Managing the Systems Development Life Cycle:Create an Action Plan.

Create an Action Plan

An important skill for top management is the ability to translate strategy into action. Although most U.S. companies are taking measures to decrease the distance between those who formulate the strategy and those who carry it out, translating vision into work is difficult. If organizations want to be successful, however, they must learn to implement strategy and beat the high failure rates often experienced by their peers.

The balanced scorecard (BSC) is a management system that enables organizations to clarify their vision and strategy and translate them into action. It provides feedback both from internal business

processes and external outcomes to continuously improve strategic performance. When fully deployed, the balanced scorecard transforms strategic planning from an academic exercise into operational tasks.

Today, the BSC enjoys increasing attention and is likely to become ubiquitous in senior management circles. Much of the BSC’s appeal stems from its ability to integrate financial and operational measures into a single comprehensive framework that can translate a company’s strategic objectives into a coherent set of performance measures.

The BSC approach lends itself especially well to one of the fundamental challenges facing CEOs and IT executives, namely, how to measure, improve, and understand the value that IT delivers to the business. The BSC can help managers identify opportunities for improvement in IT and track the impact of improvement initiatives through a wide range of performance indicators.

The BSC suggests that we view the organization from four perspectives. We develop metrics, collect data, and analyze it relative to each of the following perspectives:

1. The learning and growth perspective.

2. The internal business process perspective.

3. The customer perspective.

4. The financial perspective.

THE LEARNING AND GROWTH PERSPECTIVE

Learning and growth constitute the essential foundation for the success of any organization. This perspective includes employee training and corporate cultural attitudes related to both individual and corporate self-improvement. In our current climate of rapid technological change, workers need to be in a continuous learning mode. Government agencies often find themselves unable to hire new technical workers and at the same time are showing a decline in training existing employees. Metrics can be developed to guide managers in channeling training funds where they can be of greatest benefit.

THE INTERNAL BUSINESS PROCESS PERSPECTIVE

Metrics based on this perspective allow managers to know how well their business is running and whether its products and services conform to customer requirements. Those who know these processes most intimately need to carefully design these metrics.

THE CUSTOMER PERSPECTIVE

Recent management philosophy has shown an increasing realization of the importance of customer focus in any business. These are leading indicators: if customers are not satisfied, they will eventually find other suppliers that will meet their needs. Poor performance from this perspective predicts future decline, even though the current financial picture may look good. The customer perspective includes objective measurements such as customer retention rate, as well as more subjective criteria such as market research and customer satisfaction surveys.

THE FINANCIAL PERSPECTIVE

The financial perspective includes traditional measurements such as profitability, revenues, and sales. An overemphasis on financial performance, however, may stimulate short-run decisions that create an imbal- ance with other perspectives.

The power of the BSC model lies in the linkages between these four core measurement perspectives.

Consider, for example, a business experiencing poor performance from a financial perspective, as measured by low sales growth, and from a customer perspective, as measured by low customer retention and satisfaction. Using the BSC approach, management can examine measures from the learning and innovation perspective and from the internal process perspective to identify root causes as well as potential solutions to the problem. By identifying imbalances that exist in these measurement areas, the scorecard can be used to take corrective action.

BALANCED SCORECARD APPLIED TO IT PROJECTS

Figure 13-4 illustrates a BSC that measures the business benefits of a hypothetical online banking proposal. The bank’s retail customers are producing low profit margins because of the high overhead and

service costs of managing their accounts. Electronic banking is seen as a way to address this problem. If a strategic goal is to increase account profitability, performance indicators such as numbers of accounts managed per full-time employee and cost per transaction are relevant measures. Relationships can be drawn between these measures. For example, hours spent training support staff can have an impact on reducing customer complaints.

Through analysis of BSC indicators, the steering committee can establish priorities to competing proposals based on their strategic impact as viewed from multiple perspectives. The committee will use these metrics to identify the proposals that go forward to the project initiation phase of the SDLC. This is the first major decision point in a project’s life cycle. If the committee approves a proposal, then the proposal will undergo further detailed study and development. If a proposal is rejected, it will not be considered further within the current budget period.