If you had to pick 5, what would be the Top KPIs for a CIO, or IT Department?

In today's digital age, data is prolific and we're only going to see an exponential increase as time goes on. Building on Pat's point, it's very easy to pull together hundreds of KPIs to measure the capabilities, processes and the output of an IT department, but to use an old consulting question, "so what?"

To break it down, ask yourself, "Why are we measuring something” and “what outcomes do we want to achieve?" IT’s KPIs should ideally be directly linked to business objectives e.g. revenue, market share, transaction cost but for this exercise, let's assume we're trying to demonstrate value to the business.

I'll borrow from the BCG Value Framework to articulate the outcomes we want to achieve. It's a simple 2x2 with IT and Business mapped against Efficiency (do things better) and Innovation (do better things). Thus our objectives are to:

1. Improve IT efficiency
2. Improve IT effectiveness
3. Improve business efficiency
4. Enable business growth

And I'll add one more to build a foundation for our KPIs:

1. Improve perceived value

So our first KPI is focussed on lowering the price to serve whilst maintaining or increasing the level of predictability and quality. Typical metrics used in this space include application & infrastructure availability, % cost of maintenance but with our focus on value, let’s use the average cost of a business transaction.

Improving IT effectiveness could be a measured by IT cost reduction/IT project spend or the percentage of the IT budget spent on innovation, but I would suggest focussing on the end goal, which is IT's ability to serve and their responsiveness to the customer; IT’s agility. Measures now could be application & infrastructure architecture complexity but I would recommend measuring the outcome, which is time taken to respond to IT demand. It is important to also measure cost and quality to ensure gains are not at the expense of other factors.

Business efficiency is the ability of IT to deliver projects and can be measured by the return on investment enabled by IT projects. This focuses the conversation on value, not just IT’s ability to implement projects to time and budget.

To measure IT’s impact on business growth, we can measure the percentage of business initiatives driven by IT. This ensures that we’re not just measuring alignment but the extend IT is involved in executing business strategy.

Lastly and perhaps most importantly, we need to measure perceived value; relevant as IT departments often see themselves as effective, however they lack the means to measure success (in the eyes of the customer) or the language to articulate it to their customers. Therefore we need to measure customer satisfaction with IT services, projects and alignment to business strategy, as well as business partner satisfaction.

Our list of KPIs therefore consists of:

1. Average cost of a business transaction
2. Average time to respond to IT demand from request through implementation
3. Revenue growth & business unit cost reduction / IT project spend
4. Business project spend driven by IT / business project spend
5. Customer & partner satisfaction

Regards,

Warren

Interesting.  Thank you everyone for your responses.  I confess to being a little surprised.

I would think Key IT metrics or KPIs would need to meet some basic criteria:

• Easily definable
• Easily measureable
• Easily comparable
• Specific to the PERFORMANCE of IT
• Maybe most essentially they need to be the KEY, or most important, metrics

Therefore the start of our list for the TOP KPIs would be something close to:

1. IT Cost/Revenue (straight forward.  No, cost isn’t everything but it is very important)
2. Availability (this is basically downtime)
3. Application Performance (this includes not just response time, but also things like how fast IT gets an app up and running, and how buggy it might be.  BTW we also think this one can incorporate employee productivity)
4. Risk (if everything is done with high risk, that’s no good either.  How is the organization managing the risk of disaster, security issues, or compliance problems?)
5. Employee Satisfaction (we’re not sure on this one)

Many, many other important metrics would “roll up” into these KPIs but there would only be those top ones (we picked 5, which is obviously arbitrary).  We believe that having a relatively stable, common set of KPIs also lends itself to benchmarking and comparison, which is valuable too.

I understand why IT would want to make sure it’s “aligned” with business objectives.  Of course.  But how do you really measure that?  I would suggest “the business” defines business outcomes or initiatives or goals, or whatever.  IT would then say, “because we’re improving performance against our key metrics, we’ll be able to more effectively and efficiently help deliver on your objectives.”  So the process and components become the following:

• High level KPIs – 5 for each department.  What is the benchmark? How has a vendor impacted these at other similar organizations?
• Initiatives (or goals or pain points, etc) – how do these align with the KPIs?  An IT Initiative might be Improved Velocity, which would probably have a direct impact on Application Performance. 
• Metrics – what are the underlying metrics or PIs and how does each one “rollup” to the KPIs?
• Quantify – none of this matters if a potential improvement can’t be quantified in $.

Hope that isn’t totally confusing.  Our aim is to help vendors have a more value focused, aligned, conversation with IT, thus the reason for this discussion.  Thanks again for all the feedback.

Likewise.  Thank you Chris.