This blog is part of a series focused on IT Performance Management.
The fundamental shift in performance management that Kaplan and Norton led in the 1990s was the balance (as in their “Balanced Scorecard”) of financial and non-financial measures. The framework they developed and implemented across many organizations shows financial measures as the culminating category at the top, driven by a set of other strategic measures related to customers, internal processes and learning and growth. Using this framework, executives could better understand and communicate how the different strategic indicators influenced their ultimate outcome measures, typically revenue and profit.
Unlike a company that exists to provide returns to its shareholders, IT, or the IT organization, exists only to provide business value. IT does not exist to generate revenue. Or to develop the coolest new technology. Or to have world class processes. IT organizations should be holistically and systematically focused on generating business value for the organizations they serve. The best way to ensure this focus is to define the strategic measures that drive business value, in the context of a framework that centers around business value. With this kind of framework, IT leadership and business executives can make good decisions about where to invest and employees across the organization can understand priorities.
IT can deliver business value in many ways, some more direct than others. Lately, businesses have been primarily focused on cutting IT spend to reduce overall costs, but as we all know, IT is a key enabler of other types of business value. Investing in IT can generate cost savings in other parts of the company or increase revenue as well, through a variety of direct and indirect means. Lately, businesses have been forced to focus on direct, fast payback investments, which is fine, but tradeoffs must be weighed and understood. A framework for performance that shows where investing more or less in various components of the organization supports good decision-making and the communication.
I’ve seen several frameworks I like for performance management and they all emphasize business value. As an example, I’m including Thought Ensemble’s IT Scorecard framework with some example measures. Our framework tells the story of how the various components of IT performance lead to business value, in a holistic view that supports both lagging and leading measures.