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Financial Performance Measures: An Obsession among Asia Pacific Executives
Manila, Philippines - November 2007

Asia Pacific companies focus blindly on financial performance and budget to measure the performance of their IT function.  To assess what Asia Pacific companies measure to evaluate IT performance, XMG research study show the following results: 44% of  respondents indicated using IT budget and spending measures to assess performance; 21% assessed technology domains and architecture; 13% assessed project implementation delivery;  11% assessed alignment between business and IT;  6% assessed organizational; effectiveness;  and 5% evaluated IT process maturity.

These results clearly confirm that Asia Pacific companies continue to focus on IT as a cost function with emphasis on the financial aspect of deploying technology.  The measurement movement in the region has plenty of room to grow.

Characteristic of financially focused measurement programs where 44% organizations fall under frequently lose sight of business value and most often displace costs to other areas due to lack of consideration for other IT support requirements - such as the cost of defect due to lack of investment in support of fully effective quality programs.  Of the 44% companies focusing on the financial aspect, less than 8% have a complete IT measurement program that help track business performance to reinforce the business focus of IT investments.  Exacerbating the situation further, IT management decision-making is severely hindered by the limited activity-based performance data collected in IT departments.  This is not to be mistaken with the customary tendency of IT managers, being an organization “pack rat”, collecting too many data not and not getting to the other phases in the measurement program to conduct trend analysis and prepare credible recommendations.

So what kind of a performance culture do organizations have that are primarily fixated on financial measures?  Since financial measures is unidimensional and only assess one facet of performance, our research has shown that these companies fail to capture critical measures that become an integral part of the overall decision-making process such as the development of indicators for business and technology alignment.  Majority of company executives that fall under this class also do not provide high marks for their IT in satisfying user requirements.  Indirectly, IT staff motivation also appears to be a problem with higher than average attrition rates.  In this group, the performance culture also show several IT executives not participating as a core member of the business planning table.  IT executives are simply a voice and are not recognized as legitimate contributors in driving and supporting business growth.  The research also confirmed that the IT executives are relegated to substantiating and defending IT strategies and budgets primarily due to a perceived lack of credibility and alignment with the business.  This further reinforces the business perception that IT is a cost center and not a value center.  The situation becomes a depreciatory circle that seems to feed itself further into the management abyss.

This is a wake up call for a change in mindset in Asia Pacific IT departments when it comes to measuring IT performance.  One would agree that measurement is only an initial step toward the real goal – performance management.  A performance system, even if complete, will not make decisions or provide assumptions.  The IT executive must be prepared to interpret results and take action.  The pre-occupation on lagging financial measurement and the lack of a holistic representation of performance just raises the risks further of bad decision-making, measurement program failures and a disillusioned (and half-baked) performance culture.  Whether the IT executive adopts the use of a balance scoring approach or other similar techniques to measurement, organizations must identify the full context of that decision in order to assess the full impact of IT decisions: costs, quality, productivity, and business value delivery.

By Lauro Vives
for Asia Quality Magazine