Developing Metrics for Financial Shared Services: Best Practices, Tips and Traps Jeff Zwier Manager IS Communications, Team Lead CISO Audit & Metrics Analysis ABN AMRO Services IT Presented at: IQPC / Finance IQ Shared Services for Finance and Accounting Conference The Driskill Hotel, Austin, TX June 23-25, 2007

Presentation at a Glance Some Definitions Before you Begin Getting Started Designing your Metrics Visualization & Presentation Resources Metrics for Shared Services Jeff Zwier

Some Definitions

Before you Begin

Getting Started

Designing your Metrics

Visualization & Presentation

Resources

Some Definitions What is a ‘Metric?’ Why do we use metrics? Metrics for Shared Services Jeff Zwier

What is a ‘Metric?’

Why do we use metrics?

Metrics Design: Before you Begin As financial professionals, we are expected to take a thorough, analytical approach to our work. Depending upon your audience and objectives, this expectation can lead to somewhat less than ideal results. Metrics for Shared Services Jeff Zwier

As financial professionals, we are expected to take a thorough, analytical approach to our work.

Depending upon your audience and objectives, this expectation can lead to somewhat less than ideal results.

Incredibly detailed, unfocused reporting Most of your stakeholders don’t care about the details of your operations! A cautionary tale. . . Metrics for Shared Services Jeff Zwier

Most of your stakeholders don’t care about the details of your operations! A cautionary tale. . .

Metrics Design: Before you Begin (2) To avoid the trap: Set your reporting objectives Focus on the basics Define your audience Start a dialog Metrics for Shared Services Jeff Zwier

To avoid the trap:

Set your reporting objectives

Focus on the basics

Define your audience

Start a dialog

Getting the Right Response: Reporting Objectives and Types of Metrics Metrics can be used for. . . Executive Reporting steer enterprise-level decision making, direct investment and demonstrate value Strategic Reporting provide a “reality check” for your shared services on whether it is really delivering its intended value Operational Reporting measure the performance of your staff when executing key operational processes Tactical Reporting create a snapshot of performance for use in special projects Metrics for Shared Services Jeff Zwier

Metrics can be used for. . .

Executive Reporting

steer enterprise-level decision making, direct investment and demonstrate value

Strategic Reporting

provide a “reality check” for your shared services on whether it is really delivering its intended value

Operational Reporting

measure the performance of your staff when executing key operational processes

Tactical Reporting

create a snapshot of performance for use in special projects

Focusing on the Basics Good metrics are: Based upon consistent, measurable data Inexpensive (in terms of time and money) to collect Expressed in unambiguous, quantitative terms that are objectively defined “ Actionable” – there are no ‘FYI’ metrics! Metrics for Shared Services Jeff Zwier

Good metrics are:

Based upon consistent, measurable data

Inexpensive (in terms of time and money) to collect

Expressed in unambiguous, quantitative terms that are objectively defined

“ Actionable” – there are no ‘FYI’ metrics!

Defining your Audience: Questions to Ask Who wants to know? What do they want to know? How often do they need to know? Why do they want to know it? What channel is the most effective way to reach your audience? What will they do with your information? What behavioral change(s) do you expect as a result? Metrics for Shared Services Jeff Zwier

Who wants to know?

What do they want to know?

How often do they need to know?

Why do they want to know it?

What channel is the most effective way to reach your audience?

What will they do with your information?

What behavioral change(s) do you expect as a result?

They Don’t Know What they Want, so I Have to Give them Everything There’s always a way to find out more about what your internal or external stakeholders really need. Ask your internal communications or training department to help you create a survey of potential recipients for your report. Creating good metrics is a collaborative process – if you don’t already have a good rapport with your customers or managers, your metrics development will be a struggle. Metrics for Shared Services Jeff Zwier

There’s always a way to find out more about what your internal or external stakeholders really need. Ask your internal communications or training department to help you create a survey of potential recipients for your report.

Creating good metrics is a collaborative process – if you don’t already have a good rapport with your customers or managers, your metrics development will be a struggle.

Ways to Start a Dialog with your Reporting Audience Focus groups Performance objective setting / SLAs Budgeting Surveys User communities / forums Reactions to industry benchmarks or commonly referenced research Account managers / client engagement professionals Metrics for Shared Services Jeff Zwier

Focus groups

Performance objective setting / SLAs

Budgeting

Surveys

User communities / forums

Reactions to industry benchmarks or commonly referenced research

Account managers / client engagement professionals

Designing Your Metrics: Best Practices Guiding principles that will help you create the right metrics for the right objectives: Focus on information , not data Isolate processes to select the right level of analysis for your metric Resist the temptation select metrics based upon business intelligence tooling requirements or ‘instant dashboard’ solutions Select metrics that have clearly defined inputs, outputs and impacts Set rating criteria based upon the impact of a metric hitting a certain value, not historic trends Metrics for Shared Services Jeff Zwier

Guiding principles that will help you create the right metrics for the right objectives:

Focus on information , not data

Isolate processes to select the right level of analysis for your metric

Resist the temptation select metrics based upon business intelligence tooling requirements or ‘instant dashboard’ solutions

Select metrics that have clearly defined inputs, outputs and impacts

Set rating criteria based upon the impact of a metric hitting a certain value, not historic trends

Data versus Information Data The operational details that collectively describe the activities of your service. Information Metrics that describe the data you have available with the context necessary to make good decisions about what your service has been doing. Metrics for Shared Services Jeff Zwier

Data

The operational details that collectively describe the activities of your service.

Information

Metrics that describe the data you have available with the context necessary to make good decisions about what your service has been doing.

In Other Words. . . Remember: Metrics for Shared Services Jeff Zwier ACTIVITY Does not equal ACHIEVEMENT

Remember:

Isolate your Process to Find the Right Metrics Measure within processes to avoid mixing levels of detail or introducing intervening variables. Avoid metrics that draw data from across processes unless you are creating executive reporting. Is there a single cause of a metric’s value moving in a positive or negative direction? Metrics for Shared Services Jeff Zwier

Measure within processes to avoid mixing levels of detail or introducing intervening variables.

Avoid metrics that draw data from across processes unless you are creating executive reporting.

Is there a single cause of a metric’s value moving in a positive or negative direction?

Avoid Tool-specific Metrics Would you change the planned layout of your home in order to take advantage of using a particular hammer? Metrics for Shared Services Jeff Zwier

Would you change the planned layout of your home in order to take advantage of using a particular hammer?

Inputs, Outputs and Impacts: Use “IOI” for Higher ROI Inputs Clearly defined, objective and stable – both over time and across actors Outputs Predictable based upon variations of inputs plus the environment in general Impacts What real change happens to the business (the bottom line, availability, or other factors) when the value of a metric moves? Metrics for Shared Services Jeff Zwier

Inputs

Clearly defined, objective and stable – both over time and across actors

Outputs

Predictable based upon variations of inputs plus the environment in general

Impacts

What real change happens to the business (the bottom line, availability, or other factors) when the value of a metric moves?

Setting Rating Criteria Popular Rating Schemes Red/Amber/Green Report Cards (A, B, C, D, F) Percentage of Perfection (0-100%) How do you determine your rating thresholds? Metrics for Shared Services Jeff Zwier

Popular Rating Schemes

Red/Amber/Green

Report Cards

(A, B, C, D, F)

Percentage of Perfection

(0-100%)

How do you determine your rating thresholds?

Setting Rating Criteria (2) History is not often a good baseline for future performance measurement Look for objective impacts in order to determine what “red” or “green” status should be Stay quantitative Presence or absence Volumes, variable costs Losses, gains, rejections Metrics for Shared Services Jeff Zwier "History is more or less bunk. It's tradition. We don't want tradition. We want to live in the present, and the only history that is worth a tinker's damn is the history that we make today." (Henry Ford, quoted in the Chicago Tribune, 1916). TRAP: Don’t use history to set the standard for future performance

History is not often a good baseline for future performance measurement

Look for objective impacts in order to determine what “red” or “green” status should be

Stay quantitative

Presence or absence

Volumes, variable costs

Losses, gains, rejections

Visualization and Presentation Dashboards One to three pages of discrete, clearly defined indicators. Scorecards Balanced Scorecard summaries across defined performance dimensions. Reports Operational detail designed for comprehensive views of service data. Metrics for Shared Services Jeff Zwier

Dashboards

One to three pages of discrete, clearly defined indicators.

Scorecards

Balanced Scorecard summaries across defined performance dimensions.

Reports

Operational detail designed for comprehensive views of service data.

Dashboards Dashboards provide indicators, gauges and simple charts to help senior leaders make strategic decisions Design principle: Simple is better! Use your car as a model Make most critical information most prominent Many good (and exceptionally bad) examples to choose from online Can often be automatically generated from business intelligence tool platforms. Metrics for Shared Services Jeff Zwier

Dashboards provide indicators, gauges and simple charts to help senior leaders make strategic decisions

Design principle: Simple is better!

Use your car as a model

Make most critical information most prominent

Many good (and exceptionally bad) examples to choose from online

Can often be automatically generated from business intelligence tool platforms.

A Typical Corporate Services Dashboard Metrics for Shared Services Jeff Zwier

What your COO Would Like to See Metrics for Shared Services Jeff Zwier

Dashboard Examples Metrics for Shared Services Jeff Zwier

The Balanced Scorecard Completely focused on outcomes (or as Jeff says, impacts) Management system with integrated measurement A fundamental change in operational management approach Far beyond simply defining your measurement scheme Not for the faint of heart Provides highly effective feedback loop when designed correctly Metrics for Shared Services Jeff Zwier Source: © 1998 Balanced Scorecard Institute www.balancedscorecard.org Used with permission.

Completely focused on outcomes (or as Jeff says, impacts)

Management system with integrated measurement

A fundamental change in operational management approach

Far beyond simply defining your measurement scheme

Not for the faint of heart

Provides highly effective feedback loop when designed correctly

Traditional Reports Helpful for tactical reporting, operational effectiveness analysis Not the best solution for changing behavior Common reporting traps ‘ Executive Summary’ Often mistaken for service marketing tools Data density Jargon Produced by subject matter experts, rather than communicators Metrics for Shared Services Jeff Zwier

Helpful for tactical reporting, operational effectiveness analysis

Not the best solution for changing behavior

Common reporting traps

‘ Executive Summary’

Often mistaken for service marketing tools

Data density

Jargon

Produced by subject matter experts, rather than communicators

Using Dashboards, Scorecards and Reports Metrics for Shared Services Jeff Zwier If you want to. . . Then consider. . . … steer enterprise-level or CXO decision making, direct investment, or generally demonstrate value … executive communication tools such as dashboards, monthly update presentations. … provide a ‘reality check’ for your shared service management team to guide efficient and effective operations … balanced scorecard, guiding principle tables, operational process descriptions with progress indicators. … create a snapshot of performance for use in projects or long term analytics … traditional tactical or operations reporting formats.

Resources: For More Information Dashboard Designs and Data Visualization The Dashboard Spy www.dashboardspy.com Instant Cognition Blog http://blog.instantcognition.com/category/visualization/ Edward Tufte Q&A Forums http://www.edwardtufte.com/bboard/q-and-a?topic_id=1 Reporting and Metrics Article on Reporting for Shared Services (Shared Services Network News) www.jeffzwier.com/articles Techweb article on KPI development http://www.intelligententerprise.com/showArticle.jhtml?articleID=51201364 Balanced Scorecard What is the Balanced Scorecard? http://www.balancedscorecard.org/basics/bsc1.html Metrics for Shared Services Jeff Zwier

Dashboard Designs and Data Visualization

The Dashboard Spy

www.dashboardspy.com

Instant Cognition Blog

http://blog.instantcognition.com/category/visualization/

Edward Tufte Q&A Forums

http://www.edwardtufte.com/bboard/q-and-a?topic_id=1

Reporting and Metrics

Article on Reporting for Shared Services (Shared Services Network News)

www.jeffzwier.com/articles

Techweb article on KPI development

http://www.intelligententerprise.com/showArticle.jhtml?articleID=51201364

Balanced Scorecard

What is the Balanced Scorecard?

http://www.balancedscorecard.org/basics/bsc1.html

Developing Metrics for Financial Shared Services: Best Practices, Tips and Traps Jeff Zwier Manager IS Communications, Team Lead CISO Audit & Metrics Analysis ABN AMRO Services IT Jeff Zwier jeff @zwier.net