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Developing Metrics for Financial Shared Services: Best Practices, Tips and Traps

One of the most difficult tasks shared services managers face is measuring and demonstrating value returned to their
organizations. How can you capture your value in terms that are quantifiable, meaningful to your senior management and
useful as performance and analytical tools by your service leadership team? In this presentation, Jeff Zwier shares some of the tips, best practices and pitfalls he has
learned while developing performance and analytical metrics for shared services operating within a global financial services team, including
• Designing metrics that encourage the right responses from senior management
• Types of metrics and when to use each
• Principles of basic performance dashboard design
• Determining the right level of analysis to support performance management and demonstrate cost savings

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Developing Metrics for Financial Shared Services: Best Practices, Tips and Traps

  1. 1. 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
  2. 2. Presentation at a Glance <ul><li>Some Definitions </li></ul><ul><li>Before you Begin </li></ul><ul><li>Getting Started </li></ul><ul><li>Designing your Metrics </li></ul><ul><li>Visualization & Presentation </li></ul><ul><li>Resources </li></ul>Metrics for Shared Services Jeff Zwier
  3. 3. Some Definitions <ul><li>What is a ‘Metric?’ </li></ul><ul><li>Why do we use metrics? </li></ul>Metrics for Shared Services Jeff Zwier
  4. 4. Metrics Design: Before you Begin <ul><li>As financial professionals, we are expected to take a thorough, analytical approach to our work. </li></ul><ul><li>Depending upon your audience and objectives, this expectation can lead to somewhat less than ideal results. </li></ul>Metrics for Shared Services Jeff Zwier
  5. 5. Incredibly detailed, unfocused reporting <ul><li>Most of your stakeholders don’t care about the details of your operations! A cautionary tale. . . </li></ul>Metrics for Shared Services Jeff Zwier
  6. 6. Metrics Design: Before you Begin (2) <ul><li>To avoid the trap: </li></ul><ul><li>Set your reporting objectives </li></ul><ul><li>Focus on the basics </li></ul><ul><li>Define your audience </li></ul><ul><li>Start a dialog </li></ul>Metrics for Shared Services Jeff Zwier
  7. 7. Getting the Right Response: Reporting Objectives and Types of Metrics <ul><li>Metrics can be used for. . . </li></ul><ul><li>Executive Reporting </li></ul><ul><ul><li>steer enterprise-level decision making, direct investment and demonstrate value </li></ul></ul><ul><li>Strategic Reporting </li></ul><ul><ul><li>provide a “reality check” for your shared services on whether it is really delivering its intended value </li></ul></ul><ul><li>Operational Reporting </li></ul><ul><ul><li>measure the performance of your staff when executing key operational processes </li></ul></ul><ul><li>Tactical Reporting </li></ul><ul><ul><li>create a snapshot of performance for use in special projects </li></ul></ul>Metrics for Shared Services Jeff Zwier
  8. 8. Focusing on the Basics <ul><li>Good metrics are: </li></ul><ul><ul><li>Based upon consistent, measurable data </li></ul></ul><ul><ul><li>Inexpensive (in terms of time and money) to collect </li></ul></ul><ul><ul><li>Expressed in unambiguous, quantitative terms that are objectively defined </li></ul></ul><ul><ul><li>“ Actionable” – there are no ‘FYI’ metrics! </li></ul></ul>Metrics for Shared Services Jeff Zwier
  9. 9. Defining your Audience: Questions to Ask <ul><li>Who wants to know? </li></ul><ul><li>What do they want to know? </li></ul><ul><li>How often do they need to know? </li></ul><ul><li>Why do they want to know it? </li></ul><ul><li>What channel is the most effective way to reach your audience? </li></ul><ul><li>What will they do with your information? </li></ul><ul><li>What behavioral change(s) do you expect as a result? </li></ul>Metrics for Shared Services Jeff Zwier
  10. 10. They Don’t Know What they Want, so I Have to Give them Everything <ul><li>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. </li></ul><ul><li>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. </li></ul>Metrics for Shared Services Jeff Zwier
  11. 11. Ways to Start a Dialog with your Reporting Audience <ul><li>Focus groups </li></ul><ul><li>Performance objective setting / SLAs </li></ul><ul><li>Budgeting </li></ul><ul><li>Surveys </li></ul><ul><li>User communities / forums </li></ul><ul><li>Reactions to industry benchmarks or commonly referenced research </li></ul><ul><li>Account managers / client engagement professionals </li></ul>Metrics for Shared Services Jeff Zwier
  12. 12. Designing Your Metrics: Best Practices <ul><li>Guiding principles that will help you create the right metrics for the right objectives: </li></ul><ul><ul><li>Focus on information , not data </li></ul></ul><ul><ul><li>Isolate processes to select the right level of analysis for your metric </li></ul></ul><ul><ul><li>Resist the temptation select metrics based upon business intelligence tooling requirements or ‘instant dashboard’ solutions </li></ul></ul><ul><ul><li>Select metrics that have clearly defined inputs, outputs and impacts </li></ul></ul><ul><ul><li>Set rating criteria based upon the impact of a metric hitting a certain value, not historic trends </li></ul></ul>Metrics for Shared Services Jeff Zwier
  13. 13. Data versus Information <ul><li>Data </li></ul><ul><ul><li>The operational details that collectively describe the activities of your service. </li></ul></ul><ul><li>Information </li></ul><ul><ul><li>Metrics that describe the data you have available with the context necessary to make good decisions about what your service has been doing. </li></ul></ul>Metrics for Shared Services Jeff Zwier
  14. 14. In Other Words. . . <ul><li>Remember: </li></ul>Metrics for Shared Services Jeff Zwier ACTIVITY Does not equal ACHIEVEMENT
  15. 15. Isolate your Process to Find the Right Metrics <ul><li>Measure within processes to avoid mixing levels of detail or introducing intervening variables. </li></ul><ul><ul><li>Avoid metrics that draw data from across processes unless you are creating executive reporting. </li></ul></ul><ul><ul><li>Is there a single cause of a metric’s value moving in a positive or negative direction? </li></ul></ul>Metrics for Shared Services Jeff Zwier
  16. 16. Avoid Tool-specific Metrics <ul><li>Would you change the planned layout of your home in order to take advantage of using a particular hammer? </li></ul>Metrics for Shared Services Jeff Zwier
  17. 17. Inputs, Outputs and Impacts: Use “IOI” for Higher ROI <ul><li>Inputs </li></ul><ul><ul><li>Clearly defined, objective and stable – both over time and across actors </li></ul></ul><ul><li>Outputs </li></ul><ul><ul><li>Predictable based upon variations of inputs plus the environment in general </li></ul></ul><ul><li>Impacts </li></ul><ul><ul><li>What real change happens to the business (the bottom line, availability, or other factors) when the value of a metric moves? </li></ul></ul>Metrics for Shared Services Jeff Zwier
  18. 18. Setting Rating Criteria <ul><li>Popular Rating Schemes </li></ul><ul><ul><li>Red/Amber/Green </li></ul></ul><ul><ul><li>Report Cards </li></ul></ul><ul><ul><ul><li>(A, B, C, D, F) </li></ul></ul></ul><ul><ul><li>Percentage of Perfection </li></ul></ul><ul><ul><ul><li>(0-100%) </li></ul></ul></ul><ul><li>How do you determine your rating thresholds? </li></ul>Metrics for Shared Services Jeff Zwier
  19. 19. Setting Rating Criteria (2) <ul><li>History is not often a good baseline for future performance measurement </li></ul><ul><li>Look for objective impacts in order to determine what “red” or “green” status should be </li></ul><ul><li>Stay quantitative </li></ul><ul><ul><li>Presence or absence </li></ul></ul><ul><ul><li>Volumes, variable costs </li></ul></ul><ul><ul><li>Losses, gains, rejections </li></ul></ul>Metrics for Shared Services Jeff Zwier &quot;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.&quot; (Henry Ford, quoted in the Chicago Tribune, 1916). TRAP: Don’t use history to set the standard for future performance
  20. 20. Visualization and Presentation <ul><li>Dashboards </li></ul><ul><ul><li>One to three pages of discrete, clearly defined indicators. </li></ul></ul><ul><li>Scorecards </li></ul><ul><ul><li>Balanced Scorecard summaries across defined performance dimensions. </li></ul></ul><ul><li>Reports </li></ul><ul><ul><li>Operational detail designed for comprehensive views of service data. </li></ul></ul>Metrics for Shared Services Jeff Zwier
  21. 21. Dashboards <ul><li>Dashboards provide indicators, gauges and simple charts to help senior leaders make strategic decisions </li></ul><ul><ul><li>Design principle: Simple is better! </li></ul></ul><ul><ul><ul><li>Use your car as a model </li></ul></ul></ul><ul><ul><li>Make most critical information most prominent </li></ul></ul><ul><ul><li>Many good (and exceptionally bad) examples to choose from online </li></ul></ul><ul><ul><li>Can often be automatically generated from business intelligence tool platforms. </li></ul></ul>Metrics for Shared Services Jeff Zwier
  22. 22. A Typical Corporate Services Dashboard Metrics for Shared Services Jeff Zwier
  23. 23. What your COO Would Like to See Metrics for Shared Services Jeff Zwier
  24. 24. Dashboard Examples Metrics for Shared Services Jeff Zwier
  25. 25. The Balanced Scorecard <ul><li>Completely focused on outcomes (or as Jeff says, impacts) </li></ul><ul><li>Management system with integrated measurement </li></ul><ul><li>A fundamental change in operational management approach </li></ul><ul><ul><li>Far beyond simply defining your measurement scheme </li></ul></ul><ul><ul><li>Not for the faint of heart </li></ul></ul><ul><li>Provides highly effective feedback loop when designed correctly </li></ul>Metrics for Shared Services Jeff Zwier Source: © 1998 Balanced Scorecard Institute www.balancedscorecard.org Used with permission.
  26. 26. Traditional Reports <ul><li>Helpful for tactical reporting, operational effectiveness analysis </li></ul><ul><li>Not the best solution for changing behavior </li></ul><ul><li>Common reporting traps </li></ul><ul><ul><li>‘ Executive Summary’ </li></ul></ul><ul><ul><li>Often mistaken for service marketing tools </li></ul></ul><ul><ul><li>Data density </li></ul></ul><ul><ul><li>Jargon </li></ul></ul><ul><ul><li>Produced by subject matter experts, rather than communicators </li></ul></ul>Metrics for Shared Services Jeff Zwier
  27. 27. 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.
  28. 28. Resources: For More Information <ul><li>Dashboard Designs and Data Visualization </li></ul><ul><ul><li>The Dashboard Spy </li></ul></ul><ul><ul><ul><li>www.dashboardspy.com </li></ul></ul></ul><ul><ul><li>Instant Cognition Blog </li></ul></ul><ul><ul><ul><li>http://blog.instantcognition.com/category/visualization/ </li></ul></ul></ul><ul><ul><li>Edward Tufte Q&A Forums </li></ul></ul><ul><ul><ul><li>http://www.edwardtufte.com/bboard/q-and-a?topic_id=1 </li></ul></ul></ul><ul><li>Reporting and Metrics </li></ul><ul><ul><li>Article on Reporting for Shared Services (Shared Services Network News) </li></ul></ul><ul><ul><ul><li>www.jeffzwier.com/articles </li></ul></ul></ul><ul><ul><li>Techweb article on KPI development </li></ul></ul><ul><ul><ul><li>http://www.intelligententerprise.com/showArticle.jhtml?articleID=51201364 </li></ul></ul></ul><ul><li>Balanced Scorecard </li></ul><ul><ul><li>What is the Balanced Scorecard? </li></ul></ul><ul><ul><ul><li>http://www.balancedscorecard.org/basics/bsc1.html </li></ul></ul></ul>Metrics for Shared Services Jeff Zwier
  29. 29. 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

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One of the most difficult tasks shared services managers face is measuring and demonstrating value returned to their organizations. How can you capture your value in terms that are quantifiable, meaningful to your senior management and useful as performance and analytical tools by your service leadership team? In this presentation, Jeff Zwier shares some of the tips, best practices and pitfalls he has learned while developing performance and analytical metrics for shared services operating within a global financial services team, including • Designing metrics that encourage the right responses from senior management • Types of metrics and when to use each • Principles of basic performance dashboard design • Determining the right level of analysis to support performance management and demonstrate cost savings

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