Most reports to board about the performance of Information Technology group’s performance relate to costs related metrics such as headcounts and expenses. But as the world is changing, topics such as digital business models, process automation and changing skill mix needed to support organisation’s aspirations are becoming more relevant to organisations success. How IT manages the integration of new technologies can help determine the success of the digital strategy. Hence, just relying on the cost related metrics does not provide a reliable indicator of IT performance.
What questions board should be asking?
Boards should be asking the questions that allow management to make better decisions. They ought to be concerned about speed to market, faster product development, platform based delivery models and data analytics. According to McKinsey article [*] boards should be routinely asking the following five questions about IT performance.
- How well does technology enable the core business?
- What value is the business getting from its most important IT projects?
- How long does it take the IT organization to develop and deploy new features and functionality?
- How efficient is IT at rolling out technologies and achieving desired outcomes?
- How strong is our supply of next-generation IT talent?
These questions will enable board to understand how much value IT is creating for the business and how IT capabilities stack up against those of the competitors.
How well does technology enable the core business?
Companies are investing more in digital initiatives to gain critical process and production efficiencies. One of corporate IT’s key objectives should be to facilitate end to end business processes. How well IT implements technologies that allow core business activities to happen is a key consideration. Percent of business processes that have been automated, cycle time reductions enabled and customer satisfaction improvement are some of the metrics that can inform the board.
With such information at hand organisations can approve initiatives that improve automation, reduce cycle times while increasing customer satisfaction.
What value is the business getting from its most important IT projects?
It is critical for the boards to track most important projects and initiatives, and learn whether they are delivering outcomes promised. McKinsey have found that the act of measuring projects benefits can reduce the risk of failures by up to 10%. Board should know the number of projects that have completed on time and on budget as well as measurable business benefits generated.
How long does it take the IT organization to develop and deploy new features and functionality?
Organisations working the digital era need to deliver products and services fast. Online companies can launch new features on their websites several times a day. Amazon can release code every few seconds and roll it back with a single system command.
One metric that can be used is the percentage of groups, within IT, that can deploy “business ready” functionality within four to eight weeks in a secure and reliable and repeatable way. Another measure used by a European bank was to understand the average time a project took from initial funding to first production release. This showed a number of gaps in the approval and software development processes.
How efficient is IT at rolling out technologies and achieving desired outcomes?
Infrastructure operations, applications development and maintenance and security typically consume 90 percent of staffing and spending in a typical IT organisation. So it is important for the boards to understand just what is IT achieving and how efficiently. Looking at productivity, product quality and average costs organisations can learn a lot.
At one travel company, for instance, the board got a clear reading on productivity in the IT organization and product quality by tracking maintenance metrics—for instance, incidents and enhancements reported per software application, help-desk staffer, or call-centre employee.
How strong is our supply of next-generation IT talent?
Talent management in IT is typically a key CIO concern. IT staff are increasingly asked to play roles beyond legacy maintenance into areas such as mobile developments, data analytics, etc. The change in expectations requires new skills and capabilities. It is therefore critical for the CIOs and boards to have a shared understanding of what skills and capabilities IT organisations might need, now and in the future.
Talent development practices can be measured by staff rotation in and out of different roles within the IT group and business units, how effective IT is in promoting from within and how many roles are filled by outside recruitment.
Metrics that include staff satisfaction, how many of the project roles are filled internally are useful in informing the board and management. Regular monitoring of these ensures that IT organisations are making progress.
With the speed of innovations, it is more than likely that individual metrics will change with the time. However, the questions impose discipline on the relationship between the board and the CIO. They also engender productive discussions about IT’s strategic direction and technology initiatives that matter the most.
* Base on an article by Aditya Pande and Christopher Schrey in McKinsey Quarterly.