Towards better IT governance

Introduction

As both business and public sector organisations are becoming increasingly dependent on IT, there is growing recognition that governance of IT is an essential part of the corporate governance. Governance is about who makes the decisions? How they are made and who is accountable for what? While the need for IT governance is accepted, implementing effective IT governance continues to be a challenge.

Many C-level executives still consider IT to be too complex, technical and difficult to govern. IT governance still is perceived as a CIO issue. Alignment between IT and business strategy as well as between IT and business governance remains weak.

This article demystifies the IT governance and provides practical ideas for improvement.

Four “ares” of governance

Governance is about ensuring that the organizations resources are used the right way to create value while managing IT risks. The Val-IT framework from IT Governance institute helps address these challenges. The four “Ares’ are the core of Val-IT framework. This is a sound framework which helps organisations ensure IT efforts are aligned and IT continues to deliver value.

Four "R"s of IT Governance

  1. Are we doing the right things? To quote Peter Drucker: “There is nothing so useless as doing efficiently that which should not be done at all”. This is the question about should we be doing something at all. It ensures strategic alignment between business and IT. Is what we are trying to do fit with the organisations vision and strategy? Is it consistent with the business principles?
  2. Are we doing them the right way? This is the question about architecture and standards. Is what we are doing conform to the architecture and processes?
  3. Are we getting it done well? This is the question about the execution. Do we have the disciplined delivery and change management processes? Do we have the right skilled re sources and are we managing them well? How does our performance measure up to others? Are we effectively managing risks?
  4. Are we getting the benefits? This is a question about realising value from investments in IT /projects.  Are we clear about the benefits? Do we have metrics? Is the accountability for the benefits clearly defined?

These four questions cover the core of Governance, which are Strategic alignment, IT value delivery, IT Risk management, Performance management, and IT Resource Management. When managers at all levels address these questions, IT governance will become part of the culture.

IT Governance Models

There is no one size fits all model for IT governance.  Three common models are based on three decision-making styles within organizations. These are: Centralised, Federated or Decentralised.

 

IT Governance models

Figure 2 – IT Decision making models

  • In the centralised model efficiency and cost control is emphasised over business unit responsiveness. There is greater focus on standards, synergies and economies of scale.
  • In a BU centric (decentralised) model there is greater business ownership and responsiveness but integration and synergies suffer, resulting in likely higher costs.
  • The federated model tries to combine the best features of these two. In the federated model common applications and infrastructure resources are pooled while business units control BU specific applications.

Here are some commonly used IT Governance forums. The above models influence the scope and membership of the IT governance forums.
Business Leadership Council / Executive committee – This is the top-level committee that makes enterprise-wide decisions including approving IT strategic plan and controlling major investments (including projects). Sometimes Ex-co may delegate the IT decisions to IT Council or IT Steering committee. This usually consists of key business executives, CFO and CIO.  They would consider IT policy and investment decisions more deeply than the Ex-co.
IT Leadership council – This group consists of most senior IT leaders across the enterprise.  They focus on decisions such as IT policy, IT Architectures and IT infrastructure.  This is a critical forum in Federated and decentralised models.
IT Architecture Council consisting of key IT and some business leaders who would oversee development of architecture standards, recommend them for endorsement by the Leadership council. This group may also monitor compliance with the architecture standards.
Business-IT relationship managers – These managers bridge the gap between IT and business units and act as two-way communication channel to address and resolve any gaps.

Characteristics of good IT governance

  • IT investments and decisions are assessed in a manner similar to business investments and IT is managed as a strategic asset. This means there is top management participation in key IT decisions. There is board oversight of IT investments and executives are held accountable for realising benefits.
  • IT is essential part of corporate planning and strategic planning. IT understands the business dynamics and contributes to the development of business strategy, which is interlinked to IT strategy. IT and business work together to identify opportunities.
  • Top IT risks are considered within the enterprise risk management framework. Risks such as data protection, IT security and business continuity receive periodic board oversight.
  • IT performance is regularly measured and compared with peers and best practice.
  • How decisions are made and why, is well understood and outcomes are clearly and formally communicated to the stakeholders. Formal exception processes are established and promote transparency as well as allowing organisational learning.

Steps to better governance

Improving governance in organizations is a strategic change process. There is no silver bullet. Governance is not just a new process but it also needs a new mindset and behaviours at senior levels of both IT and business. The established power centres within organizations do not always welcome greater transparency and accountability. Experience suggests that strong support from CEO and CIO and gradual increase in governance maturity usually works better than constant tinkering.

Here are ten steps for improving IT Governance:

  1. Visible and active top management commitment is absolutely critical for the success of any governance initiative. Governance is a disciplined approach. There must be consequences for all the executives for non-compliance.
  2. Treat governance as a change program requiring resources and commitment. It must have visible benefits for it to be considered successful. Also, consider organization’s culture, resources available and capacity for change. Establish credible goals, measure and communicate the benefits.
    If the IT is struggling to deliver reliable service, or have a poor track record of customer service or project delivery; focus the governance efforts for addressing these burning issues rather than going for the lofty goals of strategy alignment and such.
  3. Use recognised frameworks for the governance initiative. There are a number of frameworks like COBIT, ITIL and others. If service management were an issue using ITIL framework would be ideal.  Use knowledgeable experts to help establish a realistic program.
  4. Transparency of decision making and reporting gives governance its potency. Transparency whether it be business cases, standards compliance or project health reports create trust and creates peer pressure to address issues identified or to question unusual decisions.
  5. Create a formal process for handling exceptions. Then report on percent of exceptions and key reasons for these. May be the standard it inappropriate or the enforcement is poor. Openly discuss and address.
  6. Encourage peer group consensus at each governance tier and avoid escalations to higher levels. This will build trust and sense of compromise within the framework of good governance.
  7. Where possible align with the corporate governance mechanisms. Most companies would have risk management, investment management, and crisis or business continuity management mechanisms. Align IT with this where possible. This would accelerate the implementation as well as give it instant credibility. Seek input from internal or external Audit staff in design of the governance framework.
  8. Educate senior management on benefits of IT governance as well as on new technologies and challenges so that they can participate in an informed manner in key technology related decisions. Lack of technological knowledge should not be an excuse for executives not to participate in key technology investment decisions.
  9. Build accountability for benefits realisation in the business case itself. This will encourage active interest in delivery governance.
  10. Avoid clogging the IT steering committee or EX-co with technical or architectural details. Address the technical details at a technical forum and report only on compliance or non-compliance/ risk to the top team. The top team can then focus on ‘is this the right thing to be doing (or investing in)’ rather than ‘how’.

If you want to discuss steps to improve IT governance in your organisations contact me.

Promises! Promises!

Introduction

Beginning of a new year is time for new beginnings. We all make new resolutions, such as, regular exercise, giving up smoking. Over time one finds that these promises just fade away. Politicians too make promises at the beginning of their new terms and the result is the same, many broken promises.

Businesses are no different. Marketing is making promises and commitments, such as, to deliver goods on time or fix a customer problem. Customers value businesses that deliver what they promise. Customers trust increases. Confidence is eroded when businesses are not as seen keeping promises. IT is no different. Without customers basic trust that you will deliver what you promise, nothing else you do matters.

If keeping promises is important, why is it so hard to keep promises?

I have been reading a book called ‘Reliability Rules’ by Price and Schultz. It describes the challenges of Promises Management and how organisations can manage their promises and improve customer satisfaction and build brand. I believe these techniques are vary valuable for IT groups.

Common myths about promising

There are many myths about promising. People like (positive) surprises! Under-promise and over deliver! According to Price and Schultz, these are just that, myths. Customers value consistency over surprise. They want their realistic expectations to be met time and again.  If you always deliver early (surprise) customer may suspect you are over charging as the work is not as much as expected or may change expectations that you will always be early, thus defeating the purpose of under-promising. Continuing to over deliver increases costs. Customer likes the extra service but may not value it appropriately. Soon that would become the new expectation.

Fundamentals of reliability

There are three principles behind the reliability philosophy. These are Promise alignment, Promise clarity and the Moment of truth.

  1. Promise Alignment – Two drivers must be aligned; a) How well promises are made? b) How well they are kept? The challenge is that a lot of attention is given to delivering on the promises rather than on how well they are made in the first place.
  2. Promise Clarity – Promises must be clear both to the people who are carrying them out but also to the receiver or the customer. Promise making is poorly managed in most businesses. As a result employees shy away from making explicit commitments or try to distance them from the promise. (E.g. Rather than saying a problem will be fixed in 3 days, call centre says, I shall notify the Technical support today. This is not a clear promise to the customer).
  3. Moment of Truth – The moment of truth for the promise is when the delivery (or action) is made. At this time the customer evaluates what he thought he was getting against what is actually delivered. When there is lack of clarity about what was promised, it is difficult to confirm that the delivery meets the promise. Any resetting of expectations must happen prior to delivery otherwise disappointment is likely to result.

Six ways promises are broken

Six ways promises are broken
Figure 1 – Six ways promises are broken


There are six ways promises are regularly broken. Only one way relates to poor delivery on a well-made promise. This underscores the importance of improving promise-making processes.

  1. Making Unrealistic promises – Unrealistic promises result from pressure from customer or competition. Customers may have unrealistic expectations. Sometimes the capability does not match expectations. Not challenging this result in unrealistic promises.
  2. Making a promise that is unclear, inaccurate or incomplete – Vague or unclear promises result in two sides having different interpretations of what was promised especially if agreement from the receiver is not obtained.
  3. Making promise by making no promise – Even when no promise is made the customer may draw from their past experience and expect certain outcomes. When these don’t match the performance, dissatisfaction results.
  4. Failing to manage promises when circumstances change – Changes to specifications, or internal peaks may time to time result in delays in delivery. Failing to notify customer and reset expectations leads to broken promises.
  5. The promise is not passed on properly – In large organisations; the person who makes the promise is not always the person responsible for the delivery.  Failure to pass on the promise in a full and timely manner result in broken promises.
  6. A promise well made is simply not done – Even when none of the above failures occur, delivery team may still overlook a detail, fail to test an aspect and the delivery is not made.

Getting promise management right

Price and Schultz identify four focus areas to get the promise management right. These are a) Brand promise, b) Partner reliability chain c) Customer promise management and d) Dependability within. Reviewing these four areas for failures of promise management would identify opportunities to improve.

a)     Brand Promise

Brand promises get made by marketing or by policies (e.g. service standards). An example of brand promise is Volvo, which is known for passenger safety. Brand applies to internal service providers like IT as well. IT policies, service levels, CIO statements and past experience creates a “brand promise”. Generally the team that has to deliver does not make the promise. Over promising can create serious disconnects and repeated over promising results in scepticism within as well as with customers.

  1. Audit the brand promise to understand where the gaps between the promise and delivery are.
  2. Explicitly communicate the ‘true’ promise by customer charters, published service levels etc
  3. Does your delivery organisation understand the brand promise and their role within it? Do they have the tools to meet the promise? Realign job roles as necessary.

b)    Partner reliability chain

Organisations have suppliers, agents, third party service providers and other parties who help deliver the service or the promise. Where partners have poor reliability (track record, quality, customer service) it can have a major impact on delivery.

  1. Establish systems to evaluate partner reliability performance. Key measures such as, ‘delivery in full on time’ or ‘on time, in full on spec’ would identify gaps.
  2. Firm’s interactions with partners (last minute changes, time to pay invoices) can also have an impact on how well they work together. Review how the firm and the partners view themselves and each other, where brand promises align and diverge and what can be done to improve trust (e.g. sharing information, mutual compromise etc)
  3. Include partners in the improvement initiatives. Where partners play a key role in delivery, including them in process improvement initiatives would pay big dividends.

c)     Customer promise management

Customers can cause promise management problems by at times having unrealistic expectations or not fulfilling their side of the transactions (e.g. specifications signed off on time). They may not have a clear understanding of their role or may not have the capability.

  1. Ensure reliable delivery of the “basics”. Get your customers to define what is their basic expectation from your firm/ group in their language (e.g. Easy to deal with, knowledgeable about their business, possess technical expertise etc). Take steps to meet these consistently.
  2. Take charge in managing customer reliability – Some companies are starting with making their customer promises explicit. Don’t assume, get the details of what the customer is going to do sorted in advance. Ensure the customer understands the consequences of the delays/ broken promises by the customer.
  3. Work with customers on change management plans. Define what is the fallback plan, what are the consequences of change. Work with the customers to reset promises.
  4. Customers can be really disorganised they can benefit from your experience in making and delivering reliable promises.

d)    Dependability within

without dependable internal people and processes, an organisation cannot improve reliability. Reliability starts at home.

  1. Is reliability measured or valued inside the organisation? Are leaders walking the talk on reliability? Are you hiring highly reliable people?
  2. Break down the silos – Collaboration between teams and silos is essential to deliver reliably on promises. Cross-functional effort to see how promises get broken and how the teams can work together to address these issues is a start.
  3. Improve promise-making capability and keep track of promises made in some type of a central system.

Impact of lack of reliability is often under estimated. Attention to reliability via promises management is a powerful way for IT groups to create trust and build credibility for them as well as for the organisation.

Developing high potential leaders

Introduction

What differentiates between success and mediocrity in organisations? Studies show that the high performing leaders are the ones most relied upon to drive the business performance in the years to come. Whether it is the delivery of strategic projects, cost stripping, or managing customer relationships, high performing leaders are the difference between success and mediocrity. High performing employees have a disproportionately higher impact on results. This means that identifying and developing future high performers is a critical priority for any organisation. CIOs have a responsibility to find and nurture these star performers in IT organisations.

While it is easier to name current high performers, identifying high potential future leaders (i.e. stars) is not so easy. Further, once identified, developing and retaining potential leaders is another challenge. This article aims to help CIOs develop  strategies to find and develop future IT leaders.

Future leaders will most probably emerge from today’s high performing employees. Current performance is a predictor of future performance. Indeed 93% of the stars are high performers. Some believe the potential depends on innate ability and the right experience. Leadership skills and ambition to succeed are also seen as indicators of potential. CIO Executive Board conducted a major study in 2006, defining a high potential employee as someone who has a 75% chance of being a top quartile performer at the next level (e.g. junior to middle management or middle to senior management). Only about 8% of the employees have a meaningful chance of being a top performer.

The study found that three indicators of high potential are strong ability, engagement and aspiration to succeed.

  • Ability is a combination of innate and learned skills. These include both technical and interpersonal skills as well as the ability to learn new skills and behaviours. Studies have repeatedly shown that the ability to learn from experience is what differentiates successful from unsuccessful executives.
  • Aspiration indicates to what extent the employee wants to advance and influence, seeks recognition and financial rewards and enjoys the job.
  • Engagement shows the commitment to the organisation, willingness to go the extra mile and intent to stay with the organisation.

Employees who don’t have a good balance of these three attributes tend to fall short. “Unengaged stars” have the ability and aspiration but are not committed to the company (high flight risk). “Dreamers” have aspiration and engagement but lack the ability to succeed at the next level. While “mis-aligned stars” have the ability and engagement but no aspiration to succeed and rise.

Figure 2 – Falling short of the ‘star’ potential

Understanding the profile of current high performing leaders, who are at a higher level in the organisation, on these three dimensions provides a good benchmark profile. Assess how employees on the level below score on these attributes, using feedback from managers, peers and employees. Compare to the benchmark and then make a judgement on how likely these are to be top performers at the next level.

Case for IT leadership development

In a recent Australian IT leadership survey by Donovan Leadership, many opinion leaders said that the professional development of technology leaders was best done within a framework that links performance assessment, and peer and client feedback with the values and leadership behaviours of the company. Opinion leaders believe that many innovative approaches are being used internationally for leadership development.

The changing technology landscape is increasing the need for developing future IT leaders. The major generational shift associated with baby boomers retiring and the exponential rate of technology change is a leadership challenge. Web 2.0, social networking and trends like Software as a service means IT leaders need to give up control and accept a more collaborative leadership style.

Not developing IT leaders will increase the gap between IT and business leaders. We may find people being promoted who don’t have the right people management and commercial skills or understanding of how the business works. Attracting and retaining Gen-Y and other new talent will become even harder.

Development Strategies

Although only about 8% employees are likely to become high potential future leaders, this percentage varies greatly between organisations. Organisation culture (quality, openness, recognition and perseverance) improves employee potential. The quality of an employee’s managers (both present and past) also influences potential.  Improvements in the culture and leadership will increase the proportion of emerging leaders.

Multiple strategies are used for the development of high potential future leaders. These include classroom training, group learning, selected job assignments and coaching / mentoring.

Classroom training and Group learning

  1. Provide training to the emerging leaders in different facets of general business. Understanding finance / accounting, marketing and people management as well as industry specific training on supply chain, credit etc will help them get a fuller understanding of the business dynamics and help learn the language of the business.
  2. Leading graduate universities in Australia and overseas run special management development programs. Depending on your budgets these are great ways to expand horizons, interact with other leaders and obtain new perspectives.
  3. Clarify how senior leaders are expected to behave. Let these leaders see how values and behaviours demonstrated by senior leaders support corporate strategy, culture and priorities. Encourage greater interaction with influential leaders from within and outside. Use guest speakers to educate and challenge.
  4. IT staff are keen to develop their technical skills but don’t show similar interest in their personal development or soft skills. This requires a willingness to take oneself on a realistic personal journey of reflection and learning from the process. IT leadership development programs would need stronger focus on people leadership development.

Selected job Assignments

  1. Involve future leaders in real business challenges involving strategy, values and execution. Being open about the challenges with high potential leaders develops trust and makes them feel involved. Involve them in solutions. They want to see how they can make a difference.
  2. Use “stretch” assignments and task forces to encourage, challenge and take risks. These new experiences will give a rich learning environment. Don’t just think about assignments within IT, consider cross-functional areas to broaden focus and develop relationships outside IT.
  3. Where right consider experiences beyond company boundaries and work with external stakeholders. Industry forums, task forces and secondments may be considered in the development plans.

Coaching and mentoring

  1. Actively involve senior leaders from IT and outside as role models, coaches and mentors to play a role in the development process. Just like elite athletes, high potential employees can benefit from coaching. A good rapport between the employee and the coach is necessary for effective coaching.
  2. Provide support during the inevitable ups and downs. Emerging leaders will experience more changes in roles and assignments than others. These will bring new challenges and at times create self-doubt. High performers have high standards for own performance. Support from managers and a mentor is critical to avoid burnout. Using skip level (next senior manager) reviews is a good way to keep an eye on the issues and barriers in employee development.

Other tips

  1. Assign clear accountability to a senior manager for development of the high potential emerging leaders. Align with corporate programs where possible but don’t delegate all responsibility to the HR department
  2. Focus on junior talent as well as the seniors. Sometimes the seniors get more attention as a part of succession planning and other processes. Create early identification and development opportunities for junior talent. Encourage their upward movement.
  3. Remuneration – show the these employees that they are valued. Give them both recognition and rewards. More frequent performance based pay rises are not unusual. Ensure retention by keeping the remuneration levels higher than others. In tough times, companies have to be more creative with the incentives.

For a detailed discussion and/or information on strategies to develop your high potential future IT Leaders, please contact the author.

Becoming a performance driven organisation with balanced scorecards

Introduction

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.

Executive Summary

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

  1. 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.
  2. 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.
  3. Strategy Mapping will show key areas where performance must be lifted. Typically, the areas covered are financials, customers, execution and people.
    1. Financials cover profits, budgets, return on investment as well as key measures of risk.
    2. Customers cover areas that are important from a customer perspective. These could include customer satisfaction, growth/ attrition in customer numbers, number of complaints, etc.
    3. 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.
    4. 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.
  4. 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.
  5. 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.
  6. 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).
  7. 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.
  8. 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.
  9. 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.
  10. 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.

Tips for a successful Business Process Management implementation

Introduction

It is a well-known fact that automation without process changes results in only marginal performance improvement. It is also true with process improvements without automation. When business and IT leaders collaborate and improve end-to-end business processes, the resulting benefits are many times higher than the routine cost reduction initiatives. Hence, organisations are increasingly looking at Business Process Management as a tool to increase competitiveness, develop business agility, increase process efficiency and reduce cycle times. According to Gartner, investment in BPM suites is literally twice the growth rate of legacy packaged enterprise applications. Clearly BPM has gained traction.

There are a number of vendors, some offering a plethora of tools that are integrated into a BPM Suite, and others offering the necessary tools in a seamlessly unified environment. All of the vendors see service oriented architecture as a necessary pre-requisite for a successful BPM strategy. Most vendors advocate a more agile methodology of quick, iterative projects and support continuous improvement.

This article aims to help organisations make a successful start to their BPM journey. Here we summarise key learning from our experience. For more information on this topic please contact us by email.

Why BPM?

Today’s businesses operate in a different world than the 80s and 90s when many business systems were developed. Legacy systems are often data-centric as well as product or function centric. They are not designed to be customer facing. They are also cumbersome to change. Business today demands constant change, and with ever shortening change cycles, customers and suppliers expect to interact via multiple channels and there is an increasing demand for self-service and strait-through processing. In this world, new, smarter systems are needed to accommodate rapid changes in the business processes spanning multiple legacy systems.  These systems also need to be able to accept input from a variety of new sources (e.g. web services, data-feeds, internet, forms, call centres and other applications etc).

To achieve this agility, organisations are beginning to adapt BPM approaches and tools. Focus is shifting from applications to managing and optimising business processes. In addition to the operational efficiency, businesses are looking for process agility, which is the ability to change operations, and the way it’s people and systems work, to adapt to change.

BPM use process models to coordinate the interactions between people, systems, policies, and information. A process centric approach has clear advantages. Transactional applications have hard-wired process elements and business logic that are slow to change. Secondly business processes are rarely completed within a single application. A process layer allows processes to be clearly defined, measured and refined. It allows quick changes to process without significant code changes. It also facilitates further automation by filling gaps and linking together applications. This allows greater value to be extracted from existing investment in applications and people.

BPM tools

A BPM suite is an integrated collection of technologies that enable control and management of business processes. BPM technology has roots in process management capabilities of workflow but unlike workflow it is not document centric. Typically a BPM technology suite includes:

Process Modelling – Typically with a visual design tool

Application integration – Out of the box plug-ins or APIs to connect to other applications

Process Engine / execution – Development and run-time environments to design and execute process activities

Process monitoring and analytics – Process measurement, monitoring and data analysis capability

Business Rules management – Rules databases to define business logic that governs and automates the processes

Collaboration portals – Tools for design for customer self-service and business partner collaboration via the web

Some vendors also provide pre-packaged frameworks to help organisations in specific industries get started more quickly.

 BPM Process


Figure 1 – Business Process Management – Process improvement cycle

BPM technologies have now advanced to provide a technology supported process improvement loop from modelling and simulation through to execution, monitoring and dynamic adjustment. Typically, tools cater for different user types and roles at each stage of the process (e.g. business analysts define process models while IT developers develop and integrate).

Gartner BPM magic quadrant contains software offerings with many different approaches to process improvement. Some are domain specific applications e.g. Siebel (CRM)/Guidewire (claims) with high level of domain specific processes. Others take the architectural approach using tools from IBM/Oracle/BEA or Tibco to integrate business processes together. Others are pure-play BPM suits from Lombardi, Savvion, or Metastorm. Pegasystems’ offers BPM Suite together with one or more industry-specific solution frameworks.

Point solution applications can help quickly address critical domain specific needs but may not be extended to other areas. The architectural/integration path is popular with many as it builds on existing investment in these tools and is universal in application. Pure play solutions provide a well-integrated environment for BPM and may be easier to use. Understanding the goals of the BPM initiative and organizations maturity in using technology should facilitate the choice of tools.

Tips for making a successful start in BPM initiatives

  1. Start with an important but contained process where the improvements would matter to the business. However, avoid the temptation to take on highly complex processes. Focus BPM objective to be working smarter and improving customer experience in a consistent manner, rather than head-count reduction.
  2. Start with an understanding of your current state. Take a “measure first” approach and determine the metrics important to your business.
  3. Unlike other IT projects, BPM directly affects how business users perform their daily tasks. Get a project sponsor who is strongly engaged in the initiative and the change management aspects. Business users should play a significant role in dynamically changing a process.
  4. Use experienced process analysts who live and breath process, for the process discovery stage. This stage sets the tone for the entire project and using wrong skills/people here will prove to be an expensive mistake.
  5. BPM projects are ideally suited for iterative or agile development methods. Don’t model to get perfection. Building consensus across silos is a challenge. Start implementing and use iterations to get the business rules and process flows right. Focus on delivering value and not just the requirements. Iterations don’t mean scope creep. Try to get a process operational within a 60-90 day window.
  6. Don’t get bogged down in too much internal detail or the technology. What matters is the benefit the end customer will get as a result of the process (e.g. faster loan approval, correct order fulfilment etc) and not the technology used.
  7. Service oriented architecture is desirable. Well-defined services will speed up integration, reuse and expansion.
  8. Manage expectations. Continuous improvement approach means features that are not there on day-1 can be added progressively. Demonstrations and simulations improve understanding and help get the user experience right. Communicate successes regularly to improve stakeholder engagement.
  9. BPM methodology is different than the typical IT project methodology. Avoid mistakes like “stove pipe” BPM or an “agile waterfall” practice. Engage the vendor full time during the architecture and design stages. Gartner now predicts that half of BPM projects will fail; follow best practices to make sure you don’t.For a successful BPM implementation, designing reusable processes is key.
  10. Rather than planning a silo by silo implementation; experience suggests that identifying and designing common processes and progressively reusing these across each business area will ultimately result in a faster and lower cost implementation. When processes change, cost of change also would be lower.

Figure 2 – BPM implementation options

Have a common team (2-3 members) that will focus on building common and re-usable artefacts and frameworks. Establish governance to reward re-use and discourage rework.

  1. Plan for change. Not only the rules and process models would change but also work patterns. Processes cross silos thus functional fiefdoms and roles of people would be affected. Address the organisational change implications such as roles, responsibilities and rewards early.
  2. Establish a rigorous structured testing, measurement and governance regime to ensure that the process performs as expected and is well controlled. Identify a few important process and ROI metrics to monitor the process effectiveness. Monitor the process to detect any problems before the customers do.

For a further discussion on how you can start BPM implementation in your organisation please contact the author.

Unlocking value from the applications portfolio

Application analysis

Introduction

In today’s IT dependent world organisations have accumulated an array of applications from the modern to the ancient. Successive mergers and acquisitions have further added to the inventory. What’s more, because they accumulated over time, these IT portfolios are often patchy, redundant and lacking proper management oversight. The resulting IT portfolio has become complex and difficult to manage. According to reports, almost 70% of the IT budget is consumed by sustaining business-as-usual activities. When CIO’s are increasingly being asked to ‘do more with less’, it is necessary to optimise the IT portfolio.

Increasingly executives are using Portfolio Management method to tackle this challenge. IT portfolio management concept is not dissimilar to managing financial assets. In both, the aim is to collect data on the assets to be able to enhance returns and reduce risks. There are two types of IT portfolios, namely, IT asset portfolio and IT projects portfolio. Although the principles of portfolio management are similar there is great deal of difference in the processes used.

Within the IT Assets portfolio, we believe managing the application assets has the greatest upside. In this paper summarises benefits of Applications Portfolio Management and key learning from my experience in implementing APM.

Executive Summary

Organisations are using Applications Portfolio Management (APM) to make rational decisions about reducing the cost of application ownership, improving the functionality and the strategic alignment and reducing portfolio risks. The reason for the rapid growth in the use of APM is that organisations have achieved successes in cost reduction, managing the complexities of hundreds of established assets, and improving budget effectiveness.

Application Portfolio Management is a periodic fact-based assessment of organisations applications. Determining which applications receive same, lower, or increased levels of funding optimizes portfolios over time. The assessment helps refine application management practices, namely, which applications to cut, which to keep, which to renovate. The focus is to make sure that the business value and ownership costs are appropriately aligned and the portfolio is streamlined by rationalizing duplicate or obsolete applications. Over time, the applications portfolios as a whole should show the greatest business value and closest architectural fit with the lowest costs and risks.

APM generally consists of the following elements:

  • Applications Inventory – Identify and catalogue what applications you have and what they do and how much they cost.
  • Applications Assessment – Assess applications in terms of business value, alignment with strategy, technical architecture or standards and cost and ability to support. Identifying cost saving opportunities via removing duplication or overlaps.
  • Recommendations and Roadmaps – Develop changes to the application management strategies and create potential application transformation initiatives or roadmaps. The goal is to get prioritised action plans for tailoring maintenance spending, rationalising or migrating applications and addressing health risks.
  • Portfolio Governance – Assign responsibility for governance including managing the repository and tracking recommendations. Track and communicate the benefits.

Application portfolio management

Figure 1 – Applications portfolio management lifecycle

APM Implementation

APM implementation does not have to be too complex. The focus is on the big picture and identifying aspects that stand out from the norm. First step is the application inventory. Business users, IT support staff, IT architects and IT Managers take part in the data gathering stages. In the second step, gather data on operational performance, fit with the architecture or standards and the known vulnerabilities. This begins to find applications that need further attention. Next step is to analyse the application cost data and compare it with business value from other similar applications. Applications with too high costs or too low costs need further analysis. Final step in the process is to develop recommendations and migration scenarios, engage stakeholders in priority setting and begin detailed business cases for the selected roadmaps.

Where there are many application managers (e.g. in a federated structure), it would be ideal to assign responsibility to a central function such as Head of Architecture for creating uniform application inventory and assessment processes. A common repository would help the identification of duplicate applications across the entire organisation.

Benefits of Application Portfolio Management

APM benefits over time

  • APM improves the understanding of the applications so they can be managed effectively.
  • It helps track and communicate the technical and business health of applications to show problems and take advantage of opportunities.
  • With APM organisations can better align the applications portfolio to the business strategies and the technical architecture, thus improving business value over time.
  • Looking at how the portfolio supports key business processes, creates opportunities to remove the complexities and streamline support.

Over time APM enables focus to shift from application health and costs, to flexibility and responsiveness and ultimately to competitive advantage. By evolving applications in a planned and methodical way, organisations can maximise returns on their existing investments while making steady progress towards a stronger applications environment.

Tips for effective application portfolio management

  1. Executive Sponsor: Project must have sponsorship from the CIO or the Head of Applications. Proper understanding their goals and constraints ensures that the last recommendations can be acted upon.
  2. Engage Business: APM gives an excellent opportunity to tell and engage the business executives. Obtain business value and functional quality data from the real users and owners. Their support is critical for decisions to rationalise the duplicate applications or to adjust maintenance levels.
  3. Be pragmatic: In the first iteration, focus on applications that account for bulk of the costs and business support.  Similarly, in data gathering focus on few important attributes and costs. Where exact data is not available stake-holder/ user surveys can be used.
  4. APM tools: Spreadsheets may be used to record the inventory data. There are a number of third-party tools, which can help manage the applications inventory and the associated information such as costs, business value and risks. Tools would be of benefit for large portfolios and especially to keep inventory up-to-date.
  5. Source code analysis tools: These tools will help analyse the source code of applications and give information about the function points, complexity, etc. This data is valuable for understanding the reasons for complexity and the maintenance cost.
  6.  Assessment: Assessment typically covers business, technical, financial and operational perspectives. The typical questions are:
    1. Business: How well applications support the business process? What synergies we could achieve?
    2. Technical: Are the applications scalable/ extendable/ adaptable/ supportable? Do they fit the architecture?
    3. Financial: Do the applications cost too much to run? Why?  How can costs be reduced?
    4. Operational: Are the applications sustainable? What are the key vulnerabilities? Is the support infrastructure too complex? Can we find the right skills for support?
  7. Analysis: Looking at the data using a variety of criteria from business, technology, operations and financial perspectives would highlight  ‘anomalies’ and areas for actions.  Using a combination of factors would highlight anomalies, such as, if two applications are similar complexity and size but one has high costs, indicates an issue. Some solutions will become obvious when you see the problem, e.g. 17 versions of warehousing applications.
  8. Trend is your friend: Collecting cost and performance trends over time can give you richer insights than just point in time data. 18-24 months data would begin to yield useful information.
  9. Applications portfolio: Typically the assessment results would group each application in one of the four categories. These are Invest, Divest, Re-engineer and Tolerate.Application analysis
    1. Invest – These are applications of high business value and good technical quality
    2. Divest – Low value/ low quality or duplicate applications.
    3. Re-engineer – High business value but low quality applications are candidates for modernisation.
    4. Tolerate – High technical quality but low business value applications are possible candidates for cost reduction.
  10. Ongoing governance: Treating APM as a one time activity is a mistake. Any short-term gains would soon be lost. Assign responsibility for governance and ensuring inventories are regularly updated and assessed and recommendations are followed through. Establish key metrics and scorecards to check progress of the initiatives. Track and publish the benefits.
  11. Link with Enterprise Architecture: APM inventory provides data for the current state and recommendations should be aligned with the Enterprise architecture ‘desired end-state’. Application roadmaps create the migration path between these two states.
  12. Communicate the results:  Widely communicate the logic of the recommendations. Use the application roadmaps with the results of the assessment to tell business executives about the issues/ risks and various choices. This will result in a stronger business agreement.

If you would like further information or help please contact Kogekar Consulting.