How CIOs can (and should) measure business outcomes
There are two kinds of measurements in business: one to assess performance and the other to provide intelligence. The smart CIO needs to do both.
By Adib C. Ghubril
Peter Drucker famously wrote that things cannot be managed if they cannot be measured. But what if we’ve been measuring the wrong thing all along?
The notion of “closing space” on the football field is a good example. The ability to restrict the opposition’s passing options is a critical factor in a successful result and, consequently, measuring the number of possession-turnovers a team can create is a telling indicator of that ability, but it doesn’t measure progress toward attaining that ability.
Pairing critical success factors and key performance indicators is a powerful tool for establishing progress towards some objective. This tool however will only be effective if the success factors and KPIs are related to underlying elements of an organization’s goals.
In our football example, the goal could be to improve the team’s passing capability. The goal to improve passing could consist of three initiatives designed to improve ball handling, fitness and spatial awareness. Both the initiatives and the goal support a ball-possession game strategy (as opposed to a counter-attack game strategy).
In effect, a coach sets the strategy for the team, in this case ball-possession, and lays out goals and initiatives that improve the capabilities of the team such that it may undertake that strategy (playing a ball-possession game).
The concept that an organizational plan (a strategy) is made up of framed goals and initiatives, design to reach those goals, applies in the enterprise as well. Corporate officers must choose a strategy they believe will bring success to the organization—and then they must lay out initiatives that boost the organization’s capabilities so as to undertake that strategy.
In the context-aware era, business managers prefer to make data-driven decisions because these are perceived to be the least biased and are therefore expected to yield better outcomes. Decisions can be about any stakeholder or asset type:
Each item in the decision table above can be framed by a success factor and a performance indicator.
For example, a success factor for maximizing return on investment lies in minimizing risk; the associated performance indicator is therefore a measure of budget-to-actual cost variance. On the intelligence side, a success factor to resource allocation is an understanding of the value proposition; the associated performance indicator is then a measure of how effective all the steps are in providing that offering, which is described as the ratio of time-taken-to-value-created.
The preceding is a tabulated example of fundamental corporate success factors paired with matching performance indicators. Any corporation of any size and in any industry must have a good sense of the state or understanding of the market it is in, how it is perceived, the state of mind of its employees, the lifecycle of its physical assets, the communities within which it operates, and the objectives of its officers.
There are means to measure all these factors, though these may differ across organizations, and many, if not all, are related to business, as opposed to technical, outcomes. The “I” in CIO is a reminder of that. CIOs are best suited to devise indicators appropriate for their organization, along with the most practical method to generate them.
Unless CIOs expand the scope of what they measure and how they measure it, they will not be speaking the language of the business and will therefore fail to elevate their profile in the c-suite.
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