IT organizations. Driving IT organizations to change their culture to a more performance-driven, strategic focus requires adapting the basic BSC construct to fit the IT environment.

A number of leading IT organizations have already begun significant work in this area. Forrester and Gartner have both published IT Scorecard perspectives that take the four perspectives in the initial BSC, and translated these perspectives into potential IT Scorecard perspectives as shown in Table 1-1.

Table 1-1

We need to examine each of these four BSC perspectives, and how they are tailored to the IT environment.

Operational Excellence

To adopt Operational Excellence as a cornerstone of your IT organization, and therefore as a cornerstone of your IT Scorecard, requires your IT organization to either utilize an existing culture of commitment to operational excellence, or design and adopt a culture of operational excellence as part of all aspects of your IT operations.

Achieving all aspects of this definition of Operational Excellence is a challenge for your IT organization, and using Operational Excellence as the first component of your BSC-based IT Scorecard will provide your IT organization a critical enabler to measure, adapt to, and achieve Operational Excellence in its complete form.

Customer/User Orientation

The second component to consider when considering a BSC-based IT Scorecard is a component focused on either "customers” or "user orientation.” Through cooperatively developing Service Level Agreements (SLAs) with internal and external customers, you can effectively address both the end user and customer. The end user is actually a subset of customers, and therefore an effective IT Scorecard should adopt as its second critical component a customer orientation, but with a focus on measuring the end user requirements and experience. Based on the requirements in an SLA, you can effectively measure both the end user’s experience with a service and the customer’s requirements.

Business Value/Business Contribution

For most organizations, and especially commercial organizations that are shareholders and other investor-owned organizations, financial measures are the most important first performance measures. The primary evolution on this component of the BSC framework has been a growing focus on not only measuring financial activity, but also focusing on the use of organizational resources producing value or contribution to the organization.

This evolution of the financial component of the BSC framework is especially relevant for your IT organization. Senior executives in organizations increasingly expect that your IT organization is investing in IT projects and IT infrastructure that directly contribute to the execution and achievement of the overall strategies or mission of your organization. IT executives, and specifically the CIO, must increasingly show the direct correlation between IT investments and spending and overall organizational success.

Future Orientation

Future orientation in your performance management system will also address a critical success factor for any IT organization – new or emerging technology that your customers will eventually demand to execute their business. With so much focus on maintaining the existing IT applications and infrastructure, and the continual need to consolidate and sunset aging technology, few IT organizations have the time and organizational resources to devote to tracking and developing emerging technologies.

IT Scorecard Implementation

Many of the steps to a successful development, deployment, and ongoing use of your IT Scorecard are similar to the process for adoption of the ITIL V3 framework for your IT organization. You must:

• Obtain executive sponsorship for your IT Scorecard project

• Select and empower a cross-functional internal team to develop the initial IT Scorecard

• Consider use of an external consultancy, or individual expert, to guide your project

• Charter the project with a clearly defined timeline to completion, measures of success, define key milestones, and define the total organizational resources required to execute the project

• Develop a list of key stakeholders to the project, and reach out to these various stakeholder groups on a regular basis to communicate ongoing project activities

• Rigorously track the progress of the project, and take corrective action if at any time the project is failing to achieve key milestones, and successfully achieve project measures

There are 5 factors you must consider in your IT Scorecard project that are unique to this project:

• You should determine if you are going to have committed, full-time staff dedicated to an organizational unit in your IT organization to track and report on your IT Scorecard, or embed these activities within existing organizational components in your IT organization

• You should consider segmenting out your application development and application maintenance performance measures from your performance measures for your infrastructure/ongoing operations performance measures

• You should consider the use of benchmarking to compare both your current performance measures, and desired future state performance measures, against some measure of desired performance commonly accepted in the IT industry

• You must include your enterprise architect, or specifically your data architect, in the development of the IT Scorecard, since most IT organizations have a tremendous amount of existing data which can be mined using business intelligence tools to populate the performance measures you decide to track using actual data

• You should be sure whatever IT Scorecard you develop is "ITIL Compliant”

Conclusion

The development and implementation of a meaningful performance management framework for your IT organization is challenging, but can be accomplished through thoughtful work and commitment. The Balanced Scorecard concepts are a strong foundation for a performance management framework, and can be adapted for use in your IT organization. Performance management is a part of all aspects of your IT organization. You must measure yourself to commit to a culture of continual service improvement, which is a critical success factor for IT organizations going forward. You need to strike a careful balance between the commitment of your organizational resources to performance management, and measureable benefits to your organization from its use.


This article is derived from the book, The Business of IT: How to Improve Service and Lower Costs, by Robert Ryan and Tim Raducha-Grace, published by IBM Press, Sept. 2009, ISBN 0137000618, Copyright 2010 by International Business Machines Corp. For a complete Table of Contents, please visit the publisher site: www.ibmpressbooks.com/title/0137000618
Mr. Ryan can be contacted at robryan@us.ibm.com or www.thebusinessofitbook.com


Copyright © 2011 by the IT Financial Management Association. 

 

more Journal Articles

Sign In


Forgot your password?

Haven't registered yet?

Calendar

6/26/2017 » 6/30/2017
2017 Financial World of Information Technology, Austin, TX

8/7/2017 » 8/11/2017
2017 World of IT Financial Management, New Orleans, LA

Sponsors & Exhibitors: