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Defining the Right Metrics for Long-Term Business Transformation

Companies often develop business cases for transformational IT initiatives to identify quantifiable implementation areas, focusing on business value to justify funding.  Such focus, however, typically doesn't last beyond the project approval phase, having little or no impact on the remaining lifecycle.  This raises the question, how can management ensure that the value defined in the business case is in fact realized through the business transformation?     

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Companies often develop business cases for transformational IT initiatives to identify quantifiable implementation areas, focusing on business value to justify funding.  Such focus, however, typically doesn't last beyond the project approval phase, having little or no impact on the remaining lifecycle.  This raises the question, how can management ensure that the value defined in the business case is in fact realized through the business transformation? 

A key component of value realization is metrics management.  This essentially means selecting the right key performance indicators (KPIs) during the business case exercise, refining them based on the engagement context, and then tracking the right subset of metrics throughout the project and beyond.  On a recent HCM ERP implementation, we defined just such a metrics management plan for the in-scope process areas of the engagement. 

The primary goal was to provide a forward-looking governance model for HCM KPI management to ensure future value realization and minimize risk.  During the metrics management exercise, we selected KPIs from the business case, mapped them to the primary in-scope HR processes, and prioritized the metrics based on ease of implementation, relative business value, and engagement impact.  We then held multiple review sessions with corporate leadership to further refine the metrics and define an effective governance model for short- and long-term management across the major processes.

Creating an effective KPI management plan often involves several key activities:

1. Define the major value themes, pain points, and opportunity areas for your client or business.  Articulate the major value areas that will be impacted by the ERP-enabled engagement as well as how specific components can be improved to drive revenue growth or cost savings.  Define the relationship between these components and specific process areas as well as change initiatives.  At Infosys, identifying and illustrating these relationships is fundamental to how we help clients realize business value from IT.

2. Define the most relevant KPIs for the key areas of improvement and quantify them through a business case.  Based on the findings of the business case, refine the metrics to include in the metrics management plan.

3. Leverage the above information to establish a clear metrics management plan and socialize the metrics with key stakeholders.  The metrics should include both strategic and operational items, as well as others that are relevant in the short-term and steady state.  The right mix will depend on the engagement and the maturity of the in-scope processes.  The plan should also include a clear governance strategy to establish short- and long-term ownership and accountability as the processes mature.

4. If information is available, identify baselines and determine target values.  In many cases, metric data may not be available for the business, hence the need for a metrics management plan.  If this is the case, leverage industry benchmarks for reference and keep these in mind as you start collecting data through the enterprise dashboard (step 5).  Once you have a sense of where your company stands, define targets and revise the incentive structure of metric owners to encourage metric improvement. 

5. Enable real-time tracking of metrics through an enterprise dashboard.  The dashboard should be configured to allow specific user groups to access the right metrics and associated data based on their needs (for example, their process areas, business unit, etc.). 

What are traits of a good metric?  There a few simple rules to keep in mind.  Generally, the metric should be: 1. actionable (there is a clear response for change in metric value), 2. have a common interpretation (there is a uniform and consistent metric definition), 3. have credible, accessible data (data acquisition involves reasonable effort from trusted sources), and 4. have a transparent, simple calculation (there is a clear understanding across stakeholders).

Remember that you cannot manage what you do not measure.  By selecting the right set of KPI's for your metrics management plan, defining clear governance, and enabling tracking through a dashboard, you will have a much better idea of whether your transformation is truly a success and be able to proactively address potential problems before they materialize. 

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