Fostering strong engagement with business partners continues to be a challenge for many IT leaders. For periods of time, such as when, a major project is underway or when a strategy is being developed, relationships with business partners can improve, but in matter of months it drops again. CIOs know that effective business relationships are key to their success. What can be done to sustain business engagement in an ongoing way? What techniques do successful CIOs use? Continue reading “Three Tips for a Stronger Business Engagement”
Typical CIO Attitudes to Politics
Many CIOs are scared of organisational politics and think it is a dirty business. Often CIOs come from a technology background and technical expertise is their forte. Politics, and wheeling and dealing are not their comfort zone. They focus their energy on finding the best technology solutions for the business’s problems. The CIO’s daily battles are about up-time service delivery, and project delivery. They shy away from business level politics wherever they can. Many CIOs see politics as a ‘necessary evil’ or some sort of ‘game’ to play. Those who tend to look at politics in this way tend not to be very good at dealing with company politics. Continue reading “Can CIOs avoid politics?”
Often new and aspiring CIOs ask advice on how they can move ahead. Recently, there was an interesting discussion on LinkedIn on this topic. The discussion was started by a newly promoted CIO and a lot of advice was given by many CIOs and ex-CIOs. There are many words of wisdom that are worth sharing, which will not only help CIOs but also aspiring CIOs. Continue reading “A Guide for new CIOs”
When companies announce technology deals both the company and the vendor are keen to describe the deal as a partnership and not a transaction. This is because a partnership sounds more strategic. There is hope that this relationship between the company and the vendor can create some long-lasting value or mutual gain, but the reality soon bites. The relationship soon changes from a partnership to transacting, which often leads to bickering and disappointment. Papers regularly report stories of long-term sourcing or services partnerships that are not renewed or are cut down in size. This makes us wonder if the vendor partnership is simply just a myth. Continue reading “Building effective vendor partnerships”
In 2009 IBM published a study based on interviews of 2,500 CIOs from across the globe. They found:
“The voice of the CIO is being heard in new ways – as CIOs are increasingly recognized as full-fledged members of the senior executive team. Successful CIOs are much more actively engaged in setting strategy, enabling flexibility and change, and solving business problems, not just IT problems”.Many of the CIOs most important goals seemed to clash, e.g. how to be innovative whilst relentlessly cutting costs and how to introduce new services without causing disruption to the business. These conflicting goals make the CIO role a constant juggling act.
The juggling act
The IBM study found that successful CIOs are simultaneously juggling three pairs of activities at any one time.
Figure 1: The Juggling Act (IBM, 2009)
Juggling three roles
By integrating these three roles, visionary but pragmatist, value creator but cost-cutter and collaborative business leader and an inspiring IT leader; the CIO aims to :
- Make innovations real,
- Increase the ROI of IT and
- Expand the business impact.
Let’s look at each of these aims individually.
Making innovations real
Successful CIOs are active members of the executive team. They are always looking for ways in which technology and data can be used to improve products and services or open new market opportunities. They have a wide sphere of influence across the organisation and they encourage IT and business to co-create innovation opportunities. Visionaries also generate excitement from the business through ideas that differentiate the organization from others. They treat information as an asset and seek to leverage information for competitive advantage.
CIOs know that being visionaries and bringing new ideas is only part of the job. Keeping the wheels of the organisation turning smoothly and efficiently is a must. They recognise that faultless service delivery remains at the heart of their credibility and influence. Pragmatic CIOs understand what their organisations do well and effectively use third-party service providers to get results. They collaborate well within IT and with external partners to help make ideas a reality. These CIOs make it easy to work together and deliver results. To stretch as a Pragmatist, a CIO sets goals like achieving higher productivity and helping the organization become more flexible.
Raising ROI of IT
IBM found, “CIOs become Value Creators when they work with the business to enable superior customer experiences”. As more and more business is conducted via electronic means, customer interactions with business become easier and create value for the enterprise. Helping organisations leverage facts to gain new customer insights also leads to value creation opportunities. In some businesses, CIOs are leaders in establishing collaborative relationships with their high value customers / partners and finding ways to improve and enrich customer interactions.
While looking for new ways to create value, CIOs everywhere are continually finding ways to improve efficiency, streamline operations and cut costs where possible. Their mantra is to do more with less. CIOs drive centralisation of services and infrastructure to gain scale benefits. CIOs use standardisation, simplification and automation to cut more costs. Attacking business process inefficiencies and supporting IT solutions is another focus. Relentlessly focusing on cost cutting enables the CIOs to redeploy their departments’ efforts into creating more value opportunities.
Expanding the business impact
Successful CIOs act as true business partners. They work as collaborative business leaders in driving cultural change across organisations. “I help business leaders figure out what they want to do with technology, then I work on how to deliver it,” said a Defence and Security CIO in the United States. CIOs regularly meet with the board and executives and are fully across key business decisions and challenges. They understand changing future business models and remain alert to rapidly facilitating business model changes with enabling technology.
CIOs understand that while remaining engaged with the business leadership is important, maintaining IT expertise is also critical. They create an environment that helps the organisation to develop and apply IT expertise. CIOs encourage professional staff to learn and develop not only their IT skills but also their business acumen. Furthermore, many CIOs create IT centres of excellence to develop greater IT expertise. These centres can also create business technology innovation opportunities.
CIO profiles in high-growth and low-growth organizations differ
The 2009 IBM CIO study found that the profiles of CIOs who work in low-growth organisations were more like those of IT Managers. They were good at leading IT staff but weak in five other areas. On the other hand, CIOs in medium growth companies had a well-balanced profile across all six dimensions. High-growth company CIO profiles showed less emphasis on IT leadership skills but higher scores on every other dimension.
- An Insightful Visionary and an Able Pragmatist – The Insightful Visionary helps the business explore how technology can drive innovation, while the Able Pragmatist makes it possible to bring creative plans to life.
- A Savvy Value Creator and a Relentless Cost Cutter – The Savvy Value Creator devises better solutions by understanding customers’ needs, while the Relentless Cost Cutter stays vigilant about trimming expenses wherever possible.
- A Collaborative Business Leader and an Inspiring IT Manager – The Collaborative Business Leader thoroughly understands the business and builds strong partnerships internally and externally. The Inspiring IT Manager demonstrates personal IT expertise and advocates deeper skills across the IT organization.
Let’s look at these in detail.
A dozen tips for success
Not every CIO is strong on each one of the six dimensions above. The experiences of over 2,500 CIOs worldwide suggested some key actions to strengthen the areas where CIOs may not be doing enough.
Make innovation real:
- Champion business and technology integration
- Encourage innovation not just in the IT organization but in the broader group as well
- Make working together with IT easy
- Concentrate on core competencies and leverage suppliers where right
Raise the ROI of IT:
- Find way to reach customers in new ways
- Enhance integration between IT and business and transparency
- Standardize and centralize IT systems and technologies to economize
- Keep cost reduction a top priority.
Increase the business impact:
- Know the business well. Present and measure IT in business terms
- Get involved with business peers in non-IT projects
- Lead the IT forces and cultivate truly extraordinary IT talent
- Enhance the data and turn it into usable information for the business
The balancing act
Many CIOs understand the balancing act necessary in their roles and work with goals that seem to be the opposite of each other. In doing so, they show a deep understanding of their role as CIOs and a high level of sophistication. Consequently, these CIOs are able to focus on what matters most in their organisations.
A lot of effort goes into developing sound strategies for performance improvement and getting them endorsed by the board and the executives. Initially there is a flurry of new activities and initiatives. But a few months down the track, day-to-day operations seem to take over and strategy is relegated to the bottom of the pile. The bulk of the organisation continues to do what it did before. As a result, the performance of the organisation remains unchanged.
What is typically missing is the process for turning the broad thrust of a strategy into specific measurable performance goals, and assigning accountability right through the organisation. A balanced scorecard turns a strategic plan from a passive document into marching orders for the troops on a daily basis.
Strategy describes where the organisation now is and where it aspires to be. It also describes the broad initiatives that the organisation plans to take. It may describe key focus areas, process changes or capability-building initiatives or projects that are necessary for the achievement of goals. Strategy execution needs the ability to take a very broad-brush strategy and find, prioritise and carry out the key things that need to be done to put that strategy in practice. A successful execution means that the goals are set, accountability assigned and the results reviewed.
A balanced scorecard (BSC) is a one-page document that outlines an organisation’s key performance goals and indicators (KPIs), usually covering financials, customers, execution and people. These KPIs are driven from the company’s strategic intent. A BSC is critical for a performance-driven organisation as it creates a common view of performance across a range of objectives. For the business, KPIs are the “guiding force” that link strategic goals with day-to-day execution. This allows managers to have a better understanding of how to improve the business. Across and down the organisation, business units and teams then define supporting targets and KPIs, which results in a hierarchy of KPIs cascading down from the corporate strategy.
Why balanced scorecards?
- We all know that ‘what gets measured gets done’. Organisations are faced with multi-dimensioned challenges (e.g. how to improve service and cut costs?). Balanced scorecards cater for many dimensions by allowing for simultaneous focus on multiple performance areas.
- Organisations expect the strategy execution to happen in parallel with the ongoing service delivery. Merely tracking strategy execution progress can result in too much attention on strategy and not enough on service delivery. Different managers also have different accountability for delivery and strategy execution. BSC enable addressing these competing demands in a rational way.
- BSCs also give the ability to assign joint accountability to multiple teams in the areas where joint effort is required to achieve results. Silo behaviours result where managers are held accountable for only the direct performance of their internal processes. External service or customer satisfaction outcomes result from end-to-end process execution. BSC makes this clear and enables teams to be jointly held accountable for the overall outcome.
- In many organisations, scorecards are used only for the senior managers or executives. In fact, scorecards that cascade down many levels of the hierarchy are more effective. Here, the executives’ KPIs are directly linked to the KPIs of their managers and team leaders. There is clearer accountability for results. Cascading KPIs offer better drill down ability, allowing quick diagnosis and action on performance issues.
- For teams lower down the hierarchy, this linkage shows, how they are contributing to the overall performance and achievement of the strategy. This can result in staff believing that “my job matters”.
The goal of metrics is to enable managers to get a complete picture of the performance from multiple perspectives, and hence make wiser long-term decisions. As a management system, balanced scorecards enable regular feedback around both internal processes and external outcomes. Good BSCs capture feedback from the customer (or external) perspective and help analyse it with metrics from the internal processes. This encourages continuous monitoring and improvement by the teams as well as improvement in strategic performance across multiple areas.
Figure 1 – Balanced Scorecard Process
Setting the balanced scorecards is a six-step process. The first step is getting the commitment from the executive sponsor. Strategy mapping then identifies the key performance areas/indicators to focus on. The third step, selection of performance metrics, is at the heart of balanced scorecards. Having the right metrics with well-understood definitions is critical for a successful implementation. Fourthly, it is worth investing time to refine the quality of data used in the measurements and assign responsibilities for data collection to impartial staff. The fifth step, regular review, includes checking the quality and effectiveness of the metrics. The last step is to refine the performance indicators as the performance or strategy changes.
Ten Key Lessons for Balanced Scorecard Implementation
- Scorecards are most effective when they are linked to pay and performance management. Without this link there is little incentive for staff to take KPIs seriously. Top-level sponsorship is needed in order for this to happen.
- Good scorecards are brief; say one page, with around ten measures of what really matters. A business view of performance is more valuable than an internal view. Ideally, the scores should show expected and superior performance levels. Scores weighting should be used to derive the performance ratings.
- Strategy Mapping will show key areas where performance must be lifted. Typically, the areas covered are financials, customers, execution and people.
- Financials cover profits, budgets, return on investment as well as key measures of risk.
- Customers cover areas that are important from a customer perspective. These could include customer satisfaction, growth/ attrition in customer numbers, number of complaints, etc.
- Execution (internal business process or delivery) covers how well the internal processes of the organisation are running in delivering the strategic mission for our customers. It includes key indicators of service delivery, such as service levels, reliability, on-time-performance etc.
- People (learning and growth) covers organisational development and ability. IT is a knowledge-worker organisation. Metrics on ‘learning’, ‘sharing’ and ‘retaining’ knowledge can be used. Metrics can cover talent management, training, turnover, and employee engagement. Some organisations also include “social responsibility”, e.g., volunteering, presentation at industry forums etc in this section.
- Unclear definitions undermine effectiveness. It is worth spending time in creating common definitions of the key measures. Assign data collection responsibility and review data for consistency and quality.
- Avoid seeking perfection with the measures or the scorecard. Measures that are 80% right can still yield valuable performance data. It is important to set up and practice the process of collecting the data, reporting, review and actions than to seek perfection. Focus on getting an acceptable level of quality. An iterative approach works best allowing all participants to learn and refine. It is also important to remember that trends are usually more valuable than absolute values. Similarly, over reliance on tools or data collection automation at the beginning will detract from getting value from the scorecards.
- Meaningful performance results from understanding the desired outcomes and the internal processes that are used to generate these outcomes. Outcomes are measured from the perspective of customers while process metrics are from perspective of process owners. Usually, process metrics are used for teams while outcome measures are used for department/ service managers. Do not confuse output (what we produce) with outcome (what we produce).
- Drill down ability is valuable in analysing performance and improving data quality. Without adequate drill down ability, there will be greater subjectivity in interpreting results, which may result in inappropriate corrective actions being taken.
- Assign shared accountability to common measures such as customer satisfaction, where many teams have to work together to deliver satisfactory service to the customers. Joint responsibility will avoid silo behaviours being rewarded.
- Organisations that openly share the balanced scorecard results and communicate performance (and the challenges) with their teams and peers create greater commitment from their teams. It also helps to show how everyone is contributing to performance and how collective actions can improve the results.
- When planning to cascade scorecards through multiple levels of management in the organisation, it is best to tackle one level at a time and use an iterative approach.
For a detailed discussion and/or information on how you can use balanced scorecards to become a performance-driven organisation, please contact the author.