IT Governance course : Corporate Contribution Scorecard
The Corporate contribution perspective evaluates the performance of the IT organization from the viewpoint of executive management, the Board of Directors and the shareholders, and provides answers to the key questions of these stakeholders concerning IT Governance. The key issues are business/ IT alignment, value delivery, cost management, risk management and inter-company synergy achievement. Benchmarks have been used where an objective standard was available or could be determined in most cases from external sources.
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Business/IT alignment |
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Value delivery |
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Cost management |
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Risk management |
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Inter-company synergy achievement |
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Figure 13: Corporate Contribution Scorecard
The main measurement challenges are with the areas of business/IT alignment and the value delivery.
Currently, business/IT alignment is measured by the approval of the IT operational plan and budget. Although not a discrete measure of alignment, the approval process within the Group is particularly thorough and as a result is accepted by business executives as a good indicator. All aspects of development, operations and governance/ support services are examined and challenged to ensure they are essential to achieving business objectives or supporting the enabling IT strategy.
In the value delivery area, the performance of a specific IT services group delivering to a specific business unit (e.g., ‘group insurance’ services) is measured. For each business unit, specific metrics are and/or will be defined. The ultimate responsibility for achieving and measuring the business value of IT rests with the business and is reflected in the business results of the individual lines of business in different ways, depending on the nature of value being sought.
Cost management is a traditional financial objective and is in the first place measured through the attainment of expense and recovery targets. The expenses refer to the costs that the IT organization has made for the business, and the recovery refers to the allocation of costs to IT services and the internal charge back to the business. All IT costs are fully loaded (no profit margin) and recovered from the lines of business on a fair and equitable basis as agreed to by the companies’ CFOs. Comparisons with similar industries will be drawn to benchmark these metrics. Next to this, IT unit costs (e.g., application development) will be measured and compared to the ‘top performing levels’ benchmark provided by Compass.
The development of the risk management metrics are the priority for the upcoming year. At this moment, the results of the internal audits are used and benchmarked against criteria provided by OSFI, the Canadian federal regulator in the financial services sector. The execution of the Security Initiative and the delivery of a Disaster Recovery Assessment need to be accomplished in the upcoming year. This will enable the business to get an insight on how well it is prepared to respond to different disaster scenarios.
Synergy achievement is measured through the achievement of single system solutions, targeted cost reductions and the integration of the IT organizations. This measure is very crucial in the context of the merger of the three IT organizations in the sense that it enables a post-evaluation of this merger and demonstrates to management whether the new IT organization is effective and efficient. The selection of single system solutions was a cooperative effort between business leaders and IT staff, resulting in a "Target State Architecture" depicting the target applications architecture. The synergy targets were heavily influenced by the consulting firm (Bain & Co.) that was used to assist in evaluating the London Life acquisition and the tri-company IT merger potential. The consultants suggested specific dollar reduction targets for technology services (IT operations) and application delivery services (IT development), largely based on norms they had developed from their previous merger and acquisition work. The approval of the Target State Architecture plan and the attainment of the targeted integration cost reductions will be measured. The IT organization integration metric refers to the synergies within the IT organization, e.g., is there one single service desk for the three companies or are there three different ones?
Customer Orientation Scorecard
The Customer orientation perspective evaluates the performance of IT from the viewpoint of internal business users (customers of IT) and, by extension, the customers of the business units. It provides answers to the key questions of these stakeholders concerning IT service quality. As shown in Figure below, the issues this perspective focuses on are competitive costs, development services performance, operational services performance and customer satisfaction.
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Customer satisfaction |
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Competitive costs |
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Development services performance |
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Operational services performance |
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Figure 14: Customer Orientation Scorecard
In the Customer satisfaction area, the IT BSC of the merged IT organization is relying on annual interviews with key business managers. It is the intent to set up one generic survey, which can be re-used, with relevant questions that cover the topics mentioned in Figure above.
Insight into the competitive costs area can demonstrate to the business how cost competitive the IT organization is compared to other (e.g., external) parties. This insight is realized by measuring the attainment of IT unit cost targets and the blended labor rate. This rate model provides an overall single rate for any IT professional who is appointed to the business. The competitive costs measures are benchmarked against Compass’s operational ‘Top Performing level’ and against the offerings of commercial IT service vendors (market comparisons).
Development services performance measures are project-oriented, using attributes such as goal attainment, sponsor satisfaction and project governance (i.e., the way the project is managed). These data are mostly captured by interviews with key managers. The most effective time to establish the basis for these (project) development measures is at the point where business cases are being prepared and projects are evaluated. Each IT project initiative will be evaluated by the IS Executive Committee in which IT and business managers determine — based on the business drivers, budget and state architecture compliance — which projects need to be executed. When a project is approved, the project manager defines clear targets for cost, schedule, quality, scope and governance. The quantitative data (e.g., budget) are reported throughout the lifecycle of the project. After completion of the project, the quantitative and qualitative data are evaluated during the major project review and the main success drivers, delivery issues and lessons learned are documented.
In terms of operational service performance, IT management measures achievement against targeted service levels. For each operational unit (e.g., data center), average response time, service availability and resolution time for incidents are rolled-up to these service performance metrics in the strategic Balanced Scorecard. The results are benchmarked against the performance of competitors.
Operational Excellence Scorecard
The operational excellence scorecard provides the performance of IT from the viewpoint of IT management (process owners and service delivery managers) and the audit and regulatory bodies. The operational excellence perspective copes with the key questions of these stakeholders and provides answers to questions of maturity, productivity and reliability of IT processes. The issues that are of focus here, as displayed are development process performance, operational process performance, process maturity and enterprise architecture management.
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Development process performance |
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Operational process performance |
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Process maturity |
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Enterprise architecture management |
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Figure 15: Operational Excellence Scorecard
In relation to development process performance, function point-based measures of productivity, quality and delivery rate such as number of faults per 100 installed function points and delivery rate of function points per month are defined. Benchmark data on industry performance will be gathered from a third party (e.g., Compass). In the operational process performance area, measures of productivity, responsiveness, change management effectiveness and incident occurrence level are benchmarked against selected Compass studies (e.g., on data centers, client server, etc.).
The process maturity is assessed using the CobiT (Control Objectives for IT and related Technology) framework and maturity models (ITGI, 2000). CobiT identifies 34 IT processes within four different domains and describes detailed maturity levels for each of these processes. The Group has identified 15 out the 34 priority processes that should have a maturity assessment in 2003 and the other processes will be measured later.
Enterprise architecture management deals with the IT responsibility to define an enterprise architecture which supports long-term business strategy and objectives and to act as a steward on behalf of business executives to protect the integrity of that architecture. Major project architecture approval measures the compliance of net new systems as they are proposed, developed and implemented. Product acquisition compliance technology standards measure our adherence to detailed technology standards which are at the heart of minimizing technology diversity and maximizing inter-company technology synergies. The "State of the Infrastructure" assessment measures the degree to which IT has been able to maintain a robust and reliable infrastructure as required to deliver effectively to business needs. It does so by comparing each platform area against risk-based criteria for potential impact to business continuity, security and/or compliance.
Future Orientation Perspective
The future orientation perspective shows the performance of IT from the viewpoint of the IT organization itself: process owners, practitioners and support professionals. The future orientation perspective provides answers to stakeholder questions regarding IT’s readiness for future challenges. The issues focused on, as depicted in Figure below, are human resources management, employee satisfaction and Knowledge Management. The metrics that will appear in the future orientation quadrant of the IT strategic Balanced Scorecard are in many cases the aggregated results of measures used in the unit scorecards (e.g., career center).
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Human resource management |
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Employee satisfaction |
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Knowledge management |
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Human resource management is an objective that is tracked by comparing measures as described in Figure above against predefined targets: the staff complement by skill type (number of people with a certain profile, e.g., systems analyst), staff turnover, staff ‘billable’ ratio (i.e., hours billed/total hours salary paid; if this ratio can be increased, the IT organization can charge lower rates to the business for the IT assigned people), and professional development days per staff member.
Employee satisfaction is measured by using surveys with questions relating to compensation, work climate, feedback, personal growth, and vision and purpose. Benchmark data of North American technology-dependent companies are provided by a third party.
In the Knowledge Management area, the delivery of internal process improvements to the ‘Cybrary’ is very important. The ‘Cybrary’ refers to the intranet that all employees can access for seeking and sharing knowledge. To measure improvements, metrics (e.g., number of hits per day on the Cybrary) still need to be developed. Closely linked to this, Knowledge Management is also measured by the implementation of the ‘lessons learned’ sharing process. Here too, specific metrics still need to be developed.
