The document discusses building an IT Balanced Scorecard to measure corporate IT performance. It involves 4 phases: 1) presenting the concept to management, 2) establishing a project team, 3) data gathering on strategy and metrics, 4) developing the specific scorecard. The scorecard includes perspectives on users, corporate contribution, operational excellence, and future orientation. Key steps are developing cause-and-effect relationships, linking measures to strategy and financial outcomes, and using it as a strategic management system.

1. Measuring and Improving
Corporate IT Performance
through the Balanced Scorecard
(Part 1)

2. A GENERIC IT BALANCED SCORECARD
BUILDING AN IT BALANCED SCORECARD
Contents

5.  Kaplan and Norton developed the balanced scorecard in the
early 90's
 their idea: traditional financial measures should be supplemented
with measures concerning customer satisfaction, internal processes,
and the ability to innovate
 these additional measures should assure future financial
results and drive the organization towards its strategic goals
while keeping all four perspectives in balance
 they propose a three layered structure for the four perspectives:
- mission: "to become our customers' most preferred supplier"
- objectives: "to provide our customers with new products"
- measures: "percentage of turnover generated by new products"
 their BSC can be translated into the more specific needs of an
IT function
The Balanced Scorecard

6. The Balanced Scorecard
Financial Perspective
Objectives Measures
Internal Business Process
Perspective
ObjectivesMeasures
Customer Perspective
Objectives Measures
Learning and Growth
Perspective
ObjectivesMeasures
How do we look to
shareholders ?
How do customers
see us ?
What must we
excel at ?
Can we continue to
improve and create value ?
Source: Robert S. Kaplan and David P. Norton, 1994

7. Customer Perspective
How do the customers view
the company?
Mission
To deliver the best added
value to the customer
Objectives
 new products
 partnership with customer
Measures
 % of new products of
turnover
 joint development efforts
The Balanced Scorecard
Financial Perspective
How do the shareholders view
the company?
Mission
Assure added value for
shareholders both in the short
and long term
Objectives
 survive
 prosper
Measures
 ROI and cash flow
 market share

8. Internal Business Process
Perspective
How can the company improve its internal
operations to improve the service to the
customers?
Mission
Efficiently produce and deliver products
and services
Objectives
 excellence in production
 excellence in deliveries
Measures
 cost price per unit
 average throughput time for orders
The Balanced Scorecard
Learning and Growth Perspective
What should the company do to remain
successful in the future?
Mission
Innovate, improve and learn to the
maximum
Objectives
 technological leadership
 product focus
Measures
 time necessary to develop a new
generation of products
 number of old products to number of
new products

9. A generic IT Balanced Scorecard
Corporate
Contribution
Operational
Excellence
Future
Orientation
User
Orientation

10. A generic IT Balanced Scorecard
User Orientation
How do the users view
the IT department?
Corporate Contribution
How does management
view the IT department?
Operational Excellence
How effective and efficient
are the IT processes?
Future Orientation
Is IT positioned to meet
future challenges?

11. User Orientation
How do the users view
the IT department?
Mission
To be the preferred supplier
of IS and to exploit business
opportunities maximally
through IT
Objectives
 preferred supplier
 partnership with users
 user satisfaction
A generic IT Balanced Scorecard
Corporate Contribution
How does management view
the IT department?
Mission
To obtain a reasonable
business contribution
of investments in IT
Objectives
 control of IT expenses
 business value of new
IT projects
 business value of the IT
function

12. A generic IT Balanced Scorecard
Operational Excellence
How effective are the
IT processes?
Mission
Efficiently deliver IT products
and IT services
Objectives
 efficient software development
 efficient computer operations
 efficient help desk function
Future Orientation
Is IT positioned to meet
future challenges
Mission
Develop opportunities to
answer future challenges
Objectives
 permanent training and
education of IT personnel
 expertise of IT personnel
 research into emerging
information technology
 age of application portfolio

13. Control of IT Expenses
 percentage over or under IT budget
 allocation to different budget items
 IT budget as a percentage of turnover
 IT expenses per staff member
Business Value of new IT Projects
 financial evaluation based on ROI, NPV, IRR, PB
 business evaluation based on Information Economics
Business Value of the IT function
 percentage of the development capacity engaged in
strategic projects
 relationship between new developments/infrastructure
investments/replacement investments
A generic IT Balanced Scorecard
Measures for Corporate Contribution

14. A generic IT Balanced Scorecard
Measures for User Orientation
Preferred IT Supplier
 percentage of applications managed by IT
 percentage of applications delivered by IT
Partnership with users
 index of user involvement in generating strat. applications
 index of user involvement in developing new applications
User Satisfaction
 index of user friendliness of applications
 index of user satisfaction

15. A generic IT Balanced Scorecard
Measures for Operational Excellence
Efficient Software Development
 number of lines of code per person per month
 average days late in delivering software
 average unexpected budget increase
 percentage of projects performed within SLA
 percentage of maintenance activities
Efficient Computer Operations
 percentage unavailability of mainframe and network
 response times per category of users
 percentage of jobs done within time
Efficient Help Desk Function
 average answer time of help desk
 percentage of questions answered within time

16. A generic IT Balanced Scorecard
Measures for Future Orientation
Permanent Education of IT Personnel
 number of educational days per person
 educational budget as percentage of total IT budget
Expertise of IT Personnel
 number of years of IT experience per staff member
 age pyramid of IT staff
Research into emerging Technologies
 percentage of IT budget spent on research
Age of the Applications Portfolio
 number of applications per age category

17. 1. presentation of the concept to senior and IT management
2. establishing a project team
3. data-gathering phase where information is collected on:
- corporate and IT strategy
- IT metrics already in use for performance measurement
4. developing the organization-specific IT balanced scorecard
Building an IT Balanced Scorecard
Project phases:

18.  start with a "standardized" model as presented
 apply the Kaplan and Norton principles
 build in cause-and-effect relationships
 include sufficient performance drivers
 linkage to financial measures
 implement the IT balanced scorecard as a
Strategic Management System
 clarify and translate vision and strategy
 link strategy to team and individual goals
 link strategy to resource allocation
 organize strategic feedback
Building an IT Balanced Scorecard
Developing principles:

19. IF
we increase IT employee's motivation (future orientation)
THEN
this will result in better quality of the developed applications
(operational excellence)
THEN
this will meet better user expectations (user orientation)
THEN
will enhance the support of business processes
(business contribution)
Building an IT Balanced Scorecard
Cause-and-Effect Relationships

20. Building an IT Balanced Scorecard
Outcome Measures and Performance Drivers
Outcome measures Performance drives
lines of code per person number of educational days
index of user satisfaction response time of help desk

21. "A failure to convert improved operational performance into
improved financial performance should send executives back to the
drawing
board to rethink the company's strategy or its implementation
plans".
(Kaplan and Norton)
Building an IT Balanced Scorecard
Financial Outcomes

22. Clarify and Translate Vision and Strategy
 align IT and corporate strategy
 clarify cause-and-effect relationships
 build in sufficient performance drivers in order to visualise
how the IT strategy will be achieved
 build in sufficient outcome measures in order to monitor
whether the strategy is successful
 link to financial objectives in order to visualise how IT strategy
is improving the company's financial performance
Building an IT Balanced Scorecard

23. Link Strategy to Resource Allocation
 stretch long term targets
 define long term targets that are realistic
 take strategic initiatives to achieve the stretch targets
 define short term milestones for the IT BSC
 link priority settings for IT investment projects to the IT BSC
Link Strategy to Team and Individual Goals
 communicate the IT BSC to the employeees
 link individual objectives of IT employees to the IT BSC
 link incentive system to the IT BSC measures
Organise Strategic Feedback
 act upon the measurement results
Building an IT Balanced Scorecard