Top level metrics for the business to direct IT

Suppose you’re a non-executive director on the Board. Or a C-level officer of the enterprise. Maybe you’re the country manager, or divisional general manager, of a piece of the organization.

What should you be looking at, to judge and give strategic direction, to whomever looks after your IT?

Stop right there, if you’re ready to point the finger at the Chief Information Officer and say “that’s not my responsibility, that’s hers/his”.

You don’t get to abdicate your responsibilities when it comes to other areas of your domain. It’s not your corporate lawyer’s responsibility to worry about all the elements of the next deal you do — they merely turn what you want into a contract you can live with if, heavens forbid, it ends up in litigation. It’s not the Vice-President of Human Resources’ responsibility to ensure that you have nothing but top talent in your organization: they may post the openings, screen the inbound résumés, and handle a thousand and one other tasks surrounding people, but who gets hired, how they perform, and sacking them remains your duty.

So let’s look at what you should be asking to see.

Projects are about results

Most people believe that if they just sort project proposals by some measure projecting their results — typically, return on investment (ROI) — and pick the best ones, they’ve exercised oversight.

Sorry. If that were the case, you’d be seeing (more or less) those results flowing to the enterprise’s financials. If you never approve anything with less than a twenty per cent ROI, shouldn’t you be seeing those results?

Are you? Did you even look?

There are a vast number of reasons you’re not seeing the results, but only one measure tells you what’s actually flowing through the veins of the enterprise: actual return on investment obtained (AROIO).

This gets you out of the weeds of projection and into the cold, hard light of reality. It also stops the finger-pointing cold, since getting results is inherently a joint effort of your IT resources and your business people.

Your goal should be to bring AROIO closer to your projected ROI year over year. That means the enterprise as a whole is getting better at projecting and estimating, better at execution, and better at deploying change and ensuring your results are delivered.

Did the light bulb just go on? There isn’t anything about AROIO that’s specific to IT, is there?

AROIO, in other words, applies to all aspects of the enterprise: it is a way to track changes in organizational effectiveness. If you’re a Board Director, it’s a tool to judge the effectiveness of management. If you’re on the senior leadership team, it’s a tool to judge your organization. (Best of all, get better at it, and you’ll start producing better results all around.)

Assets are about improving leverage

The other side of the equation is found in the asset pool. This sinkhole of past decisions is an essential part of the enterprise — you wouldn’t exist without it — but it needs to be directed intelligently.

Avoiding fads, and (equally) avoiding the fad of being overly cautious about change, is a delicate act.

Intelligent, strategy-level discussions about the assets involved in IT can take place only if you get them out of the individual products and services end of things. Tracking and providing direction around the enterprise’s total cost to own and operate (TCOO) its base would work well here.

What TCOO thinking does is force the IT side of the enterprise to think about technology change differently. Their goal should be to slowly but surely move the total cost of the portfolio to the lowest point the market currently sustains. It’s a journey, not a destination — new products and services are constantly coming into play, and changes in the enterprise’s demand levels affect what’s spent.

But there’s also an inclination, throughout the enterprise, to keep adding onto what exists rather than periodically going back and cleaning up. There’s a passion that small practices that are comfortable be carried forward into the future no matter what it costs over the next decade to make that possible. There’s a comfort with what’s already known (so please don’t change it).

IT, too, is filled with people who make their living from very specific and often non-transferrable skills. They will always have one eye on their personal security, and if that means the enterprise pays more for the next ten years, well, that’s not their problem.

Again, this is a trend measure, not an absolute. There’s no magic “best practice” on TCOO beyond “improve it year over year”.

Since TCOO encapsulates decisions such as outsourcing — it’s just another cost curve — it can be used to project possible strategic decisions such as ripping up the current application portfolio and replacing it with new packages, moving from in-house operation to an outsourced environment, mixing cloud services with in-house ones, hotelling of staff and telecommuting vs office environments, and a host of other choices.

Did you notice, again, that you could apply TCOO just as well to business decisions? How many service centres or outlets to have? What goes on the plant floor?

These two measures, AROIO and TCOO, are the gateway to being able to provide strategic insight to those in charge — and strategic direction back to the enterprise about IT. Asking your CIO to implement them, and to report them with analysis, is a good way to ensure that executive and director time is turned to productive uses.

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About Bruce Stewart

A philosophically minded politically interested fellow with more opinions than is probably good for him.
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