Chapter 3

Linking IT to Business
Metrics

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IT Metrics Goal
The Goal of IT Metrics are to
demonstrate that what a
company spends on IT has a
DIRECT IMPACT on the
performance of the firm.

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IT Measurement
Approaches
Peel the Onion attempt to
show how IT adds value on a projectby-project basis.
Put the Onion Back Together
employees who truly understand
what their business is trying to
achieve can sense the right ways to
personally improve performance that
will show up at a business unit and
organizational level.

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Why Measure IT Results?

Measurement Counts.
What a company measures and
the way it measures influence
both the mindsets of
managers and the way people
behave.
(Marchand, Kettinger, and Rollins, 2000)

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IT Measurement Goals
The key to linking IT to
business performance is to
create an environment where
everyone understands what
measures are important to
the business and are
accountable for them.
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IT Measurement Levels
Enterprise Measures Tie the
work of IT directly to the
performance of the organization
(e.g., external customer satisfaction,
corporate financial performance).

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IT Measurement Levels
Continued
Functional Measures Assess the
internal work of the IT organization
as a whole (e.g., IT employee
satisfaction, internal customer
satisfaction, operational
performance, development
productivity).

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IT Measurement Levels
Continued
Project Measures Assess the
performance of a particular project
team in delivering specific value to
the organization (e.g., business case
benefits, delivery on time).

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Approaches to Linking IT
with Business Metrics
Balanced Scorecard Uses
measures from four dimensions
(Customer perspective, Financial
perspective, Internal Operations
perspective, and Learning & Growth
perspective). Each metric measures
progress against the enterprise
business plan. IT is treated as a
separate business unit with its own
scorecard.

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Balanced Scorecard

Source: Balanced Scorecard Institute, www.balancedscorecard.org

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Approaches to Linking IT with

Business Metrics Sample
Scorecard Metrics
Shareholder Value
(financial)
Expense
Management
(financial)
Customer/Client
Focus (customer)
Customer Loyalty
(customer)
Customercentric
organization
2009(customer)
Pearson Prentice Hall

Effectiveness and
Efficiency of Business
Operations
(operations)
Risk Management
(operations)
Contribution to
Firmwide Priorities
and Business
Initiatives (growth)
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Approaches to Linking IT
with Business Metrics
Modified Scorecard Five key
metrics that are linked to the
companys vision statement.
Complimented by IT specific metrics.
Results are communicated on a
quarterly basis. This approach
orients the employees to the
company mission and vision.
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Modified Scorecard Business

Metrics
Customer Loyalty Index the
percent of customers who said they
were very satisfied with the
company and would recommend it to
others.
Associate Loyalty Index
employees perception of the
company as a great place to work.
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Modified Scorecard Business

Metrics Continued
Revenue Growth the percentage
of this years total revenues with last
years total revenues.
Operating Margin the operating
income earned before interest and
taxes for every dollar of revenue.
Return on Capital Employed
earnings before interest and tax
divided by the capital used to
generate the earnings.

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Approaches to Linking IT
with Business Metrics
Strategic Imperatives company
identifies a number of strategic
imperatives each year. Each area of
the business identifies initiatives that
support these imperatives and
determines which metrics to use. IT
identifies key projects and measures
that will help the business achieve
these imperatives.
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Approaches to Linking IT with

Business Metrics Strategic
Imperatives
Initiatives are integrated into
Variable Pay Program.
Variable Pay Program links a
percentage of an individuals pay to
business results and overall business
unit performance.
Metrics can change from year to
year.

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Strategic Imperatives
Example

Figure 3.1

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Principles of a Business
Metric Program for IT
Focus on Overall Business
Performance focus employees on
financial and nonfinancial enterprise
performance.
Understanding is a Critical
Success Factor ensure employees
understand their objectives and how
they tie to company performance.
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Principles of a Business Metric

Program for IT Continued
Simplicity metrics should be
simple and easy to use.
Visibility encourages employee
buy-in and accountability.
Links to Incentive Systems
distinguish between fair
compensation for the individual and
reward for successfully achieving
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Recommendations for
Implementing a Business Metrics
Program
Results will take time.
Have common goals.
Follow-up on problem areas.
Be careful what you measure.
Dont use measurement as a method
of control.
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Conclusion
There are significant benefits to be
realized by holding IT accountable
for key business metrics.
Business performance will become
part of the mindset of IT staff if the
business measurement program is
properly defined.
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Copyright 2009 Pearson Education, Inc.

Publishing as Prentice Hall

2009 Pearson Education, Inc. Publishing as Prentice Hall

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