Managing IT performance to create business value

In ConclusionProject/Process Measurement Questions Organizational Measurement Questions References CHAPTER 4 ESTABLISHING A SOFTWARE M EASUREMENT PROGRAM Resources, Products, Processes D

Managing IT Performance to Create Business Value

Managing IT Performance to Create Business Value

Jessica Keyes

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CHAPTER 2 DESIGNING PERFORMANCE MANAGEMENT AND MEASUREMENT SYSTEMS

Developing the QI Plan

CHAPTER 3 DESIGNING M ETRICS

What Constitutes a Good Metric?

IT-Specific Measures

System-Specific Metrics

Financial Metrics

Initial Benefits Worksheet

Continuing Benefits Worksheet

Quality Benefits Worksheet

Other Benefits Worksheet

ROI Spreadsheet Calculation

Examples of Performance Measures

In Conclusion

In Conclusion

Project/Process Measurement Questions

Organizational Measurement Questions

References

CHAPTER 4 ESTABLISHING A SOFTWARE M EASUREMENT PROGRAM

Resources, Products, Processes

Direct and Indirect Software Measurement

Views of Core Measures

Strategic View

Tactical View

Application View

Use a Software Process Improvement Model

Organization Software Measurement

Project Software Measurement

Software Engineering Institute Capability Maturity Model

Identify a Goal-Question-Metric (GQM) Structure

Develop a Software Measurement Plan

Example Measurement Plan Standard

In Conclusion

CHAPTER 5 DESIGNING PEOPLE IMPROVEMENT SYSTEMS

Impact of Positive Leadership

Motivation

Recruitment

Employee Appraisal

Automated Appraisal Tools

Dealing with Burnout

In Conclusion

References

CHAPTER 6 K NOWLEDGE AND SOCIAL ENTERPRISING PERFORMANCE MEASUREMENT AND MANAGEMENT

Using Balanced Scorecards to Manage Knowledge-Based Social Enterprising

Adopting the Balanced Scorecard

Attributes of Successful Project Management Measurement Systems

Measuring Project Portfolio Management

Project Management Process Maturity Model (PM)2 and Collaboration

In Conclusion

References

IT Risk Assessment Frameworks

Risk Process Measurement

Step 5: Determine Funding Approach

Step 6: Establish Service-Level Agreements

Step 7: Postdeployment Operations and Management

Configuration Management

CM and Process Improvement

Implementing CM in the Organization

In Conclusion

References

CHAPTER 9 DESIGNING AND MEASURING THE IT PRODUCT STRATEGY

Product Life Cycle

Product Life-Cycle Management

Product Development Process

Continuous Innovation

Measuring Product Development

In Conclusion

References

CHAPTER 10 DESIGNING CUSTOMER VALUE SYSTEMS

Customer Intimacy and Operational ExcellenceCustomer Satisfaction Survey

Using Force Field Analysis to Listen to CustomersCustomer Economy

Innovation for Enhanced Customer Support

Managing for Innovation

I NDEX

One of the reasons why information technology (IT) projects so often fail is that the return oninvestment rarely drives the technology investment decision It is not always the best idea that wins.Often, the project that wins the funding just did a better job of marketing the idea and themselves Aneven more important reason for all of the IT project chaos is that there is rarely any long-termaccountability (i.e., lack of performance management or measurement) in technology

There are literally hundreds of processes taking place simultaneously in an organization, eachcreating value in some way IT performance management and measurement is about pushing theperformance of the automation and maintenance of these processes in the right direction, ultimately tominimize the risk of failure

Every so often, a hot new performance management technique appears on the horizon.Complimentary to the now familiar agile development methodology, agile performance management

is designed for an environment where work is more collaborative, social, and faster moving than everbefore As should be expected from a methodology that stems from agile development, the mostimportant features of agile performance management are a development focus and regular check-ins.Toward this end, this methodology stresses more frequent feedback, managers conducting regularcheck-ins with team members, crowdsourcing feedback from project team members and managers,social recognition that encourages people to do their best work, emphasis on skills power as opposed

to the usual rigid hierarchical power, tight integration with development planning, and just-in-timelearning The goal is to improve the “performance culture” of the organization

Unsurprisingly, agile performance management is just a new name for a set of methodologies thathave long been used by forward-thinking IT managers Knowledge management and socialenterprising methodologies, which we cover in this book, have always had a real synergy withperformance management and measurement

This volume thoroughly explains the concepts behind performance management and measurementfrom an IT “performance culture” perspective It provides examples, case histories, and currentresearch on critical issues such as performance measurement and management, continuous processimprovement, knowledge management, risk management, benchmarking, metrics selection, and peoplemanagement

I would especially like to thank those who assisted me in putting this book together As always, myeditor, John Wyzalek, was instrumental in getting my project approved and providing greatencouragement

Jessica Keyes is president of New Art Technologies, Inc., a high-technology and management

consultancy and development firm started in New York in 1989

Keyes has given seminars for such prestigious universities as Carnegie Mellon, Boston University,University of Illinois, James Madison University, and San Francisco State University She is afrequent keynote speaker on the topics of competitive strategy and productivity and quality She isformer advisor for DataPro, McGraw-Hill’s computer research arm, as well as a member of theSprint Business Council Keyes is also a founding board of director member of the New YorkSoftware Industry Association She completed a two-year term on the Mayor of New York City’sSmall Business Advisory Council She currently facilitates doctoral and other courses for the

University of Phoenix and the University of Liverpool She has been the editor for WGL’s Handbook

of eBusiness and CRC Press’ Systems Development Management and Information Management.

Prior to founding New Art Technologies, Keyes was managing director of R&D for the New YorkStock Exchange and has been an officer with Swiss Bank Co and Banker’s Trust, both in New YorkCity She holds a masters of business administration from New York University, and a doctorate inmanagement

A noted columnist and correspondent with over 200 articles published, Keyes is the author of thefollowing books:

Balanced Scorecard, CRC Press, 2005

Bring Your Own Devices (BYOD) Survival Guide, CRC Press, 2013

Datacasting, McGraw-Hill, 1997

Enterprise 2.0: Social Networking Tools to Transform Your Organization, CRC Press, 2012 How to Be a Successful Internet Consultant, 2nd Ed, Amacom, 2002

How to Be a Successful Internet Consultant, McGraw-Hill, 1997

Implementing the Project Management Balanced Scorecard, CRC Press, 2010

Infotrends: The Competitive Use of Information, McGraw-Hill, 1992

Knowledge Management, Business Intelligence, and Content Management: The IT Practitioner’s Guide, CRC Press, 2006

Leading IT Projects: The IT Manager’s Guide, CRC Press, 2008

Marketing IT Products and Services, CRC Press, 2009

Real World Configuration Management, CRC Press, 2003

Social Software Engineering: Development and Collaboration with Social Networking, CRC

Press, 2011

Software Engineering Handbook, CRC Press, 2002

Technology Trendlines, Van Nostrand Reinhold, 1995

The CIO’s Guide to Oracle Products and Solutions, CRC Press, 2014 The Handbook of eBusiness, Warren, Gorham & Lamont, 2000

The Handbook of Expert Systems in Manufacturing, McGraw-Hill, 1991 The Handbook of Internet Management, CRC Press, 1999

The Handbook of Multimedia, McGraw-Hill, 1994

The Handbook of Technology in Financial Services, CRC Press, 1998 The New Intelligence: AI in Financial Services, HarperBusiness, 1990 The Productivity Paradox, McGraw-Hill, 1994

The Software Engineering Productivity Handbook, McGraw-Hill, 1993 The Ultimate Internet Sourcebook, Amacom, 2001

Webcasting, McGraw-Hill, 1997

X Internet: The Executable and Extendable Internet, CRC Press, 2007

so tightly that, when complete, the cloth’s individual threads are nearly impossible to distinguish fromone another The strength and resiliency of the completed cloth are the result of this careful weaving.

A company, too, is made up of many threads, each with its own strategy Only when all of theseunmatched threads, or strategies, are woven evenly together can a successful general business strategy

be formulated But first, those crafting the corporate (and information technology [IT]) strategy have

to understand exactly what strategy is

McKinsey research (Desmet et al 2015) indicates that some organizations are recognizing thatrigid, slow-moving strategic models are no longer sufficient The goal is to adapt to a structure that isagile, flexible, and increasingly collaborative while keeping the rest of the business running smoothly.One way to become agile is by simplifying The focus should be to allow structure to followstrategy and align the organization around its customer objectives with a focus on fast, project-basedstructures owned by working groups comprising different sets of expertise, from research to IT

The important thing is to focus on processes and capabilities Having a clear view of whatMcKinsey calls a company’s Digital Quotient™ (DQ) is a critical first step to pinpoint digitalstrengths and weaknesses A proprietary model, DQ is a comprehensive measurement of a company’sdigital maturity The assessment allows organizations to identify their digital strengths andweaknesses across different parts of the organization and compare them against hundreds oforganizations around the world It also helps companies realize their digital aspirations by providing

a clear view of what actions to take to deliver rapid results and sustain long-term performance

DQ assesses four major outcomes that have been proved to drive digital performance:

1 Strategy: The vision, goals, and strategic tenets that are in place to meet short-term, term, and long-term digital–business aspirations

mid-2 Culture: The mind-sets and behaviors critical to capture digital opportunities

3 Organization: The structure, processes, and talent supporting the execution of the digital

of the organization Of course, everything done is carefully measured.

IT Roadmap

A technology roadmap assists the chief information officer (CIO) to act more in line with the strategy

of the organization as a whole, for example, it is a plan that matches the short-term and long-termgoals with specific technology solutions to meet those goals A roadmap is the governing documentthat dictates specifically how IT will support the business strategy over a window of time, usually 3–

5 years Most road-maps contain a strategy statement, with a list of strategic priorities for thebusiness; a prioritized list of improvement opportunities; high-level justifications for each project;costs and schedule for each project; and a list of owners and stakeholders for each project

A technology roadmap has several major uses It helps reach a consensus about a set of needs andthe technologies required to satisfy those needs; it provides a process to help forecast technologydevelopments; and it provides a framework to help plan and coordinate technology developments.The technology roadmapping process usually consists of three phases, as shown in Table 1.1

Strategic Planning

It is said that, “failing to plan is planning to fail.” Strategic management can be defined as the art andscience of formulating, implementing, and evaluating cross-functional decisions that enable anorganization to achieve its objectives Put simply, strategic management is planning for anorganization’s future The plan becomes a roadmap to achieve the goals of the organization, with IT

as a centerpiece of this plan Much like the map a person uses when taking a trip to another city, theroadmap serves as a guide for management to reach the desired destination Without such a map, anorganization can easily flounder

Table 1.1 Steps for Creating a Technology Roadmap

IDENTIFY AND CLARIFY CONDITIONS AND TAKE

STEPS TO MEET UNMET CONDITIONS

Phase 1:

Preliminary

Provideleadership/sponsorship

Committed leadership is needed Leadership must come fromone of the participants—that is, the line organization mustdrive the process and use the roadmap to make resourceallocation decisions

Define scope andboundaries

The roadmap must support the company’s vision The planninghorizon and level of details should be set during this step

Phase 2:

DevelopmentIdentify the focus

Common product needs are identified and accepted by theparticipants of the planning process

Identify the criticalsystem requirementsand targets

Examples of targets are reliability and costs

Specify majortechnology areas

Example technology areas are market assessment, systemdevelopment, and component development

Specify technologydrivers and theirtargets

The critical system requirements are transformed intotechnology drivers with targets These drivers will determinewhich technology alternatives are selected

Identify technologyalternatives and theirtime lines

Time durations or scale and intervals can be used for timeline

Recommend thetechnology alternativesthat should be pursued

Keep in mind that alternatives will differ in costs, time line,and so on Thus, a lot of trade-off has to be made betweendifferent alternatives for different targets, performance overcosts, and even target over target

Create technologyroadmap report

The roadmap report consists of five parts: identification anddescription of each technology area; critical factors in theroadmap; unaddressed areas; implementation

recommendations; and technical recommendations

Phase 3:

Follow-up

Roadmap is critiqued, validated, edited, and then accepted bythe group A plan needs to be developed using the technologyroadmap Periodical reviews must be planned for

The value of strategic planning for any business is to be proactive in taking advantage ofopportunities while minimizing threats posed in the external environment The planning process itselfcan be useful to “rally the troops” toward common goals and create “buy in” to the final action plan.The important thing to consider in thinking about planning is that it is a process, not a one-shot deal.The strategy formulation process, which is shown in Figure 1.1, includes the following steps:

1 Strategic planning to plan (assigning tasks, time, etc.)

2 Environmental scanning (identifying strengths and weaknesses in the internal environment

and opportunities and threats in the external environment)

3 Strategy formulation (identifying alternatives and selecting appropriate alternatives)

4 Strategy implementation (determining roles, responsibilities, and a time frame)

5 Strategy evaluation (establishing specific benchmarks and control procedures, revisiting thestrategy at regular intervals to update plans, etc.)

Figure 1.1 Strategy formulation.

Figure 1.2 Basic competitive strategies.

Business tactics must be consistent with a company’s competitive strategy A company’s ability tosuccessfully pursue a competitive strategy depends on its capabilities (internal analysis) and howthese capabilities are translated into sources of competitive advantage (matched with externalenvironment analysis) The basic generic strategies that a company can pursue are shown in Figure

In all strategy formulation, it is vital for the company to align the strategy tactics with its overallsource of competitive advantage For example, many small companies make the mistake of thinkingthat product giveaways are the best way to promote their business or add sales In fact, the oppositeeffect may happen if there is a mis-alignment between price (lowest cost) and value (focus)

Michael Porter’s (1980) Five Forces model gives another perspective on an industry’sprofitability This model helps strategists develop an understanding of the external marketopportunities and threats facing an industry generally, which gives context to specific strategyoptions

Specific strategies that a company can pursue should align with the overall generic strategyselected Alternative strategies include forward integration, backward integration, horizontalintegration, market penetration, market development, product development, concentric diversification,conglomerate diversification, horizontal diversification, joint venture, retrenchment, divestiture,liquidation, and a combined strategy Each alternative strategy has many variations For example,product development could include research and development pursuits, product improvement, and so

on Strategy selection will depend on management’s assessment of the company’s strengths,weaknesses, opportunities, and threats (SWOT) with consideration of strategic “fit.” This refers tohow well the selected strategy helps the company achieve its vision and mission

Strategy Implementation

According to several surveys of top executives, only 19% of strategic plans actually meet theirobjectives Strategies frequently fail because the market conditions they were intended to exploitchange before the strategy takes effect An example of this is the failure of many telecom companiesthat were born based on projected pent-up demand for fiber-optic capacity fueled by the growth of theInternet Before much of the fiber-optic cable could even be laid, new technologies were introducedthat permitted a dramatic increase of capacity on the existing infrastructure Virtually overnight, themarket for fiber-optic collapsed

Strategic execution obstacles are of two varieties: problems generated by forces external to thecompany, as our telecom example demonstrates, and problems internal to the company Internal issuestest the flexibility of companies to launch initiatives that represent significant departures from long-standing assumptions about who they are and what they do Can they integrate new software into theirinfrastructure? Can they align their human resources?

What could these companies have done to ensure that their programs and initiatives wereimplemented successfully? Did they follow best practices? Were they aware of the initiative’scritical success factors? Was there sufficient senior-level involvement? Was planning thorough andall-encompassing? Were their strategic goals aligned throughout the organization? And mostimportantly, were their implementation plans able to react to continual change?

Although planning is an essential ingredient for success, implementing a strategy requires morethan just careful initiative planning Allocating resources, scheduling, and monitoring are indeedimportant, but it is often the intangible or unknown that gets in the way of ultimate success The ability

of the organization to adapt to the dynamics of fast-paced change as well as the desire of executivemanagement to support this challenge is what really separates the successes from the failures

TiVo was presented with a challenge when it opted to, as its CEO puts it, “forever change the waythe world watches TV.” The company pioneered the digital video recorder (DVR), which enablesviewers to pause live TV and watch it on their own schedules There are millions of self-described

“rabid” users of the TiVo service In a company survey, over 40% said they would sooner disconnecttheir cell service than unplug their TiVo

TiVo is considered disruptive technology because it forever changes the way the public doessomething According to Forbes.com’s Sam Whitmore (2004), no other $141 million company hascome even close to transforming government policy, audience measurement, direct response and TVadvertising, content distribution, and society itself

But TiVo started off on shaky footing and continues to face challenges that it must address tosurvive Therefore, TiVo is an excellent example of continual adaptive strategic implementation, and

is worth studying

Back in the late 1990s, Michael Ramsey and James Barton, two forward thinkers, came up with theidea that would ultimately turn into TiVo They quickly assembled a team of marketers and engineers

to bring their product to market and unveiled their product at the National Consumer Electronics show

in 1999 TiVo hit the shelves a short 4 months later Ramsey and Barton, founders and C-levelexecutives, were actively involved every step of the way—a key for successful strategicimplementations

Hailed as the “latest, greatest, must-have product,” TiVo was still facing considerable problems.The first was consumer adoption rates It takes years before any new technology is widely adopted bythe public-at-large To stay in business, TiVo needed a way to jump-start its customer base On top ofthat, the firm was bleeding money, so it had to find a way to staunch the flow of funds out of thecompany

Their original implementation plan did not include solutions to these problems But the firmreacted quickly to their situation by jumping into a series of joint ventures and partnerships that wouldhelp them penetrate the market and increase their profit-ability An early partnership with PhilipsElectronics provided them with funding to complete their product development Deals with DirectTV,Comcast Interactive, and other satellite and cable companies gave TiVo the market penetration itneeded to be successful The force behind this adaptive implementation strategy was Ramsey andBarton, TiVo’s executive management team Since implementations often engender a high degree ofrisk, the executive team must be at the ready should there be a need to go to “Plan B.” Ramsey andBarton’s willingness to jump into the fray to find suitable partnerships enabled TiVo to stay thecourse—and stay in business

But success is often fleeting, which is why performance monitoring and a continual modification ofboth the strategic plan and resulting implementation plan is so very important Here again, the

presence of executive oversight must loom large Executive management must review progress on analmost daily basis for important strategic implementations While many executives might be contentjust to speak to his or her direct reports, an actively engaged leader will always involve others lowerdown the chain of command This approach has many benefits including reinforcing the importance ofthe initiative throughout the ranks and making subordinate staff feel like they are an important part ofthe process The importance of employee buy-in to strategic initiatives cannot be underestimated interms of ramifications for the success of the ultimate implementation Involved, excited, and engagedemployees lead to success Unhappy, fearful, disengaged employees do not.

TiVo competes in the immense and highly competitive consumer electronics industry where being afirst mover is not always a competitive advantage Competition comes in fast and hard Cable andsatellite providers are direct competitors It is the indirect competitors, however, that TiVo needs towatch out for Although Microsoft phased out its UltimateTV product, the company still looms large

by integrating some extensions into its Windows operating system that provide similar DVRfunctionality TiVo’s main indirect competitor, however, is digital cable’s pay-per-view and video-on-demand services, as well as services such as Hulu and Netflix The question becomes—willDVRs be relegated to the technological trash heap of history where it can keep company with thelikes of Betamax and eight-track tapes? Again, this is where executive leadership is a must ifimplementation is to be successful Leaders must continually assess the environment and makeadjustments to the organization’s strategic plan and resulting implementation plans, particularly wheretechnology is concerned They must provide their staff with the flexibility and resources to quicklyadapt to changes that might result from this reassessment

TiVo continues to seek partnerships with content providers, consumer electronics manufacturers,and technology providers to focus on the development of interactive video services One of its morecontroversial ideas was the promotion of “advertainment.” These are special-format commercialsthat TiVo downloads onto its customers’ devices to help advertisers establish what TiVo calls “fardeeper communications” with consumers TiVo continues to try to dominate the technology side of theDVR market by constant research and development They have numerous patents and patents pending.Even if TiVo—the product—goes under, TiVo’s intellectual property will provide a continuingstrategic asset

Heraclitus, a Greek philosopher living in the sixth century BC said, “Nothing endures but change.”That TiVo has survived up to this point is a testament to their willingness to adapt to continualchange That they managed to do this when so many others have failed demonstrates a wide variety ofstrategic planning and implementation skill-sets They have an organizational structure that is able toquickly adapt to whatever change is necessary Although a small company, their goals are carefullyaligned throughout the organization, at the organizational, divisional, as well as employee level.Everyone at TiVo has bought into the plan and is willing to do what it takes to be successful Theyhave active support from the management team, a critical success factor for all strategic initiatives.Most importantly, they are skillful at performance management They are acutely aware of allenvironmental variables (i.e., competition, global economies, consumer trends, employee desires,industry trends, etc.) that might affect their outcomes and show incredible resourcefulness and

resiliency in their ability to reinvent themselves.

It is a truism that the strategy and the firm must become one In doing so, the firm’s managers mustdirect and control actions and outcomes and, most critically, adjust to change Executive leadershipcan do this not only by being actively engaged themselves but also by making sure all employeesinvolved in the implementation are on the same page How is this done? There are several techniques,including the ones already mentioned Executive leadership should frequently review the progress ofthe implementation and jump into the fray when required This might translate to finding partnerships,

as was the case with TiVo, or simply quickly signing off on additional resources or funding Moreimportantly, executive leadership must be an advocate—cheerleader—for the implementation with aneye toward rallying the troops behind the program Savvy leaders can accomplish this throughfrequent communications with subordinate employees Inviting lower-level managers to meetings,such that they become advocates within their own departments, is a wonderful method for cascadingstrategic goals throughout the organization E-mail communications, speeches, newsletters, webinars,and social media also provide a pulpit for getting the message across

Executive leadership should also be mindful that the structure of the organization can have adramatic impact on the success of the implementation The twenty-first-century organizationalstructure includes the following characteristics: bottom-up, inspirational, employees and free agents,flexible, change, and “no compromise” to name a few Merge all of this with a fair rewards systemand compensation plan and you have all the ingredients for a successful implementation As you cansee, organizational structure, leadership, and culture are the key drivers for success

Implementation Problems

Microsoft was successful at gaining control of people’s living rooms through the Trojan horsestrategy of deploying the now ubiquitous Xbox Hewlett-Packard (HP) was not so successful inraising its profile and cash flow by acquiring rival computer maker Compaq—to the detriment of itsCEO, who was ultimately ousted Segway, the gyroscope-powered human transport brainchild of thebrilliant Dean Kamen, received a lukewarm reception from the public Touted as “the next greatthing” by the technology press, the company had to reengineer its implementation plan to reorient itstarget customer base from the general consumer to specific categories of consumers, such as golfers,cross-country bikers, as well as businesses

Successful implementation is essentially a framework that relies on the relationship between thefollowing variables: strategy development, environmental uncertainty, organizational structure,organizational culture, leadership, operational planning, resource allocation, communication, people,control, and outcome One major reason why so many implementations fail is that there are nopractical, yet theoretically sound, models to guide the implementation process Without an adequatemodel, organizations try to implement strategies without a good understanding of the multiplevariables that must be simultaneously addressed to make implementation work

In HP’s case, one could say that the company failed in its efforts at integrating Compaq because it

did not clearly identify the various problems that surfaced as a result of the merger, and then use arigorous problem-solving methodology to find solutions to the problems Segway, on the other hand,framed the right problem (i.e., “the general consumer is disinterested in our novel transport system”)and ultimately identified alternatives such that they could realize their goals.

The key is to first recognize that there is a problem This is not always easy as there will bedifferences of opinions among the various managerial groups as to whether a problem exists and as towhat it actually is In HP’s case, the problems started early on when the strategy to acquire Compaqwas first announced According to one fund manager who did not like the company before the merger,the acquisition just doubled the size of its worst business (De Aenlle 2005) We should also askabout the role of executive leadership in either assisting in the problem determination process orverifying that the right problem has indeed been selected While HP’s then CEO Carly Fiorina did amagnificent job of implementing her strategy using three key levers (i.e., organizational structure,leadership, and culture), she most certainly dropped the ball by disengaging from the process andeither not recognizing that there was a problem within HP or just ignoring the problem for otherpriorities The management team needs to pull together to solve problems The goal is to helpposition the company for the future You are not just dealing with the issues of the day; you are alwayslooking for the set of issues that are over the next hill A management team that is working well seesthe next hill, and the next hill This is problem-solving at its highest degree

There are many questions that should be asked when an implementation plan appears to go offtrack Is it a people problem? Was the strategy flawed in the first place? Is it an infrastructuralproblem? An environmental problem? Is it a combination of problems? Asking these questions willenable you to gather data that will assist in defining the right problem to be solved Of course,responding “yes” to any one or more of these questions is only the start of the problem definitionphase of problem-solving You must also drill down into each of these areas to find root causes of theproblem For example, if you determined that there is a people problem, you then have to identify thespecifics of this particular problem For example, in a company that has just initiated an off-shoringprogram, employees may feel many emotions: betrayed, bereft, angry, scared, and overwhelmed.Unless management deals with these emotions at the outset of the off-shoring program, employeeproductivity and efficiency will undoubtedly be negatively impacted

Radical change to the work environment may also provoke more negatively aggressive behavior.When the U.S Post Office first automated its postal clerk functions, management shared little aboutwhat was being automated The rumor mill took over and somehow employees got the idea thatmassive layoffs were in the works Feeling that they needed to fight back, some postal employeesactually sabotaged the new automated equipment Had management just taken a proactive approach byproviding adequate and continuing communications to the employees prior to the automation effort,none of this would have happened Sussman (Lynch 2003) neatly sums up management’s role inavoiding people problems through the use of what he calls “the new metrics”—return on intellect(ROI), return on attitude (ROA), and return on excitement (ROE) As the title of the Lynch articlesuggests, it is important that leaders challenge the process, inspire a shared vision, enable others toact, model the way, and encourage the heart

It is also quite possible to confuse symptoms of a problem with the problem itself For example,when working with overseas vendors, it is sometimes hard to reach these people due to the difference

in time zones This is particularly true when working with Asian firms, as they are halfway across theglobe Employees working with these external companies might complain about lack ofresponsiveness when the real problem is that “real time” communications with these companies aredifficult due to time zone problems The problem, then, is not “lack of responsiveness” by theseforeign vendors, but lack of an adequate set of technologies that enable employees and vendors tomore easily communicate across different time zones, vast distances, and in different languages (i.e.,video conferencing tools, instant messaging tools are all being used for these purposes)

Once the problem has been clearly framed, the desired end state and goals need to be identifiedand some measures created so that it can be determined whether the end state has actually beenachieved Throughout the problem-solving process, relevant data must be collected and the rightpeople involved Nowhere are these two seemingly simple caveats more important than in identifyingthe end state and the metrics that will be used to determine whether your goals have been achieved

Strategy implementation usually involves a wide variety of people in many departments Therefore,there will be many stakeholders that will have an interest in seeing the implementation succeed (orfail) To ensure success, the implementation manager needs to make sure that these stakeholders arealigned, have bought into the strategy, and will do whatever it takes to identify problems and fix them.The definition of the end state and associated metrics are best determined in cooperation with thesestakeholders, but must be overseen and approved by management Once drafted, these must becomepart of the operational control system

A scorecard technique aims to provide managers with the key success factors of a business and tofacilitate the alignment of business operations with the overall strategy If the implementation wasproperly planned, and performance planning and measurement well integrated into the implementationplan, a variety of metrics and triggers will already be visually available for review and possibleadaptation to the current problem-solving task

A variety of alternatives will probably be identified by the manager Again, the quality and quantity

of these alternatives will be dependent on the stakeholders involved in the process Each alternativewill need to be assessed to determine: (a) viability; (b) completeness of the solution (i.e., does itsolve 100% of the problem, 90%, 50%, etc.); (c) costs of the solution; (d) resources required by thesolution; and (e) any risk factors involved in implementing the alternative In a failed implementationsituation that resulted from a variety of problems, there might be an overwhelming number of possiblealternatives None of these might be a perfect fit For example, replacing an overseas vendor gone out

of business only solves a piece of the problem and, by itself, is not a complete solution In certainsituations, it is quite possible that a complete solution might not be available It might also bepossible that no solution is workable In this case, a host of negative alternatives such a shutting downthe effort or selling the product/service/division might need to be evaluated

Once a decision is made on the appropriate direction to take, based on the alternative or acombination of alternatives selected, a plan must be developed to implement the solution We caneither develop an entirely new implementation plan or fix the one we already have There are risks

and rewards for either approach, and the choice you make will depend on the extent of the problems

you identified in the original plan

In Conclusion

Strategic planning is not a one-time event It is rather a process involving a continuum of ideas,

assessment, planning, implementation, evaluation, readjustment, revision and, most of all, good

management IT managers need to make sure that their strategies are carefully aligned with corporate

and departmental strategic plans—and consistent with the organizational business plan, as shown in

Desmet, D., Duncan, E., Scanlan, J., and Singer, M (2015) Six building blocks for creating a

high-performing digital enterprise McKinsey & Company Insights & Publications September.

Retrieved from

http://www.mckinsey.com/insights/organization/six_building_blocks_for_creating_a_high_performing_digital_enterprise?cid=other-eml-nslmip-mck-oth-1509

Lynch, K (2003) Leaders challenge the process, inspire a shared vision, enable others to act, model

the way, encourage the heart The Kansas Banker, 93(4) 15–17.

Porter, M E (1980) Competitive Strategy New York: Free Press.

Whitmore, S (2004) What TiVo teaches us Forbes July 7.

An organization can achieve the overall goal of effective performance management by continuouslyengaging in the activities shown in Table 2.1.

Performance management encompasses a series of steps with some embedded decision points Thefirst step ensures that the resources dedicated to manage and measure performance are directed to theorganizational strategic goals and mission The primary reason to measure and manage performance

is to drive quality improvement (QI) The dialogue about an organization’s priorities should includethe organization’s strategic plan, quality management plan, and similar strategic documents Often, anorganization reflects on what is not working well to determine its focus In some cases, improvementpriorities are determined by external expectations

The time that an organization’s leaders spend discussing priorities is time well spent Thesestrategic discussions improve buy-in from key leaders within the organization and encouragereflection from multiple perspectives

After an organization discusses what is important to measure, the next step is to choose specificperformance measures Performance measures serve as indicators for the effectiveness of systems andprocesses Measure what is important based on the evaluation of an organization’s internal priorities

as well as what is required to meet external expectations

It is important to include staff in the measure selection process since staff will be involved in theactual implementation of measurement and improvement activities Buy-in from staff significantlyfacilitates these steps It is also a good idea to use existing measures, if possible Criteria formeasures include

1 Relevance: Does the performance measure relate to a frequently occurring condition or does

it have a great impact on stakeholders at an organization’s facility?

2 Measurability: Can the performance measure realistically and efficiently be quantified given

the facility’s finite resources?

3 Accuracy: Is the performance measure based on accepted guidelines or developed through

formal group decision-making methods?

4 Feasibility: Can the performance rate associated with the performance measure realistically

be improved given the limitations of the organization?

Table 2.1 Performance Management Activities

IDENTIFYING AND PRIORITIZING DESIRED RESULTS

Establishing means to measure progress toward those results

Setting standards for assessing how well results are achieved

Tracking and measuring progress toward results

Exchanging ongoing feedback among those individuals working to achieve results

Periodically reviewing progress

Reinforcing activities that achieve results

Intervening to improve progress where needed

Once performance measures are chosen, an organization collects the baseline data for eachmeasure Baseline data are a snapshot of the performance of a process or outcome that is considerednormal, average, or typical over a period of time and reflects existing care systems Determining thebaseline involves calculating the measure As an organization assesses where it is before embarking

on a QI program, it often finds that its data reflect a lower-than-desired performance This should notcause alarm but rather provide the opportunity to focus QI efforts to improve performance

Established performance measures include details about the numerator and denominator tocalculate the measure Specifically, it is important to record the following for each measure:

1 Data source

2 Collection method

3 Frequency of data collection

4 Standardized time to collect data as applicable

5 Staff responsible for measurement and other aspects of the measurement process to create adetailed record

The baseline reflects the current status quo The larger the desired change, the more the underlyingsystems have to change Some organizations choose to set aims that indicate a percentage ofimprovement expected over their baseline, while others choose aims that reflect their desiredperformance, regardless of their baseline performance

Once the baseline calculation is complete, an organization decides if performance is satisfactory orimprovements are needed To provide context for evaluating baseline data, an organization maychoose to compare and benchmark its data against other organizations Benchmarking is a process thatcompares organizational performance with industry best practices, which may include data from

local, regional, or national sources Benchmarking brings objectivity to the analysis of performanceand identifies the strengths and weaknesses of an organization.

If an organization is satisfied with its current level of performance, then it should put a system inplace to monitor performance periodically If an organization’s performance is less than desired, then

it may establish an aim for improvement Sometimes, the barriers to QI exist in the structure orsystem It may be beneficial to examine the system as it supports or inhibits QI While much of thestructure/system cannot be changed, it is likely that there are some areas where change is possible.Some actions include

1 Construct flowcharts depicting inputs, outputs, customers, and interfaces with otherorganizations These can be constructed for various levels of the organization Attempt toidentify likely QI areas

2 Implement quality teams

3 Ask the people involved for ideas about changing the structure/system

4 Track improvement progress after a change has been made

5 Staff members need to be aware of the importance of a quality and/or productivityimprovement process

6 Write down the organization’s quality and/or productivity improvement policy and thenmake sure everyone sees it

A critical part of QI is to measure when changes occur In the same way that data for the baselinemeasurement are calculated, periodic calculations of performance measures should be accomplished.For an organization actively engaged in improvement work, this is often monthly As performance ismeasured over time, a trend develops It is important to use the same methodology to collect andcalculate the data each time

Changes that improve the underlying critical pathway often reflect improved performance on themeasure An organization may choose to continue its improvement efforts as it moves toward itstarget or goal for the performance measure An organization that is not experiencing improvement mayreflect on the trend data and use the opportunity to reevaluate its approach All changes do not result

in improvement and reflection on other change opportunities may be required to get improvementback on track Most organizations continue to test changes and make improvements until their aimshave been achieved

Developing the QI Plan

QI refers to activities aimed at improving performance and is an approach to the continuous study andimprovement of the processes of providing services to meet the needs of the individual and others.Continuous quality improvement (CQI) refers to an ongoing effort to increase an organization’sapproach to manage performance, motivate improvement, and capture lessons learned in areas that

may or may not be measured It is an ongoing effort to improve the efficiency, effectiveness, quality,

or performance of services, processes, capacities, and outcomes

The key elements of a QI plan include a description of the purpose, priorities, policies, and goals

of the QI program, as well as a description of the organizational systems needed to implement theprogram, including QI committee structure and functions; descriptions of accountability, roles, andresponsibilities; the process for gaining consumer input; core measures and measurement processes;and a description of the communication and evaluation plan

Describe the purpose of the QI plan, including the organization’s mission and vision, policystatement, the types of services provided, and so on Also, define the key concepts and quality termsused in the QI program/project so that there is a consistent language throughout the organizationregarding quality terms

Organizational structure is a formal, guided process for integrating the people, information, andtechnology of an organization, and serves as a key structural element that allows organizations tomaximize value by matching their mission and vision to their overall strategy in QI Implementing a

QI plan requires a clear delineation of oversight roles and responsibilities, and accountability The

QI plan should clearly identify who is accountable for QI processes, such as evaluation, datacollection, analysis education, and improvement planning The specific organizational structure forimplementing a QI plan can vary greatly from one organization to another In all cases, it isrecommended that a quality coordinator is assigned to support the process

Depending on the size of the organization, who participates in QI activities may vary For example,

in small organizations, most of the staff members are involved in all aspects of QI work In largerorganizations, a quality committee is often established that includes senior management, designated

QI staff if there are any, and other key players in the organization with the expertise and authority todetermine program priorities, support change, and if possible, allocate resources The main role ofthis group is to develop an organizational QI plan, charter a team, establish QI priorities andactivities, monitor progress toward goal attainment, assess quality programs, and conduct annualprogram evaluation

Areas for improvement can be identified by routinely and systematically assessing performance QIprojects may be identified from self-assessment, customer satisfaction surveys, or formalorganizational review that identifies gaps in services Staff from all levels should be included tobrainstorm and develop a list of changes that they think will improve the process The QI projects thatare selected and prioritized should show alignment with the organization’s mission

Key program goals and objectives should be defined for the current year This list should betailored to the program and include specific objective(s) that need to be accomplished to successfullyachieve the goal The objective(s) for each of the selected goals need to be specific, measurable,achievable, relevant, and time-framed (SMART) objectives so that you will be able to clearlydetermine whether the objectives have been met at the end of the year by using a specified set of QItools

For example,

By December 29, 2018 (timebound), increase the number of training sessions given for QI staff on “QI concepts and tools” (specific and relevant) from 6 to 10 (measurable and achievable).

Generally, the QI committee identifies and defines goals and specific objectives to beaccomplished each year These goals may include training of staff regarding both CQI principles andspecific QI initiative(s) Progress in meeting these goals and objectives is an important part of theannual evaluation of QI activities

Performance measurement, discussed in more depth in the next chapter, describes howperformance is measured and data are collected, monitored, and analyzed It is used to monitorimportant aspects of an organization’s programs, systems, and processes; compare its currentperformance with the previous year’s performance, as well as benchmarks and theoretical testperformance measures; and identify opportunities for improvement in management, development, andsupport services The basic steps are to determine performance measures and develop indicators tomeasure performance To do this will require the measurement population to be defined, the datacollection plan and method to be described (e.g., survey, data analysis, interviews), and an analysisplan to be determined

The QI methodology and quality tools/techniques to be utilized throughout the organization must beclearly identified Strategies for improvement in the existing process can be identified by using QItools such as benchmarking, fishbone diagram, root-cause analysis, and so on

The plan-do-study-act cycle is one of the more widely used QI methodologies for testing a change

on a small scale—by planning change and collecting baseline data, testing the change and collectingdata, observing the results and analyzing the data, and acting on what is learned If the change did notresult in improvement in the process, try another strategy If the change resulted in improvement,adopt the change, monitor the process periodically, and implement the change on a larger scale

A number of other QI approaches have also been used Based on your organizational priorities, the

QI committee can choose a preferred approach such as Six Sigma (define, measure, analyze, improve,and control) and FADE (focus, analyze, develop, execute, and evaluate)

Once a QI initiative is launched, it is important to have regular communication on QI with all staffincluding the board and stakeholders Regular updates on how the QI plan is being implemented, howtraining activities are being conducted, and improvement charting are important parts of anycommunication plan The progress in QI projects can be documented using activity logs, issueidentification logs, meeting minutes, and so on Improvement efforts can be communicated throughvarious methods, such as kick-off meetings or all-employee meetings; storyboards and/or postersdisplayed in common areas; sharing organization’s annual QI plan evaluation; e-mails, memos,newsletters, and/or handouts; and informal verbal communication

Table 2.2 HP TQC Program

Break-even time Measures return on investment Time until development costs are offset by profits

Measures responsiveness and competitiveness Time from project go-ahead until

Time to market release to market.

Progress rate Measures accuracy of schedule Ratio of planned to actual development time

Post-release

defect density

Measures effectiveness of test processes Total number of defects reported duringthe first 12 months after product release

Turnover rate Measures morale Percentage of staff leaving

Training Measures investment in career development Number of hours per year

Hewlett-Packard (HP) has adopted a similar methodology that they refer to as total quality control(TQC) A fundamental principle of TQC is that all company activities can be scrutinized in terms ofthe processes involved; metrics can be assigned to each process to evaluate effectiveness HP hasdeveloped numerous measurements, as shown in Table 2.2

The TQC approach places quality/productivity assessment high on the list of development tasks When projects are first defined, along with understanding and evaluating theprocess to be automated, the team defines the metrics that are to be used to measure the process

software-HP has also established a systems software certification program to ensure measurable, consistent,high-quality software through defining metrics, setting goals, collecting and analyzing data, andcertifying products for release

HP’s results are impressive Defects are caught and corrected early, when costs to find and fix arelower Less time is spent in the costly system test and integration phases, and on maintenance Thisresults in lower overall support costs and higher productivity It has also increased quality for HP’scustomers HP’s success demonstrates what a corporate-wide commitment to productivity and qualitymeasures can achieve

Balanced Scorecard

We addressed the concept of the IT roadmap in Chapter 1 One of the popular techniques that manycompanies have selected is the balanced scorecard, as shown in Figure 2.1 Heralded as one of themost significant management ideas of the past 75 years, the balanced scorecard has been implemented

in companies to measure as well as manage the IT effort

Robert S Kaplan and David P Norton developed the balanced scorecard approach in the early1990s to compensate for their perceived shortcomings of using only financial metrics to judgecorporate performance They recognized that in this “New Economy” it was also necessary to valueintangible assets Because of this, they urged companies to measure such esoteric factors as qualityand customer satisfaction By the mid-1990s, the balanced scorecard became the hallmark of a well-run company Kaplan and Norton (2001) often compare their approach for managing a company withthat of pilots viewing assorted instrument panels in an airplane cockpit—both have a need to monitormultiple aspects of their working environment

Figure 2.1 The balanced scorecard and its four perspectives.

In the scorecard scenario, a company organizes its business goals into discrete, all-encompassingperspectives: financial, customer, internal process, and learning/growth The company thendetermines cause–effect relationships—for example, satisfied customers buy more goods, whichincreases revenue Next, the company lists measures for each goal, pinpoints targets, and identifiesprojects and other initiatives to help reach those targets

Departments create scorecards tied to the company’s targets, and employees and projects havescorecards tied to their department’s targets This cascading nature provides a line of sight betweeneach individual, what he or she is working on, the unit that he or she supports, and how that impactsthe strategy of the whole enterprise

The balanced scorecard approach is more than just a way to identify and monitor metrics It is also

a way to manage, change, and increase a company’s effectiveness, productivity, and competitiveadvantage Essentially, a company that uses the scorecard to identify and then realize strategic goalscan be referred to as a strategy-focused organization Cigna is a good example of this When Cignainitiated the balanced scorecard process, the company had negative shareholder value The parentcompany was trying to sell it but had no takers Five years and a few balanced scorecards later,Cigna was sold for $3 billion

For IT managers, the balanced scorecard is an invaluable tool that permits IT to link to the businessside of the organization using a “cause-and-effect” approach Some have likened the balancedscorecard to a new language, which enables IT and business line managers to think together aboutwhat IT can do to support business performance A beneficial side effect of the use of the balancedscorecard is that, when all measures are reported, one can calculate the strength of relations between

the various value drivers For example, if the relation between high development costs and high profitlevels is weak for a long time, it can be inferred that the developed software does not sufficientlycontribute to results as expressed by the other (e.g., financial) performance measures.

The goal is to develop a scorecard that naturally builds in cause-and-effect relationships, includessufficient performance drivers and, finally, provides a linkage to appropriate financial measures Atthe very lowest level, a discrete software system can be evaluated using a balanced scorecard Thekey, here, is the connectivity between the system and the objectives of the organization as a whole

Establishing a Performance Management Framework

Several steps need to be undertaken to establish a performance management framework that makessense and is workable throughout the organization

1 Define the organizational vision, mission, and strategy The balanced scorecard methodologyrequires the creation of a vision, mission statement, and strategy for the organization Thisensures that the performance measures developed in each perspective support theaccomplishment of the organization’s strategic objectives It also helps employees visualizeand understand the links between the performance measures and successful accomplishment

of strategic goals

The key is to first identify where you want the organization to be in the near future andthen set a vision that seems somewhat out of reach In this way, managers have theinstrumentation they need to navigate to future competitive success If you cannotdemonstrate a genuine need to improve the organization, failure is a virtual certainty

2 Develop performance objectives, measures, and goals Next, it is essential to identify whatthe organization must do well (i.e., the performance objectives) in order to attain theidentified vision For each objective that must be performed well, it is necessary to identifymeasures and set goals covering a reasonable period of time (e.g., 3–5 years) Although thissounds simple, many variables actually impact how long this exercise will take The first,and most significant, variable is how many people are employed in the organization and theextent to which they will be involved in setting the vision, mission, measures, and goals.The balanced scorecard translates an organization’s vision into a set of performanceobjectives distributed among four perspectives: financial, customer, internal businessprocesses, and learning and growth Some objectives are maintained to measure anorganization’s progress toward achieving its vision Other objectives are maintained tomeasure the long-term drivers of success Through the use of the balanced scorecard, anorganization monitors both its current performance (financial, customer satisfaction, andbusiness process results) and its efforts to improve processes, motivate and educateemployees, and enhance information systems—its ability to learn and improve

When creating performance measures, it is important to ensure that they link directly to thestrategic vision of the organization The measures must focus on the outcomes necessary toachieve the organizational vision and the objectives of the strategic plan When draftingmeasures and setting goals, ask whether or not achievement of the identified goals will helprealize the organizational vision.

Each objective within a perspective should be supported by at least one measure that willindicate an organization’s performance against that objective Define measures precisely,including the population to be measured, the method of measurement, the data source, and thetime period for the measurement If a quantitative measure is feasible and realistic, then itsuse should be encouraged

When developing measures, it is important to include a mix of quantitative and qualitativemeasures Quantitative measures provide more objectivity than qualitative measures Theymay help to justify critical management decisions on resource allocation (e.g., budget andstaffing) or systems improvement The company should first identify any availablequantitative data and consider how it can support the objectives and measures incorporated

in the balanced scorecard Qualitative measures involve matters of perception, and therefore

of subjectivity Nevertheless, they are an integral part of the business scorecardmethodology Judgments based on the experience of customers, employees, managers, andcontractors offer important insights into acquisition performance and results

3 Finally, it takes time to establish measures, but it is also important to recognize that theymight not be perfect the first time Performance management is an evolutionary process thatrequires adjustments as experience is gained in the use of performance measures

4 If your initial attempts at implementation are too aggressive, the resulting lack oforganizational “buy-in” will limit your chance of success Likewise, if implementation is tooslow, you may not achieve the necessary organizational momentum to bring the balancedscorecard to fruition Incorporating performance measurement and improvement into yourexisting management structure, rather than treating it as a separate program, will greatlyincrease the balanced scorecard’s long-term viability

To achieve long-term success, it is imperative that the organizational culture evolves to the pointwhere it cultivates performance improvement as a continuous effort Viewing performanceimprovement as a one-time event is a recipe for failure

Creating, leveraging, sharing, enhancing, managing, and documenting balanced scorecardknowledge will provide critical “corporate continuity” in this area A knowledge repository willhelp to minimize the loss of institutional performance management knowledge that may result fromretirements, transfers, promotions, and so on

Developing Benchmarks

The central component of any performance management and measurement system is benchmarking Abenchmark is a point of reference from which measurements may be made It is something that serves

as a standard by which others may be measured

The purpose of benchmarking is to assist in the performance improvement process Specifically,benchmarking can

1 Identify opportunities

2 Set realistic but aggressive goals

3 Challenge internal paradigms on what is possible

4 Understand methods for improved processes

5 Uncover strengths within your organization

6 Learn from the leaders’ experiences

7 Better prioritize and allocate resources

Table 2.3 describes the ramifications of not using benchmarking

Table 2.3 Benchmarking versus Not Benchmarking

WITHOUT

Defining customer

requirements Based on history/gut feeling Based on market reality

Acting on perception Acting on objective evaluationEstablishing effective goals Lack external focus Credible, customer focused

Lagging industry Industry leadershipDeveloping true measures of

productivity Pursuing pet projects Solving real problems

Strengths and weaknesses notunderstood

Performance outputs known, based onbest in class

Becoming competitive Internally focused Understand the competition

Evolutionary change Proven performanceLow commitment High commitmentIndustry practices Not invented here Proactive search for change

Few solutions Many options

2 You do not know what your customers require from your process.

3 Key stakeholders are not involved in the benchmarking process

4 Inadequate resources, including budgetary, have been committed

5 There is strong resistance to change

6 You are expecting results instantaneously

Most organizations use a four-phase model to implement benchmarking:

The creation of a benchmarking plan is similar to the creation of a project plan for a traditionalsystems development effort, with a few twists:

1 The scope of the benchmarking study needs to be established All projects must haveboundaries In this case, you will need to determine which departmental units and/orprocesses will be studied

2 A purpose statement should be developed This should state the mission and goals of theplan

3 If benchmarking partners (i.e., other companies in your peer grouping who agree to be part ofyour effort) are to be used, specific criteria for their involvement should be noted Inaddition, a list of any benchmarking partners should be provided The characteristics ofbenchmarking partners that are important to note include: policies and procedures,organizational structure, financials, locations, quality, productivity, competitiveenvironment, and products/services

4 Define a data collection plan and determine how the data will be used, managed, andultimately distributed

5 Finally, your plan should discuss how implementation of any improvements resulting fromthe benchmarking effort will be accomplished

The collection phase of a benchmarking effort is very similar to the requirements elicitation phase

of software engineering The goal is to collect data and turn them into knowledge

During the collection phase, the focus is on developing data collection instruments The mostwidely used is the questionnaire with follow-up telephone interviews and site visits Other methodsinclude interviewing, observation, participation, documentation, and research

Once the data have been collected, they should be analyzed Hopefully, you will have managed to

secure the cooperation of one or more benchmarking partners so that your analysis will becomparative rather than introspective.

The goal of data analysis is to identify any gaps in performance Once you find these, you will needto

1 Identify the operational best practices and enables In other words, what are your partnersdoing right that you are not? Then you need to find out exactly “how” they are doing it

2 Formulate a strategy to close these gaps by identifying opportunities for improvement

3 Develop an implementation plan for these improvements

The analysis phase uses the outputs of the data collection phase—that is, the questionnaires,interviews, observations, and so on It is during this phase that process mapping and the development

of requisite process performance measurements are performed

Process performance measurements should be

1 Tied to customer expectations

2 Aligned with strategic objectives

3 Clearly reflective of the process and not influenced by other factors

4 Monitored over time

Once the plan has been formulated and receives approval from management, it will beimplemented in this phase Traditional project management techniques should be used to control,monitor, and report on the project It is also during this phase that the continuous improvement plan isdeveloped In this plan, new benchmarking opportunities should be identified and pursued

The benchmarking maturity matrix can be used for a periodic review of the benchmarkinginitiative They stress that to understand an initiative’s current state and find opportunities forimprovement, the organization must examine its approach, focus, culture, and results Thebenchmarking maturity matrix demonstrates the maturity of 11 key elements derived from 5 core focusareas: management culture (e.g., expects long-term improvement), benchmarking focal point (e.g.,team), processes (e.g., coaching), tools (e.g., intranet), and results

The 11 key elements within the matrix are

10 Documentation

11 Financial impact

The five maturity levels are, from lowest to highest:

1 Internal financial focus, with short-term focus that reacts to problems

2 Sees need for external focus to learn

3 Sets goals for knowledge sharing

4 Learning is a corporate value

5 Knowledge sharing is a corporate value

Based on these two grids, a series of questions are asked and a score is calculated:

Key 1: Which of the following descriptions best defines your organization’s orientation towardlearning?

Key 2: Which of the following descriptions best defines your organization’s orientation towardimproving?

Key 3: How are benchmarking activities and/or inquiries handled within your organization?Key 4: Which of the following best describes the benchmarking process in your organization?Key 5: Which of the following best describes the improvement enablers in place in yourorganization?

Key 6: Which of the following best describes your organization’s approach for capturing andstoring best practices information?

Key 7: Which of the following best describes your organization’s approach for sharing anddisseminating best practices information?

Key 8: Which of the following best describes your organization’s approach for encouraging thesharing of best practices information?

Key 9: Which of the following best describes the level of analysis done by your organization toidentify actionable best practices?

Key 10: How are business impacts that result from benchmarking projects documented withinyour organization?

Key 11: How would you describe the financial impact resulting from benchmarking projects?

The maturity matrix is a good tool for internal assessment as well as for comparisons to othercompanies

Looking Outside the Organization

Competitive analysis serves a useful purpose It helps organizations devise their strategic plans and

gives them insight into how to craft their performance indicators It is quite possible that informationcoupled with the experience of a seasoned industry manager is more than adequate to take the place ofexpensive experts in the field of competitive analysis.

The goal of this technique is to analyze one competitor at a time to identify strategies and predictfuture moves The key difference between this technique and others is the level of involvement ofsenior managers of the firm In most companies, research is delegated to staff who prepare a report onall competitors at once An alternative is to gather the information on just one competitor, and thenuse senior managers to logically deduce the strategy of the competitor in question

Once the competitor is chosen, a preliminary meeting is scheduled It should be attended by allsenior managers who might have information or insight to contribute concerning this competitor Thisincludes the chief executive officer as well as the general manager and managers from sales,marketing, finance, and manufacturing A broader array of staff attending is important to this techniquesince it serves to provide access to many diverse sources of information This permits the merger ofexternal information sources—as well as internal sources—collected by the organization, such asdocuments, observations, and personal experiences

At this meeting, it is agreed that all attendees spend a specified amount of time collecting morerecent information about a competitor At this time, a second meeting is scheduled in which to reviewthis more recent information

At an information meeting, each attendee will receive an allotment of time to present his or herintimation to the group The group will then perform a relative strengths/weaknesses analysis Thiswill be done for all areas of interest uncovered by the information obtained by the group Theanalysis will seek to draw conclusions about two criteria First, is a competitor stronger or weakerthan your company? Second, does the area have the potential to affect customer behavior?

Unless the area meets both of these criteria, it should not be pursued further either in analysis ordiscussion Since managers do not always agree on what areas to include or exclude, it is frequentlynecessary to appoint a moderator who is not part of the group

At this point, with areas of concern isolated, it is necessary to do a comparative cost analysis Thefirst step here is to prepare a breakdown of costs for your product This includes labor,manufacturing, cost of goods, distribution, sales, administrative as well as other relevant items ofinterest as necessary

At this point, compare the competitor’s cost for each of these factors according to the followingscale:

cost, it is now possible to calculate the competitor’s total costs.

Analysis of competitor motivation is perhaps the most intangible of the steps The group must nowattempt to analyze their competitor’s motivation by determining how the competitor measures success

as well as what its objectives and strategies are

During the research phase, the senior manager and his or her staff gather considerable information

on this topic By using online databases and websites, it is possible to collect information about promotions, annual reports, press releases, and the like In addition, information from formeremployees, the sales force, investment analysts, suppliers, and mutual clients is extremely useful andserves to broaden the picture

self-Based on the senior managers’ understanding of the business, it is feasible to be able to deduce thecompetitor’s motivation Motivation can often be deduced by observing the way the competitormeasures itself Annual reports are good sources for this information For example, a competitor thatwants to reap the benefits of investment in a particular industry will most likely measure success interms of return on investment

By reviewing information on the competitor’s strengths and weaknesses, relative cost structure,goals, and strategies, the total picture of the firm can be created

Using this information, the group should be able to use individual insights into the process ofrunning a business in a similar industry to determine the competitor’s next likely moves

For example, analysis shows that a competitor is stronger in direct sales, has a cost advantage inlabor, and is focused on growing from a regional to a national firm The group would draw theconclusion that the competitor will attempt to assemble a direct sales effort nationwide, whilepositioning itself on the basis of low price

Because it is best done in small teams, process mapping is an important focal point for employeeinvolvement The act of defining each unit operation of a given process gives a much deeperunderstanding of the process to team members—sometimes leading to ideas for immediateoperational improvements

The following six steps will help you apply process mapping to your company’s operationalprocesses:

Step 1: Understanding the basic process mapping tool

Step 2: Creating a flowchart of your product’s life cycle

Step 3: Using the flowchart to define boundaries

Step 4: Identifying the processes within the boundaries you have set

Step 5: Applying the basic process mapping tool to each process

Step 6: Compiling your results

The first basic step in process mapping is to break down a process into its component steps, or unitoperations The process map depicts these steps and the relationship between them

The second basic step in process mapping is to analyze each unit operation in the form of adiagram that answers the following questions:

1 What is the product input to each unit operation? (The product input to a given unit

operation is generally the product output of the preceding unit operation For the first unitoperation of a process, there may not be any “product input.”)

2 What are the nonproduct inputs to the unit operation? (These include raw materials and

components as well as energy, water, and other resource inputs.)

3 What is the product output of the unit operation?

4 What are the nonproduct outputs of the unit operation? (These include solid waste, water

discharge, air emissions, noise, etc.)

5 What are the environmental aspects of the unit operation? (These may have been designated

as inputs or outputs.)

The first application of the basic process mapping approach is to create a simple flowchart orprocess map showing the main stages of the life cycle of your product, from raw material extraction

to end-of-life disposal (or reuse or recycling)

On the simple process map, draw a dotted line around the processes that you want to include inyour analysis, as shown in Figure 2.2

Your next step is to identify the processes included in the scope you selected As you look at yourlife-cycle process map, most of your basic processes will be obvious However, there may be someprocesses or operations that are not central to making your product but have an impact nonetheless

Now you need to apply the process mapping tool to each of these processes to generate a processmap showing the unit operations for each process You can then use a unit operation diagram toidentify the relevant aspects of each unit operation Be sure to include employees familiar with theoperation in question on the team that identifies the aspects

If you have completed the previous steps, you have identified unit operations for all of yourorganization’s processes and identified the relevant aspects for each unit operation You will then usethese data to evaluate which of the aspects that you have selected for analysis are significant