“The biggest threat to superb KPI scorecards is unfocused IT strategies.”
Yes, I have been in the situation numerous times. The situation when we start up the KPI work for a coming year and trying to understand what should be measured and why. We ask ourselves key questions such as “what makes our organization successful” and “how do we create value to business”. These are questions that should be described in the IT strategy document. But surprisingly, often this questions are not address or answered anywhere in the IT organization. Instead, we often find very fluffy Gartner-influenced statement about IT ambitions describing all and nothing. Not a great starting point for KPI work.
Let me give you an example. One of the most common KPIs to measure is cost consumption (total IT spend). This is no surprise. We need to deliver IT services in a cost efficient way. But most IT organizations are being transformed to support the ongoing digitalization. The IT strategic focus is to support shorter time-to-market, innovation and customer engagement rather than cost efficiency. That is how IT creates value! Digitalization will demand more agile management methods, modern and dynamic applications, different skills and leadership styles. This will cost money! Setting cost efficiency as primary objective in an IT organization will have a negative impact on the needed digital transformation. What is interesting is that organizations with an unfocused IT strategy – tend to lean against a cost reduction strategy as default – and as primary KPI and not focusing on business-centric strategic direction. IT Organizations with a fluffy IT Strategy tend to set the wrong KPIs and investment prioritizes– resulting in less than optimal IT delivery and a management chaos. Cost is easy to follow-up (numeric) and is almost always right – but dangerous to trust in the digital environment.
The first step in any KPI setting process is to quality assuring the IT strategy. I would say that there are four key questions to start with:
- What makes our organization success from a business perspective?
- What is our role in the value chain and how do we contribute with value?
- What is our strategic focus for the coming period (maximum 3 focus areas)?
- Why is this important for our company and organization?
It is four simple questions that need to be defined and documented in a simple and precise way for communication purposes. We often find very fluffy answers to these questions – or not at all. I am allergic to strategic statements such as “satisfying business needs” or “high service quality”. If we as IT leaders do not know where we are going and why, how can we expect our employees to understand and be motivated?
October/November is the time to start the KPI work in the IT organization for the coming year. It is a period to ask the right questions, get the right focus and use the KPI framework to drive transformation in the right direction. The fact is that it is not more difficult or time consuming to do the KPI setting is the right way, but the reward will be will be much greater than doing it wrong. What do you have to lose?
- Contact The Goodwind Company for advice and coaching to get the right KPIs in place. It is a small investment compared to the consequence of wrong priorities and investments in the IT organization. We have standardized methods to drive the KPI process and get the optimal business effects. Let us make you successful!
Yes, I have been in the situation to start up the KPI setting process a numerous times. But I have also been in a situation at the end of the year when right IT effects have been achieved with increased value creation and happy business partners. It is a situation when I am proud of my work and feel that I have been able to contribute to business results. It is a fantastic feeling! That creates enormous motivation for the coming challenges.
– Hans Gillior