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Creating a Business Value Scorecard for IT

Blog Post created by tbmcouncil Employee on Feb 2, 2015

How can IT leaders measure, manage and communicate business value? In my experience, this is perhaps the biggest challenge that CIOs face today. TBM provides a useful framework and best practices, so it makes sense that the TBM Council would take a leadership role in developing a standard for the profession. I’m pleased to share the results of that effort, which represent a significant step forward for CIOs looking to bridge the language gap with their business-side stakeholders.

 

This summer we engaged Forrester Research to help define the gap and develop a framework for filling it with meaningful business metrics. The result of the research is a balanced set of key performance indicators (KPIs) that, as part of a business value scorecard, are designed to directly address this challenge.

 

Forrester developed a hypothesis and proposed a four-domain BT value scorecard based on its research in the area of CIO dashboards.  Forrester then conducted in-depth interviews with 19 C-level business and IT executives to test this hypothesis and to gather opinions on proposed metrics.  Technology leaders were asked to identify KPIs they currently use and how they would change them, while business leaders were asked to identify KPIs that would most benefit them in making business decisions and understanding technology contributions to business outcomes.

 

Forrester found that most CIOs are still measuring things that are IT-centric, while CFOs and CMOs are looking for metrics that better communicate IT’s contribution to business outcomes. This divide is illustrated by the Forrester chart at the right. To measure business value, many CIOs will fneed to adopt a different set of KPIs.

 

To create and use a scorecard effectively, there are three things CIOs must get right:

  • First, CIOs must measure and report the right things. Forrester found that an optimal BT value scorecard would span four areas: health, delivery, outcome, and agility. These domains convey the best blend of information to help business leaders truly understand the role and contribution IT makes to business outcomes.
  • Second, CIOs and their senior leaders must communicate in business terms. Many of the business-centric metrics recommended by Forrester are financial in nature. Money helps everyone make smarter tradeoffs, such as how much extra capacity is right for the business or what level of service makes sense. IT leaders who understand and communicate financial impact will be able to facilitate more collaborative discussions, securing a more strategic role for technology in business decision-making.
  • Third, CIOs should partner with their CFOs, CMOs and other business partners to drive a regular governance process based, in part, on the scorecard. These vary from business to business, but often take the form of quarterly business reviews and annual strategy meetings. These give stakeholders a chance to review the KPIs, assess performance and collaborate on decisions to improve value.

 

All three of these elements depend on choosing an effective portfolio of KPIs. Forrester recommends choosing 8-12 KPIs, with a focus on quality, not quantity. They’ve define four categories of metrics, two of which are more IT centric (health, delivery) and two of which are more business-centric (agility, outcome). Altogether, the research report proposes 36 different possible KPIs, which provide a running start for any IT leader in any industry.

 

You can download the research findings and recommendations and learn more by attending the TBM Council’s webinar on October 15, where you’ll have a chance to ask Forrester VP Khalid Kark questions about how these KPIs can be applied to different situations. And don’t forget to register for the TBM Conference in Seattle in November, where you’ll hear from an amazing lineup of speakers who have successfully transformed their IT organizations with TBM.

 

For updates on the TBM Council, be sure to join our LinkedIn Community and follow us on Twitter @TBMCouncil.

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