IT Scorecard

1. 1
Senaka Ariyasinghe
21st February 2013
Developing an IT
Scorecard using the
Balanced Scorecard
Approach

2. 2
Agenda
▪ Balanced Scorecard (BSC) Background
▪ BSC components
▪ Business Case and BSC positioning
▪ Strategy Map
▪ Anatomy of an IT Scorecard
▪ Developing an IT Scorecard
▪ Sample Metrics
▪ Summary & conclusion
▪ Q&A

3. 3
Balanced Scorecard (BSC) - background
▪ A profound measurement
and management tool to
transform organisations –
both from business and IT
perspectives
▪ Developed by Kaplan and
Norton in the mid 90s
▪ Successfully adopted by
many global organisations
▪ BSC helps translate strategy
in to action…whilst
communicating it across the
organisations from top to
bottom
Strategy
Action

4. 4
So why use a Balanced Scorecard
approach?
▪ Many organistations tend to use Financial Metrics
(like RoI, RoE etc) to measure company performance
▪ Concentrating solely on Financial metrics can give a
short-term focus for the organisation
Short-term focus: Cutting costs, increasing revenue
Creating long term value: What will be our next “billion dollar”
product and how to get there before the competition?
▪ BSC adds non-financial performance measures to
traditional financial metrics to give managers and
executives a more 'balanced' view of organisational
performance

5. 5
BSC helps align IT with Business
▪ Not all IT investments pay off in the form of
tangible business benefits
▪ Most IT investments are preceded by a
Business Case – however, they are sometimes
flawed due to invalid assumptions
▪ Not many tools available to measure real value
of post-investment benefits thus realised
▪ Post investment, BSC helps articulate
realisable business benefits of IT in an
objective manner
30-year IRR = 7.04%
Business Case
IT
Investment
Decision
NPV = $300mil
IRR = 22%
RoI = 300%
Business Case Balanced Scorecard
Benefits Realisation

6. 6
BSC translates an organisation's strategy
into 4 perspectives
How do we appear to
shareholders?
What business processes
should we excel at?
How do our customers
perceive us?
What should we learn to
grow and prosper?

7. 7
BSC Components – Perspectives, Measures &
Objectives
Financial Perspective Process Perspective
Customer/User Perspective Learning/Development (People)
Perspective
“Financial Performance Metrics” “Efficiency Metrics”
“Knowledge/Innovation Metrics”
“Customer Satisfaction Metrics”
Objectives Measures
Revenue Growth % revenue increase
from new products
Cost Containment % operation & maint.
cost reduction
Objectives Measures
Order-to-Cash cycle
efficiencies
% reduction in cycle
time
Improvement in
product time to market
% reduction in time
Objectives Measures
Improve Customer
Satisfaction
% increase of
customer satisfaction
rating YoY
Customer Retention % sales from repeat
customers
Objectives Measures
Well trained staff % increase in class-
room training
Innovation in IT &
Systems
% increase in IT user
satisfaction

8. 8
Balanced Scorecard Flow-on Effect
Investment in L&D (People) leads to profitable growth
5% growth in staff training…
…will lead to a 3% decrease in
handling errors
…resulting in a 6%
increase In customer
satisfaction
…that will translate into a
10% increase profitability
Learning&Development
Perspective
Process
Perspective
Customer
Perspective
FinancialPerspective

9. 9
Balanced Scorecard – Strategy Map
Trained
ground staff
Improved
Turnaround
Time
Target
Marketing
Trained
Marketing
team
On-Time
Flights
Lowest
Prices
New budget
travelers
Lower
Costs
Increased
Revenue
Improved
Profitability
Learning &
Development
Internal
Customer
Internal
Process
Financial
▪ Strategy Map is used to
visually represent an
organisation’s strategy
across four
perspectives:
▪ Financial
▪ Customer
▪ Internal Processes
▪ Learning &
Development
▪ Strategy Map illustrates
the long-term strategy
adopted by an
organisation to achieve
increased profitability
Strategic Theme: Operating Efficiency
…Strategy Map applied to a
budget airline

10. 10
Developing a Balanced Scorecard (example)
Trained
ground staff
Improved
Turnaround
Time
Target
Marketing
Trained
Marketing
team
On-Time
Flights
Lowest
Prices
New budget
travelers
Lower
Costs
Increased
Revenue
Improved
Profitability
Learning &
Development
Internal
Customer
Internal
Process
Financial
Strategic Theme: Operating Efficiency Objectives Measures Targets
Revenue Growth
Cost reduction
Revenue per
Passenger
2% per year
O&M costs
Increase in
On-time flights
Customer
Satisfaction
On time
arrival rating
% of repeat
customers
3% per year
90% ± 5%
Improved ground
turnaround
Improved ground
staff performance
Formal training &
OTJ training time
20 hrs classroom +
30 hrs buddy time
On ground time <30 mts
On-time departure 95%
5% per year

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So what is an IT (Balanced) Scorecard?
▪ A scorecard used within the IT department
▪ Help senior IS managers understand their
organisation’s performance, and measure it in
a way that supports its business strategy
▪ Helps CIOs better articulate business value of
IT
▪ The IT scorecard is linked to the corporate
scorecard, by ensuring that the measures
used by IT are those that support the
corporate goals

12. 12
Business
BSC
IT
Scorecard
Network
Scorecard
Security
Scorecard
Network
Scorecard
Cascading Scorecards – help align IT strategy with
Business Strategy

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Anatomy of an IT Scorecard
▪ Perspectives
▪ Strategic Objectives
▪ Measures
▪ Targets
▪ Initiatives
Perspectives

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Steps in creating the IT Scorecard
▪ Identify Perspectives
▪ Draw a Strategy Map (optional)
▪ Define the Objectives
▪ Define Measures
▪ Set Targets
▪ Develop Initiatives

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Identifying Perspectives
▪ Perspectives
Views of organisation’s strategy - how IT
is going to support and enable the
business
▪ How many perspectives?
No magic number, but not too many!
Idea is to get a balanced set of
perspectives
▪ Which perspectives?
Use default BSC perspectives: Financial,
Process, Customer/User, Learning &
Development (People)
Or be creative: Green, Quality, Process,
People

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A Strategy Map can help visualize linkages
between perspectives
Trained
IT staff
Improved
IT Response Streamlined
Systems
New Orders
Lower
Costs
Increased
Revenue
Improved
Profitability
Learning &
Development
Customer
Internal
Process
Financial
Faster
Shipments
X functional
Teams

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Defining Objectives
▪ Objectives
Define objectives for each perspective
Use SMART guideline to define objectives
Perspectives Objectives
Financial Reduced costs
Customer/User Increased customer
satisfaction
Process Reduced problem
resolution times
Learning & Development Improved IT Staff
Competencies

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Defining Measures
▪ Measures
Observable parameters used to measure progress toward achieving
objective
Selecting the right measures will determine the success of the
scorecard to a large extent
Perspectives Objectives Measures
Financial Reduced costs % reduction in costs
Customer/User Increased customer
satisfaction
% increase in
customer satisfaction
Process Reduced problem
resolution times
% increase in closed
cases per day
Learning &
Development
Improved IT Staff
Competencies
No of trained staff in
ITIL service
management

19. 19
Example IT Measures
Dimension Description Example IT
Measures
Financial Perspective Measures to indicate
contribution of activities
to the bottom-line
IT project ROI, NPV,
IRR, cost/benefit, TCO,
ABC
Customer Perspective Measures that reflect
factors that really matter
to customers
Customer satisfaction,
Customer complaints
Business Process
Perspective
Measures of what the
company must do
internally to meet
customer expectations
IT process metrics,
project completion rates,
system operational
performance metrics
Learning & Development
Perspective
Measures of the
company’s ability to
improve and learn
IT R&D, New technology
introduction success
rate, training metrics

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Why Metrics & Measures are important
Cisco’s VSEM Framework...
Source: http://www.cisco.com/en/US/services/ps2961/ps2664/collaborative_imperative.pdf
Vision: Communicates a
team’s shared view of
success
Strategy: Represents
important decisions for
where and how to apply
resources to accomplish the
vision
Execution: Outlines critical
initiatives, programs, or
actions that support each
strategy
Metrics: Shows how the
team measures success and
agrees to be held
accountable to the execution
plan

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Defining Targets
▪ Targets
Set realistic target values to measure each objective
Perspectives Objectives Measures Target
Financial Reduced costs % reduction in costs 10%
Customer/User Increased
customer
satisfaction
% increase in customer
satisfaction
5%
Process Reduced
problem
resolution times
% increase in closed
cases per day
20%
Learning &
Development
Improved IT
Staff
Competencies
No of trained staff in
ITIL service
management
10

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Develop Initiatives
▪ Initiatives
Activities/programs that must be initiated to achieve objectives
Perspectives Objectives Measures Target Initiatives
Financial Reduced costs % reduction in costs 10% Communicate cost reduction
initiative
Gain executive sponsorship
Customer/User Increased
customer
satisfaction
% increase in
customer
satisfaction
5% Improve customer survey
system
Process Reduced
problem
resolution
times
% increase in
closed cases per
day
20% Invest in new case management
system
Learning &
Development
Improved IT
Staff
Competencies
No of trained staff
in ITIL service
management
10 Identify ITIL training courses
Obtain budget

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IT Scorecard Example
PBX replacement with IPTel for a hospital
Perspective Strategic
Objective
Measures Target Before After
Financial Cost savings % reduction in maintenance charges 15%
Financial Control IT Budget IT spend as a percent of Revenue 3%
Process Improved
processes will lead
to more innovation,
less fire fighting
% increase in IT-hours spent on new
projects
10
Customer Improved
Customer
Satisfaction (e.g. IT
staff attending to
MAC requests
faster)
% increase in customer staff
satisfaction rating
10%
Customer Improved efficiency
(e.g. due to
extension mobility)
% increase in closed cases per day 5%
Learning Personal
Development of IT
support staff
No of Telephony CCIEs 3
Learning IT Staff Satisfaction
(i.e. opportunity to
learn new
technology)
% increase in IT staff satisfaction
rating
20%

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Other Scorecard Examples
IT Operations Scorecard
ID Strategic Objective Metric Value Target
V1 Manage to the IT budget Actual vs. budget variance 0% 0%
V2 Strategy alignment % of project aligned with a strategic objective 85 90%
V3 Improved efficiencies % of budget allocated to nondiscretionary expense 67 65%
U1 Improved user satisfaction Index of user satisfaction 7.7 7.5/10.0
U2 Improved user satisfaction % of SLAs that meet or exceed targets 95 98%
OE1 Improve release management • Time to provision known good builds 2 1 day
• Percent of systems that match known good builds 80 98%
• Percent of builds that have security sign-off 100 100%
• Number of turns to a known good build 1.1 1.2
OE2 Improve change management • Number of changes authorized per week 8 < 10
• Number of actual changes made per week 5 < 5
• Percent of unauthorized changes 0 0%
• Change success rate 97 100%
• Number of service-affecting outages 0.8 < 1/week
OE3 Improve resolution times • MTTR 0.75 < 1 hour
• MTBF varies by system
FO1 Improve staff effectiveness Billable/utilization rate 92 98%
FO2 Improve staff development Percent of staff with completed personal development plan 88 95%
FO3 Improve teamwork # of documented best practices 15 25/month

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Other Scorecard Examples
IT Project Scorecard

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Other Scorecard Examples
IT Project Scorecard

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Common mistakes in creating IT scorecard
▪ Taking an IT-centric view of IT performance
▪ Lacking business relevance
▪ Selecting measures that don’t matter
▪ Lack of standard metrics definitions
▪ Over-reliance on tools
▪ Lack of drill-down capability hindering interpretation
▪ Too many metrics
Think strategic...yet keep it simple!

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IT scorecard lacking business relevance
IT-centric view of IT
performance

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Summary & Conclusion
▪ BSC – a profound measurement &management tool for the
business
▪ High-level understanding of BSC concepts will help define
the IT scorecard
▪ Select a balanced set of perspectives that closely
represents strategy
▪ Brainstorm and develop objectives and measures!
▪ The selection of the right measures will make or break the
IT scorecard!
▪ Set targets
▪ Develop and execute initiatives

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Additional Reading
Thanks for your time!

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Any Questions?