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Challenges in Business Performance Measurement: The Case of a Corporate IT Function


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Title: Challenges in Business Performance Measurement: The Case of a Corporate IT Function

Challenges in Business Performance Measurement
The Case of a Corporate IT Function
Stephen Corea Andy Watters (Warwick
University, UK)
Presentation Outline
  • Research Motivation
  • Theoretical Review
  • Methodology
  • Case Study GITS
  • Findings Discussion
  • Conclusion

Research Background
  • Business performance measurement (PM)
    presenting relevant information to management
    staff for assessing the organization's progress
    towards achieving strategic/operational aims
  • Several major PM frameworks proposed recently
    field dominated by prescriptive, top-down
    perspective (formal derivation from strategy)
  • Significant no. of PM initiatives fail to take
    root or adequately deliver expected benefits (70
    according to McCunn, 1998)
  • Need for greater understanding of on-the-ground
    challenges and bottom-up perspective of
    challenges involved
  • exploratory study to understand the
    challenges in mounting dashboard based PM
    practices in a corporate IS Dept

Theory PM Implementation
  • Robust PM system should take a balanced
    approach (Kaplan Norton, 1992)
  • Identification/population of useful performance
    measures (or metrics) to capture progress towards
    goal attainment is a key but not easily satisfied
    criteria (Neely et al, 1997)
  • Key proposed principles of PM design
  • Should be grounded in strategy performance
    metrics must be derive from predefined
    strategy/objectives (De Tonia Tonchia, 2001)
  • Should incorporate a high proportion of leading
    indicators (Eckerson, 2006) i.e. in comparison to
    lag indicators

Theory PM Design
  • 22 most-cited recommendations for designing
    measures (Neely e al, 1997)

Be derived from strategy Be simple to understand Provide timely and accurate feedback Be actionable based on quantities that can be influenced or controlled Reflect the business process both customer and supplier should be involved in defining Relate to specific targets Be relevant Be predictive part of a closed management loop Be clearly defined Have visual impact Should focus on improvement Be consistent (i.e. should maintain significance as time goes by) Provide fast feedback Have an explicit purpose Be based on explicitly defined formula and source of data Employ ratios rather than absolute numbers Use data which are automatically collected as part of a process Be reported in a simple consistent format Be based on trends rather than snapshots Provide information Be precise be exact about what is being measured Be objective not based on opinion
Theory PM Implementation
  • Systemic aspect of effective PM process
    rationalisation, shared understanding staff
    commitment, IT support (data capture/collection,
    processing presentation)
  • Dashboards visual impact, data quality and
    timeliness (Few, 2005 Dixon et al., 1999)
  • PM for the IT Function need for spread of
    measures across 3 categories (Stanwick
    Stanwick, 2005) (i) efficiency (ii)
    effectiveness (iii) productivity

Research Method
  • Interpretive case study method (Walsham, 1995)
    indepth single-site case study, aimed at
    theoretical generalisation
  • Case organisation/unit GITS (Group IT Services),
    the corporate IT function of Multicorp (a
    pseudonym), a multi-national manufacturer of
    tobacco-based products
  • Data Gathering Analysis
  • multiple site visits June to August 2006
  • 27 semi-structured interviews, dashboards/document
    s review, informal conversations
  • inductive analysis (Glaser Strauss, 1967)
    identifying patterned regularities (common
    themes, issues or dilemmas)

Case Study Multicorp /GITS
  • Major manufacturer of cigarettes tobacco-based
  • 300 brands sold in 180 end-markets (i.e.
    country-specific regions) factories in 54
  • stable industry competitive conditions strategy
    is strongly focused on efficiencies
    (cost-savings) across business units (esp.
  • GITS (Groups IT Services)
  • corporate IT function, formed in 2004
  • transform supply of IT support across Multicorps
    worldwide business units from traditional
    geographically-localised model into a
    centralised, shared services model
  • to achieve cost-savings of 100 million by 2009

Case Study GITS
  • Strategy structure
  • vision irresistible value
  • client-facing units management team
  • critical need to monitor performance
  • 3 dashboards in use
  • Two years ago GITS had less than 100 staff, the
    management team could sit in a room and discuss
    in detail operational issues throughout the
    department. Now were more than 500 strong, and
    are doing far more things. We havent a clue what
    is going on out there, and dont know what
    operational things we should be looking at.

GITS Leadership Dashboard
GITS Application Services Dashboard
GITS Technical Services Dashboard
Case Findings
  • Inadequacies in dashboard population and scope of
  • difficulties obtaining timely accurate data
  • areas of performance left untracked (in scope
  • deficient in leading indicators (heavily
    lagged-oriented) lack of predictive capacity to
    take proactive interventions
  • Ive no idea what drives the numbers. Im not
    sure if anyone has (manager)

Case Findings
  • lack of clarity or common understanding regarding
    definition of certain measures, e.g.
  • Constitution of measures e.g. managed volume
  • (i) We count managed volume against our target
    only when services have been transferred to GITS,
    and the first invoice sent to the end-market
  • (ii) Managed volume is just that services which
    we (GITS) manage. It doesnt matter if we havent
    billed the customer yet.
  • Progress towards targets e.g. cost savings
  • (i) We claim that we have achieved a cost saving
    when we sign a contract with an outsource
    provider to provide the service at a cost lower
    next year than our current deal
  • (ii) Cost savings are claimed when we release
    next years price list to the end markets in May,
    with confirmation in early December.

Case Findings
  • Relation of measurement to strategy difference
    between Leadership AS/TS dashboards
  • Application Services Technical Services
    dashboards reported self-chosen operational
    targets beyond existing strategy
  • non-strategy derived measures were seen by
    managers as useful aspects for monitoring
    operational health
  • There are quite a few measures which dont
    directly relate to strategy or targets, but we
    think it is worthwhile to keep track of them. It
    helps to know the operational health of the
    business. (Application Services manager)
  • political value or signaling
  • We benchmark the charge rates of our project
    managers against external consultancy providers
    were less expensive, and the difference is
    classed as Cost Avoidance. It helps us
    demonstrate our value to the business.
    (Technical Services manager)

Case Discussion
  • Lack of systemisation in data collection and
    measurement (cum dashboard) design
  • no top-down mandate or formal programme /
    framework guiding the implementation of these
    practices need for process rationalisation and
    information systems infrastructure (Bourne et.
    al, 2003)
  • difficulty identifying leading indicators (Neely
    et al., 2000 Eckerson, 2006)
  • Need for re-orientation of fundamental aim/focus
  • from a tool for simply monitoring/reporting to
    one of learning what factors drive results (i.e.
    to be able to influence/control)

Case Discussion
  • Re-thinking major PM tenets/principles
  • Notion of balance in balanced measurement
  • financial vs. non-financial lever
  • reporting vs. predication/learning lever
    (lagging vs. leading indicators)
  • Existing strategy as the source for deriving
    measures a case for de-coupling strategy from
  • cost-focussed strategies promote financial and
    discourage non-financial indicators
  • de-politicizing of measurement
  • promote transformation of PM towards a learning
    rather than simply a monitoring tool

  • Results of this exploratory study suggest a need
    for further research theoretical development to
    extend deepen understanding of the complex
    nature of PM
  • What does balanced measurement imply
  • Relationship between strategy and measurement
  • Questions?
  • Thank you

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    Harvard Business Review. January-February, 71-29.
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  3. Neely, A., Richards, H., Mills, J., Platts, K.
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  5. De Toni, A. and Tonchia, S. (2001) Performance
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  6. Eckerson, W. (2006) Performance Dashboards
    Measuring Monitoring and Managing Your Business,
    edn. New Jersey John Wiley Sons.
  7. Few, S. (2005) Dashboard Design Beyond Meters,
    Gauges, ad Traffic Lights. Business Intelligence
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    Homewood, IL Dow Jones-Irwin.
  9. Stanwick, P. and Stanwick, S. (2005) IT
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    The Journal of Corporate Accounting and Finance
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  10. Walsham, G. (1995). Interpretive case studies in
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  11. Glaser, B. and Strauss, A. (1967) The discovery
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  12. Bourne, M., Franco, M. and Wilkes, J. (2003)
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