Using A Balanced Scorecard For An IT Department -- The Secret To Know…

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You are a Lieutenant in Napoleon's army. You are a part of the elite group of technical experts known as the Scientific and Artistic CommissionNobody had been able to read the Ancient Egyptian hieroglyphs for over 1,000 years. You spotted a stone that had been used to build a part of the wall of the fort that you were repairing. There are 3 sets of writing on the same stone: one in the unreadable classic Egyptian hieroglyphs, the second in Demotic which was a later form of Egyptian longhand writing, and the final in Greek. You can read Greek and you quickly realize that the same message has been inscribed on the stone in all three languages. This stone, which is to become known as the Rosetta Stone, will be the key that will be used to unlock how to read all Egyptian hieroglyphs.

Just like the ancient Egyptians, IT has a communication problem with the rest of the company – they don’t speak our language.The biggest challenge that IT departments are facing today: the everyone believes that the IT department is slow and that we cost too much. You don't so much have to change how they interact with you, but rather how you interact with them. The Balanced Scorecards can solve an IT department’s comm. problem -- you'll look just like the rest of the company.A Balanced Scorecard allows an IT department to share its strategy and its performance with the outside world.The Balanced Scorecard way of measuring performance has really caught on. It has been adopted by 1/2 of the Fortune 1000 firms.By using the balanced scorecard, an IT department can adopt the vocabulary and the focus that the rest of the company uses and this can break down communication walls.

Whenever someone shows up with a new process, they always like to present it as a flowchart or a neat graphic of some sort. The balanced scorecard is a little to practical for all of that fancy showman stuff. Instead, considering that what we're trying to do is to create a way to communicate the value of the IT department to the rest of the company, I've decided that the best way to think about the balanced scorecard is to view it as being a kind of recipe. Anyone hungry? <animation> Every recipe requires that you start with some ingredients [ask audience what to do with ingredients]You also need some instruction on what to do with these raw ingredients in order to transform them into the final product – biscuits!It turns out that Balanced Scorecard is a recipe for creating a way to improve your IT department.

Where should we start? Every recipe starts in the same place: you collect the raw ingredients.<animation> The balanced scorecard recipe requires 5 ingredients.Sponsorship from your senior management is critical to the success of any Balanced scorecard implementation program.Once we have our raw ingredients, we next need to have some directions on how to prepare a balanced scorecard. It turns out that there are 10 steps in this recipe.(Animation Slide 5: How To Create A Balanced Scorecard For Your IT Department)The purpose of your assessment of your IT department is pretty straightforward. You need to come up with answers to three simple questions.

A recipe tells the cook what is needed and what has to be done. Take the time to read it before you start in order to prevent mistakes.Is IT trying to get the rest of the company to talk like it does?During your analysis determine if IT uses phrases like "up time" and "servers" instead of "bottom line" and "return on investment".Does everyone in IT understand exactly what the company is in business for and is trying to accomplish this year?Your assessment needs to reveal if the folks in the IT department really understand what Sr. management is sayingthe strategy is.IT departments always have a lot of projects going on and are busy planning to do even more things in the future.You need to determine if everything that the IT department is doing really relates to what the company is trying to accomplish.

Sifting the flour is necessary because otherwise it will clump up and the biscuits will be lumpy. Creating an IT strategy is important because otherwise everyone will create their own individual strategy.The second step in our recipe to create a balanced scorecard is to create a strategy for the IT department.Why do IT depts do such a lousy job of executing their strategy.?What is a strategy anyway? An IT department's strategy is simply a hypothesis, a guess, developed by its creators. Having an IT strategy is not enough. You also have to be able to execute that strategy and this is where IT departments fall down. IT departments announce what they are going to accomplish at the beginning of the year and then by the end of the year those grand goals had been all but forgotten.The very smart people who study why IT departments have such a hard time executing their strategy have identified four reasons why IT departments seem to fail when it comes to strategy execution.

Biscuits require kosher salt, not table salt. Get this wrong and you’ll have salty biscuits. Too much of these strategy execution faults will leave an IT department with a bad taste in it’s mouth. Reason #1: All too often many IT employees simply don't know what the IT department is trying to accomplish. Reason #2: Your IT staff may not be motivated to help the IT department execute its strategy. <use Nortel lines of code example>Reason #3: IT departments hinder their ability to execute their strategy when they create their budget and their strategy separately. Reason #4: We end up shooting ourselves in our strategy execution foot simply by what we spend our time talking about: financial issues. None of these things by itself is impossible for any IT department to do. Where the real challenge comes in is when you try to do all four of them at the same time. This is where the Balanced Scorecard can help an IT department out.

An important part of making biscuits is adding the baking soda. Baking sofa instantly reacts with moisture and starts to create gas bubbles to cause the dough to rise and change. 4 different Perspectives makes the IT department's strategy clearer. (1) the customer persp, (2) the internal process persp, (3) the employee learning & growth persp, and (4) the financial persp.Customer perspective. For an IT department, your "customers" are really other departments within your company. Who are our target departments that we serve?What is our value proposition in serving them?What do these departments expect or demand from us?Internal processes are how any IT department accomplishes anything. Employee learning and growth perspective: you will discover gaps between what your people can do Financial perspective: This is how we'll be able to tell if our strategy execution is leading to improved bottom-line results

Biscuits contain baking powder which creates gas only after it’s exposed to heat. Only after creating the scorecard components can you transform them into a balanced scorecard.Create a balanced scorecard by transforming your IT department's strategy into (1) objectives, (2) measures, (3) targets, and (4) initiatives in each of the four Scorecard perspectives. A balanced scorecard translates the vague terms that show up in every IT department's mission statement such as "superior service" into something that we can all get our hands around like "95% on time delivery of IT projects to department customers".A balanced scorecard decodes an IT department's mission, values, vision, and strategy into performance objectives and measures in each of the four scorecard perspectivesThe real power of the balanced scorecard comes from its ability to create a new language of measurement that guides each IT employee's actions towards the achievement of your stated direction.

A key ingredients in biscuits is buttermilk. Buttermilk can taste bitter and the face that you’d make if you tasted it is the same face that most of us make when we hear the words mission stmt.Our discussion of objectives for your IT department needs to start with the department's mission statement. Mission statements may be the most misused tool in business today. Do we even know what a good mission statement looks like? A mission statement defines the core purpose of an IT department – why it exists.It turns out the people who study mission statements have discovered that a good mission statement has three characteristics that make it stand out: It inspires changeIt is long-term in natureIt is easily understood and communicatedRemember that just because the company has a mission statement, doesn’t mean that the IT department doesn’t need it own. Create a mission statement that means something to everyone in IT.

Mixing the dry biscuit ingredients is a necessity in order to make sure that you distribute everything. Mixing the ingredients is just one step towards realizing your vision of delicious biscuits. What our companies generally put forward as a vision statement always seems to be vague and unrelated to what we are actually working on from day to day.A vision defines where the department wants to go in the future.The vision is the transition from the unwavering mission and core values to the dynamic world of strategy. A vision statement provides a word picture of what the department ultimately wants to become in 5, 10, 15, 20 years. The vision statement must not be abstract – it must create as much of a concrete picture of the desired state as possible. A vision statement needs to be concise. It's going to also have to be feasible and inspirational. When IT departments take the time to create a vision, they rarely know what to do with it once it exists. By itself a vision is not going to do anybody any good. It's going to take the balanced scorecard to translate your vision into reality.

One of the secret ingredients in biscuits is lard. You have to freeze it so that you can grate it into fine pieces. It’s the individual pieces of lard that make a biscuit so light and fluffy. Individual values can make an IT department be great.The concept of "values" seems sorta old fashioned doesn't it? The answer to this is yes and no. Yes, the idea of values has been around for a long time, and no – they haven't gone out of style. So just exactly what are values? Values are the timeless principals that guide an IT department. It turns out that values represent how you are going to achieve your mission. They represent the deeply held beliefs within the IT department and are represented by the day-to-day behavior of all IT employees. Values are established independent of the current environment, competitive requirements, or management fads. IT departments tend to have a small number of core values that reflect their very essence. These values don't change over time.

The great taste of a biscuit comes from the butter that gets frozen and then grated into the biscuits. Forget this part and you won’t be able to create a great biscuit. Forget your strategy and an IT department will fail.Your strategy needs to describe how you are going to move the IT department into the future towards your vision.The key to your strategy needs to be that you identify a set of activities that are different from everyone else. You're going to have to make a series of tradeoffs. Ultimately your strategy is going to have to fit with your department. Make sure that you collect various thought processes from the best minds in the department and make sure that your final strategy has continuity with what you have been doing. Most IT departments have a strategy. They just don't know how to execute it successfully. The balanced scorecard provides a framework for an organization to move from creating its strategy to actually doing it.

Grating butter is easy until it sticks to the bottom of the grate. Now the cook has a problem that is going to require a solution. Using the 4 strategy perspectives to execute a strategy requires a solution also.The third step in our recipe for creating a balanced scorecard requires us to create objectives. The balanced scorecard is all about making your IT department more successful. In order to make this happen, you need to have objectives that everyone in the department is aware of and working towards. Since the balanced scorecard uses four different perspectives to look at your IT department's strategy, this means that you're going to use the department's mission, vision, and values to create four different sets of objectives.

Combining the wet and dry ingredients has to be done carefully. Note that the secret ingredient, bacon grease is being added. Objectives are the secret ingredient that makes the balanced scorecard work.Financial persp: The IT department's goal is to provide more services while spending less. Focus on both revenue and productivity. Customer persp.: first ask yourself two questions: who are the IT department's internal customers and what is your value proposition in serving them? IT departments fail because they try to be all things to all departmentsInternal process persp: how will the IT department fulfill our UVP displayed in the customer perspective and achieve the objectives set in the financial perspective? Employee learning & growth persp: These employee related objectives are the ones that will enable all of the other perspectives.I recommend that you have no more than 15 objectives. This keeps things manageable and allows you to better focus your attention.

One of the most important parts of creating the biscuits is when you transfer the raw dough from the mixing bowl to the kneading surface. This is what will transform raw dough into biscuits. The balanced scorecard requires a strategy map to transform your strategy into results.The fourth step in our recipe to create a balanced scorecard is to create a strategy map. When the balanced scorecard system was originally invented over 20 years ago, it was designed to be a simple management tool. Its popularity and success has allowed it to continue to grow and evolve to meet more needs. In the early years, it transitioned to become a strategic management tool. It has gone on and developed the ability to communicate strategy throughout an IT department. It does this by using strategy maps.

One of the biggest challenges with moving the dough out of the mixing bowl is that its very sticky. If you don’t have a strategy you’ll lose a lot of your dough in this step. The strategy map makes sure that the balanced scorecard doesn’t miss any part of the strategy.The heart of the balanced scorecard system is the strategy map. This is where everything comes together – the objectives, the performance measures, and the metrics. A strategy map is a one-page graphical representation of what you must do well in each of the four perspectives in order to successfully execute your strategy. Objectives define what you must do well. Linking the objectives together allows you to tell your strategic story in a compelling way that can be easily understood and embraced by all employees.

Kneading the dough is an important part of the process. This distributes the gas bubbles throughout the dough. A strategy map is the way that the IT department strategy can get distributed.This strategy map stuff sounds complicated. Why do it? It turns out that studies have shown that fewer than 10% of IT departments are able to execute their strategies. One of the reasons that this is so hard to do is because of who is carrying out the IT department's strategy: the IT workers. The problem comes about when you realize that far too many of these workers don't know what the department's strategy is. A strategy map transforms an IT department's strategy into crystal-clear objectives that must be done if the department wants to succeed and differentiate itself from its competition. The strategy map can act as an early warning system for an IT department's strategy – signaling trouble when indicators suggest a problem with any element of the plan.

One of the most enjoyable steps in creating biscuits is cutting out the biscuits. However, be careful – don’t twist while you are cutting! Creating performance measures is what can make a strategy map seem “real”.The next step in our recipe for creating a balanced scorecard is to create performance measures for each objective.In order to make the balanced scorecard work, the IT department needs to have performance measures that will allow it identify the specific things that it has to perform well if it is to implement its IT strategy successfully. Performance Measures for the balanced scorecard are derived from the objectives appearing on the strategy map.

Problem: Funding had been cut for 3 years in a row even as responsibilities grew. Clearly the University didn’t value the IT department. IT leadership turn-over had resulted in a confusing mix of strategies and communication programs.The university’s IT department is organized in three major divisions.IT Service Center has primary responsibility for customer service contact: IT Call Center, Desktop Support, AV ServicesInfrastructure Services is responsible for engineering and operations of network, systems, enterprise applications and web services: Network/Systems Operation Center, Systems Engineering, Network Engineering, Web/Applications EngineeringeMediaServices provides media conversion/design, faculty development and instructional design services supporting the academic community: Media Services, Instructional Design

Adding heat is what will transform raw dough into biscuits. Adding employee measures will transform staff into strategy executors. Creating performance measures for the balance scorecard's employee learning & growth perspective can be hard to do. The way that you're going to make your IT department better is by setting the right performance goals for your employees. This means that you're going to have to come up with ways to do such things as using core competencies to measure skill development. You're going to have to use personal development planning to boost competence holders. Ultimately it all comes down to finding ways to measure employee productivity.University Learning & Growth: to achieve our goals, how do we sustain our ability to change and improve?Anticipation is the total number of unplanned outages in a monthEffectiveness is the number of incidents that are closed on first contact. First contact resolution (FCR) is expressed as a percentage of total incidents closed in a month

Checking on the biscuits while they cook is a good way to prevent problems. Measures for internal processes prevent IT dept problems.Operations mgmt measures: Basic day-to-day processes necessary to keep the IT department operating. Focus on options that are critical to tracking execution of processes that drive value.Customer mgmt measures: Include such processes as selecting new departments to serve, understanding your department customer's needs, and deepening your relationship with them.Innovation: The process of creating and supplying captivating new products and services to distance yourself from the completion. Identify the unique processes the drive the customer value proposition in your IT department and define the specific measures that tell your story.University Internal Processes: to satisfy our customersChange is the total number of approved Requests for Change, or RFCs, that occur in a month.Productivity is the total number of Incidents resolved/completed (or closed) by IT Services in a month. Of particular interest is the average number of days required to close an Incident.

Is there any greater joy than taking piping hot biscuits out of the oven? Hopefully what makes your IT department happy is when you can measure how your customer views the department.When creating performance measures for the customer perspective, understand how the IT department wants to distinguish itself. Generally there are three different ways to go about doing this: Operational excellenceIT product or service leadershipCustomer intimacyUniversity Customer: to achieve our missionAvailability is the total time during a month that networks and computer systems are operational, exclusive of planned maintenance. Availability is expressed as a percentage of available minutes during a 24-hour period over a 30-day7 month (available minutes ÷ 43,200 minutes). The dial gauge shows current month average network and computer system availability. The graphs shows network and system availability performance over the past 12-months.Satisfaction is the total number of “Excellent” and “Good” ratings received in a month expressed as a percentage of total responses. The dial gauge shows current month satisfaction. The graph shows monthly satisfaction performance over the past 12-months.

Biscuits are great by themselves, but they are even better when you have both butter and honey. Financial perspective measure s make a balanced scorecard even better.One of the key ways that an IT department can measure how it’s doing financially is to determine if it is staying within it’s budget.Generally IT department revenue growth comes from expansion – but be careful! Make sure to measure the value returned from any expansion of the IT department.Better ways include enhancing productivity. This can be measured in two ways: reducing costs and boosting how IT assets are being utilized.Never over complicate a measurement decision. Improve asset utilization = monitor asset utilization University Financial: to be fiscally accountable and agileBreakeven is the forecasted year-end surplus or deficit expressed as a percentage of total IT Services funding.Reallocationis the dollar amount of budget that is shifted monthly.

The correct way to add condiments to a biscuit is to put button on one half and then put honey on the other before combining. When you combine all of your metrics you’ll have a complete balanced scorecard.The next step in your balanced scorecard recipe is to prioritize your IT initiatives – not all projects are created equally.Our problem is that we're trying to do too much and we just don't seem to be able to wrap any one project up..You can start doing this by performing an inventory of all initiatives that are taking place in the IT department right now.

The last step in our balanced scorecard recipe s also the one thing that you'll find yourself doing very little of: change. Every balanced scorecard program will need to be changed over time – the environment that it is operating in will be changing and so the program will need to change also. If you've done the up-front work correctly, then you won't have to make major changes. However, you will find yourself making a series of smaller changes as you attempt to fine tune your balanced scorecard program. What you'll probably end up doing is changing things such as how you choose to calculate various performance measure results and how often you collect your metric information.These should not be considered to be major changes. If you do start to think about making major changes such as how your strategy map is organized or what your objectives are, I would suggest that you hold off for a while. What I've discovered with my clients is that all too often they'll want to make a change; however, after some time has passed they'll realize that their initial gut decision on things such as objectives was correct and the desire to make changes will go away.

Using A Balanced Scorecard For An IT Department -- The Secret To Knowing Where You Are Going

Blue Elephant Consulting

Using A Balanced Scorecard For An IT Department -- The Secret To Knowing Where You Are Going