VideoTime was, chief financial officers regarded IT departments as a financial black-hole. A whole lot of capital went in, but precious little light came out. What's more, the gadgets normally used to measure return on investments simply did not work in that heavy gravitational field.
But oh, how times have changed. With e-commerce now a business imperative, technology is moving into the spotlight as a revenue generator. And as such, CFOs are bound and determined to take some readings from the field. So determined, in fact, that many management teams have begun deploying metrics to gauge the cost-effectiveness of IT projects (see "Mad to Measure)."
"The CFO wants to be more involved in the CIO's mission and take direct responsibility because of the CIO's increasing importance to the bottom line of the company," says Jack Schiff, program manager at Getronics, a global technology services company. According to a recent Getronics survey of 288 CFOs, 84 percent said they believe IT is very important or crucial to revenue/profit growth. The survey also found that finance chiefs want to have more of a say in how tech spends money.
Of course, getting the most out of IT investments generally means getting the most out of IT workers. Affixing hard numbers to the mercurial contributions of tech employees can be tricky stuff, however. And without such numbers, it's nearly impossible to judge if the pet projects of IT managers actually jibe with a company's business strategies.
To get everybody pulling in the same direction, executives at some corporations have begun considering applying the balanced scorecard method to tech workers. While a balanced scorecard approach will undoubtedly help CFOs get a better handle on how tech employees are performing — and would help managers align IT agendas with corporate strategy — creating such a beast is no easy task. In fact, it appears that many finance chiefs are taking fairly small steps when setting up IT scorecards.
No More Ticking Packages
Take the case of United Concordia Companies Inc., a $900 million-in-revenues dental insurance company based in Harrisburg, Pennsylvania. "Historically, what we've done is look at IT projects from a return on investment," says CFO Daniel Wright. "There's a certain amount we understand we have to spend to keep our systems going. But for projects, we look at what's going to be the payback in terms of new revenue, expense reduction, that sort of thing."
After a few tech projects came in late and over budget, however, Wright says company management decided something had to change. "A better appreciation for cost was needed," Wright says bluntly.
So last December, United Concordia instituted a service excellence initiative for its IT staff. The goal? "To look at the productivity [of IT workers] so we get more bang for our buck," explains the company CFO. Although the insurer has outsourced the initiative to a consultant, Wright insists that the program will be "built into the fabric of how [the IT staff] manage their activities on a daily basis."
According to Wright, the consulting firm is using basic metrics to gauge things like the productivity of programmers. But beyond that, both the consultant and the client are trying to come up with some different yardsticks for judging tech. And United Concordia's management has set high standards for those new standards. "We hope to see as much as 25 to 30 percent improvement in productivity in IT as result of this methodology," insists Wright.
Surprisingly, Wright says the relationship between IT and finance has gotten healthier since the coming began rolling out the service excellence initiative. "It used to be a little contentious, because every time we wanted something done we felt it was expensive," concedes Wright. "But I think we have a better appreciation now for what's involved and what IT is trying to do. And they understand our business better as time goes on."
The tech scorecard at United Concordia should take a about a year to roll out, maybe a bit longer. For his part, Wright believes it will be well worth the effort. "We need to be able to spend more dollars on automating certain … revenue-generating processes such as selling over the Internet or working with our customers electronically." Coming up with a formal method for assessing how well tech employees implement those kinds of projects should go a long way in helping the company determine the likely success of future E-commerce initiatives.
Align in the Sand?
Managers at Sharp Electronics Corp. also want more formal procedures for measuring IT performance. According to Tom Riley, CFO at the Sharp Services Organization, in Mahwah, New Jersey, executives at the manufacturer are considering using a balanced scorecard for tech employees, as well as workers in other departments. Given that the company CIO reports to the finance department, Riley says that sort of formalized process will "ensure the group is aligned and contributing to the success of the enterprise."
Presently, Sharp management conducts an audit following major technology projects to see if all the desired benefits and goals have been achieved. "We have various metrics for our help desk and maintenance and support organization," says Riley. "Our current performance evaluation system is more project or task based."
Reader Comments» Post a comment