by David Chou

Are you managing your department as a business?

Jun 27, 2016
Business IT AlignmentCIOHealthcare Industry

The next generation of CIOs have to manage their department as a business and here are the 10 steps that I follow. Are you aligned with these steps as well?

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Are you a CIO that us running your department as a business, because it seems so logical and it sounds like it should be of tremendous benefit to your organization. It really does sound like a great idea, but just what are the real benefits to a company if it chooses to operate its IT center as a business – and why should it be the approach that your company adopts?

The answer lies in getting the most out of your IT department, and that means more than just efficient operation, but it includes alignment with all other departments in the corporation, so it can be a true business partner. The goals of the company should also be the goals of the IT department, and IT technology should be employed in a manner which best supports company goals and objectives. I will touch base on how to achieve that kind of synchronicity, so your IT department can stand alongside every other department of the company, committed to a common purpose – the success of your company.

10 steps to running IT as a business

  • Start with appropriate CIO philosophy – The department leader should be thinking like the CEO of the department, which means managing the department profit-and-loss properly, and staying within budget while delivering the best possible experience to the organization’s customers and users. 
  • IT budgeting – This is the companion step to the philosophy noted above – being able to effectively manage the IT budget is a foundation for every other business principle to be built upon it. Without proper management of the departmental budget, the CIO and IT department heads will constantly be engaged in dialogue about how to control it and manage it better. There’s no since proceeding to the next step until this one is mastered.
  • Investment planning – As much as one-third of all IT expenditures are on new initiatives and projects, which makes it understandable that the corporation considers the project portfolio to be the most valuable deliverable of the department. This makes it critical that an end-to-end view is made visible to corporate management for all projects in the portfolio, so that their true costs can be understood and planned, as opposed to implementation costs only.
  • Chargeback/showback – While this is a much-debated practice in business, proper chargeback practices can better align IT with business goals, enhance demand management, provide justification for IT costs, and increase IT financial transparency. The most businesslike approach to chargeback is to use service-based pricing, because it expresses IT services in business terms.
  • Benchmarking – The real value of benchmarking is that it provides an effective way to monitor department performance over time, while comparing it to the performance of other departments. It takes very little to implement benchmarking and it can be extremely helpful in identifying areas of opportunity where improvements could be made that are highly beneficial to the company.
  • Cost optimization – While the primary focus of cost optimization has traditionally been the IT operational budget, and ‘doing more with less’, the full onus of cost optimization should not be placed on the IT department alone. The rest of the corporation should be involved with input about which projects are to be undertaken, which services are to be provided, and what kind of customer service levels the company can actually afford.
  • Performance metrics – Performance metrics need to be much more than just 100 percent system availability, but should include metrics concerning other deliverables like projects and services, performance to budget, operational performance, innovation, and alignment to company objectives. In the long run, these can be much more telling about the overall effectiveness of the IT department and how well it’s doing.
  • Clearly define IT processes – Every other department in the organization has clearly defined methods for carrying out its function, whether it be purchasing, shipping, or processes on the shop floor. The IT department should have the same clarity of process and the same uniformity of method.
  • Communicate successes – In many cases, the IT department is an afterthought within the company, only considered when the computer system goes down or when system performance is sluggish and hindering productivity. To be viewed as an equal partner within the organization, IT successes should be communicated to the rest of the corporation, to provide a more accurate picture of their value to the company.
  • Alignment with corporate strategy – This is a critical step to bringing focus to IT planning, and mapping IT strategy to the company’s overall objectives. From management’s perspective, the IT department should not be considered in terms of its cost to the corporation, but in terms of its capacity to support long-term strategic goals.

Here is my advice for CIOs to run their department as a business. I would love to hear your feedback in the comment sections and send me your questions for the next #askcio blog.  I am available on the various social channels below and snapchat.