Most current measures of IT performance are ineffective, and IT directors should get fewer and better performance measures accepted by their organisations.
That was the view of Andrew Likierman, professor at the London Business School, speaking at the IT Directors Forum.
“There is a need to move away from measuring cost and activity and to measuring efficiency, output and outcome,” he said.
Likierman added that standard business performance measurements for IT – such as those based on cost, activity and input, or on aspirations such as “value-added” or “return on investment” – lacked conviction.
“Measuring cost of IT against turnover or profit is no good at all because there is rarely comparability,” he said. “I have never seen IT costs in relation to total turnover making any sense at all, and cost reduction as a measure is not necessarily a good indicator of performance either.”
Likierman also dismissed value-add and return on investment as good measures for IT performance.
“We do not have the means of quantifying them,” he said. “IT is not a revenue generating function in most organisations, and you cannot measure some of the important things that IT provides.”
IT directors need to take the lead in promoting fewer and more effective performance measures, said Likierman. “If you leave a vacuum, others will do it for you and set bad measurements for you.”
The key to creating more effective measurements depends on the ability of the IT director to communicate with their counterparts in other business functions.
“The IT function has to be clearly linked to organisational objective,” he said. “Where you are going has to be credible to the top team in the organisation.
“A sign of how good CIOs are is how well they communicate.”