In my June column, I proposed that IT organizations can benefit from using the balanced scorecard (BSC) framework and methodology to describe, measure and manage IT's contribution to enterprise value creation. I offered a strategy map template as a starting point for IT organizations to clearly describe their strategy that enables IT to move to areas of strategic value, such as partnering with business units to implement new solutions and technologies that help gain a competitive edge in the marketplace.
With its interconnected set of business objectives clearly articulated on its one-page strategy map, the IT organization is now ready to turn its attention to performance measurement and resource allocation - two topics that greatly influence the IT organization's ability to set and manage expectations with internal business partners. Similar to objectives, performance measures and initiatives must be chosen through a process that involves a healthy mix of debate and good thinking.
Many organizations have found it valuable to start the process of selecting performance measures and initiatives by crafting a brief definition that elaborates the meaning and intent behind each objective on the strategy map. For example, a simple objective can be elaborated in a brief description. Well-written objective descriptions follow a "what/how" structure (what = IT standardizes architectures; how = by creating ... tools) that communicate what is necessary to achieve the objective and also reduce ambiguity. They provide insight into potential areas for measurement, such as establishing architectures, communicating architectures and so on. Completing this exercise has the additional benefit of supporting communication efforts with key stakeholders who are responsible for executing the IT strategy.
Figure 1 illustrates how the objective descriptions can be useful in helping an IT leadership team select its performance measures. In this case, the objective, "effectively select and manage supplier relationships" has been defined by the team and the objective's performance advocate, who opens the discussion required to select an appropriate performance measure.
Figure 1: Measure Selection Process
As this example shows, there are multiple possible performance measures that can be used to track performance against an objective. In preparation, the performance advocate lists several leading candidates and recommends one to the group; in this case, "number of formal meetings with strategic supplier partners" is proposed on the basis that this activity is an important prerequisite to identifying appropriate supplier relationships. The team then asks: does the measure support the intent of the objective, would it create the desired behavior, does it belong at this level in the organization and is it easy to collect data? An outcome measure, "cost savings generated from strategic supplier partnerships" is a much better indication of the results flowing from the desired activity. The originally proposed measure would be appropriate to include on the personal scorecard of the individual charged with identifying and selecting strategic suppliers. However, it has limited value in communicating IT's contribution to enterprise value creation and is, therefore, not the best choice for the IT organization scorecard.
A similar logic stream can be applied to the selection of initiatives on the IT scorecard. With an inventory of current and proposed initiatives, the IT organization then applies a rigorous definition to "qualify" all of the projects. As a rule, items on the list must be intervention projects with clear start and stop dates, executive sponsorship and defined benefits. Once the final list of initiatives is available, the team should analyze their "fit" with the objectives on the strategy map using a simple initiative alignment matrix and decide whether to a) prioritize and select for the scorecard; b) demote oversight to a lower level; c) defer execution to a later time when appropriate resources and attention can be allocated; or d) cancel due to lack of available resources or strategic fit.
Most IT organizations find that focusing on a few critical performance measures and initiatives has an immediate, positive impact on its reputation. Armed with the BSC framework and practical approaches, the IT organization can easily realize this immediate opportunity to establish and build credibility with the business and become a true strategic partner.
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