The Elusive IT Balanced Scorecard

Here's how to develop a systematic approach for measuring IT's contribution to the bottom line.

The whole idea of the Balanced Scorecard is that it gives you a clear picture of how well you're doing. When it comes to IT, however, the rules for keeping score can get a little murky. IT departments frequently use a set of metrics to gauge their progress, but they track performance indicators -- like system availability and network latency -- that are unfamiliar to people in other areas of the business. So while IT may believe it's performing well, the rest of the organization may be less convinced of its success. Divergent opinions about which metrics are most valuable for judging technology initiatives are the biggest obstacle to accurately measuring IT's contribution to the bottom line.

"An effective IT scorecard puts in place crossover measures that make the connection between IT activities and business success," says Sidney Finehirsh, founder and CEO of CMX Group, an IT management, financial and technical consultancy in New York City. "IT needs to learn what these crossover measures are by going out and talking to business units. Unfortunately, IT often resides in silos, separated from the rest of the company."

The problem is that IT has historically been regarded as a utility -- not much more than a plug in the wall. What's more, the traditional mind-set of IT personnel has been reactive, and their focus has been limited to putting out fires and answering distress calls. That kind of orientation doesn't lend itself to strategic thinking; if a company intends to develop strategic measures for IT, the function will likely need to be told what those measures should be. Yet IT departments often resist strategic scorecards dictated by business managers because they're unfamiliar with the concept of business alignment and unsure how to respond to it.

One key is to encourage the CIO to become more of a management-team player. CIOs need to talk to key stakeholders about their business needs and show how IT can meet those needs. "If it's a situation where the CIO is trying to promote something and the business units just stand back and watch, that's a recipe for disaster," warns Bill Kirwin, vice president and worldwide research area leader at IT advisory services provider Gartner Inc. in Stamford, Conn. "Any CIO who isn't mingling with the business units to learn how IT can support various initiatives is going to be toast."

No single IT scorecard model fits all organizations. Whichever you choose, it should improve the alignment between IT and the rest of the enterprise. Certainly, if IT can help business units operate more efficiently, keep inventories under control, reduce process time, increase customer satisfaction and facilitate faster decision-making, then it's adding value. Historically, there has been no easy way to quantify those contributions. That quest begins by achieving a common understanding of strategic goals inside and outside IT and agreeing on what's important.