MeasuringthecontributionofITtoyourorganization ITDResearch#10:14October2011

1 ITD #10 Measuring the contribution of IT to your organization IT Decisions 14 October 2011 All rights reserved

Introduction
Everyonewantstobeloved.InITthisoldsayingistruer thaninmostcorporatefunctions.However,theproblem withITisthatmostpeopleinthebusinessjustexpectit towork,theywanttheiremail,Internetaccess,and systemstomonitorandchargecustomerstoallfunction withoutaproblemandmostofthetimeitdoes. Butwhenthingsgowrong,ITgetstheblame.Sotheonly timemanypeopleinyourcompanywillinteractwiththe ITdepartmentiswhenthereisaproblem,whichcanlead toanegativeimpressionofwhatyoudo.Nobodycalls youupattheendofthedaytosaythanksforkeepingthe networkrunningalldaywithoutaglitch. Sohowdoyoueffectivelymeasuretherealcontribution thatITmakestothecompanyandalsoensurethatthe peopleinthebusinessareawareofthiscontributionto whattheydo? AlmostallmodernorganizationsdependentirelyonIT. Canyouimagineamodernairline,logisticsfirm, manufacturer,retailerorgovernmentdepartment functioningwithoutthesupportofacomplexITsystem? Perhapsyourimportancedoesntneedtobestateditis obvious. Unfortunately,thatsnottheexperienceofmostIT executives. Businessdecisionsandstrategyplanning canallaffectITyouneedtomanage andsupportwhatthebusinessteam does.Iftheytakedecisionsaboutanew projectorbusinessdirectionwithout reallyappreciatingtheITimplication thenitcancausechaosorafailed projectdelivery. Tobeplanningbusinessstrategywith thebusinessyouneedtobeableto demonstratetherealvaluethatIT providestothemandthatneedssome formofquantitativemeasurementanda communicationstrategy. IntheITDecisionsresearchthisweek, theparticipantsofourcollaborative researchnetworkexplainhowthey managetomeasuretheimportanceof whattheydo,andhowthey communicatethis. .

Howdoyoumeasurethe realimpactofITwhile makingbusinessareas awareofthat contribution?

2 ITD #10 Measuring the contribution of IT to your organization IT Decisions 14 October 2011 All rights reserved

Participantfeedback
ToexploretheissueofhowtoensurethatthevalueofyourITdepartmentismeasuredand communicatedeffectivelyweaskedfourquestionsthreeofwhichweremultiplechoiceandone designedtopromoteanopendiscussion. Wereceivedanswersfrom23executivesfrom15industrysectors:logistics,media,chemicals, retail,health,consumerservices,shipbuilding,financialservices,consumergoods,education, insurance,foodproduction,automotive,broadcasting,andmanufacturing. Question1:Woulditbecorrecttosaythatotherareasofyourorganizationonlyappreciatethe contributionofITifaformalcommunicationstrategyisapplied?

ITcontributionisobvious

21.7%

No

17.4%

Yes

60.9%

10

12

14

WhataninterestingresponsefromourITleaders.ItverifiesthatyoumaybethegreatestITleader yourcompanyhaseverseen,butifyoudontremindpeopleofthisfactthentheywillnot appreciateit. Some60.9%ofrespondentsconfirmedthattheythinkitisessentialtocommunicateITwinswith thebusiness,sothecontributionofITisappreciated.Asolidquarter(21.7%)ofrespondentsbelieve thattheircontributionisobviousandnofurthercommunicationisneeded. 3 ITD #10 Measuring the contribution of IT to your organization IT Decisions 14 October 2011 All rights reserved

Perhapsitisdisappointingtoseejust17.4%disagreewiththestatement,butinmanywaysthis minorityisinthebestpositiontheybelievethatthecontributionofITisnotalwaysobvious,but theydontneedtowastetimeonpromotingtheirworkjustsootherscanunderstandit. Question2:IsyourremunerationbasedinpartonthecontributionofITtothebusiness?

Bonusbasedonothercriteria

26.1%

Nobonusinmycompany

0%

No

21.7%

Yes

52.2%

10

12

ThiswaspotentiallyasensitivequestionaskingITleadershowtheyarejudgedintheirmonthly salarybutitisinterestingtofirstobservethatnotasingleITleadersaidthatthereisnobonusin theircompany. Overhalfofallourrespondents(52.2%)confirmedthattheirpayislinkeddirectlytothesuccess ofhowITisdeliveredtotheirbusinessandafurther26.1%getabonusbasedonothercriteria mostprobablythefinancialperformanceofthecompany. ItisinterestingtonotethatwhilstthesenumbersshowthemajorityofITleadersgetabonus basedontheITdepartmentortheircompanyingeneralperformingwell,thereisasignificant minorityof21.7%whosaidthattheirpayisinnowaylinkedtowhatITdeliverstothebusiness.

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Question3:WhatisthebesttoolavailabletomeasuretheimpactofITinyourbusiness?

Changingdeliverymodels,suchasABC

0%

AnalysisofITactivity(servicecalls)

0%

Structuredfeedback

30.4%

PerformanceIndicators

69.6%

10

12

14

16

Thisquestionwasveryinterestingbecauseoftheoverwhelmingresults.Despiteourassumption thatdataanalysisperhapsonservicedeskcallswouldbeausefulsourceofinformation, nobodysaidthattheoryiscorrect. Likewise,nobodyisreallyinterestedinmodelslikeActivityBasedCosting(ABC),orpayment basedonsuccessfuldeliveriesonly. ThetwotoolsITleadersareusingtoprovetheirownworthiskeyperformanceindicators(KPIs) withahuge69.6%oftheresponsesandstructuredfeedback,whichtooktheremaining30.4%. Structuredfeedbacktakestheformofsurveyingusersorhostingtownhallmeetingsand discussionsfocusedonIT. ButtheoverwhelmingchoiceofKPIsshowsthatthemetricscannotlie.Ifyouaremeasuringthe activityanddeliveriesofyourteamthenthatharddataisthebestwaytodemonstratetothe businessthatyouaredeliveringforthem.

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Question4:PleasetellushowtheimpactofITismeasuredinyourorganizationandhowyou communicatetheseresultstootherareasofthebusiness. Manyoftheresponsesoutlinedtheirviewsonthisindetail.Themostrelevantarelistedbelow. FoodProduction:Communicationplancoversstrategic,tacticalandoperationalaspects ThewayinwhichITcommunicateswiththeotherareasofthebusinessisessentialforensuring thattheactionsarealignedandthatthecontributionofITisperceived,aswellascreatingan environmentthatenablesthesellingofnewprojects.Thiscreatesavirtuouscycleinthe relationshipbetweenITandbusiness. Weimplementedacommunicationplanasabyproductofthestrategicplanof2006,whichhas sincebeensensitivetopositiveperceptionsaboutthecontributionofITtothebusiness.Our communicationplanhasspecifictoolsforcommunicatingwithvariousaudiences:strategic, tacticalandoperational,aswellasothertools,whicharespecificallydesignedforcommunication withITstaff. Strategiclevel: BusinessandITForumsTheseoccuroverlongerperiodsoftimetoseekalignmentofprojects anddiscussionsofinitiativesfocusedoninnovationandtransformation.Theyareoneday meetingswiththebusinessdirectorandkeyexecutivesofthebusinessandITleadershipareas. StrategicCommittee&ProjectfollowupsWithCIOparticipationatboardmeetingsforformal presentationofresults,discussionofindicatorsandprogressofITprojects.Occursatleasttwicea year,withtheparticipationofalldirectorsandtheCIO. Tacticallevel: ActiveOmbudsmanfunctionStructuredfeedbacktool,wherethefocusistointerviewthe processmanagersandleadersofvariousareasandseekevaluationsofeachITserviceprovided, includingtheperceptionofthecontributionofITintheinnovationprocess.Whereaserviceis assessedasunsatisfactorytherespondentmustputforwardevidenceofthereason,sothatby thenextinterview,theissuecausingdissatisfactionisresolved.Thesemeetingsoccurtwiceayear andareaddedtotheevaluationof[IT]participationintheannualresults. ITManagementCommitteeRegularmeetingswithcasemanagersabouttheneedforreviewof processes,extraordinarymeetingswhennewcompaniesareacquiredornewproductionfacilities, distributioncentersorotherindustrialsitesarelaunched.

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Operationallevel: CallRecords/HelpDeskUsersatanoperationallevelhaveacommunicationchannelviathehelp deskcalls,whereservicelevelagreementsaroundproblemsolvingaremonitored,aswellas performancearoundchronicproblemsandsoon. ITstaff: IndividualmonthlytargetsforITAllITstaffhaveaportionofvariableremunerationinlinewith monthlytargets.Thisbydefinitionestablishesamonthlybenchmarkfornegotiatingthe establishmentofgoalsandalsoamonthlyfeedbackwiththeobtainedresult.Thisapproach makesclearwhatITleadersexpectfromeachteammember. EverysemesterweholdameetingwithallthecorporateITprofessionalsatthecompany.For eachworkshop,wecreateathemefordiscussionaroundbusinessprocesses,researchofnew technologies,andsoon.Andwealwaysthrowchallengesattheteam,sothatprocessestobe rethought"outsidethebox." InadditiontothecorporateITprofessionals,someprocessmanagersareinvitedtotheseevents accordingtothetopicsofinterest.Suppliersarealsoinvitedtotalksinordertointroduce innovativeconceptsandtrendsintheITmarket.Someofthethemesofthelastworkshopswere: "Mobility:thekeytoinnovation","BPMProcessManagement,""SocialMediaOpportunitiesfor Innovation,"amongothers. Logistics:Resultsarecommunicatedinternallyandthroughthepress WhensettingannualobjectiveswhicharelinkedtocorporatestrategyITismeasuredaccording totheiractualcontributiontobusiness.Onvariablepay(bonus)thisrepresents65%,leaving35% thatistiedtobusinessresults(wherethecostofIThasadirectimpactonEBITDA). Withregardtocommunicationoftheresults,thisisdoneintwoways:internallyviatheintranet, throughboardmeetingsandmeetingswithbusinessunitsseparately.Itisalsodoneexternally, throughthemarketcommunicationfunctionandthepressoffice.Thereisnodoubtamongstthe companymanagementaboutthevalueofITtoourbusiness. FoodProduction:MeasurementofITisbasedonpointsofimpactonbusiness WechoosethemaincriticalpointsofstrategicITthathaveadirectimpactonthebusinessand applyindicatorsthatmeasurethequalityoftheseservices.Theseresultsarepresentedthrough anITportalbasedontheconceptGestoaVista(managementtoolaimedatprovidingnecessary informationaboutacertainareaofactivityinawaythatissimpleandeasytoassimilate). 7 ITD #10 Measuring the contribution of IT to your organization IT Decisions 14 October 2011 All rights reserved

Financialservices:TheneedforIT"sellitself"isworrying TheneedforITtobeforcedtocommunicateand"sell"itselfconstantlyworriesmeabit.Other areasofthebusinessarenotconcernedaboutthatatallandaredoingverywellthankyou.Keep thebasicsworking,participateandcommittodecisionsmadeanddeliver. ITisnottheuglyducklingneithertheswanofthecompany,itissubjecttohitsandmisses, sometimesitistheprotagonistandsometimessecondaryinbiggerorsmallerprojects. ConsumerServices:AccountabilityhelpsthebusinesstodiscoverIT's"blackbox" KPIsandindicatorsingeneralareessentialtoshowtheITcontributiontotheorganization. Additionally,itisadvisabletocarryoutregularcommitteeswithotherbusinessmanagersinorder toaccountfortheachievementsofITaswllasprojectsinprogressandsoon. Theseattitudeswillhelptherestoftheorganizationtodiscoveralittleaboutthe"blackbox"ofIT andanalyzehowtheseareascanfitintothecontextofIT. Insurance:Performanceindicatorsallowstructuredmeasurementofresults Ihavedevelopedperformanceindicators(inareassuchasproductivity,projecttime,cost effectiveness,innovation/competitiveedge)sothatthemeasurementismadeinamore structuredmannerandbasedonareal,tangiblesetofcriteria. Icommunicatethroughreports(suchasnewslettersandbulletins)inadditiontomeetingswith theboardofexecutivesofthecompany(theexecutivecommittee). Retail:Formalcommunicationprocessesareessentialtorecorddeliveriesandfeedback IThasadirectimpactonbootomlineresultsforus,aswellashowthecompanydeliversits productsandservicestothecustomer.DespiteevidenceoftheobviouscontributionofITtothe businessisalwaysimportanttoestablishaformalprocessofcommunicationinordertorecord howITisdeliveringresultsandalsotogetfeedbackonthesedeliverables. ConsumerServices:MeasurementismadebasedonindicatorsofallITservices InourorganizationallITservicesgenerateindicatorsand,basedonthat,weevaluateour contribution.Increasingly,ITcangenerateintangiblevaluetothebusiness,giventhetechnical relianceofsomesolutionsandproducts.

8 ITD #10 Measuring the contribution of IT to your organization IT Decisions 14 October 2011 All rights reserved

Chemicals:Therecipeforsuccessistocombinemethodologywithsuccessstories Wehavebeenworkingonperformanceindicatorsforyears.Theideaistousetheminour relationshipswithinternalcustomersaswellastacticalandstrategicmonitoringofIT.However, onadailybasis,thebusinesscouldnotcarelessaboutITperformance,providedthereareno disasters.Itisthefateofbeingautilityprovider. Ontheotherhand,thesuccessstoriesspeakvolumes.Agoodproject,anewpolicyforweb access,newgadgetsandotherinitiativesresonatemuchmorestronglyintheorganization. Especiallyinthetopmanagement.Anyway,myrecipeistocombinethings.Useofmethodology combinedwiththecommunicationofsuccessstories,toreachouttotheentirecompany. Education:Accountabilityisusedinfavorofspecificindicators ThereisnospecificindicatortomeasuretheoutputofITwithinthebusiness,giventhewide scopeofactivitiesthatIThasacrossallotherdepartments.Whatwecanclearlyseeisthe importanceofITinallfrontsandhowithasbeenadifferentiatingfactorwhentheinitiativesare wellplannedandproperlyaligned.Wehaveamonthlymeetingtoreportresults,whereother departmentsarealsoinvited.Wealsopresentintheboardmeetings,wherewebrieflyaccount fortheinitiatives. WhatotherITexecutivestoldusabouthowtheymeasurethecontributionofITinthebusiness... Shipbuilding:WeuseKPIstomeasureperformanceandtheactualcontributionofITtothe business.Inthecurrentgovernance,indicatorsarepresentedanddiscussedmonthly. Foodproduction:ImeasurebyexaminingareasofITactivity,butformetheidealwouldbeto collectstructuredfeedback,butIdonothavethestructuretodoso. Broadcasting:WemeasurethecontributionofITthroughthelaunchofproductsandserviceson time,onbudgetandwithqualityaswellasindicatorsaroundsupportandcost. FinancialServices:Measurementisdonethroughthesatisfactionofusersandcustomers,aswell assystemavailabilityandperformance,innovationandcostreduction. Foodproduction:WemeasurethecontributionofITthroughperformanceandfinancial indicators,whicharecommunicatedinmeetingsheldbyITcommitteewhereallbusinessareas involvedtakepartalongsidethepresidencyandIT. Media:Wearemeasuredbyperformanceindicators,andthereisalsotheinterpretationof feedbackfrombusinessareas,aswellasthepresentationofprojectsrelatedtostrategicplanning. 9 ITD #10 Measuring the contribution of IT to your organization IT Decisions 14 October 2011 All rights reserved

ConclusionandExecutiveSummary
Thiswasaveryinterestingresearchcycle,becauseverystrongmessagesflowedfromthe executivefeedback.Threeinitiallessonscamethroughfromtheresponsesverystrongly: ITisonlyappreciatedbythebusinessifyoufindaneffectivewaytocommunicatewhat youdoandwhyitisimportant. MostITleadersinBrazilgetabonusbasedontheircontributiontowhatthebusiness does,whichmakestheeffectivemeasurementandcommunicationofyouractivitieseven moreimportant. TheuseofKeyPerformanceIndicators(KPIs)anddatametricsiscriticalindemonstrating thevalueofwhatITprovidestothebusiness. Thisfinalpointdemonstratesthatmanyofthelessonslearnedbytheoutsourcingcommunity havebeenadoptedinhouse.AnITsuppliermustmeasurewhattheydoaccurately,becausethey needtoputacommercialpriceonitandsendyoutheinvoice,buttheyalsoneedgood measurementsotheycangetthecorrectamountofresourcetoworkonaproject. Overtime,thedevelopmentofKPIsinthesuppliercommunityhasbecomeverysophisticatedand reliable.Manyoftheseskillsandpracticescanbeimportedtointernalteams,allowingclose measurementoftheinternalITteamandthesubsequentabilitytoquantitativelydemonstrate whatyouaredoingforthebusiness. Whenaskedabouttheirownparticularmethodsformeasuringandcommunicatingtheir activities,therewerealsosomeclearmessages: Eventsanduserfeedbackisimportant.Sometimesusersdonothaveagoodopportunity togiveanyfeedbackotherthancomplaintsandtheyhavenotimetosendsuggestions.So meetingsthatexploretheservicelevelscanbeusefulforgaugingusersatisfaction. Attheendoftheday,yourimplementationandwillingnesstotakeresponsibilityforthe systemssaysmorethananycommunicationsplan.Iftheusersknowtheycanalwayscount onyouandtheITteamthentheywilltrustandrespectyouropinions. ThebusinessreallydoesntcareaboutITonadaytodaybasistheyjustwantittowork soyouneedtothinkcarefullyabouthowtoapproachthemwithinformation.Mostwill notwanttoreadanewsletterproclaiminghowwonderfulandusefulITisthecompany. Dontbetooscaredoffailureandbepreparedtobackupyourteam.Everdepartment makesmistakesatsomepointwithITtheyareoftenmorevisiblebecausepeoplerelyon it,butifyouneverfailitmeansyouhaveneveractuallytriedsomethingnew.

10 ITD #10 Measuring the contribution of IT to your organization IT Decisions 14 October 2011 All rights reserved

 Thinkaboutproducingaclearanddetailedplanthatcombinesyourcommunicationplans atalllevelsstrategic,tactical,andoperational.Souserswhoneedupdatesand informationaboutthesystemscangetiteasily,justasthemanagementteamcaneasily accessdetailedinformationontheperformanceofyourdepartment.

ItisclearfromtheresponsesgivenbyourgroupofITleadersinthiscollaborativecyclethatthe needtomeasuretheachievementsofITisverymuchconnectedtotheneedtocommunicatethe importanceofthoseservices. However,communicatingITachievementswithoutgivingtheprocesssomeconsiderationcan boreusersorworse,itmakesthemlessinterestedinwhatyourdepartmentdoesforthem. Carefulplanningtoensurecommunicationsreachtherightpeople,aswellasquantitativemetrics demonstratingdeliveriesgoalongwaytoearningrespectfortheITteam.

11 ITD #10 Measuring the contribution of IT to your organization IT Decisions 14 October 2011 All rights reserved

ITDecisionsResearch
ITDecisionsproducesareportlikethiseveryFriday,basedonwhatCIOstoldusthatsameweek. Itisfastandrelevantknowledgefromyourpeers,itisonlyavailabletotheCIOsintheresearch network,anditisfree. Whatisthecatch?Youpaybyparticipating.Everyweek,wewillsendyoufoursimplequestions thatwilltakenomorethanfiveminutestoanswer. Themoreparticipants,thebetterthequalityoftheresearch.Sopleasedoinviteyour colleaguestojoin!Getintouchwithrecommendationsviacontact@itdecs.com. Doyouwanttodirecttheresearchanddefinethetopicsalongsideourboardoffounder members?WealsoofferPlatinummembershipsthatallowyoutosteertheprocess,aswellas otherbenefitsincludingcomprehensivereports,facetofacefocussessionsandmore. TheITDecisionsFutureSkillsfundisacharitable,transparentfundfocusedonimprovingIT educationandtraininginBrazil. IfyourecommendaPlatinummembertothenetwork,wewilldonateR$500tothefundinyour nameandPlatinummemberswillgettochoosewhichorganizationgetsthemoneyattheend oftheyear.Pleasecontactusformoredetails.

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AboutITDecisions
ITDecisionsisthepremiersourceofinsightintothetechnologyandhightechserviceindustryin Brazil.ThecompanycreatesEnglishlanguagenewsandinsightforaCIOaudiencewithregular featuresandanalysisthatcannotbefoundelsewhere. Wefocusondecisionmakersandinfluencersthebuyside.Reproducingthesalespitchor advertsofsuppliersisnotourthing;wefocusonthosebuyingthesystems. ITDecisionswasfoundedin2011byMarkHillaryandAngelicaMari,twoofthemostrespected businessandtechnologywritersinEuropewithacollectionofbestsellingbooksandindustry awardsbetweenthem. TheITDecisionsresearchnetworkisaninvitationonlygroupofCIOsinBrazilwhoworktogether toproduceanewresearchreporteveryweek. TakeamomenttoconnectwiththeITDecisionsmanagementonLinkedInandtakealookatsome oftheirbooks,othermedia,blogs,andpublications: MarkHillary,CEO http://j.mp/markhillary AngelicaMari,PublishingDirector http://j.mp/angelicamari Mark,Angelica,andthewholeITDecisionsteamisbasedinSoPaulo,Brasilthebiggestcityin theSouthernHemisphere.

www.itdecs.com
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ITD #10 Measuring the contribution of IT to your organization IT Decisions 14 October 2011 All rights reserved

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