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Measures of the Strategic Scorecard: Corporate Contribution Scorecard

June 16, 2008

Corporate Contribution Scorecard

The corporate contribution perspective evaluates the performance of the IT organization from the viewpoint of executive management, the board of directors and the shareholders, and provides answers to the key questions of these stakeholders concerning IT governance . The key issues, as depicted by Figure 9, are business/IT alignment, value delivery, cost management, risk management, and inter-company synergy achievement.

Objective

Measures

Benchmarks

Business/IT alignment

  • Operational plan/budget approval

  • Not applicable

Value delivery

  • Measured in business unit performance

  • Not applicable

Cost management

  • Attainment of expense and recovery targets

  • Attainment of unit cost targets

  • Industry expenditure comparisons

  • Compass operational ‘top performance’ levels

Risk management

  • Results of internal audits

  • Execution of security initiative

  • Delivery of disaster recovery assessment

  • OSFI sound business practices

  • Not applicable

  • Not applicable

Inter-company synergy achievement

  • Single system solutions

  • Target state architecture approval

  • Attainment of targeted integration cost reductions

  • IT organization integration

  • Merger & acquisition guidelines

  • Not applicable

  • Not applicable

  • Not applicable

The main measurement challenges are with the areas of business/IT alignment and the value delivery.

Currently, business/IT alignment is measured by the approval of the IT operational plan and budget. Although not a discrete measure of alignment, the approval process within the group is particularly thorough and as a result is accepted by business executives as a good indicator. All aspects of development, operations and governance/support services are examined and challenged to ensure they are essential to achieving business objectives or supporting the enabling IT strategy.

In the value delivery area, the performance of a specific IT services group delivering to a specific business unit (e.g., ‘group insurance’ services) is measured. For each business unit, specific metrics are and/or will be defined. The ultimate responsibility for achieving and measuring the business value of IT rests with the business and is reflected in the business results of the individual lines of business in different ways, depending on the nature of value being sought.

Cost management is a traditional financial objective and is in the first place measured through the attainment of expense and recovery targets. The expenses refer to the costs that the IT organization has made for the business, and the recovery refers to the allocation of costs to IT services and the internal charge back to the business. All IT costs are fully loaded (no profit margin) and recovered from the lines of business on a fair and equitable basis as agreed to by the companies’ CFOs. Comparisons with similar industries will be drawn to benchmark these metrics. Next to this, IT unit costs (e.g., application development) will be measured and compared to the ‘top performing levels’ benchmark provided by Compass.

The development of the risk management metrics are the priority for the upcoming year. At this moment, the results of the internal audits are used and benchmarked against criteria provided by OSFI, the Canadian federal regulator in the financial services sector. The execution of the security initiative and the delivery of a disaster recovery assessment need to be accomplished in the upcoming year. This will enable the business to get an insight on how well they are prepared to respond to different disaster scenarios.

Synergy achievement is measured through the achievement of single system solutions, targeted cost reductions and the integration of the IT organiza tions. This measure is very crucial in the context of the merger of the three IT organizations in the sense that it enables a post evaluation of this merger and demonstrates to management whether the new IT organization is effective and efficient. The selection of single system solutions was a cooperative effort between business leaders and IT staff, resulting in a “target state architecture” depicting the target applications architecture. The synergy targets were heavily influenced by the consulting firm (Bain & Co.) that was used to assist in evaluating the London Life acquisition and the tri-company IT merger potential. The consultants suggested specific dollar reduction targets for technology services (IT operations) and application delivery services (IT development) largely based on norms they had developed from their previous merger and acquisition work. The approval of the target state architecture plan and the attainment of the targeted integration cost reductions will be measured. The IT organization integration metric refers to the synergies within the IT organization, e.g., is there one single service desk for the three companies or are there three different ones?

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