CGEITEXAMPREP#4 PerformanceMeasurement

PerformanceMeasurement
BillPankey TunitasGroup

COBITME4.6MonitorandEvaluate|

ProvideITGovernance|PerformanceMeasurement
ControlObjective

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CGEITEXAMPREP#4 PerformanceMeasurement

PerformanceMeasurement:

JobPractice
Establishtheenterprise'sstrategicIT objectives,withtheboardofdirectorsand executiveleadershipteam,categorizedintofourareas: Establishoutcomeandperformancemeasures,supportedbymetrics,andtargets thatassessprogresstowardtheachievementofenterpriseandITobjectivesand thebusinessstrategy. EvaluateITprocessperformance,trackITinvestmentportfolioperformance,and measureITservicedeliverythroughtheuseofoutcomemeasuresand performancedrivers. Usematuritymodelsandotherassessmenttechniquestoevaluateandreporton thehealthoftheenterprisesperformancelevel. Usecontinuousperformancemeasurementtoidentify,prioritize,initiateand manageimprovementinitiativesand/orappropriatemanagementaction. Reportrelevantportfolio,programandITperformancetorelevantstakeholdersin anappropriate,timelyandaccuratemanner.

RevealingSlipofthePen

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CGEITEXAMPREP#4 PerformanceMeasurement

TritebutTrue?
Ifyoucantmeasureit,youcantmanageit PeterDrucker Whatgetsmeasured,getsdone TomPeters Performancemeasurementexiststoaddressa managementproblemCGEITexamperspective

FunctionsofPerformanceMeasurement
Directs/motivates behavior

Focusesattention Clarifiesexpectations Increasesvisibilityofperformance Enablesaccountability Increasesobjectivity Providesbasisforgoalsetting Promotesconsistency Facilitatesfeedback Providesearlywarnings Enablesprediction

Improvesdecision making

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CGEITEXAMPREP#4 PerformanceMeasurement

InformationValue
Measurementreducesuncertainty
ValueofInformation=R(Decision|information) R(Decision|w/oinformation)

Managementuseindecisionmakingdetermines thevalueoftheinformation
Informationthatdoesnotinfluencemanagement decisionhasno[business]valuethenwhymeasure?

2TypesofManagementDecisions

ITPerformanceMeasurement@2levelsofManagement 1. Strategicplanning/ongoingstrategy
Longrangeexternalfocus/partnerships,(definitionofcore, etc) TypicallyusesBalancedscorecardstocommunicatestrategy andassesscompletion OperationalfocusonefficiencyandeffectivenessofIT systemsandprocesses Typicallyusesservicemetrics,keyperformanceandgoal indicators

2. Managementcontrol

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CGEITEXAMPREP#4 PerformanceMeasurement

PerformanceMeasurementinGovernance
*

1. Confirm(ornot)that thetargeted processessupport thebusiness objectives

Alignment Value

1
*Copyright2003bytheITGovernanceInstitute.

2. Supportthe improvementofthe processesthat createdtheresults beingmeasured

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ManagementDecisiondiffersbyCGEITDomain
1 1
1. Strategicalignment/value management
Havethetargetedprocesses achievedobjectives? HastheportfolioofIT enabledbusiness investmentsdelivered businessvalue Note:Benefitsdefined intermsofcorporate objectives Havethetargetedprocesses beenefficient&effective

2. Valuedelivery

2 2
*Copyright2003bytheITGovernanceInstitute.

2. ResourceManagement

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CGEITEXAMPREP#4 PerformanceMeasurement

PerformanceMeasurement:

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JobPractice
Establishtheenterprise'sstrategicITobjectives,withtheboardofdirectorsand executiveleadershipteam,categorizedintofourareas: Establishoutcomeandperformancemeasures,supportedbymetrics,andtargets thatassessprogresstowardtheachievementofenterpriseandITobjectivesand thebusinessstrategy. EvaluateITprocessperformance,trackITinvestmentportfolioperformance,and measureITservicedeliverythroughtheuseofoutcomemeasuresand performancedrivers. Usematuritymodelsandotherassessmenttechniquestoevaluateandreporton thehealthoftheenterprisesperformancelevel. Usecontinuousperformancemeasurementtoidentify,prioritize,initiateand manageimprovementinitiativesand/orappropriatemanagementaction. Reportrelevantportfolio,programandITperformancetorelevantstakeholdersin anappropriate,timelyandaccuratemanner.

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CGEITEXAMPREP#4 PerformanceMeasurement

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GenericITBalancedScorecard
FutureOrientation
Mission:PositionITtomeet futurechallenges Objectives: Staffexpertise Knowledgeofemerging technology Architecturalflexibility Measures: AgeofApplicationportfolio LevelofSOAadoption| percentageofapplications supportingwebservices Levelofvirtualization StaffhoursofCPE

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GenericITBalancedScorecard
OperationalExcellence
Mission:CosteffectiveIT processes Objectives: Efficientservicedesk& problemresolution Stableinfrastructure|code base Wellmanagedchanges Measures: Avg.timeresolveservice requests Avg.timetocompleteRFC #ofplannedchanges/#of unplannedchanges #securityincidentsw/same cause

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GenericITBalancedScorecard
UserOrientation
Mission:Bepreferredsupplier; exploitbusinessopportunities throughIT Objectives: Highlevelofusersatisfaction Costeffectivesupportfor businessoperations Partnershipw/businessin strategicinitiatives Measures: Userratings #Repeatedservicerequests Costofservice Levelofteamparticipation #feasibilityproject/#of projects

Businessmgmt.

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GenericITBalancedScorecard
CorporateContribution
Mission:Obtainreasonablebusiness valuefrominvestmentsinIT Objectives: ControlITexpenses HighbusinessvalueofIT participation HighbusinessvalueofITprojects Measures: ROIofITprojects Avg.ValueofprojectswithIT participation/Avg.valueofall projects YrtoyrITbudget/growthofuser base&supportedfunctions #daysw/onoticetriggering securityincident

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CGEITEXAMPREP#4 PerformanceMeasurement

PerformanceMeasurement:

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JobPractice
Establishtheenterprise'sstrategicITobjectives,withtheboardofdirectorsand executiveleadershipteam,categorizedintofourareas: Establishoutcomeandperformancemeasures,supportedbymetrics,andtargets thatassessprogresstowardtheachievementofenterpriseandITobjectivesand thebusinessstrategy. EvaluateITprocessperformance,trackITinvestmentportfolioperformance,and measureITservicedeliverythroughtheuseofoutcomemeasuresand performancedrivers. Usematuritymodelsandotherassessmenttechniquestoevaluateandreporton thehealthoftheenterprisesperformancelevel. Usecontinuousperformancemeasurementtoidentify,prioritize,initiateand manageimprovementinitiativesand/orappropriatemanagementaction. Reportrelevantportfolio,programandITperformancetorelevantstakeholdersin anappropriate,timelyandaccuratemanner.

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MeasurementQuestions
Tosupportaspecificmanagementobjective
1.

Whatneedstobemeasured?

2. 3. 4. 1.

Howtomeasure? Whentomeasure? Whoisresponsible[forthemeasurement/evaluation]? Arethemeasurementprocessesrelevant,complete,accurate andtimely? Doestheenterpriseusetheperformanceinformationwell?

Learningtheappropriatelessons

Processcharacteristic(metrics) Businessresult(outcome)

Governance ofperformanceevaluation
2.

COBITPC6providesguidance COBITME4.1providesguidance

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CGEITEXAMPREP#4 PerformanceMeasurement

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GenericProcessControlModel
COBITsprocesscontrolobjectiveappliestoallCOBITprocesses
PCrequirementsintroducedwithCOBIT4.1

Setsrequirementsinthedefinitionofanyprocess. PC6:processperformanceimprovementrequires: Metrics thatprovidesinsightintotheoutcomes&performance oftheprocess Targets thatreflectprocessgoals Datacollectionmethods Comparison ofactualmeasurementtotargetsandremedial action Alignment ofmetrics,targets&methodsw/ITsoverall performancemonitoring=>ME1

SimilarrequirementsinITILsprocessdefinition

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ProcessControlPractices

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ME1:Monitor&EvaluateITPerformance ME1Processgoalistransparencyofthecosts& benefitsofIT

Transparenttowhom?
Different[information]consumersrequiredifferentcontent, formatandtiming Distinctrequirementsvis avis strategiclearningvs managementcontrol

Thegovernanceobjectiveissatisfiedby:
Translatingperformance reportsintomanagement reports Comparingperformancewithagreedupontargets Determiningremedialactionplan

ME1:Monitor&EvaluateITPerformance

ControlObjectives: Definetherelevantperformanceindicators
ME1.1 Establishthemonitoringframework ME1.2Defineperformancetargets&benchmarks ME1.3Establishmonitoringmethods

Systematic&timelyperformancereports
ME1.4Periodicallyreviewperformance ME1.5SeniorManagementreports

Promptactionupondeviation
ME1.6Remedialaction
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ME1.1:MonitoringFrameworks
Specifymeasurementscope,methodology&process
1. Monitorcontributiontobusiness(strategiclearning) 2. MeasurepropertiesofITsolution\ servicedelivery (managementcontrol)

PotentialFrameworks(some)
BalancedScorecards(BSC) InformationEconomics(IE) COBIT ITIL|ITSMMetrics

Useofalternateframeworksarenotmutuallyexclusive
1. BSC&IEbettersupportstrategicplanning,#1 2. COBIT&ITILbettersupportmanagementcontrol,#2

Needbothbusinessdirection&processcontrol

MonitoringFrameworks #1.ITContributiontoBusiness| PerformancereBusinessStrategy

PerCOSO,Monitoringisanessential componentofenterprise governanceappliedtoall areasofcorporateactivity,notjustIT TheevaluationofbusinessvalueofITshouldbemade relativetothevalueofallothercorporateinvestments AssessmentofITsvaluemustbemadeinthevernacularof corporateplanningandcannotbeITcentric
Corporateinternal|proprietarymethodologies Balancedscorecards Informationeconomics/Decisionanalysis

Focusonvalueandinformationeffectiveness
Doingtherightthingandderivingvalue

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CGEITEXAMPREP#4 PerformanceMeasurement

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MonitoringFrameworks #2SolutionandServiceDelivery

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Monitoringofvaluedoesnotprovidedetailedinformationaboutthe operationofsystems&process
Managementscorecardvs.processmetrics

ITsolution/servicemanagementrequires(near)continuous monitoring
DistinctfromIT&businessplanningcycles

Challengeistoensurethattheservice/solutionsmetricsare relevanttothebusinessrequirements
E.g..Dontemphasizeavailability (uptimemetrics)whenthe businessrequirementisforreliability

Monitoringmustbeperformedinthevernacularofinformationand systemsmanagement
COBIT ITIL

Focusonefficiencyandcosteffectiveness

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ME1.2:EstablishGoals/Targets
Monitoringsystem[should]explicitlytieITgoals/ objectivestospecificbusinessgoals
Responsibilityofbusinessmanagementtoapprove
1. 2. Strategicplans Servicelevelagreements

Ahierarchyofobjectivesprovidesdirection\ guidancefor ITcomponents(cascade)

e.g.,Businesstarget=>ITtarget=>ITdevelopmenttarget e.g.,meetingITdevelopmentobjectives(inpart)resultsin satisfactionofITobjectives
dilutionreflectsthepresenceofotherfactorsaffectingITgoals beyondjustITdevelopment SatisfactionofITGoalmaynotguaranteesatisfactionofbusiness goal

Cause&effectrelationshipsupportsgoalhierarchy

Oftentargetsarenecessarybutnotsufficientconditions

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Targets
Managementrequirestargets|specific objectives
w/otargetsquestformorecomesatthe expenseofcompetingobjectives Boundtothetimingofstrategy|servicelevel agreements

EstablishGoals/Targets: UseofIndustryBenchmarks
Benchmarksshortcuttheprocessofdetermining performancetargets
Usetheperformanceofcompetitors(orother)to determinewhatisobtainable
Industryatlarge topperformers

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Setgoalsintermsofsuchbenchmarks Howdoesattainmentofbenchmarkimplysuccessin achievingbusinessobjective?

Mostlikelynotappropriateforstrategicplanning

Begsthequestionofcausation\ relevance

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ME1.3:SelectionofMonitoringMethods
Withincontextofframework,mustselectspecific measures
e.g.,a balancedscorecard e.g.,a (setof)metrics

Thechosenframework,shouldprovideguidancefor selecting/constructingthemeasures
Sometimesthisismoreartthanmanagementscience

Taskofconstructingmeasuresistypicallyassignedtothe roleresponsibleforperformanceoftheprocess/IT componentbeingmeasured

Must bereviewedandapprovedbypersonaccountablefor process/ITcomponent Processownerwillgenerallybetheconsumerofthe performancemetric

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ME1.4:PeriodicReview Timing
Managementpurposedeterminestimingofreviews
1. Strategicbusinessplanninghas35yearcycle
Reviewofperformancetoconfirm/adjustalignmentwith expectations Reviewfrequencyvarieswithcompanyandindustry
Monthly(!) Synchwithfinancialreports(qtr|annual) Eventdriven

2. Managementcontrol
Continuousprocessimprovementrequiresfrequentreporting Timingvarieswithrequirementsofchangemanagementprocess e.g.,Wherechangesareexpensiveordifficulttorollback=>less frequentperformancereviewgivenrelativereluctancetoact uponfindings

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ME1.5:ManagementReports Managementpurposeandcompanyculture determinethecontentandgranularityof reports

Reportssupportingstrategicplanning
Generallyintendedtoindicatethesuccessorfailure| timingoftheachievementofstrategicobjectives Recommendationsforadjustment;acceleration,etc

Reportssupportingmanagementcontrol
Indentifyprocess shortfall/failures

Dashboardscanbeusedtocollect&integratea varietyofmeasures

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ME1.6:RemedialAction
RequiredActionuponrecognitionofshortfallbetween performanceandtarget
1. Verification Confirmaccuracyandmeaningofmeasure
e.g.,didasingleanomalouseventresultskewresults? e.g.,haveextraneousbusinesseventsdilutedtheimpact ofITperformanceuponthetargetedmeasuresandleadto anunderestimationofITperformance e.g.,istheshortfallafailureinstrategy?Orexecution?

2. Rootcauseanalysistoidentifyunderlyingdeficiency Manymethods(someindustryspecific),e.g.:
Faulttree,barrieranalysis,failuremode&effect,5whys,Ishikawa

Focusonprocessfailuresthatledtothedeficiency
i.e.,itisprocess improvementthatreliablyleadstobetterresults

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RemedialAction(cont)
3. ActionPlan Astrategiclevelactionplanmaybesomethingother thanaprojectascompletionmaybeindeterminate
E.g.,realignstrategicobjectives

Atthemanagementcontrollevel,expectdefinitionof projectlifecyclecomponents
Proposal Reviewandapproval Tracking

Attheprocesscontrollevel,theactionplanmayjustbe aservice/changerequest
Moreorlessongoingactivity

4. Adjustmentoftarget Increase/lowerexpectations Obviousreviewandapprovalcycles

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COBITAssessmentModel

2typesofmetrics

Outcomemeasures(akakeygoalindicatorsakaKGI)

Measuregoalsatisfactionposthoc

Performanceindicators(akakeyperformanceindicatorsakaKPI)
Assessmentofongoingsystem Boundtospecificgoals

Laggingindicatorofwhetherornotgoalhasbeen achieved.

Leadingindicatorofwhetherornotgoalislikelytobe satisfied
Activity Process IT Business

Metricsaredefinedat4levelsforeachCOBITprocess

CascaderelatedtoCauseandeffect

BusinessGoals>ITGoals>ProcessGoals>ActivityGoals

COBITincludessomemetrics

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CGEITEXAMPREP#4 PerformanceMeasurement

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COBITsCascadeofMeasures

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Outcome Measure

Business Metric Performance Indicator

Copyright2003 bytheITGovernanceInstitute.

PerformanceMeasurement:

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JobPractice
Establishtheenterprise'sstrategicIT objectives,withtheboardofdirectorsand executiveleadershipteam,categorizedintofourareas: Establishoutcomeandperformancemeasures,supportedbymetrics,andtargets thatassessprogresstowardtheachievementofenterpriseandITobjectivesand thebusinessstrategy. EvaluateITprocessperformance,trackITinvestmentportfolioperformance,and measureITservicedeliverythroughtheuseofoutcomemeasuresand performancedrivers. Usematuritymodelsandotherassessmenttechniquestoevaluateandreporton thehealthoftheenterprisesperformancelevel. Usecontinuousperformancemeasurementtoidentify,prioritize,initiateand manageimprovementinitiativesand/orappropriatemanagementaction. Reportrelevantportfolio,programandITperformancetorelevantstakeholdersin anappropriate,timelyandaccuratemanner.

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MaturityModels
Characterizetheprocesswhoseperformanceisbeingmeasured
Assessprocessmanagementcapabilitynotprocessperformance Capabilitymaynotbefullydeployedorutilized Processmaturity&benchmarksprioritizeprocessimprovementtargets

COBITidentifiescharacteristicsofeachprocessatthevarious maturitylevels
COBITsgeneric6pointmaturitymodel 0 Nonexistent 1. Adhoc.Activitymanagedonindividualbasisw/o standardization 2. Repeatable.Regularprocessw/oformality.Relianceon individualknowledge\ diligence 3. Definedprocess.Standardprocessformalizedand communicatedthroughtraining. 4. Managed&measurable.Monitoringofprocessand correctiveactiontakenwherethereisdeviationfrom expectedresults 5. Optimized.Continuousprocessimprovementimplemented.

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Maturity=Performance
Maturity=>reliabilityofprocess,notthe outcome
Maturityreflectslevelofdefinitionandcontrol =>lowervarianceinoutcomes

Maturityisinitialstepinqualityprogram
Poorquality=>calibrationproblem

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CGEITEXAMPREP#4 PerformanceMeasurement

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PerformanceMeasurement:

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JobPractice
Establishtheenterprise'sstrategicIT objectives,withtheboardofdirectorsand executiveleadershipteam,categorizedintofourareas: Establishoutcomeandperformancemeasures,supportedbymetrics,andtargets thatassessprogresstowardtheachievementofenterpriseandITobjectivesand thebusinessstrategy. EvaluateITprocessperformance,trackITinvestmentportfolioperformance,and measureITservicedeliverythroughtheuseofoutcomemeasuresand performancedrivers. Usematuritymodelsandotherassessmenttechniquestoevaluateandreporton thehealthoftheenterprisesperformancelevel. Usecontinuousperformancemeasurementtoidentify,prioritize,initiateand manageimprovementinitiativesand/orappropriatemanagementaction. Reportrelevantportfolio,programandITperformancetorelevantstakeholdersin anappropriate,timelyandaccuratemanner.

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MeasurementdriveChange
Measurementdriveschange
Informalapproachtoassessment =>haphazardchange

Determineiftheplanhas achievedorisachievingthe desiredresults

Strategicgoals&value realization Operationalefficiency Controleffectiveness etc

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ITILServiceMetrics
Continuousimprovementisan importantconceptwithinservicemanagement
ProcessmetricsareadesignelementwithineveryITIL process,similartoCOBITsPC6 Management
Realitycheckvis avis servicelevelagreements Monitorfortrendsleadingtoproblemsinnearormediumterm Typicallyhavesomepersonalrewardassociatedwithachievementof targetedlevelsor%ofimprovement SourceofsuggestionssupportingtheContinuousService ImprovementProgram(SIP)

Individualmetricshave1of3consumers:
Processowners Staff(operators)

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ITILMetrics
Baseline
Startingpointforfuturecomparison Mustbeacceptedbyallstakeholders

Process
Efficiencyandeffectiveness

Service
Demonstrateachievementofcustomer expectation

Technology
Performanceofindividualinfrastructurecomponents

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ITILCSIModel

CrownCopyright2007

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GeneralcommentsonMeasurement
Anymeasurementshouldhaveanobjective
Whatisbeingmeasuredandwhy

Measurementwelldesignedandexecutedisamethodof control
Assuch,theeffectivenessofameasurecanbeitselftested

Acollectionofcorrelatedmeasuresisgenerallymoreuseful thansinglemeasuresofperformance
Overcomeirrelevantaspectsofasinglemeasure
Aggregatemeasureshasmorevalidity thanasinglemeasure

Overcomeextraneouserrororvariabilityassociatedwithasingle measure
Aggregatemeasurehasmorereliability thanasinglemeasure
Varianceofacompositemeasureislessthantheaveragevarianceof componentmeasures

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?
NEXTWEEK: FRAMEWORKS

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