Aligning It Service Goals

8/3/2019 Aligning It Service Goals

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Copyright 2004 CNET Networks, Inc. All rights reserved.

Aligning IT service goalswith business objectives

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Aligning IT service goals with business objectives

2Copyright 2004 CNET Networks, Inc. All rights reserved.

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Part 1

Defining the ideal IT organization

Part 2

Aligning IT with the business: The other side of the story

Part 3

How to create an aligned enterprise

Part 4

Practical tips for aligning IT strategy with company needs

Part 5

IT must have role in developing an effective business plan

Part 6The CIOs first priority is to understand the business

Part 7

Successful CIOs offer tips for conveying the value of ITto the business

Part 8

Members offer tips, advice on improving SLAs

Part 9

Balance the cost of IT with the need for resources

Part 10

Improve your IT departments performance by calculatingkey equations


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Defining the ideal ITorganizationBy Harris Kern

The experience Ive gleaned from workshops, assessments, and consultingactivities with hundreds of major IT organizations bears out one fact: IT isstill considered a cost center by its business counterparts in 70 percent of theGlobal 2000 companies. IT executives need to change this perception. CIOsmust address infrastructure issues and market the IT organization to raise theenterprises recognition of IT as a business partner.

Ive compiled this list of the top issues facing CIOs that must be resolvedbefore IT can be leveraged for business value and growth. Its no surprise to meand probably will be no surprise to you that almost half of the issues are direct-ed toward the infrastructure. No wonder IT is still considered a cost center.

How do CIOs lead, educate, and partner with CEOs and the executivemanagement team?

How can IT ask the right questions and jointly specify project requirements?

How do IT executives market and enhance their value to the enterprise?

How does IT prevent business units from throwing project requirementsover the transom (often as solutions masquerading as requirements)?

How does IT stop purchasing technology for technologys sake and alignitself with business objectives?

How can IT stop mistrust and develop credibility? How can IT change the mindset that IT is for ITs sake into a customer-

centric culture?

How does IT jointly develop business cases used to determine priority?

How does IT continue to do a good job of following orders and begin tochange the culture to one that also has creative solutions?

How can IT get its business partners to communicate ITs value to theenterprise?

Traditional IT strategic planning is a yearly, typically static, and discrete

process. It takes considerable time (often four to six months) to produce alarge, static document that details projects and timetables from a technologyvs. business viewpoint. How does IT change this process into one that ismore tightly integrated with the business?

How can IT do a better job of aligning with the business?


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How can IT nurture the staff to achieve exceptional productivity and jobsatisfaction?

How can IT do a better job of thinking strategically and being more

proactive instead of being in a reactive mode in its production environment?

What are the minimum processes required to build the ideal IT organiza-tion?

How can IT maintain centralized control for standards, processes, andarchitectures?

How can IT improve communication, such as between applications

development and infrastructure support?

When systems are being slam-dunked into production, how can IT ensurea smooth transition from development to production?

How can IT become more cost-efficient?

How does IT design an infrastructure thats a competitive advantage?What are the top issues/obstacles to overcome when building the proper

infrastructure?

How does IT stop working in silos and start becoming a team with synergy?

How can IT change the perception that centralized IT is bureaucratic to aperception that it is adaptable?

How can IT change from related communication (isolated) to develop key

relationships?

How does IT gain direct management of its own vendors, and not continueto have other customers of IT services manage its vendors?

How can IT build for efficiency and effectiveness and architect for growthand business alignment?

Pursuing the ideal IT environment

What is the definition of the ideal IT environment? These are a few of thecharacteristics:

A culture where honesty, mutual respect, and job satisfaction flourish

Executive managers educated and committed to the enterprise

Business goals and objectives completely aligned for success

Strategic decisions that accommodate a rapidly changing dynamic businessenvironment

Cost-effectiveness



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Common architecture (tools, standards, etc.)

Nurturing individuals instead of drowning individuals in a bureaucratic envi-ronment

To build a world-class IT organization, your organization has to be designed to

exceed the enterprises strategic goals while still nurturing individuals to achieveexceptional productivity and job satisfaction. This provides the enterprise with avision that is meaningful to every individual. The more meaningful it becomes

to the people involved, the harder theyll work to bring about success.

According to the CIO desk referenceMeta Group 2001 (subscription required),

most IT organizations have a cost center, just-keep-the-lights-on, service-utility mentality that maintains IT should be mostly transparent to the rest ofthe business. If things are going well, no one knows the IT organization isthere. If things are going badly, it gets noticed.

Organizations in which IT is viewed as extremely critical to the business,

according to the CIO desk reference, are those in which the CIO has realized thatmarketing the IT organization furthers the awareness of the value that IT addsto the business and helps ensure the CIO is a business partner.

The best way to achieve this partnership is by organizing IT to respond to theneeds of individual business groups. This can only be done by establishingworking relationships at individual and group levels with all business partners

in which business teams, including IT as a business, can work together.Enterprise infrastructure is the only IT project. Whether responsible for 10percent or 90 percent of the tasks, IT is a member of a business team led by abusiness project champion. All projects require business unit champions andbusiness project champions.

What makes a successful partnership

Remember that relationships, while strongly encouraged on an individual level,need to be understood on a group level. For example, if a particularly difficultpartner has been unable to form a relationship with the technology staff, thetechnology department must recognize this and take steps to forge the rightrelationships. This requires senior technology managers to identify the sourcesof the relationship problems and actively work to correct them. Successfulpartnerships are based on:

Relationships that are continuously nurtured.

Relationships that are institutionalized.

Relationships that grow beyond individuals to departments.

Relationships that are viewed as value-add.

A partners perspective that is anticipated at all times.

A partner that can answer a question before it is asked.



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Success is based on:

Managing technology as a strategic asset rather than managing technology asa cost center by:Managing risks

Managing expectationsBusiness alignmentVisionPlanning strategy vs. tactics

Partnering with the business and becoming part of the business rather thanstaying apart from the business by:Building relationshipsCreating business teamsPresenting business casesAcknowledging business unit champions

Building a track record

Building a culture based on shared values such as:Guiding principlesCommon cultureQuality of life

Recognizing and communicating value to the enterprise by:Expressing ITs value to the enterpriseRecognizing valueMeasuring value

Communicating value

IT organizations need to sell to their business colleagues the idea that IT canand should be leveraged for business value and growth. Dedication requires aneducated understanding. Its the CIOs responsibility to demonstrate the rela-

tionship between understanding strategic technology initiatives and the long-term success of the firm.



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Aligning IT with the business:The other side of the storyBy Michael Sisco

In an article written aboutaligning IT with the business, a readerprovided some great comments that deserved a follow-up article.

First, Rob_Pros feedback and comments:

Mr. Sisco, you write some great articles and obviously have a wealth ofknowledge and experience to draw from. So, I have a bit of a challenge foryou, and all members of the community. These are similar to what I often

hear at my current company:

The IT Department is out of sync with our companys needs.

Our IT department is not responsive.

We dont understand why we are spending so much in IT.

While this is common at many companies, what I have yet to see are anyarticles on how to resolve these issues from the other direction. The advice

given is usually to align the IT plan to the business plan, or something similar.Here are a few questions I would like insight on:

What happens if your company doesnt have a business plan?

What happens when there are no strategic goals for you to try and alignyour support efforts with?

What happens when you sit down with the business unit managers and

they claim they are getting all the support they need from IT, but tell a verydifferent story to the CIO?

What do you do when the business units dont know what their needs are?

What are some strategies you can use to convince the CEO that you are asupport department and need a direction to align yourself to?

What strategies can you use to persuade the business units to develop thebusiness case for adding technology so you can show that IT is contributingto their success and the success of the company?

Almost every article I have read lately puts the task of correcting any mis-

alignment squarely on the shoulders of IT management. What happens whenthe problem isnt necessarily the IT department? Here is the challenge: Howdo you address the alignment issue from the other direction?

Question and answer

Excellent set of questions and insight that Im sure many have interest in.Rob_Pro certainly captured my attention with the questions posed. Before we



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start, lets first discuss the issue in general, in order to set a framework onwhich to answer Rob_Pros questions.

Every company is unique. Some do a much better job of developing businessstrategy and defining plans on how they expect to achieve their goals and objec-

tives. If you sit down with most CEOs and CFOs and ask them, What can wedo in technology to help the company? you may not get very much feedback.The reason is that they just dont know how to look at business issues and auto-matically translate them into opportunities that can be gained by using technol-

ogy. Thats where we as IT managers, CIOs, and CTOs come in.

When a company does not have a formal business strategy for you to align

IT with, it doesnt make it any less your responsibility to identify IT initiativesand projects that will provide real value to the business. If you ask questionsthat help you better understand the business, its challenges and issues, and gainendorsement of technology solutions that address those issues, youll be takingsteps that will keep your efforts in sync with company needs.

What happens if your company doesnt have a business plan?

If theres no formal business plan, interview senior managers and departmentheads to learn about their operation, issues, and challenges. Aligning IT withthe business is not necessarily adapting your IT initiatives plan to a formalcompany business plan. Its about doing things in IT that support businessneeds. That may be improving support responsiveness and follow-up toimprove client satisfaction and productivity of your technology users, or it maymean implementing a major new technology to address a specific challenge inthe company.

You will be able to help the business succeed by understanding the overall

goals of the companyinterview managers and learn what they need to gettheir jobs done effectively.

What happens when there are no strategic goals for you totry and align your support efforts with?

The important thing to realize with all of these questions is that we cant sim-ply look for a specific target, which the business has clearly defined for us, to

align our technology initiatives around. The key issue is to ask questions thatallow the company manager to discuss the business. You can learn what makesit successful or not, the challenges it faces, and the issues that prevent it frombeing more successful.

As you understand these issues, you can start translating business issues intotechnology opportunities that can make a difference for a department man-ager or senior manager of the company. If you then target specific technologyinitiatives that are cost-effective and that address issues or challenges that willtruly help the business component become more successful, and then gainapproval by the stakeholders, you will be aligning your efforts closely with

the business need.



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Its more a matter of learning about your companys business needs, validat-ing you are on target, and gaining approval on recommendations rather thanimplementing an IT strategy that you think is what the company needs.

What happens when you sit down with the business unit man-

agers and they claim they are getting all the support they needfrom IT, but tell a very different story to the CIO?

If there is a disconnect with what your department managers are telling youversus those you report to, its usually due to one of several things:

They dont want to hurt your feelings.

They are concerned that their support will decrease even further.

They dont want to confront you with their concerns.

You are not hearing what they are saying.

If a disconnect occurs, I try to sit down with the department head and open

up the discussion with, I need your help. Asking for help in understandingthe nature of client service issues can often get you the insight you need. Todo this, you should be reassuring, be very open to constructive criticism, and

listen objectively. Getting defensive will only exacerbate the problem.

When you hear their story, quantify the specific issues and gain agreementthat you have identified the areas of improvement needed. Once you havespecifics, you can attack the problem or go about the task of resetting theirexpectations as appropriate.

What do you do when the business units dont know whattheir needs are?

Most business department managers have difficulty telling you exactly whattheir technology needs are. Ive never been able to simply ask a departmentmanager, What do you need from the IT department? and get the answer Ineed. It would be nice, but it is just not that straightforward.

Their core competency is in operating the business component they haveresponsibility for, not technology. Thats why effective IT managers and CIOshave an ability to ask general questions about the business and to drill deeperin finding opportunities by which IT can help the department be more suc-cessful as they learn more about the departments business and challenges.

Once you have an idea, you can articulate your suggestions to the department

head to gain his or her understanding and concurrence.

What are some strategies you can use to convince the CEOthat you are a support department and need a direction to alignyourself to?

As a CIO, I may have to help the CEO carve out a direction for the compa-ny or at least instigate enough conversation to help me understand what we are



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trying to accomplish as a company. If the company is in a transitional state, itmay be very difficult to even know what the specific objectives are.

The conversations may lead me to department managers where the real helpis actually needed. Part of our job is to take general concepts and sometimes

partial information and to develop a plan that makes sense in supporting thebusiness.

Example

In one company, my general insight from the senior management team was thatwe needed IT to be prepared to support the acquisition of other companies.

To do that meant I needed to improve the level of our internal clients satis-faction with IT, move one of my technology offices to another city, improvethe capabilities of our business applications, standardize IT services on thenetwork, and to eliminate the external clients we had. My CEO and presidentdidnt spell that out for me.

I looked at what we had, what we were going to need to support a businessten times the size we were at the time, and came up with my own conclusions,as the new CIO. However, before starting to implement any of these initia-

tives, I sat down with the senior management team to discuss my proposal, thereasons, the benefits, and to gain their insight and endorsement. As you mightexpect, the initial strategy was modified somewhat to better meet the needs ofour company.

Because I approached the issues in this manner, my CEO and senior manage-ment team were not surprised by our IT actions and fully understood what thetechnology team was trying to accomplish to support the business.

What strategies can you use to persuade the business unitsto develop the business case for adding technology so youcan show that IT is contributing to their success and thesuccess of the company?

I dont necessarily try to persuade business units to add technology. Its alwayseasier to facilitate developing a needs requirement than to push the depart-ment toward my technology proposal.

What this means is that, by asking questions about the businesss needs andchallenges, I will help the department manager arrive at the technology solu-

tion himself, even if I get to the answer much quicker. When the businessowner drives the need, its often more effective and easier to get the funding,plus you then have a real business partner working with you to make the proj-ect a success.

As soon as we agree on an opportunity, I will work closely with the depart-ment manager to develop a business case for senior management approval, andlater I will want him or her involved in developing the project to ensure it willbe successful.



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This approach builds IT partners and makes for healthy relationships. Afterall, my success as an IT manager lies in my ability to help others be successfulin the company.

Summary

Aligning IT with the business requires you to learn about the business, validat-ing the specific needs and challenges you are identifying, proposing technologyinitiatives that will help the business, and gaining full approval and commit-ment of the operational managers of the company in funding and implement-ing these initiatives.

The idea of taking a company strategy document and building your IT align-ment strategy around it is a misleading concept. Our role as IT manager is toseek out what our clients business needs are and to interpret those needs intoprudent IT initiatives that support the business.



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How to create an alignedenterpriseBy Tom Mochal

Alignment is about having all the resources in your company striving towardthe same purpose. It comes from making sure that people and organizationsknow what is important to the company. It also means that people have incen-

tives to move the company in that direction and not in directions that arecounter to the overall goals.

Many IT professionals roles in an organization have been on a tactical ormanagement level. Often, when theyre asked to create an organization with agreater sense of a collective goal, theyre unsure where to begin. Lets look atwhat you and your IT professionals can do to ensure that youre creating analigned organization.

Mission statement, vision statement, goals

A company mission statement, the concise description of the businesss pur-pose, usually speaks to the value the company is trying to deliver to its cus-tomers. On a practical level, a mission statement will:

Keep the company aligned and focused.

Serve as a marketing tool to help communicate to employees and customerswhat your company will achieve and where the organization will go.

Allow those working with customers a platform for touting your services.

Function as a motivator.

No matter how successful a company is, its always striving to exploit newmarkets, increase market share, and provide more value to its customers. Thecompany vision statement describes what the company would look like if it

achieved a perfect state.

The company mission and vision are defined at a high level and typicallydont change from year to year, unless a company has a major shift in businessfocus.

Each year, companies also create goals, the outcomes the company wants toachieve to help it achieve its mission and move toward its vision. Goals are

also at a high level and may take more than one year to achieve. Companygoals can change from year to year, although theyre written at a high enoughlevel that they remain fairly consistent. Company goals provide more detail andguidance to the organization on what is important to achieve in the next oneto three years.

As an example, lets say part of your companys mission is to be the leading

supplier of high-quality computer components to the aerospace industry. Oneof your company goals might be to increase your market share of components



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in the aerospace industry, while another might be to have the highest qualitycomponents in the industry.

Aligned goals and objectives

One of the greatest challenges that company management faces is how to

successfully achieve its mission, move toward its vision, and achieve its goals.It can only be done through a coordinated effort from the entire company.Each division creates high-level goals and detailed concrete objectives tosupport the company goals. Since objectives are written at a specific level,they tend to be measurable so that the organization can tell if they wereachieved.

For example, the sales division might set an objective to increase sales by 10

percent, while the manufacturing division might have an objective to reducethe number of defects by 50 percent. Both of these statements have aspectsthat are measurable.

StrategyAfter setting more detailed and relevant goals and objectives to support thecompany goals, each division also creates a strategy. The goals and objectivestell you what needs to be achieved. The strategy tells you how the goals willbe accomplished. Organizational strategy provides a roadmap of how thegoals and objectives will be met. For example, if the sales division wants to

increase sales by 10 percent, one of the strategies might be to focus onincreasing the level of training for salespeople or implementing a new CRMpackage. These are not goals in themselves but are ways to build capability inthe organization so that sales can be increased.

Ultimately, the measure of success in this example is not going to be that

all salespeople take a training class. The measure of success will be toincrease sales by 10 percent.

Pulling in different directions

Without high-level mission, vision, and goal statements, a company runs therisk of its workers independently determining what is important to them,resulting in inconsistent goals. Even organizations that have overall companyand division goals often dont do a good job of keeping them all aligned.

For example, your company may have an overall goal to reduce costs tobecome more efficient. The sales department might be focused on increasingrevenue by implementing new products. These new products may cost thecompany more money in the short term.

Manufacturing, on the other hand, may be focused on building more capac-ity to support increased sales, which again may increase costs in the short

term. The IT department may be trying to be more client-focused by sup-porting major initiatives from many divisions, which will require them to hiremore contract labor.



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You can see that each organization is striving for something good.However, it is doubtful that the company can achieve its cost-reduction goalssince the division goals arent aligned, and in some cases, actually requiremore money to meet their individual priorities.

The best example of nonalignment Ive seen occurred when I worked for amajor soft drink company. (This was actually a supply chain problem, but theexample is still relevant.) The companys sales organization was trying toincrease sales and market share for a particular soft drink brand in theUnited States. However, our major bottler, the people who actually sell theproducts to our customers, had a big push to increase total sales.

I remember all of the frustration and grumbling at a sales conference. As

the salespeople complained that they were trying to increase sales of onebrand, the company bottler was actively promoting the brand of our num-ber-one competitor. Talk about misalignment. Partners in the supply chainhad incentives to work against each other, which made it doubtful that eithercompanys objectives would be met.

Alignment continues down the organization structure

Depending on how big your company is, the alignment process ripples downinto each lower organizational level. Each organization looks at the goals,objectives, and strategies of the organization above it, and then establishes alower-level set of goals, objectives, and strategies to directly support the onesabove it.

At the end of the alignment process, each person in the company workswith his or her manager to create a set of realistic individual objectives. As

we have seen, these personal objectives must support the organization, butthey must be written at a very low level so that the actions are within the

employees control. In some cases, an entire team may create a set of com-mon personal objectives that are then rolled down to each individual on theteam.

Lets look at a couple of examples of personal alignment. Well use thesimple example of the company that is trying to reduce costs. Many peopledont see how their jobs can contribute to this lofty company goal. Theythink that it is only the job of management to reduce costs.

Remember that each person only needs to align to the organization towhich he or she belongs. This helps make alignment easier than it otherwise

might be. Each lower level of organization has more direct and targetedguidance as to what needs to be focused on.

Lets say your group has seven members and one of them is retiring thisyear. Your team may have an objective to continue to operate without

replacing the retiree, saving the company the cost of the replacement.



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Each person in the group may have an objective to learn some aspect ofthe retirees job, and effectively take on the new work.

A team on the factory floor has an objective to look at its manufacturingprocess for ways to improve productivity. The objective is to produce 5

percent more product, using the same resources as today. Each personwithin the team then has a similar personal objective. All of them nowhave an incentive to make suggestions on increasing efficiency and reduc-ing waste.

A marketing group realizes that it is inefficient to use five companies for

its marketing campaigns. It sets an objective to reduce the vendor list fromfive to two, in exchange for receiving volume discounts from the tworemaining vendors. Each person on the team then has a personal objectiveto assist in the evaluation, and to help in the transition of work to thesevendors.

Align the rewards and recognition programs

The last part of the alignment process is to ensure that people are actuallyrewarded based on how well they achieve their personal objectives. Theremay be other performance criteria as well, but the achievement of objectives

must be part of the equation.

Companies that go through the trouble of achieving alignment but dontalso have the review and rewards process aligned are just kidding themselves.In other words, if cutting costs is a company goal, you cant give full rewardsto people that dont contribute. This goes for the CEO, as well as each man-ager and employee. This doesnt mean people get no reward, since there may

be a number of objectives that are important to each person. However, if aperson doesnt reach objectives around reducing costs, that employee mustget a smaller reward than he or she would have if this objective had beenachieved as well.

Consistent focus will bring alignment

Think of the power of this aligned enterprise. Senior management maps thedirection and then can count on every employee doing his or her part tohelp get the company there. If your organization has 50,000 people, you cancount on 50,000 people to help. Need to cut costs? You have 50,000 people

looking for ways to do it. Do you need to improve customer service and

value? You have 50,000 people helping you.

Alignment is a powerful process. Its not easy, which is why few organiza-tions achieve it. In fact, it will likely take a few years. Like all culture changeinitiatives, it takes management focus, perseverance, and courage.



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Tip #1: Communicate openly with operational groups andclients

You cant fix something if you dont know two things:

A gap (problem) exists

Specifics of the problem

Its quite all right for different departments to disagree or misunderstandone another; in fact, its normal. Operational groups see themselves asfocused on the true core competency of the company and many of the cor-porate support organizations view their role to be critical to operational suc-cess. Both are completely accurate in this perspective, but the IT departmentis just as critical for company success as any department in the company.

Plus, IT is one of the few organizations that can help every organization inthe company be more productive and successful.

Gaps are created when IT starts taking care of business in a vacuum.

There are many IT initiatives that must take place to create a stable and sup-portable technology environment that are of no real interest outside of IT.However, its important for you to keep your company aware of what youredoing. Otherwise, the natural inclination is that you arent doing very much.

Network upgrades, system installations, etc., take time and often have largeexpenses associated with them. For the most part, these projects are notsomething an operational manager or company executive can actually seeand touch, so they may not understand the real benefit in doing such proj-ects. In other words, its just one of those expensive projects the IT depart-ment is always asking funding for.

Communication is a skill that will help you reduce or eliminate the IT-Operational Gap.

Tip #2: Find out whats needed

As a consultant walking into a new company, I have an advantage. I can askanyone virtually any question to learn what I need to know to understandwhat they are trying to do about their objectives, problems, and issues. Noone is put into a defensive posture because I represent someone trying to

develop an objective evaluation of the companys IT situation.

You, representing IT, need to do the same. Go ask your internal clientswhat their needs are and whether your IT organization is focused on theseissues.

Tip #3: Validate your plans

Have you ever thought you knew an answer to something, but when youasked questions about it discovered that your answer was off center or

completely wrong?



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We all have the ability to size up a situation and come up with a technologystrategy to address that situation. But the solutions you and I develop for anissue can be very different. Both solutions may work to solve the issue, butone of these solutions may be totally inappropriate for the company at the

time.The only way to know this is to develop a specific IT plan, or strategy, thataddresses the key technology issues you have identified in the company. Theplan needs to identify the issues you are addressing, the IT initiatives youplan to execute and their priority, the benefits expected, resources required,and the cost of your plan.

Once completed, presenting the plan to your senior management team and

asking for their validation in at least a couple of areas is key. Ask yourself:

Have we addressed the companys critical needs?

Do our IT initiatives appear to be prioritized appropriately?

Do they agree with our plan and will they support it fully?

If company priorities change, be sure you verify any IT initiatives planchanges with those who approved your original plan. Otherwise, you mayfind yourself being expected to deliver both sets of priorities.

Its simply a matter of ensuring everyone stays on the same page for what

you are working on. Its a simple concept but one thats overlooked by toomany.

Tip #4: Conduct periodic surveys

The IT-Operational Gap is always lurking in the background in your com-

pany. Its something we all need to be constantly aware of to keep it mini-mized.

One of the ways to keep the gap minimized is to follow the tips above and

to add one more. Periodically, you need to go back to the operational man-agers and senior managers of your company and ask them how your ITorganization is working for them.

This doesnt have to be a formal program. Simply walk down the hall andmeet with people, take them to lunch, or ask them at the water cooler howyour organization is doing relative to supporting their operation.

Are there things you need to do differently? Is your group responsive to

their needs? Are there initiatives coming up that you need to know about tosupport their efforts? All of these questions can be asked quickly, and theanswers can give you insight that lets you know if your operation is focusedon their needs.

But remember, if you want an open and honest reply, you have to be open

to their answers. Bad news is good news in disguise. It gives you informationthat will help you and your organization do a better job.



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I make it a point to conduct a formal survey of all key managers in thecompany at least annually, and informally I constantly ask questions to verifythat we are on the right track in meeting my IT organizations client needs.

You can minimize or even eliminate the IT-Operational Gap, but it takes

proactive effort and lots of consistent, open communication with all the keymanagers of your company.



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IT must have role indeveloping an effective

business planBy Suzanne Ross

All the articles being written about the importance of aligning IT strategywith business strategy probably demonstrate that somethings still amiss. Atthe same time, current thinking on the development and alignment of strate-gy is changing. The days when senior management formulated the businessstrategy and then handed it over to IT to align with are, thankfully, starting

to fade. Thats a reactive approach and one that is actually the crux of manyalignment problems. If a CIO is still waiting for the business plan to arrivebefore starting to work on developing the IT strategy, hes arguably alreadybehind.

Increasingly, high-level strategic planning is becoming an all-inclusiveprocess, conducted by the senior management team, including the CIO. Thisis the only way companies will achieve true strategic alignment, with IT atthe table helping to shape enterprise goals. And perhaps alignment is nolonger even an appropriate concept. In this context, congruence or co-evolu-tion may be more appropriate.

Co-strategy development

The process of co-strategy development is the approach taken by pharma-

ceutical manufacturerAstraZeneca. CIO Robert Cohen, who spoke at arecent CIO Perspectives Conference in California, said, the next stage ofbusiness and IT strategic developmentco-evolutionis critical. The busi-ness strategy shapes the IT strategy and the IT strategy in turn shapes the

business strategy. AstraZenecas vice president of marketing, Richard Fante,who presented jointly with Cohen, agreed, and emphasized that cooperativestrategic development is now an integral part of the companys planningprocess.

It is vital for IT to be in the loop during strategy development, to ensurethat all parties know when the technologies do or dont exist to meet theorganizations requirements, and to ensure that the implications of the vari-

ous business units proposals are identified and considered during the plan-ning process. Take the case of an insurance company whose directors are

planning to grow the business by 10 percent over the next year by offeringWeb-based services. They need to know if the infrastructure exists to sup-port that service and, if it needs to be built, how long it will take and howmuch its going to cost to implement and support.



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In many organizations, its the enduring distinction between the businessand IT that still seems to be at issue. IT cant be separated from the busi-nessits a vital, core business function in most organizations. For the col-laborative strategic approach to work, much hinges on the quality of the

CIOs relationships with the CEO, the executive team, and the business unitmanagers. To effectively contribute to the development of business strategy,the CIO must work closely with the business unit managers to understandthe directions they are taking. They, in turn, need insight from the CIOabout current directions in technology.

Strategy disconnect

A classic example of strategy disconnect occurred in a large professionalservices organization that, not surprisingly, declined to be named. One con-sulting arm of this firm provides technology solutions to internal and exter-nal clients, and part of its strategy included moving heavily into the develop-

ment of online solutions for project and document collaboration. Thisinvolved a significant investment in hardware, training, and software develop-ment, and was forecast to represent a significant percentage of the groupsrevenue. But it wasnt until a chance meeting occurred between the CIO andthe business unit manager that it was revealed that IT was planning toupgrade the document and information management solutions for the com-pany as a whole, and that this would include a method for the rapid deploy-ment of online solutions.

The effect of this was that the consulting group would, in all likelihood,derive much less revenue than originally forecast from custom development.

The CIO had no idea what the consulting groups strategy was. The consult-

ing group, while generally aware that systems were being upgraded, had noidea what the actual ramifications of the upgrade would be. Had there beena collaborative approach to strategy development at the outset, both campswould have known the direction the other was considering, and this wouldhave given the consulting group the opportunity to reassess its strategy,leveraging the investment already being made by the company in the ITupgrade, and focusing its development in more lucrative areas.

Collaborative development leads to right strategy

At UPS Inc., vice president of information services Stu Sutliff is alsoinvolved in collaborative strategy development. When interviewed about

strategy alignment by CIO Magazine, Sutliff said, We have an annual meet-ing in the company for all of the directors, and were not just talking ITyoure talking about the entire companyto roll out the corporate strategic

imperatives for the year. Sutliff went on to indicate that they then deter-mined what those imperatives meant for the different business lines andfunctional groups in the organization, and that the strategies and metrics of



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the individual departments were subsequently mapped back to the originalplan.

Without IT at the table during the formulation of business strategy, horrorstories will continue to abound about disconnects occurring between IT and

the business, and about what happens when technology decisions are madeby executive management in absentia. When decisions are made without afirm grasp or appreciation of the enabling technologies, you can bet thatproject budgets will blow out, user expectations wont be met, and theorganization will be left with half-baked solutions.

Formulation of a business strategy should represent the collaborativeefforts of the whole executive and management team, with the CIO adding

insight about technological directions and innovative ways technology couldbe used to add value and provide competitive advantage. With a collaborativeapproach to strategy development, aligning IT strategy with business strategyisnt a separate exerciseits already part of the plan.



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The CIOs first priority is tounderstand the businessBy Michael Sisco

In todays business environment, its vitally important for the CIO to become atrue business partner of the companys CEO and CFO. Together, these threeexecutives can drive significant strategies that benefit their company.

The CEO and CFO are the two people looked to the most to see that the

company performs as expected. They are ultimately responsible to the boardof directors and stockholders for company performance. For the most part,company performance is measured in terms of financial performance. Theirability to achieve the numbers is enhanced exponentially when they have aCIO who understands the business and operates in partnership mode withthem.

CEO types often come from the sales or operations side of companies in thesame industry. CFOs usually have accounting experience in the industry aswell; industry experience is a critical factor in operating a company. Conversely,CIOs often come from technology careers that may or may not have been in

the same industry the company participates in. Our skills as an IT manager orCIO are actually very transferable across any industry.

Key contributions of an effective CIO

Good CIOs can be effective in virtually any company and in any industrybecause they are able to:

Assess business issues and needs. Identify technology issues.

Define IT initiatives that address these needs and issues.

Facilitate the prioritization of IT initiatives to provide company value.

Develop strategic IT plans for the company and anticipate need.

Lead in building an IT organization that:

provides systems stability and security.

positions the technology resources for scalability as needed.

provides responsive support to technology user needs.

implements IT initiatives that provide value.

Budget and manage the IT operation to be cost-effective.

Implement change through technology to improve profitability, productivity,

and other results deemed to be important to the company.



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A CIO wears many hats. Effective CIOs take care of business methodicallyand use proven formulas of success to generate positive results for their com-pany. They can use these processes in any company or industry.

First, a CIO must be acutely aware of company financial challenges that the

CEO and CFO have to deal with. Achieving targeted financial numbers is wellover 50 percent of the executive wings mindset and what absorbs much oftheir time. All you have to do is watch the anticipation every month when itstime to produce the companys monthly financial reports to realize this is the

case.

Being able to relate well with the CEO and CFO in financial terms is

extremely important. Its not something you can fake. To gain full partner-ship status, you have to be able to communicate in such financial terms asearnings per share, expense as a percent of revenue, ROI (or return oninvestment), and EBITDA (earnings before interest, tax, depreciation, andamortization). You also need to have a solid understanding of company P&Ls,

the budgeting process, and the issues that can affect earnings, especially as theyrelate to technology.

Too many IT managers reach a senior management position in small andmidsize companies without ever budgeting or having responsibility for a P&L.

Lacking an understanding of how the financial engine of a company worksmakes it very difficult to become an integral partner with the senior manage-ment team.

Second, a CIO must understand the business. I stated that strong CIOs canmove from company to company or from industry to industry and be veryeffective. They can do that only if they learn the business of the company and

the industry its in. Sharp CIOs make it a priority to get under the hood to dis-cover what drives the company and how its successful. In other words, theylearn the business quickly.

Every industry has leverage points where technology can improve profitabilityand productivity, create a competitive edge, or provide other value thats

important for a companys success in that industry.

For example, the healthcare industry tends to have three major drivers that

contribute to operational success beyond the actual medical services provided:

Regulatory compliance

Billing for services provided as accurately and as quickly as possible

Collecting the cash for services rendered

If a healthcare company is heavily paper-oriented with little automation, its avirtual gold mine for a savvy CIO. Believe it or not, healthcare is still a heavily

paper-intensive industry.

Every industry has levers like these that can be capitalized on when the CEO,

CFO, and CIO combine forces. Within an industry, companies have unique



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business issues, and one size will certainly not fit all. What I mean by this isthat once you know where the industry leverage points are, assessing a compa-ny situation may identify more basic technology issues. For example, as late as1999, I was still running into companies without e-mail services.

Astute CIOs try not to take anything for granted when learning about a newcompany. They assess globally and begin peeling layers of the onion away asthey drill down into the real issues that the company is dealing with. CEOs andCIOs need partners who can help them solve the companys financial challenge

riddle, and the only way to do that is by understanding the business. Having aCIO who can speak the financial lingo and who spends money on real issuesthat make a tangible difference for the company is a valued asset. Those whodo this are considered partners.

CIOs are in a unique position in that they can facilitate change through tech-nology that can improve the company in so many ways. Your ability to under-stand business issues and have financial insight into managing the technology

resources operation of your company can have the most dramatic and positiveeffect. Gaining an executive-level perspective in the financial and businessneeds arena of your company and industry is the first step in gaining two new

partners at the top of your company.



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Successful CIOs offer tipsfor conveying the value of

IT to the businessBy Karen Ann Kidd

Lets face it: Though theres been some progress toward changing businessusers perception of IT, IT still has a lousy image. Theres an impression thatIT is off in its own little world, doing its work in veiled secrecy. Customerscomplain that theyre getting little attention, when folks in IT know all too well

thats untrue.

In a day when any IT organization is in competition with outsourcedproviders, promoting ITs mission and services should be priority one forCIOs. I asked four CIOs what methods they used to communicate the value of

IT to the rest of the company. Heres what they said.

Stick to a regular schedule

Bill Hicks, CIO forPrecision Response Corporation (PRC), is quick to point

out that it is the IT departments responsibility to keep all the other depart-ments informed, and he takes the responsibility very seriously. His approach toIT interdepartmental communications is three-tiered:

Keep the CEO (Tom Cardella) informed.

Maintain lateral communications (C-level and department heads).

Make sure the entire IT team knows whats going on.

Hicks said he schedules a meeting with the CEO anytime an issue or anything

new comes up that involves the IT department. For example, Hicks recentlymet with Cardella to explain the companys ongoing migration to a Linux plat-form. I dont think e-mail or memos are good for getting that kind of infor-mation across, Hicks said.

Hicks said his meetings with Cardella are very important because, otherwise,we may not interact on a regular basis.It is mission-critical that he is keptinformed.

At the second tier of Hicks approach is communication with other C-levelpersonnel and department heads throughout the company. For them, Hicksdevelops monthly update reports. These are usually about four informativepages that include topics such as goals that were set and the outcome of those

goals, and updates on key projects.

The first two tiers of communication are important, but Hicks said the great-est effort goes into making sure the entire 220-person IT department knowswhats going on. Each month, a two-hour meeting is scheduled between leader-ship and management-level IT personnel. Topics for these meetings include



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new technology. In addition to keeping IT management informed and talkingabout their own strategies and goals, this also gives this level of management achance to develop and improve communication skills, Hicks said. Most impor-tantly, it gives teams within IT a chance to discuss ongoing projects that mayaffect other groups. This is a challenge I noticed early on, Hicks recalled.

Maybe Im working on a project in the UNIX group that might impact thequality assurance group, but the quality assurance group wont know about ituntil it hits them in the face. Good communications within the department

will prevent that, Hicks said. Hicks also holds roundtable discussions that areopen to anyone in IT.

Keeping the entire company informed when the network, or something elsefor which IT is responsible, does not perform as expected is another taskHicks takes seriously. Hicks said he quickly informs others in the companywhat went wrong, what was done to fix it, and what effect it had on the com-pany. His team is careful to issue these reports in a way that less computer-lit-

erate members in other departments will understand. We want to make surepeople realize IT is not all that complex, he said. The more you strip offthat complexity, the better it is overall. We take the mystery out of it.

Hicks has good reason to know this. Hes been CIO for three years, and his

first year in the position was very sobering. There was not enough communica-tion between the IT department and other departments, and there was a lot ofmisunderstanding about the IT departments role in the company. Meeting reg-ularly and sending out regular reports has helped to demystify the IT depart-ment.

But Hicks cautioned against too much communication. If there are too many

meetings, too many reports, too many details shared with other departments,the communication gets lost. I think that you lose your voice when that hap-pens.

Employ multiple communication levels

Croswell Chambers, CIO and vice president of Lexmark, said he focuses hiscommunication on three levels of personnel worldwide at Lexmark: the busi-ness area, the general employee population, and IT employees.

The business area includes C-level personnel and other high-ranking Lexmarkemployees who gather in monthly meetings. During these meetings, theyreceive updates on operations and discuss upcoming initiatives and overall

strategy. These monthly meetings are augmented with quarterly staff meetingswith division executives. There also are bimonthly board meetings and regularIT planning meetings.

The general employee population receives regular corporate newsletters,which include at least two articles from the IT department. One recent topicwas upcoming broadband connectivity service the IT department implement-



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ed. Chambers said he is careful to include any key significant win that we hadin IT, something which provided real value to the company. Gatheringresources for these articles is as simple as getting the right people within ITwho know whats going on and getting together with the folks who can put itinto words for corporate communications, Chambers said.

Chambers also sponsors and participates in brown bag and other open meet-ings. Its an opportunity for me to present what IT is doing for them, but itsalso a chance for them to tell me what they would like from IT. In addition,

Chambers encourages quality circle meetings between IT personnel and admin-istrative assistants, engineers, sales support, and other pockets of users whouse IT slightly differently from the rest of the population, he said. We try tomake sure we know what their needs are. The general Lexmark employee alsocan receive news from and about IT via special events or awareness meetings.One recent topic was password security.

To communicate directly with his IT employees, Chambers participates in

monthly roundtable gatherings. These face-to-face meetings are tough to setup within a worldwide company like Lexmark, so IT employees are randomlyselected for these open topic meetings. Whatever they want to talk about,

Chambers said. Its an opportunity for me to listen to them speak candidlyabout their ideas and concerns.

Chambers cautioned that his efforts to communicate about IT with the restof the company isnt stopping there. His department is looking at implement-ing a value-added scorecard to more closely align the department with thecompanys key business strategies, initiatives, and objectives. If all goes asplanned, this new system will be implemented in the next year. Were always

looking at news ways to better the company, he said.Take advantage of technology

BMC Software is a $1.3 billion company used by 80 percent of Fortune 500companies to help manage their enterprise systems, applications, and databases.For a company that size, internal communication is crucial, and the IT depart-ment is not excluded.

With an eye toward fostering effective executive communication, BMC execu-tives formed the Business Optimization Leadership Team (BOLT), a smallgroup of top executives, including Jay Gardner, CIO. The group meets regular-ly to decide the direction of BMCs business and IT services. BMC developed

this consortium, as they know how difficult it is for executives to make timefor meetings and think that if executives have a dedicated team framework,they will be able to share ideas and reach several of their peers in one sitting,said a BMC press release describing BOLT.

In addition, these executives communicate using the latest technology:Blackberries, wireless e-mail, and cell phone. Through these technologies, eachmember of the executive team has access to the Dashboard, an application



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that tracks the key performance indicators within the company. Indicatorstrack sales order revenue, expenses, customer support activity, and employeeattrition.

Appoint IT points of contact

Teradata is a $1 billion division of NCR and a leader in data warehousing. CIOSteven Dippold said he pairs a service program director with appropriate rep-resentatives in other departments, such as vice president of sales or the headof marketing. The service program director acts as that persons point of con-tact into the IT department.

Meanwhile, Dippold conducts a variety of meetings. The steering committee,made up of vice presidential-level personnel and their staff, meet with seniorprogram directors and other IT department personnel. Topics discussed duringthese two-hour sessions include evaluation and review of the status of IT ini-tiatives, product status, future operations, and new projects and goals.

Dippold also encourages the periodic meeting of cross-steering committees,as well as teams within IT. For instance, the leadership team, business units,and other interdepartmental teams will discuss a variety of targeted topics,including budgets, IT initiatives, goals, long-range plans, and other departmen-tal strategies. Other meetings are less formal but just as important, Dippoldsaid. He participates in and sponsors Web and face-to-face forums, roundtablediscussions, brown bag sessions, and other gatherings. These usually focus onhorizontal services, he said.

Dippolds strategy evolved during his four years as Teradatas CIO. We had acompletely centralized IT department four years ago, he explained. At times,it wasnt as easy as it could be to recognize problems to be solved in IT. The

system of pairing key company personnel with IT service program directors,along with the other meetings, developed over time, and the system continuesto evolve, he said.



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Members offer tips, advice onimproving SLAsService level agreements (SLAs) arent new, but theyre certainly not stagnant.Traditionally, SLAs have measured traffic on backbone networks only, buttheyre now incorporating local loops and becoming more end-to-end in

nature, according to Liz McPhillips, Probe Researchs senior analyst for busi-ness services. Probe recently published Service Level Agreements in NorthAmerica, a report by McPhillips.

In addition, service-specific SLAs are beginning to appear. For instance, voiceover Internet protocol (VoIP) SLAs, which measure jitter, packet loss, and callcompletion rate, are now available. Yet, as Phillips notes, its still difficult toextract individual user statistics from networks that accommodate hundreds of

clients.Despite that continuing hurdle, current SLA trends bode well for CIOs in

their efforts to improve client service. However, the effectiveness of an SLAstill depends on how effectively a CIO negotiates and enforces the agreement.

We queried TechRepublic members to get their insight and advice on how techleaders can best optimize that next SLA in light of the new trends. Theyoffered the following tips, based on their experiences with SLAs.

Base compliance on real world, not technical, criteria

The best SLA is one that even nontechnicians can easily understand.TechRepublic member Dale McAllister, an IT professional working in Beijing,

China, advises that instead of network availability, use e-mail access availabili-ty.This ensures that all aspects of the service are in tune and satisfying [to]the customer instead of being technically correct and completely frustrating tothe customer.

Use penalties as tools

Theres no way that an SLA penalty can make up for the damage that a failed

system causes. Will rebates heal an enterprises damaged reputation? Will theymake up for customers lost to a competitor? Of course not. So, instead ofviewing penalties solely on a punitive basis, you should use them strategicallyto extract better performance from the service provider.

If an ISP tells you theyll give you 100-percent availability, you know you arenot going to get that, notes McPhillips. However, if there are high penaltiesfor this failing, then they are in a position that they will do their best to keepthe backbone up and running, and they will correct problems as quickly as theycan, she adds.



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Treat the SLA as a sophisticated contract

SLAs are highly specific and sophisticated legal documents. CIOs should treatthem that way. Make sure that the scope of the SLA, the customer and sup-plier responsibilities, performance measures and reporting, support and escala-

tion procedures, and remedies for nonperformance are all clearly defined toyour satisfaction, advises TechRepublic member Chris Elmes, IT manager for

Cotswold Outdoor Ltd., a UK-based retailer of outdoor clothes and equip-ment. If you dont understand anything 100 percent, dont be afraid to ask

until you doafter all, its your reputation that will get damaged by a badlyimplemented SLA covering a service that is not performing, Elmes adds.

Technology and business conditions change quickly

Make sure your SLA can change as technology and business conditionschange. Leendert Stuyt, the chief of help desk operations for an Air ForceReserve unit in the Midwest, explains that SLAs can dictate actions that hap-

pen far in the future. He notes that the gear that actually will be used in thefuture might have been updated in the interim. Its important to account forsuch updates, yet it can be hard to do. For instance, the enterprise may want touse an OS that is released between the writing of the SLA and actual installa-tion. This has ripple effectsyou must take care to ensure that the hardwareagreed to in the SLA can support the new OS. Its also likely that the stafftraining stipulated in the SLA will need to be changed.

Communications is the key to hitting all the relevant elements. If nothingelse, notes Stuyt, the SLA people are usually manpower folks or resourcemanagement folks. They should sit down with the tech folks or a least get a

draft [of the inventory] to them.

Companies changeand sometimes go out of businessbetween the sign-ing of an SLA and the implementation of its provisions. Timothy Holm, aTechRepublic member and project manager for the Minnesota Department ofAgricultures IS division, knows the potential scenario all too well. In oneinstance, a project supplier was originally slated to provide help desk and appli-cation support. When the time came, the company was unable to comply. Areasonable amount of change must be expected and dealt with in the SLA,says Holm, who recommends mandated six-month reviews.

Threes a crowd

Vendors often treat third-party equipment and services as exceptions to a SLA.

CIOs need to keep a close eye on this sort of thing, notes Elmes, as it can beused as a way to shirk responsibilities. The key is to study the agreement closely.

As far as possible, make sure that it covers your needs end to end, and whereit cannot (e.g., [where] there is a reliance on a third party for communications),make sure you know where responsibilities lie, says Elmes. Also, try tounderstand any third-party influences that may affect performance against [the]

SLA, as these are likely to be included as exceptions that you cannot claim



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against and the supplier may use these areas to avoid some responsibility forfailure, Elmes adds.

Be able to say goodbye

Its important to include language in the SLA that will enable you, the cus-

tomer, to break free. These stipulations should cover at least three thingsservice changes, catastrophic meltdowns (even if they are one-time affairs),and chronic bad performance.

After the number of bankruptcies and mergers recently, many customers aredemanding exit clauses in their SLAs, to make it easy to get out of the contractin the case of a change in service policy, explains McPhillips. She also recom-mends that customers write provisions into the contract stipulating that ifSLAs are violated several months in a row, the client can break the contractwithout penalty.

Make credit for noncompliance automatic, not a hassle

Its a good idea to put the onus on the vendor, notes McPhillips.Customerswant proactive SLAsi.e., if their guarantees are not met, theyare automatically credited at the end of the month, without the need to makeseveral phone calls [and do other things] to receive their credit. At present,only a few providers offer this.

Adjust for international differences

Many enterprise users operate across international boundaries. Its important tostandardize SLAs as much as possible between countries. The most significantvariable, says McAllister, is the cost of time, which differs due to differentlabor rates and cultures.

McAllister has a straightforward formula to address the issue: We settled ona relatively simple approach to manage the key variations. [We] clearly definethe responsibilities [and] clearly and simply define the way the responsibilities

will be measured (in the language of the user), then agree to the cost as a stan-dard. Then, as we implement the same services across countries, we indexadjustments to the SLA against adjustments to the costs. In this way, we wereable to implement standard services and SLAs that were flexible enough tocompensate for the differences in cost of time.

The best tool is common sense

While the provided guidance offers good advice, respondents also stressed thatthe CIOs best tool for carving out an SLA is common sense.

The SLA is a living document that needs attention in order to be useful, andsometimes [it] can bring an errant project or customer back to the negotiatedbaseline, says Holm.



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Balance the cost of IT withthe need for resourcesBy Michael Sisco

Its a vicious cycle. The more we do in IT, the more thats expected. At thesame time, were asked to spend less while user needs and demand for IT serv-ices increase. Is there a way to balance it all? Its difficult, but there are a few

things you can do that will help you deal with this challenge. Consider the fol-lowing.

Appreciate the problem

Since the dot.com debacle and the economy dip, pressure on earnings hasbecome a key issue for most companies. Companies have been scrambling tomake their revenue and earnings forecasts in order to remain viable concerns.

This is especially true of midsize and small companies.The net effect to many IT organizations has been a squeeze in technologyfunding for the past few years. The economy appears to be picking up, andthere are signs of some increased spending, but the squeeze still exists formany IT shops.

During tough times, IT has the opportunity to shine. No other department inthe company has the leverage that IT has to help the company save money. Wecan literally affect almost any company department in a positive sense by help-ing them cut costs or improve productivity through technology initiatives.Tackle some of these hidden gems with cost-effective technology initiativesand save the company money; you may find that the view of ITs role in the

company will change considerably.

Tips in managing cost vs. need

There are a few management basics that will help you manage the challengesplaced on you in an environment where everyone wants more for less.

Quantify your capabilitiesIf you dont quantify the IT services you canprovide, you leave yourself wide open for interpretation of those services.When that happens, your clients and technology users will typically assumeyou can do more than you actually can.

Quantify your capacityLikewise, you need to have a crystal-clear idea as

to how much service your organization can provide the company in all thetechnology disciplines you support. In addition, communicating the level ofresponsiveness that your IT operation can perform becomes important.

For example, I determine my programming support capacity fairly quickly.Assuming my programming staff is predominately focused on programmingenhancements and supporting our companys business applications, I assign aprogramming productivity factor of 100 to 120 hours a month that a pro-



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grammer should be productive. The number is higher when we have a morestable environment and each programmer is able to focus more time to pro-gramming tasks.

If I have 10 programmers in my organization, my output capacity will be

between 1,000 and 1,200 hours per month. Certain months may fluctuate quitea bit, but over the course of four to six months, the trends will average out.

If I know my capacity, I can forecast how much of our programming backlogcan be tackled per month. When we establish a sound track record of estimat-ing programming enhancements and delivering on our capacity level, ourclients are better able to prioritize and are much more of a partner that

works with us as opposed to just wanting us to do more.

Manage according to capacity

By establishing what you can do and quantifying your capacity, you positionyourself to manage to your capacity instead of leaving yourself open to any

and all requests. When capability and capacity are defined, you have a muchbetter opportunity of getting your technology users to prioritize your work.

You have a certain capacity with your IT resources. Think of a five-pound

sack. That sack will hold five pounds of sugar, maybe a little more, but it willnot hold 10 pounds. You can be flexible on what your IT resources work on,but not very flexible on how much they can do. You have to work within yourcapacity constraints.

By articulating what you can do and how much you can do, you actuallyempower your users to help you determine the best projects to work on inorder for them to meet their needs and priorities. One rule of thumb is thatthere will usually be more need than you have capacity, so make the effort toquantify what you can do and how much of it you can deliver with confidence.

Manage expectations and avoid the new project trap

When I was a young IT manager, I wanted to please my senior managementteam very much, just as most of us do. The challenge I had was that I didntknow how to manage their expectations, so I would fall into the new projecttrap. This trap isnt intentional, but its nonetheless sitting out there waitingfor the unsuspecting if we allow it to be.

It works this way: We develop our plans to support our company and focus

our employees on important issues in that support effort. Along comes ourboss, or another senior manager of the company, who wants to spend time todiscuss a special project that the company needs us to focus on.

As a young IT manager, I fell into this trap hook, line, and sinker. I wasntmature enough to know that I needed to manage this managers expectationsof what my IT organization could accomplish. I also didnt have a clue inthose days about quantifying capabilities and measuring capacity.



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So the result was that I would sign up for the new project without taking any-thing off our already full commitment list. The result was just as you mightexpect. We didnt deliver everything we committed to. Fortunately, I quicklylearned how this works and was able to do a better job in managing expecta-tions. But the initial learning curve can be a tough lesson.

If your plate is already full, you can add more to it only if you remove some-thing first. When you do a good job of quantifying your capability and capaci-ty, it gives you and your clients more power in being able to balance the work-

load more effectively so you concentrate on the most important issues.

Summary

Most companies want and need more than your IT operation can deliver.Spend time to truly understand and communicate your capabilities and capaci-ty, and manage your clients expectations around what you can delivernotaround the number of requests. Pull them into the decision-making process of

determining your IT priorities, since they have a vested interest in what you do.When they become part of the prioritization process and begin understandingyour capabilities and capacity limitations, youll find it easier to balance thework.



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Improve your IT departmentsperformance by calculating

key equationsBy Michael Sisco

If youre wondering if measuring the performance of your team is worth yourtime, consider NBA coach Pat Riley. As coach of the Los Angeles Lakers inthe 1980s, Riley led his team to the NBA title in 1982 and 1985.

After they failed to make the finals the next year, Riley initiated the CareerBest Effort (CBE) program to:

Measure performance statistics of each player against the stats of players ofthe same position in the league. (Previously, individual stats were compared

to all league players.) Challenge each player to improve each of his personal statistics by 10 per-

cent. Players scoring 20 points per game were challenged to increase theiraverage to 22 per game.

The Lakers believe these new sets of measurements helped them win thenext two championships.

The Lakers in the early 80s were enjoying great success, but they used per-formance measurement to push even higher. IT managers who are achievingexcellent results can also reach higher. Measuring performance is an importantattribute for success as an IT manager. It can also be a powerful motivator and

tool to help you achieve greater results with your team.You will also find it useful to track trends where possible. Any given monthcan skew the real picture of what is taking place, but a trend line over timeindicates true progress.

Measuring the organizations progress

Senior managers tend to look at the big picture, and they may not be aware ofyour departments progress unless you tell them. Collecting meaningful meas-

urement criteria will assist you in making your case to others in the company. Italso shows an awareness and an understanding of your business as a manager.

So where do you start? Start globally and work your way down. Consider

what the CEO and CFO want to know. Most of the time, its tied to financialperformance in some way.

Types of measurements

In the executive level of IT, there are several important measurements to have

handy at all times:



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IT expense as a percent of revenue

Actual expense compared to budget (monthly, year to date, andmonthly trend)

Future expense projections (at least the next three months or a full quarter)

Summary of benefits derived from past project initiatives

Define the responsibilities of the IT departmentIts impossible to measure performance without first coming to a clear agree-ment of what is expected from the IT department.

In one situation I encountered while working as a consultant for a new com-pany, the IT organization had very little credibility. Two main reasons werecontributing to the problema lack of focus and insufficient staff in certainareas.

Like so many organizations, the CEO and CFO were insistent that IT was

costing the company too much money, but they werent sure why. Senior man-agement didnt know what the problems were and they were looking to theirCIO to resolve the credibility issues.

The CIO had a tough job. Not only did his department need to improve theIT delivery of services, which often means spending money, but he also need-ed to reduce the money spent by the IT department.

My approach was simpledefine what services the IT department should beproviding for the company and have management agree on this mission state-ment and list of responsibilities. Then, I would quantify staffing requirementsin resource, experience, and skill to fulfill those needs.

In other words, I would show the true cost of providing the level of servicesthey said they wanted. Keep in mind, wants dont always translate to needs.Needs are often different after management understands and appreciates the

true cost.

Once management has agreed with the IT department about what deliver-

ables are expected, you can track performance and establish goals for increas-ing performance levels. For instance, if senior management decides that asuperior level of service is not required for the help desk because the organiza-tion can only afford average staffing levels, then you can calculate realisticgoals for your department that must operate with reduced staffing.

For example, with one help desk person for every 100 end users, perhaps thehelp desk staff member is expected to clear 30 telephone help calls each daywith a 70 percent rate of resolution. The average wait time for end users maybe another calculation that you need to consider. Whatever you establish as the

standard, you can challenge your help desk to surpass that performance eachquarter.



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Calculate IT expense as a percent of revenueOne of the best ways to help the CEO or CFO relate to the cost of technolo-gy is to present IT expense as a percent of revenue using the calculation inFigure A.

In this company, IT expense was running 6.5 percent of revenue. It was a

small company with two separate IT organizations in two cities as a result of acompany acquisition.

My assessment identified several opportunities to reduce cost by focusing theIT organization on the companys true priorities and eliminating duplication ofeffort by two IT organizations. I recommended that this refocus could not bedone too quickly without creating risk for the company and creating moraleissues for the IT staff.

Note: The objective was not to simply cut IT expenses but to align IT spend-ing in areas that supported the companys true objectives. By focusing the teamon the right issues, certain costs would drop and the expense as a percent ofrevenue would take care of itself.

To set the stage with senior management, I created a graph similar to Figure Bto show what would occur as we refocused priorities of the IT organization.

IT expense as a percent of revenueThe graph clearly indicates an increase in short-term spending that I refer to asthe bubble effect. It also shows decreased expense as a percent of revenueby the eighth month. Typically, senior management will invest in the shortterm to achieve long-term benefits for the company. The key is to have a solidplan that indicates you have a high level of understanding and good odds ofsucceeding.



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Track this measurement every month to keep your management teaminformed. Dont be surprised if you need to remind senior management everymonth where the financial numbers are headed. The time frame when thebubble peaks can be financially challenging for the CEO and CFO becauseevery bit of increase in IT spending reduces bottom-line earnings of the com-pany. I draw the graph shown above at every opportunity when Im taking anorganization through such a transition.

In the company example, I reduced the IT expense as a percentage of rev-

enue by 3.5 percent over five years while the IT budget grew from $1.7 millionto $15 million to support company growth. The bubble effect is real, espe-cially in turnaround situations.

Know your financial numbers

No matter what your title is, you should be aware of the financial numbersthat are key to your organization. Your senior managers, the CEO, and CFO

are going to be financially focused. If your organization has a board of direc-tors, it will measure senior management on the health of financial performancemore than anything else.

Keep track of where you stand relative to your annual budget. Your CEOand CFO may ask questions that pertain to your organizations financial status,so it always makes sense to be prepared. Always keep three numbers in yourmind.

Most recent months expense compared to budget

Know why your budget exceeded its limit or why it fell below the limit for themonth. In many publicly held companies, the monthly budget is not as impor-tant as the quarterly budget. In these companies, its acceptable to have a

monthly budget thats over the limit as long as you have a plan to meet yourquarterly goals. Be familiar with what time frame is key in your organization.

Year-to-date actual expense compared to budget

Know why its overbudget or underbudget and how you believe total expensewill compare to budget at the end of the fiscal year. Also know the trend ofyour expenses and whethe

Aligning It Service Goals

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