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Why CIOs Must Rethink How They Measure Success

success metrics

“Ask finance chiefs about their frustrations with IT and you are bound to get an earful,” begins the recent Deloitte report Evaluating IT: A CFO’s Perspective. “Excessive investments made. Multiple deadlines missed. Little ROI achieved. The list goes on.”

After nearly a decade of talking, reading, and wringing our hands about business/IT alignment, relations between IT leaders and business leaders are better than they once were, but they’re still not great. And for our organizations to succeed in an increasingly tech-dependent future, better-but-not-great is insufficient. Now that technology is a key element of every organization’s success, no one can afford an IT-business disconnect anymore.

Why are most organizations still failing to fully match business and IT priorities? Part of the problem may lie in the way most IT organizations evaluate their own success. Like most smart technologists, they’re driven by metrics. They measure everything they do, and evaluate that performance against their performance on the same metrics in earlier years.

There’s only one problem: Most are measuring the wrong items. This became strikingly clear in a recent Forrester survey that asked CIOs, CFOs, and CMOs to define their top ten measurements of technological success. To say that the lists didn’t match would be an understatement. What CIOs considered the most important measurement, the percentage of projects that met or exceeded expectations, ranked fourth in the business leaders’ list. Conversely, the CMOs’ and CFOs’ most important metric, IT cost per business service, ranked fourth for the CIOs.

And it gets worse. Four items on the business leaders’ top 10 list weren’t on the CIOs’ radar at all. Two of those items compared how IT spend related to the business’ overall revenue growth. The other two looked at moving the business forward. Business leaders cared what percentage of IT spend went for innovation versus “keeping the lights on.” And – significantly – they measured IT success in part according to external customers’ satisfaction score.

Will marketing dominate tech spending?

Two years ago, Gartner famously predicted that marketing departments would spend more on technology than IT departments by 2017. We won’t know for a while whether that prediction comes true, but spending patterns seem to be trending that way. Assuming the trend continues, CIOs have every reason to work on aligning with marketing objectives. And whatever happens specifically to marketing spend, IT’s role in relation to technology is evolving quickly. As “every company is a technology company” becomes more and more true, technology, as well as technology talent, will fall increasingly outside of the CIO’s domain. Preparing for that future means doing a better job of understanding and assimilating business objectives.

The good news is that contained in the survey results is the key to reducing the disconnect. IT can improve IT’s success rate over the coming years by making sure that the measures CIOs are watching are the same ones that matter to their bosses. Beyond that, a change in mindset can take CIOs a long way toward helping them make sure they’re on the same page as finance and marketing leaders.

Here are some places to start:

IT and business can’t be “us” and “them.”

I’ve been thinking and writing about the IT-business disconnect for a long time, and I’ll always remember attending the IT conference where I first heard tech professionals use the term “the business side,” as though IT and business were opposing teams in a sporting event.

IT attitudes have evolved since then, but it’s still too easy for too many tech leaders to think of the business as a separate entity that IT serves, rather than one company. It’s time for anyone in IT to stop that way of thinking. Technology is now deeply embedded in everything every company does, and will become more so as the Internet of Everything evolves and there is technical expertise in every corner of every large organization. There is no longer an “us” and “them.”

IT must share responsibility for sales.

I’m fascinated that two of the measures business leaders found important are two that CIOs didn’t think about at all. That is measuring the financial performance of IT in tandem with that of the business: year-over-year IT budget growth compared to revenue growth, and IT spend as a percentage of business revenue.

There is an interesting assumption rolled into this measurement: That IT spend should have a direct impact on the company’s financial health, but on how much of its product or services it sells. That makes sense in this era when most customer contacts and sales involve many levels of technology, and most companies interact with customers at least partly over the Internet. It’s the same reason marketing departments need so much technology. Tech is vital to the sales cycle.

Non-IT departments must share responsibility for technology risks.

There’s a basic imbalance when it comes to technology decision-making. A business unit that requests new technology is the one to reap the benefits if that new technology works well. But if it fails, or worse creates a security breach, IT is the one to bear the consequences. Thus, CIOs have what amounts to an incentive for standing in the way of innovation. That situation needs fixing, and the best way to fix it is by both aligning metrics and having a serious discussion about risk that lets the business unit share the downside and IT share the upside of deploying new technology.

It’s time to redefine the word “customer.”

Every time I interview a CIO who uses the word “customer,” I have to pause for a moment and ask for a clarification: Does that mean internal customers, such as the company’s business units, or external customers who buy products from the company? For years the answer was always that they meant internal customers, although recently some CIOs have begun focusing more on external customers.

That’s way overdue. A company succeeds or fails on one measurement only: how many people or organizations buy its products. In the most effective companies everyone is focused on that single objective. CIOs and CMOs know this as they identified customer satisfaction as one of the top ten measurements of IT’s success.

“For any company, every employee action should be connected back to a business/customer impact – after all, if you cannot do that, then you have to ask, ‘why is this activity important?’” Nigel Fenwick, a Forrester VP and former CIO of Reebok wrote earlier this year. But, he added, “When I suggest these changes to IT leaders, all too often I hear objections like this: ‘We have no control over things like customer satisfaction.’”

That’s a cop-out few organizations can afford. Especially when you consider that virtually every customer service interaction, from dialing a call center to reading an FAQ to placing an order via a mobile device, depends on technology.

The best way to learn what CFOs and CMOs want is to ask them.

The survey results seem to suggest that CIOs and other tech leaders are figuring out for themselves how to measure their departments’ success. And while their number-one KPI, percentage of IT projects that met or exceeded expected benefits, might seem like a logical way to measure whether IT is doing its job well it fails to take into account technology’s effect on the business as a whole. The CFOs and CMOs top ten measurements demonstrate this effect interests them most.

The lesson is clear. Instead of measuring IT’s success as a lone entity, consider the success of the organization as a whole and how IT’s efforts are part of it. Better yet, before deciding which KPIs to follow and share, find out from your business counterparts and bosses which ones matter most to them.

For more blogs by Minda Zetlin, visit www.innovatethink.com.

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