IT gets its report card

IT leaders at all levels, right up to the CIO, need to be prepared to respond to their toughest critics. That may be the CEO, another C-level officer or even the company chairman. One of these people, one of these days, is going to confront you with some very to-the-point questions about what IT is doing, what it should be doing, and how the IT function can perform for the business better. It would be wise to think about those questions now, so that, when the time comes, you will be ready with answers that demonstrate that this is not the first time you have contemplated such questions.

The toughest question of all, the one whose multiple parts get to the heart of how you should be thinking about the IT function, goes something like this: “Is our IT function where it needs to be? Do we even know where it needs to be? And how will we know when we get there?”

Your answer to this big question cannot be equivocal, and for your response to be both satisfactory and useful in the future, it must be delivered in the language of business.

At the very least, you need to be able to say that the IT function is actively striving to be where it needs to be, but because the business it serves is itself always evolving, the IT function must constantly be reassessed. The important things are to understand the direction it should be moving in, and to realize that improvement must be constant.

We know the IT function is moving in the right direction when:

* Business leaders perceive it as a powerful ally to the enterprise.

* It is seen to be continually helping the enterprise avoid cost, improve service and increase revenue.

* We are certain that each IT investment we make will improve the enterprise’s value proposition to its customers, employees and stockholders.

Those are goals, but how do we reach them? The answer is by always being a highly effective IT function. But that just raises yet another question, namely, how do we define a highly effective IT function? To my mind, this is a matter of attitude, direction and structure. These three things are all vitally important, and it’s crucial to understand the part that each plays in making IT effective. Ignore one, and IT will be out of balance. Achieving the right combination is imperative. An IT function with a perfect structure and a great attitude can still go off the rails if it’s taking the wrong direction.

You can think of these three aspects as categories on a report card. The higher the grade that IT receives in each of them, the more directly connected and responsive the IT function will be to business needs. And an “F” in any one of them means IT could be held back, and is probably holding the business back.

The most concrete of these three aspects of IT is structure, so let’s begin there.

Show Me the Structure

The basic structure of a well-organized IT function derives from three branches: “plan,” “build” and “run.” As those names suggest, the IT function is organized by responsibilities. Assuming you have sufficient head count, you want to have one group that plans the systems the business needs, another that builds those systems, and a third to run the systems once they have been implemented. I didn’t invent this organizational scheme; it’s been addressed in countless books. But I’ve found it to be a highly effective way to meet the needs of the enterprise.

Various IT functions are grouped within the plan, build and run domains. In practice, with the right direction and attitude, the details of this compartmentalization will eventually arrange themselves optimally. Nonetheless, it’s good to start with such groupings, as useful checklists.

And remember, even if you devise the perfect structure, it will mean nothing by itself. Without the proper attitude and direction, an IT function can become a bureaucratic nightmare, actually stifling the growth of the business and using up considerable time and financial resources.

You don’t want that.

Attitude Adjustment

Of the three aspects of the IT function, attitude may be the most important. The attitude you want to foster is one where the customer, and not technology, is the focus. The professionals within the IT function should feel that IT has no destiny separate from the business units it serves. They will declare IT a success only when the business units it serves are successful.

Attitudes are reflected in language. Take a look at the chart below. You know your IT function is where you want it to be when the terms used in discussions by and about IT move from those on the left side of the chart to those on the right side.

Please know that some training in business communication and something called “best practices” are shortcuts to the outcomes on the right.

The more you hear the terms on the right, the higher the grades given to the IT function’s attitude.

How do you instill this attitude? Leading by example is important, but so is a constant focus on business-IT “win-win” collaboration activities and the adoption and continued use of best practices. But be assured, once this transformation begins in earnest, it is irreversible, and ever more beneficial IT initiatives will surface from the IT function over time.

Asking for Directions

With the right structure and attitude, you might think nothing can go wrong. But it can if you haven’t assured that the IT function is moving in the right direction.

Imagine an IT function that is conducted as a business, not with captive clients or even virtual clients, but with clients who can choose between using the corporate IT function or something else.

Such an IT function would unambiguously understand that the direction it needs to follow is to be a commercialized entity, earning a reputation as the IT service provider of choice. Perhaps the business unit leaders in your enterprise don’t have such a stark choice between your IT function and something else, but all IT functions should be oriented toward being a commercialized entity. They need to always be considered as a commercial business partner that is creative and proactive about driving out cost and continually improving responsiveness.

It might sound like a difficult task to help IT professionals develop business acumen. Good news: It isn’t. In fact, time and again I have witnessed IT professionals rise to this challenge. They actually want to know more about how they can aid the business they work for, at every level.

Try it and see for yourself. Once you have directed the IT function to commercialize itself, things will happen quickly. Your staff will establish lines of service business. They will figure out what’s important to IT’s clients. They will set up the structure and capacity to provide it. And they will calculate the costs associated with providing it.

You’ll also want the IT function to start to benchmark itself against commercial alternatives to determine whether it has the advantage in costs for services and, if that advantage is lacking, to understand why it doesn’t measure up.

As a commercialized entity, the IT function will naturally develop new priorities, such as focusing on cost control. You will find that no projects are proposed if they would incur an IT cost that does not have a clear and direct relationship to successful customer outcomes.

You will know for sure that the IT function is moving in the right direction when the staff raises the idea of offering senior management a kind of annual report on IT performance that uses terms such as operational excellence, client satisfaction, positioning for the future and industry leadership.

And your IT function will deserve a high grade on its report card. (See my previous article, “CRM initiative shows there’s no lasting change without buy-in.”)

Getting There

Clearly, a proactive IT leader will be on top of all these issues before ever getting those tough questions about where the IT function ought to be. It’s likely, in fact, that a proactive IT leader will preclude the need for anyone to ask those questions by bringing up the topic himself. The important thing, though, is to anticipate the need to address such issues and to recognize that the answer must be to make the IT function a full and responsive part of the business that has a responsibility to help it achieve its goals.

I’m an advocate of the proactive approach, of course, and in my view, getting the answers to these questions out to the business-unit executives is IT marketing in action. You want to keep these questions from being asked by eliminating the need to ask them — everyone will already know the answers.

The same goes for that ultimate shareholder question: “Can an outside IT service firm do what our IT function does cheaper or faster or better?” And if you’re getting good grades (and steadily improving) on your IT report card, then your IT function has some profound strategic advantages to the enterprise over most for-hire IT firms.

These advantages need to be understood by all IT staff (and just as they will want to develop their business acumen, they will enjoy knowing about how to sell the IT function), and they need to communicate them periodically with all levels of their client community. In other words, they need to market the IT function.

What makes a high-performing IT function really different from an outside IT service provider? It’s a mix of several things, including the following:

The IT function has extensive resources and staying power. I’ve found it an extremely useful exercise to direct the IT team to draw up an inventory of the IT function’s proven capabilities and performance. When your team does this themselves, they internalize this information, and the opportunities to share it with others in the enterprise are endless. This exercise also has an effect on the IT team’s pride.

Make sure the team doesn’t over look the IT function’s stability in their inventory. IT service firms come and go. They get acquired, or they end with so many clients that they can’t give you the proper attention. In other words, a high-performing internal IT function can be relied upon to be the safe and dependable choice for all enterprise needs.

It offers services not found elsewhere. Here’s another inventory that will open eyes. Every internal IT function that I have been familiar with has done things for strategic business units that no outside IT service provider will do — and some things that you might be able to get an outside firm to do, but only at great cost, after a custom bidding process.

It is free of vendor bias. An internal IT function will choose the best price/performance vendor for the enterprise’s needs, no matter what. Have you ever known an IT systems integration or facilities management service that didn’t recommend its parent company’s IT products?

It has one priority: Internal enterprise clients. An IT function has no other clients to keep happy. You won’t be subjected to any trade-offs that might arise because of potentially conflicting service levels. And an internal IT function has no financial secrets, making it easy for business units and the enterprise as a whole to manage their cost structure.

It is committed to quality and continuous improvement. A high-performing internal IT function will establish yearly targets for continuously improving productivity and client satisfaction, and it will objectively show progress. Will you routinely see this kind of initiative from outside IT contract service firms? No.

It has a business orientation and knows its clients’ needs. Because a high-performing IT function is commercialized and run like a business, its clients’ business needs are readily apparent to the IT team. The team knows the enterprise’s client acquisition cycle, its retention process, its strategic performance goals and all the rest.

It is easy to buy from. Whenever a business unit has to contract with an outside service provider, settling accounts is complicated. Expenses have to be tracked and monitored. Discrepancies eat up time and other resources. Reconciling items on an invoice can be burdensome. And you don’t even want to think about what happens anytime Legal has to get involved.

Because it doesn’t seek profit, it is the lowest-cost alternative. Benchmarking, done properly, compares the cost of specific internal IT functions to the cost of those same services performed by outside firms. Because any outside IT service firm will necessarily require a high gross profit margin, external IT costs will normally be higher, sometimes significantly so. In the rare cases when a specific internal IT service cost is not lower, the high-performing IT function will find out why and either fix the problem immediately it or use the lower-cost outside service until it can fix it.

As with all marketing efforts, the core message of IT performance marketing will need to be updated and repeated. But I can assure you that as you effectively deliver your message, your audience will be looking forward to knowing more about your high-performing IT function.

Obviously, much more could be said about all of this, and it’s more complicated than I’ve led you to believe. There is a lot that I could tell you about how to take IT effectiveness measurement to even higher levels (including targeted quality, efficiency and productivity measures). But you don’t have to be a rocket scientist to know that the sooner the IT function understands its mission in such terms, can articulate its true value proposition to the business and becomes a powerful ally in achieving business goals, the better for everyone, including the stockholder.

Will being part of such a transforming achievement have an effect on anyone’s résumé?

Yes, but only in positive ways.

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