How to Make Sure Your KPIs Are Balanced

I have written a number of blogs about metrics and KPIs recently, each focussing on a different area of IT service management. Here are some links in case you’ve missed any of them.

• Defining metrics for change management
• Defining metrics for problem management
• Defining metrics for incident management

It’s great to have well thought out KPIs for individual ITSM processes, but if you combine them all you will end up with a huge unwieldy report that’s of very limited use to anyone.

Every report must be useful to its audience, and everything in the report should be focussed on that audience. Somehow you need to create balanced reports for different audiences, but they all need to derive from the data that you have collected about what you are doing. My preferred approach to achieving this is to use a balanced scorecard.

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What is a Balanced Scorecard?

A balanced scorecard is a way of thinking about metrics that helps you to focus on strategic goals. The balanced scorecard defines four perspectives, and every report should include metrics that are balanced between these.

• Financial metrics help you to understand how well you are using your organizations’ resources.
• Customer metrics help you to understand how well you are serving customers’ needs, and how satisfied the customers are with your services.
• Internal business processes metrics help you to understand the efficiency and effectiveness of your internal processes, and whether they are meeting their agreed goals.
• Learning and growth metrics help you to understand how well you are preparing for the future, and whether you are continually improving in order to remain competitive.

These four perspectives can be used at many different levels within an organization, and can form a cascade to link together reporting at each level, so that it all rolls up to provide useful data for management decision making. They can also help you to move from an old-fashioned “inside-out” view of your work towards an “outside-in” view that thinks about what you do from the perspective of the customers who fund everything.

The strategic metrics that you could report with a balanced scorecard are not typically ITSM focussed. A strategic balanced scorecard typically includes metrics like: return on capital employed, customer churn rate, number of business process errors, or average staff training hours per year. This is the sort of thing that senior management in the business care about. The great thing about a balanced scorecard though, is that you can break down the high level business goals into goals for each business unit, and then team or process goals below that. Each set of goals retains all four perspectives but considers them from a different organizational context.

For example you might have an overall IT report that shows:

• Financial: Percentage of annual turnover spent on IT. Return on investment in IT projects.
• Customer: IT customer satisfaction rating. Achievement against end-to-end service metrics.
• Internal business processes: Number of ITSM processes meeting their internal goals. Number of IT projects meeting their agreed goals.
• Learning and growth: Number of improvement opportunities completed from CSI register. Average hours training per year for IT staff.

This can then be further broken down to individual ITSM processes, or technology groups. So for example the service desk could measure and report:

• Financial: Total annual cost of running the service desk. Average cost per incident.
• Customer: Incident closure satisfaction ratings. Achievement of SLA commitments.
• Internal business processes: Number of problems logged by service desk.
• Learning and growth: Number of improvement opportunities logged on CSI register by service desk staff and accepted for implementation. Number of service desk staff who spent at least 4 hours working in a business unit to learn about their customers.

The great thing about using a balanced scorecard approach to metrics and reporting is that you can focus each report on the audience it is intended for, by collating, averaging, or summarizing data from more detailed reports. You can ensure that each team and each process thinks beyond their view of the business to how they are impacting the rest of the organization, and you can make sure that everyone thinks about a broad range of metrics, not just the detailed process metrics that some IT organizations focus on.

How many of these four perspectives are covered by your existing ITSM metrics? Could you add some new metrics and KPIs to improve the balance of your reports, and their relevance to the audience? Could you move some of your existing metrics and KPIs to reports that are just used for process managers, to avoid overloading customer-facing reports with internal ITSM information?

Please share your thoughts in the comments or on Twitter, Google+, or Facebook where we are always listening.