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CHAPTER 4: MEASURING THE SUCCESS OF STRATEGIC INITIATIVES

A few questions banking executives recently raised regarding their IT systems include:

• Is the internal IT operation performing satisfactorily?
• Should the company outsource some or all of the IT operations?
• How is the outsourcing company performing?
• What are the risk factors to consider in an IT project?
• What questions should be asked to ensure an IT project proposal is realistic?
• What are the characteristics of a healthy project?
• Which factors are most critical to measure to ensre the project achieves success?

• Key performance indicator - measures that are tied to business drivers.
• Metrics are detailed measure that feed KPIs.
• Performance metrics fall into the nebulous area of business intelligence that is neither technology, nor business centered , but requires input from both IT and business professionals.

Efficiency and Effectiveness

Efficiency IT metrics measure the performance of the IT system itself including throughput, speed, and availability.

Effectiveness IT metrics measure the impact IT has on business processes and activities including customer satisfaction, conversion rates, and sell-through increases.

Benchmarking--Baseline Metrics

Benchmarking is a process of continuously measuring system results, comparing those results to optimal system performance(benchmark values), and identifying steps and procedures to improve system performance.

The Interrelationships of Efficiency and Effectiveness IT Metrics

Efficiency IT metrics

•  Security is an issue for any organization offering products or services over the internet.
• It is inefficient for an organization to implement Internet security , since it slows down processing.

Metrics for Strategic Initiatives

A few of the more common financial ratios include:

• Internal rate of return (IRR) -- the rate at which the net present value of an investment equals zero.
• Return on investment (ROI) -- indicates the earning power of a project and is measured by dividing the benefits of a project by the investment.
• Payback method--number of years to recoup the cost of an initiative based on projected annual net cash flow.
• Break-even analysis--determines the volume of business required to make a profit at the current prices charged for the products or services.

The following metrics will help managers measure and manage their strategic initiatives:

• Website metrics.
• Supply chain management (SCM) metrics.
• Customer relationship management (CRM) metrics.
• Business process reengineering (BPR) metrics.
• Enterprise resource planning (ERP) metric

 BUSINESS PROCESS REENGINEERING (BPR) AND ENTERPRISE RESOURCE PLANNING (ERP) METRICS

The balanced scorecard is a management system, in addition to a measurement system, that enables organizations to clarify their vision and strategy and translate them into action.

The balanced scorecard views the organization from four perspectives,and users should develop metrics, collect data, and analyze their business relative to each of these perspectives:

• The learning and growth perspective.
• The internal business process perspective.
• The customer perspective.
• The financial perspective