Our IT Measures Are Not Balanced
What Get's Measured Gets Done & Sometimes What's Measured Is The Only Thing That Gets Done
Over the last few months I have been thinking about what it means to develop meaningful measures for IT Management. Of course this is due in part to the fact that I was working on my Balanced Score Card (BSC) Presentation for the upcoming Pink conference in February as well as the fact that I was speaking on BSC and Continual Service Improvement (CSI) at the PinkPERSECTIVE Events. In any case, suffice it to say I have had measures on the top of my mind for the past while.
It was on the PinkPERSPECTIVE tour in India and Indonesia that the need for this article became apparent. It has been 19 years since Kaplan and Norton first published their acclaimed book “The Balanced Scorecard” describing a practical approach for translating an organization's mission and strategy into a comprehensive set of Performance and Outcome Measures that provides a framework for Strategic Measurement and Management.
In their book they explain that there are four major areas of measurement that must be considered for long term profitability, growth and sustainability.
Those four areas are:
- Financial Perspective: To succeed financially, how should we appear to our shareholders?
- Customer Perspective: To achieve our vision, how should we appear to our customers?
- Internal Business Processes Perspective: To achieve our vision, what management processes must we excel at?
- Innovation, Learning & Growth Perspective: To achieve our vision, how will we sustain our ability to grow, change and improve?
To focus on only one or a partial aspect of these 4 measurement quadrants eventually leads to long term organizational and capability damage.
However, 20 years later we don't seem to have moved very far on this front and we seem to be hobbling along. Perhaps that is the point! We are hobbling along measuring what we know how to measure versus what we should measure. For many IT shops that comes down to technical performance measures and overall IT Costs. So in essence our industry's total strategy can be summed up in the following statement.
IT Strategy: Every Year We Will Make It Go Faster and With Less Costs. (end strategy)
So if you work in an organization where your total goal is to deliver a 10-15% cost reduction on IT Services every year you will have focused most of your Portfolio initiatives on the following:
Data Center Consolidation, Desktop Consolidation, Application Consolidation, Virtualization, Green IT as it relates to consolidation, organizational consolidation and now cloud services.
Now don't get me wrong I am not decrying these worthy activities. Kaplan and Norton themselves point out that a primary area of measure must be financial. However it is very possible to score big on one area such as cost reduction and gut the other four areas of organizational value and capability. By trimming the fat to the point we are cutting into the bone it is very possible to drive customer satisfaction into the ground, have no appetite for maturing process and have nothing left over at the end of the year to invest in your staff's skill development.
In this sorry state of affairs we find ourselves grasping the brass ring of cost reduction while the very structures and capabilities we need to sustain profitability, growth and agility face the chopping block!
To illustrate the illogic of this type of management approach Kaplan and Norton use the following effective analogy.
For the purposes of this article lets assume that “Airspeed” = decreased costs, higher margins and short term profitability $$$$
Imagine entering the cockpit of an airplane in flight and seeing the pilot focusing only on a single instrument?
You engage the pilot in the following discussion:
- Q: I'm surprised to see you operating the plane with only a single instrument. What does it measure?
- A: Airspeed! I'm really working on airspeed this flight, we have been told to focus on speed as the primary objective.
- Q: That's good. Airspeed certainly seems important. But what about altitude?
- A: I worked on altitude for the last month and I've gotten pretty good at it. Now I have to concentrate on maximum air speed.
- Q: But I notice you don't even have a fuel gauge. Wouldn't that be useful?
- A: You're right; fuel is significant, but I can't concentrate on doing too many things at the same time. So on this flight I'm focusing on air speed. Once I get that worked out we'll work on fuel.
I am sure that like me you would have some major concerns if you were flying on this particular aircraft!
But in a sense this is what we are doing when we focus on cost and profit at the expense of all else. This is particularly challenging during difficult economic times such as we have been experiencing over the last couple of years, and there are times in a company's lifecycle where one of the four areas of measurement and management need to have a heavier focus than the other quadrants to achieve specific short term goals.
However, lets now loose track of the long term vision!
No one want's to burn out the engines as they race towards profit, hit a mountain due to poor direction / altitude or run out of talent fuel before they reach their destination.
Time to start focusing on balance and making sure that financial goals are supported and sustained by a practical focus on customer, process and internal enablers!
Troy's Thoughts What Are Yours?
“Life is like riding a bicycle. To keep your balance you must keep moving” ~Albert Einstien
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