Identify relative strategic value (even if you’re comparing apples to oranges).When faced with a stack of potential projects, it’s important to find a way to see beyond their differences and compare them, accounting for their business value as well as cost and risk. Many IT shops develop their own evaluation and ranking tools, which help them focus on the factors that matter most to their organization.
At Northeastern University, CIO Bob Weir wanted the senior VPs to prioritize the backlog of IT requests. “The trouble with asking them is that there isn’t necessarily a common language, or set of priorities, or common much of anything,” he says. “You get into advocacy mode. Whoever waves their arms the most and screams the loudest [gets their project approved]. But that isn’t any way to make a business decision.” So he and one of his direct reports sat down with more than 40 university leaders and asked them to identify critical success factors for IT projects. They then developed a model with six weighted value categories (including “competitive advantage” and “service to the NEU community”) and compiled 60 key questions to ask when “interviewing” a project under consideration. They ran several old projects through the new tool to calibrate it. The answers to those 60 questions yield a score that enables comparisons between dissimilar projects like applications and network investments. This year, NEU’s tool helped university leaders allocate the 15 percent of the IT budget earmarked for new projects relatively quickly, whittling a list of 36 potential projects down to just 12. In the past, university leaders requested IT projects as the need arose, and Weir would say yes or no to each one. “The 15 percent got decided as we went,” says Weir. “It was haphazard.” Now, he says, “the whole senior executive team looks at the whole pile” of potential projects, so the new project budget gets allocated according to overall institutional priorities, not functional priorities. Thanks to the new value-based model, “everybody was on the same page talking about the same criteria list,” says Weir. “Everybody got serious more quickly.” The comparison tool is also effective for remediation. Champions of low-scoring projects can tweak them so they’ll score higher in important value categories.
Yellow Technologies takes the concept of weighted questions a step further by plotting out the results on a grid showing cost and financial return. Projects with large risks are depicted by large bubbles; small-risk projects get small bubbles. The color of the bubble indicates how strategic the project is (green is highly strategic, red is not very strategic, yellow is in between). Roadway simply borrows the forced weighting technique long favored by eye doctors (“Which is clearer, A or B?”), forcing executives to choose between pairs of projects until a ranked list of priorities emerges.
GE Industrial Systems relies on a cause and effect matrix to help sort out which IT projects it will pursue. First, business leaders identify strategic focuses for the year, such as customer centricity, business simplification, increasing productivity or reducing inventory. Then would-be project owners must identify whether their project has low, medium or high impact for each strategic initiative on the matrix. An algorithm factors in payback on financials, strategic value and the proposing team’s success of delivering promised value on time and on budget to score each project on a scale of 1 to 100. “It helps take bad projects easily off the table and get obvious good projects into the program deck,” says CIO Stuart Scott. Then the Investment Council spends most of its time discussing the projects that are on the fence.
Top business execs should set IT priorities. When it comes to the final decision about how to spend the IT budget, most companies rely on a committee of business and IT leaders. Of this year’s CIO-100 winners, 51 percent use an executive council to vet ideas for new projects and business transformation and 38 percent use a cross-functional IT steering committee. Giving the business control over the IT purse strings (or at least sharing that control) not only helps IT align with business objectives, it also encourages business executives to share accountability for realizing the benefits. So it’s not surprising that 73 percent of CIO-100 honorees say the CIO and business unit sponsors share responsibility for achieving value from IT projects. Project-specific steering committees with relatively high-level executives are also fairly common.
At Farmers Insurance, for example, the top business executives who compose the IT Governance Board meet quarterly and provide overall strategic direction for IT. Funding decisions, however, are made by the Capital Appropriations Committee (CAC), which includes the IT Governance Board members plus some of their key direct reports. The CAC meets twice a month to review all capital appropriation requests with a total cost of ownership of $50,000 or more. Requesters must submit what CIO Jan Franklin calls “a very, very detailed standard document” that outlines the project’s purpose and an in-depth cost/benefit analysis. Once a project is approved, a project-specific business and technology integration (BTI) group of line vice presidents from IT and the business meets weekly to review project progress and touch base with the project management office (PMO). Farmers has been convening BTI groups for nine years. “We completely revamped our applications starting in the early ’90s, and when we started the effort, we built in control points,” explains Franklin. Such governance practices help Farmers achieve its goal of cutting expenses or improving capacity 5 percent annually.
When AARP’s CIO John Sullivan established AARP’s overall governance committee three years ago, he initially wanted the executive team on the committee. But they insisted he’d be better served with a handpicked group of their direct reports, who are one step closer to the organization’s day-to-day operations. In retrospect, Sullivan agrees they were right. He chairs the committee, but doesn’t vote on funding decisions unless there’s a tie. And so far, he hasn’t had to, since the committee tends to have unanimous up or down votes. All major IT investments get steering committees, and a group of IT staff serve as dedicated business liaisons to promote business/IT alignment and help craft IT project proposals.