Performance Metrics: Bringing It Home, Part 3Performance Metrics: Bringing It Home, Part 3
What do metrics mean to the CIO of today's IT organization? What must be done to align IT resources with business-driven metrics initiatives? The conclusion of our series offers some practical guidance.
March 23, 2004
Change is what characterizes today's business environment. Prior to the advent of computers, this "statement of the obvious" meant a linear rate of change. Now, Moore's Law sets an exponential pace. Information technology has made opportunities possible that would have been inconceivable just decades ago. Bar codes, radio frequency identification (RFID), and robotics were once science fiction. Real-time data collection has made these advancements part of our emerging reality.
Today's executive has grown up with computer technology and isn't intimidated by it. In endless pursuit of "faster, better, cheaper," executives are eager to explore IT solutions. They aren't bashful about demanding that IT respond to their requirements; their own performance is increasingly measured against aggressive benchmarks. Executives and managers see the value of universally accessible Web portals that draw data from across the enterprise into "at-a-glance" dashboards. Executives devour acronyms — BPM (business performance or process management), BAM (business activity monitoring), RTO (real-time operations) — like candy, and want more. And if IT can't satisfy needs or is perceived to be too slow in adopting new technologies, executives are willing to bypass IT altogether and work directly with third-party vendors and systems integrators, who are adept at convincing business executives that they can meet their needs.
It has been said that you can't manage what you don't measure. While some assail the veracity of this statement, without some way of determining where you've been, where you are, and where you intend to go, progress is strictly accidental. A robust metrics program can provide directional guidelines and a basis for advancement in process efficiency and flexibility — critical differentiators in today's competitive business environment.
With metrics in place throughout the enterprise, the contributing factors to solid business performance gain visibility. Then, initiatives such as BPM, BAM, Six Sigma, and other measures-based initiatives may be achieved in half the time that they might otherwise take. Companies can perform the painstaking identification, selection, collection, and reporting of these measures only once, instead of having to repeat the cycle for each new initiative.
The pressures of competition, financial performance, and increased regulation have made corporate survival a truly Darwinian exercise. Only the most agile and capable enterprises succeed. Metrics are critical.
The View from the Top
CIOs are well aware of the pressures imposed upon their businesses and the IT organization's obligation to support its goals. Most CIOs are fully committed to meeting strategic obligations. However, given the pressing demands already imposed upon their organizations, CIOs need to know what impact a metrics portfolio will have on IT relative to time, resources, and quality:
Time. As metrics gain momentum, requests related to metrics will begin to trickle into the IT queue. The flow may at first be intermittent. However, IT should beware of responding by implementing "one-off" solutions, which have a tendency to become silos that bedevil enterprise goals.
As requests accumulate, patterns will emerge that indicate affinity among the types of requests and the groups supplying them. CIOs should maintain a holistic perspective that looks across the entire enterprise. Better yet, they should initiate a metrics portfolio process in anticipation of inevitable need. The time investment to establish the infrastructure and processes for a metrics portfolio will have measurable results. Among them will be the development of reusable components for a multitude of cross-functional applications, offering accelerated time to deployment. With the introduction of BAM and dashboards, the notion of RTO has become far more realistic. An RTO approach promises the organizational agility necessary to compete in fast-paced markets. But without identifying and collecting appropriate metrics, BAM and dashboards to support RTO are not going to work. CIOs need to allot the time necessary to create a metrics portfolio to support RTO, understanding that demands for such capabilities will only increase — along with customers' time-to-deployment expectations once they get a taste of the fruits of RTO successes.
Resources. While IT professionals have great skills, their focus is in technology implementation. IT professionals may have a general understanding of the business and its ecosystem, but they tend to have little deep expertise in finance, operations, or other specific business areas. They are, by necessity, business generalists. Thus, IT professionals will need to be (re)introduced to the world of statistics as the subject applies to business performance. Companies that have introduced Six Sigma into their organizations often address this issue by including IT in their initiatives (nearly all of which involve IT activities anyway). Through their participation, IT professionals can then become certified at the various Six Sigma "belt" levels (Green, Black, and Master Black). In any case, IT training resources should be an important consideration in metrics objectives.
Metrics efforts demand an ever closer alignment between IT and the business. This is important not only for the broader goal of helping IT understand business objectives and strategies; more specifically, the closer alignment will aid in developing a thorough knowledge of the key performance indicator (KPI) metrics so that IT managers can identify and capitalize on opportunities for improvement.
Finally, IT will need hardware, software, and personnel resources in place to capture, consolidate, and present metrics data to the organization. These are the resources needed for the metrics portfolio infrastructure, which I discussed in Part II of this article ("A Primer on Metrics, Part Two," March 20, 2004). I will discuss their implementation in a moment.
Quality. Many companies find themselves too busy fighting fires to address "root cause" quality issues. "We don't have time for theoretical solutions," they assert. What such companies fail to realize is that if they don't make an effort to regain control of their business, before long there won't be a business to save.
The Six Sigma Breakthrough Process and other quality initiatives have enlightened many companies and allowed them to regain control of their businesses. (See the sidebar, "The Six Sigma Stages," at right) Metrics, giving visibility into business processes, have been essential to their success. Metrics enable the discovery, identification, and remedy of root cause issues: poor quality, bottlenecks, duplicate or conflicting processes, constraints, and other issues. Processes can become more efficient, freeing resources to address the next problem, until you have a true cycle of improvement. General Electric offers a leading example of how extraordinary the results can be: The company gained a nearly 300 percent return on investment from its Six Sigma initiative, giving evidence to what metrics can mean to the corporate bottom line.
Overall, as businesses move closer toward real-time process monitoring and reporting, an active metrics portfolio implementation will be critical to standardizing, coordinating, and controlling the correct application of metrics throughout the enterprise.
Although nearly every organization already has some form of metrics, implementing a portfolio program can present significant challenges in environments where there's no formal understanding of metrics. People will resist change: that's human nature. (For helpful literature about how to handle the impact of change, I recommend the books listed in Resources.)
The process for implementing a metrics program consists of the following steps:
1. Conform definitions. It's extremely difficult to communicate across different contexts in an enterprise without this step. The word "definition" is used here within the framework of business processes and their related attributes: metric, measure, entity (organizational unit, data unit), activity, task, and so on. To "conform" a definition, you must identify the context(s) within which a word is used; then, you must identify antonyms and synonyms, and make these definitions consistent within the context - and begin to map them across contexts. Conformed definitions, then, are definitions given to words or standardized word groupings that make them consistent or translatable from one context to many contexts.
2. Develop a metrics portfolio and repository. These elements serve as a resource of documentation and metrics definitions; the repository can provide a link to the database of historical measurements itself. By storing these artifacts in a central repository available to anyone who needs to reference it, you will go a long way toward guaranteeing consistency and authenticity.
3. Model business processes formally. This must be a separate activity, with little regard for metrics at this point in the sequence. The model will be a critical component of the infrastructure you need for the identification and collection of appropriate metrics. Whether the methodology is IDEF1x, Business Process Management Initiative (BPMI), or something else, the modeling process must be standard and formal throughout the organization. Otherwise, you'll face an expensive ordeal of mapping one methodology to another, and the metrics effort will fail.
4. Identify application opportunities. Once you've completed the first three steps, you'll uncover numerous opportunities for metrics capture and application. During the identification process, keep in mind the costs, as well as the benefits, of applying metrics. You'll discover competing opportunities, which must be evaluated and prioritized according to an objective criteria, such as "potential savings" or return on investment. 5. Start a pilot project. A pilot project should be small, but with a measurable impact. The project will introduce the formal metrics process into the enterprise and demonstrate the benefits of the concept. The first step in developing the pilot project will be to create a baseline for the current state of the target process area so that you can show the effectiveness of the metrics program.
6. Develop an internal business intelligence (BI) perspective. BI need not be restricted to external applications. You can use metrics to consider how a portfolio approach could work for analysis across the enterprise. The BI perspective has given rise to performance management and BAM. As part of this step, consider what are the most effective methods, processes, and formats for presenting BI (via dashboards, portals, and so on) to users throughout your organization.
7. Communicate, communicate, communicate! Once the enterprise's user community sees the power that visibility into the business that a metrics portfolio makes possible, demand will explode. Wide access, along with proper training, will give the organization an optimal chance of success.
These steps in implementing a metrics portfolio complement closely related efforts, such as Six Sigma, performance management, BAM, and others. By bringing these efforts together through comprehensive, conformed metrics, your organization will seen even greater benefits than what may be achieved by each initiative alone.
An Epic Journey
When you develop a metrics portfolio for your organization, you're taking the first steps of an epic journey. The goal — true corporate visibility — isn't easily attained. But the rewards can be extraordinary. Bon voyage!
Gary T. Smith [[email protected]] is a consultant with 25 years of experience in all areas of IT, including IT directorship, project management, and consultancy to support global enterprises working with BI, data warehousing, and Oracle database management.
A Primer on Metrics, Part Two March 20, 2004
A Primer on Metrics, Part One March 6, 2004
Waxer, C., "Six Sigma Costs and Savings," 2004, see www.isixsigma.com/library/content/c020729a.asp
Carr, D. K., Kelvin, H. J., Trahant, W. J. (contributor), and K. J. Hard (contributor), Managing the Change Process: A Field Book for Change Agents, Team Leaders, and Reengineering Managers, McGraw-Hill Trade, 1995.
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