KPIs – Key Performance Inhibitors and a method to transform theses back to Indicators

This month I am dividing my time between several initiatives at work:

  • Technology development activities
  • Process adoption
  • Metrics definition
  • Skills transfer

A rather interesting and eclectic combination of activities. But as I started to ponder these I started to reflect on the metrics definition activities of past and the relationship to other initiatives on my list. My goal is to create a suite of KPIs for my group that is useful in advancing our success. With that premise several things come to mind.

  • KPIs or metrics that truly indicate how the organization is progressing to its goals; rather than those fool us into believing we’re doing well when we’re not
  • KPUs that the organization believes in; that is, we have control in positively effecting these and can relate to achievement of our goals
  • KPIs that are diagnostic; they provide insights to help us determine what we can do better

This is a tall order considering people often are suspicious of how measurements are used. Especially if such has been used in the past not as guidance but justification for other agendas. This typically results in KPIs that are meaningless but always show green, even in the face of disaster. Such have a witnessed before within sales organizations that measured success by size of backlog rather than quality of backlog or customer satisfaction. This eventually became a game of musical chairs with the unlucky sales rep. at the end of the cycle taking the hit for a bad backlog he had nothing to do with.

Based upon such experience, my belief is that KPIs need to be a serious discussion and negotiation between all levels within the organization. Staff must believe that these measurements are able to be influenced by their actions; Management must believe these measurements indicate status of the journey to goal achievement.

These seem simple enough, except that the altitude that each party operates at is different. If you’re a Senior Executive you’re often looking at corporate performance: profit/loss, customer satisfaction, market share, etc. If you’re a programmer in IT you’re focus is on cost and time of delivering an application, response time of system, uptime, etc. This difference in metrics can and often does create misalignment between management and staff.

The results of which is often KPIs become Key Performance Inhibitors as staff become disillusioned with measurements as they can’t relate their measurements with goals management focuses on rather than how their measures relate to business measurements.

This conundrum can be address with a method called Hoshin Planning. Hoshin Planning is nothing more than a cascading set of matrices of goals, strategies, and measurements that relate one altitude of measurements to another. While the technique works well, it does require additional effort between management and staff to be explicit about the goals, tactics and measurements as well as reasonable in setting measures and targets that assignees believe are achievable. This however, is not a simple twenty-minute exercise and like all planning requires constraint revision in the light of new information (i.e., planning forecasts are not accounting transactions).

Is Enterprise Architecture Completely Broken?

IASA Question Is Enterprise Architecture Completely Broken?

EA –that is credited to John Zachman– originally was “A framework for information systems architecture” a tool for MIS (aka IT) to “design” the components needed to support business objectives.  This was an evolution from a former methodology “BSP”  Business System Planning –also from IBM– which provide information to MIS directors and Business Executives to plan budgets/investments.  Later this budget prioritization was advanced by Parker-Benson in BEAM (refer to Information Economics).  EA roles became split into two camps:  Budgeting and Design.  The problems arise in that both roles forgot that the architecture role was that of facilitator rather than decision-maker and the primary stakeholders don’t have dialogs with these role holders typically.  This leaves rise to EAs creating visions and actions to create local optimizations.

Of course it is not too often that EAs are placed in a position that has the exposure and influence necessary to fulfill the role’s perceived charter.  Thus often EAs are glamorized programmers or software engineers granted the title after years of hard work in their domain by HR.  This gives them the title but not the scope or enterprise orientation.

More impactful to that position of influence; what CEO, COO or other CxO would grant that power to a non-executive.  While HR has toyed with titles such as CTO and CIO, the role of Chief Architect for enterprise has yet to be established in any meaningful way and has challengers to that title.  Books like “CFO, Architect of the business” are popular fair in the book trade.   And why would a COB/CEO/COO create such a role if they feel their role should be that, even if they don’t have the necessary architecture skills -after all they climbed to the top and are thus “entitled” to wear that crown.   However, it then gets back to a view of what an architect does/is.  Two schools or architecture: Architect as Decision-Maker, Architect as Facilitator/Advisor of Stakeholder’s Vision.

If one looks at chief design roles in other disciplines which have had more time to mature you’ll discover that such roles take years to develop an understanding beyond the mechanics of the discipline and how it fits in context beyond just building something.  This the senior role-holder must have a broader background than just Agile Development, DFD modeling, etc. and needs to step out into understanding the enterprise as a living organism. My recommendation is to study the Cybernetic Hierarchy in General Systems Theory to get beyond “Frameworks” and “Clockworks” through Adaptive/Dynamic Systems to Transcendental Systems.  These later types of systems capture more than frameworks do.  However with increases of information, increased thinking time is required to understand such data; something executives are in short supply of these days.

IT Planning and Agile

Some of the new organizations I’m dealing with are going crazy with “Agile”.  The Hype Cycle  is in full force.  Soon Agile with be advertised to put the kids to bed on time, solve world peace, and feed the world.  The problem I see is not with Agile its with its close cousin “Addle” which is often what I see organizations implementing (I.e., the worst of each methodology glued together).   I will point out that I am neither a zealot for Waterfall or Agile; its a tool and like other power tools –notice the woodworking reference– it should be used carefully.  Too often I’ve seen Agile be used for an excuse for poor or no planning and/or poor development practices.

If one reads the original materials, nowhere does it say don’t plan.  Actually it indicates you need plans, just not at the level of precision and scope previously and wrongly drummed into people’s heads.  Agile suggests or recommends planning in short enough horizons such that the problem doesn’t change before you finishes planning (accuracy) and to a granularity (precision) that is enough to get the job done.  Another way to look at it:

If my problem was to cross the river and you spent five years planning to build a bridge, by the time you actually built the bridge I may have cross the river with a boat and now I’m faced with climbing a mountain (problem has changed).  If I want something to sit on I may want a chair, but it may not need to be designed and constructed to 1 millionth of an inch tolerance –which would cost a significant amount.  I could probably get by with 1/32 of an inch, produced at lower cost but yielding the same level of performance I desire.  So in the end Agile is a balancing act that I believe still requires planning; just different types of planning and a whole lot of thinking.

 

Structure in Threes: Budgeting and Planning -observations and muses

The beatings will continue until moral improves, or so goes the typical planning cycle each year.  Although being an observer of the process in many enterprises for 30 years and a unwilling participant at times, I would classify these activities as anything but planning.  These are more like the High School Senior Prom with all the politics and drama leading up to the final ceremonies.  Management spends hours of their as well as staff time building a case to justify their groups existence rather than actually looking at how and what to contribute to the enterprise’s bottom like.  Then having to “re-plan”  funding / headcount don’t match political expectations.

It doesn’t have to be this war dance each year.  Developing a real enterprise portfolio management system could remedy this, however, methodology zealots (aka methodologist, of which I’m sad to say I associate myself with) often get caught up in the minutia rather than the goes.  A joke I’m fond of telling during presentations when asked about strict adherence to any methodology might clue you into my worries about methodologies that too often become dogma:  What’s the difference between a terrorist and a methodologist? Answer: You can negotiate with a terrorist.

Much of the research and design work I’ve done over the years is now starting to converge:  Process Modeling (IDEF0 & BPMN),  Simulation and Analysis of systems (System Dynamics and Viable Systems Models), Digital Nervous System (AD), IT Economics ( ISIS, Information Economic/BEAM, REJ, and VRF) and now integrating financial Portfolio Management Concepts with VA/VE and Systems Engineering Concepts with the focus on designing enterprises like one would design any other product or service.  As I near competition of my basic research for Modern IT Portfolio Management I look forward to thinking about how to deploy and enable adoption.  Now that the basics of a digital nervous system are in place, its time to create the “brain of the firm “which I see is a portfolio management system connected to the DNS driven by people making fact based decisions.

The one caveat to using this approach is taking it too far, enterprises are composed of people as are markets.  And people are emotional, thus making decisions that address attempts at gratification for those emotions.  Thus Portfolio management needs to be applied with flexibility to not only accommodate this phenomena but exploit it in the positive sense.  Then perhaps budgeting and planning will be more of a constructive than destructive activity, creating intrapreuers in the company.

Structure in Threes: Building vs Planning

One of the problems systemic to the design and planning world is the often famous quote:  “Its done its just a small matter or implementation or programming or etc.”  All too often I’ve seen designers or planner consider the job done once the design is finished.  However, there is often a lot of work to get it accomplished; even it there are not changes to the design.  This got me thinking about the terminology used in regard to projects.  To me implementation take is a larger concept than just deployment which seems to be the typical thoughts around projects, especially in IT.  “The application has been installed we’re done”.  True implementation carries with it both deployment and adoption, anything less is just dumping.

The proposed remedy to this is to have adoption KPIs included in project metrics, not just development cost and schedule.  This would foster a greater concern that what is built is actually used.

Structure in Threes: IT Business Models

Early

Yesterday on the way back from client’s site I started pondering the intersection of Service Quality, Brand Value, and Business Models with regard to Information Technology.  Traditionally, IT functions had been focused around a product development model with operations being dragged in tow as a little more than after market support.  The only difference was that IT had a captive market or so the unconscious bias appears to be within these organizations.  As the IT industry has aged, other goal expectations were placed upon these organizations.  These ranged from being the gatekeeper to precious information, the controller for allocating technology & resources, and the integrating force between other parts of the organization. Whether it is possible for one function to successfully execute on all three missions is a topic for another post.

These expectations struck a nerve with me as I was reading Step Guide for Building a Great Company .  I have been researching business strategy, models and processes for most of my career.  As I read through the first few pages I wondered if IT Functions were not using the wrong business model.  In the past decade many IT functions are desperately trying to change their culture to a service oriented business.  Initiatives such as ITIL, COBIT, and SOA seek to inject a service mindset.  I think the objective is a laudable.  Having experienced a slightly less than customer / service oriented environment decades ago (a story for another time over a beer).

However, the typical service model that is put in place is one for a stabilized or mature business.  A business that has a standardized set of services that are being optimized, not a service that is constantly evolving which has been the nature of the IT function over the past several decades: Mainframes, PC/Workstations, Network, Internet, and now Cloud and BYOD.  This would not be considered a stable and mature industry as the technology keeps changing.  The  consider as the technology keeps changing new services are being either asked for or developed constantly.

With that fact I wonder if the business model IT functions should use is that of a Startup or possibly a bifurcated model that has service groups start out in incubators and move into optimization models as the service matures.  This is very similar to the extension’s I developed for another employer with regard to managing business portfolios.  I had based much of the initial work on The Alchemy of Growth: Practical Insights for Building the Enduring Enterprise adding another horizon and much more recently figuring out how to tie each horizon portfolio together using Real Options and Cluster Analysis.

In this recent expansion new services in ideation are considered a new business opportunity or new technology opportunity.  This determines if they are a Horizon 3 or Horizon 4 portfolio member.  As the internal market/business develops or the technology becomes understandable and stable enough to pilot these opportunities move onto the next portfolio where different operating rules and metrics are applied to manage these.

The result of using such a model makes the IT Function vertically integrated business incubator going from Founder & Angel Investor, to Startup & Venture Capitalist, to an stabilized operating line of business.   Which leads to yet another simulation model to build for my clients and possible discussion at next April’s Engineering Conference.

Structure in Threes IT Lifecycle Management: EOL

Spent a few minutes during breakfast pondering some of the issues around IT Lifecycle Management.  Specifically the term End of Life (EOL).  IT community is still a little behind other engineering disciplines in its understanding and application of this concept.  Take S/W for instance.  There EOL typically means either no more support for the product or that the product has been withdrawn from the market.  That is on the vendor’s side of the equation.  On the customer side EOL has other implications.  Does the application still operate and provide utility?  If so EOL is really a transition from vendor support to self-service;  think out of warranty for your car.  A third level of consequence are the customers of IT, the Line of Business that use the service based upon the application.  Does EOL of the application mean EOL for the service or does it mean a mad scramble to replace the utility by some other means.

 

This brings me back to the nuances I am exploring in Portfolio Management.  Currently one of the failings of IT Portfolio Management has been the lack of linkage between service utility and application serviceability in managing a portfolio.  Too often have a seen that second and third order consequences were not considered during portfolio decisions.  Y2K issues a decade ago are just one ripple effect of short term decision making.  The hierarchical model of portfolio I’ve been prototyping and testing appears to address this issue.  I’ve started to look at applying via usage strategies of Active Directory which was what I had considered when we came up with the conceptual design.  Only a decade or so behind schedule.  However, Cloud technologies may make implementations easier and harder now.  IT Financial Management approaches are on an upswing again so the timing might be right