IT Business Performance Management—
RMS specializes in IT-business skills professional development
in government and business.
RMS (Resource Management Systems, Inc.) is a private company located in lower Manhattan, New York
City. Since our founding in 1985, RMS has concentrated on developing and refining practical techniques and
tools that organizations use to improve performance and results.
http://www.rms.net/lc_briefs_perform.htm
What Is It?
There are two sides of IT performance management: technical and business. Since this web site is concerned
with IT’s business management issues, we will discuss IT "performance management" from that perspective.
Purpose of IT Business Performance Management
The intent of IT business performance management is to assure that IT projects and activities deliver the
results promised, on-time, and within budget. This requires that approved and funded IT projects / activities
are effectively controlled by senior organization management as well as IT management.
Effective managers know that it is too late to manage IT performance once a project grossly exceeds cost
estimates, is seriously delayed, or fails to deliver promised results. That’s disaster management, not
performance management.
The word "manage" is a verb. To be effective it must be dynamic and continuous, proactive and not reactive.
What does that involve?
There are five prerequisites for effective IT business performance management:
1. top management and IT management that is willing to change the way that IT is planned, controlled,
and evaluated
2. a performance management process and supporting systems
3. the motivation and skill to analyze IT performance
4. willingness to make tough decisions based upon the analytic results
5. the ability to implement the decisions timely
It involves the continuous assessment of IT projects and activities to answer two deceptively simple-sounding
questions:
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What is working as expected?
What is not working as expected?
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How can an organization hope to answer those questions?
Recent surveys report that the "average" IT budget for large organizations is about $250,000,000 (US). How
can senior management and the CIO hope to manage the performance of thousands of technically complex
projects and activities?
The answer is that they implement performance management processes and systems that are designed to
routinely:
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compare actual financial and project / activity performance to predefined plans
quickly identify significant deviations from planned performance
analyze the significance of the deviations
provide decision-makers with clear and insightful explanations of significant deviations, their potential
consequences, and recommendations for corrective action
What is an example of performance management?
To illustrate the concept simply, we’ll pick an activity that we are all familiar with - driving a car to a
particular destination. Here are some of the elements:
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results that you want to achieve (your chosen destination)
criteria that you have established (when you want to arrive)
a plan that maps the way to get there (your intended travel route)
milestones along the way (places you use to mark your progress)
indicators that give you important data about what is going on (the car’s odometer, speedometer)
Armed with the knowledge of where you want to be, when you want to get there, how you will get there, and
the key checkpoints along the way, you now have a plan. But simply having a plan doesn’t get you there on
time.
Together, these elements provide you with sufficient data to monitor, analyze, and control your journey:
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As you drive, you continuously gather data on your speed, the distance you have traveled, and the map.
(Monitor)
At key points, you check your actual location vs. where you planned to be and when you estimated to
be there. If there is a significant deviation you plan corrective action. (Analyze)
If you miss a milestone, or are behind schedule, you decide to take corrective action to meet your
target (e.g., adjust your route or speed). Sometimes, you might need to call ahead and tell someone that
you will be a bit late. (Control)
Making sure that you arrive where you want to be, when and how you want to get there, is the essence of
performance management. Although decidedly more complex, effective IT performance management is a
necessary and attainable goal.
Refer to our tutorial, "Introduction To IT Performance Management And Measurement", for more
information.
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Introduction To IT Performance Management And Measurement :
Tutorial
Subject : IT Performance Management
http://www.rms.net/tut_perform.htm
Issue:
IT organizations are being challenged to assure that their projects / activities, (1) are aligned with overall
strategic goals and business objectives, and (2) deliver promised results on time and within budget. Although
accustomed to measuring and managing technical performance (e.g., network downtime), many IT
organizations have a poor track record of measuring and managing non-technical performance (e.g., budget,
project schedules, and project risk).
Purpose:
This is a high-level introduction to performance management and measurement designed for IT professionals
who have little or no experience in non-technical performance management and measurement. The major
activities involved in measuring and managing the contribution of IT projects / activities to an organization's
strategic goals and business objectives are discussed.
Objective:
Our aim is to provide an understanding of the basic principles of non-technical performance measurement and
management systems applicable to IT projects and activities. We discuss the basic issues: (1) what is
performance management, and why is it of concern to IT organizations; (2) what needs to be done to develop
and implement performance management and measurement; and (3) things you should know before you
undertake an IT performance management initiative.
Your Comments:
The goal of this web site is to provide useful information to those who must cope with the issues; this tutorial
is part of that effort. RMS would appreciate your comments and suggestions to help us make the information
as useful as possible. Please take a few minutes to complete the evaluation form at the end of this tutorial.
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Introduction To IT Performance Management And Measurement,
Contents Map
Part I.
1. What is Performance Management?
In general, performance management refers to the use of performance measurement information to help:
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define organizational goals and objectives in clear, tangible, and quantified terms,
develop project / activity plans designed to attain the goals and objectives,
routinely monitor actual performance vs. plans,
analyze significant performance deviations,
advise (via routine performance reports) key managers of situations requiring attention,
formulate corrective action plans, and
implement corrective actions to remedy performance deviations or modify plans.
The goal of performance management is to assure that organizations link plans to strategic goals and business
objectives, make funding decisions in light of project / activity benefits and outcomes that support those goals
and objectives, and actively manage projects and activities to assure that the planned benefits are realized.
In short, it is actively and proactively managing an organization to assure that it achieves pre-determined
levels of performance. In contrast, management that takes action only after a performance problem
significantly affects the business is engaged in crisis management and damage control, not performance
management.
Introduction To IT Performance Management And Measurement, Lesson 1 of 13
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2. What is the performance management issue for IT organizations?
Many senior managers believe that IT organizations are:
 wasteful and inefficient (as evidenced by chronic project cost overruns, late deliverables, etc.), and
 not aligned with strategic goals and business objectives.
Senior management is often handicapped in its decision-making for IT because it has difficulty determining:
 if the most important strategic and business needs are being met
 if they have been presented with the best IT options for decision-making
 the appropriate funding levels for IT projects / activities (how much to budget)
 whether the IT organization is likely to deliver the promised benefits and results on time and within
budget
Typically, these are characteristics of organizations that have paid insufficient attention to measuring and
managing IT performance and results, and have failed to establish an overall analytic framework for IT
evaluation and decision-making (See the tutorial "The IT Investment Management Approach" for a description
of an extended analytic framework.)
Instituting adequate performance management is an important step that CIOs and IT organizations can take to
restore their credibility. Meaningful performance measurement and management reporting will tell IT and
senior management what is working and what is not; especially important is the ability to recognize potential
problems in time to take corrective action.
Introduction To IT Performance Management And Measurement, Lesson 2 of 13
3. Don’t IT organizations already measure and manage performance?
IT organizations typically measure, monitor, and act upon data provided by a broad range of performance
management tools and techniques; these effectively monitor and control what we shall refer to as technical
performance (e.g., through "configuration management" and "fault management").
When asked about the performance management systems and processes, CIOs and IT managers will typically
speak at length in terms, such as:
 the polling function of the topology map provides a snapshot of overall network vitality, and it can
issue alerts when nodes become unavailable or are slow to respond. When a node is failing, it
automatically alerts network management. To get more information on a node, we drill down for
critical station statistics, and
 the protocol distribution function tracks total packets, octets, percent utilization, packet rate, and
average packet size.
Management of technical performance is an important part of an IT organization’s job; there is no doubt about
that. But, the IT organization’s management responsibility doesn’t stop there; IT managers are responsible for
assuring that they are meeting their organization’s highest priorities and business needs to the extent possible
with the available resources.
This performance information that most IT organizations lack relates to the non-technical aspects of the job;
the information that can tell IT and senior management whether:
1.
2.
3.
4.
IT projects / activities are progressing as planned
there are telltale signs of future performance problems
there are troubled projects / activities that require higher management’s intervention, or
actions already taken to correct problems actually worked.
Introduction To IT Performance Management And Measurement, Lesson 3 of 13
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Part II.
1. IT Performance Management - What are some of the key terms and concepts?
Before we proceed further to describe how non-technical performance management works, some key terms
and concepts should be discussed. Some of the terms used throughout this tutorial will be interpreted
differently by different readers; therefore, a glossary of performance management terms is provided. These are
meant to be useful interpretations, not standard definitions.
Three of the concepts underlying performance management, which often confuse novices, are an
organization’s "management system", performance measures, and performance metrics:
 A management system is an interconnected set of processes, and a process is a set of activities that
produce products or services (results). For performance management and measurement purposes,
products and services are treated alike. That is, the output of a process might be a product (such as a
computer or a project deliverable) or a service (such as PC support help desk assistance). Products and
services are tangible, measurable, and susceptible to analysis; thus,
 Performance measures are indicators that can be systematically tracked to assess progress made in
achieving predetermined objectives (e.g., the number of NT workstations deployed to replace Unix
workstations) or service levels (e.g., help desk call resolution time).
 Performance metrics are standards of measurement (such as minimum acceptable elapsed time to
resolve help desk calls). A metric establishes a benchmark target that is compared to actual
performance - the difference between the benchmark (the plan) and actual performance provides
insight into what is working as planned and what is not.
Dealing with these concepts can become complicated and are often a bit intimidating and confusing at first.
What is important is recognition that performance management is a sophisticated management tool and that
we are introducing you to some of the basics.
Introduction To IT Performance Management And Measurement, Lesson 4 of 13
2. How does non-technical IT performance management work?
Performance management involves the routine, and sometimes non routine, measurement of key aspects of IT
project / activity performance and making this information available to decision-makers. The goal is to assure
that the benefits of IT are realized as planned.
Preparatory steps for performance management initiatives include: definition of the overall analytic
framework, formulation of implementation plans, assignment of analytic responsibility, staff and management
training, and conceptual design of the necessary supporting systems applications.
Once the foundation is established, performance management involves a number of recurring steps:
1. Gather performance data on those variables of interest to IT and senior management.
2. Analyze the data to determine normal (baseline) levels.
3. Determine appropriate performance thresholds for each important variable; exceeding a threshold
indicates a problem worthy of attention (e.g., achievement of a major project milestone is 30 days, or
more, behind schedule) and possibly action.
4. Periodically (often monthly) monitor performance variables for deviations from established thresholds
(a.k.a., variances). When a performance threshold is exceeded (e.g., vacant PC support staff positions
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increases to 10% when the acceptable vacancy threshold is 3%), analysts identify a variance and
determine its significance. Depending on a number of factors (e.g., severity or risk), analysts may take
one of several actions, including:
 identifying the project / activity as "at risk" and more closely analyzing performance during the next
reporting period
 contacting the project / functional manager for a verbal variance explanation
 "margin-left: 25">investigate the cause of the variance and formulate corrective action
recommendations
5. Report on performance to senior management (at least annually), and functional management (at least
quarterly).
6. Initiate corrective action.
The foregoing steps are part of an ongoing process established to support a performance planning, monitoring,
and control system. The intent is to provide management with a stable, recurring "early warning" mechanism
to detect and correct incipient performance problems before they actually become problems.
Introduction To IT Performance Management And Measurement, Lesson 5 of 13
3. How does non-technical IT performance management work? (cont'd)
Performance management also employs ad hoc methods to assess and predict performance. These include
techniques such as simulations, trend analysis, and in-depth performance reviews:
 Simulation (e.g., "what if" analysis) can be used to project how changes in certain activities might
affect others.
E.g.: If the PC support group is deploying NT workstations to replace Unix workstations very much
ahead of schedule, how this will affect the software development group that must convert Unix-based
software for use on NT. Such simulation can effectively alert management to impending problems
(e.g., the software development group can’t keep up with the accelerated NT conversion schedule; as a
result, business users would lose mission-critical functionality). This knowledge would enable
management to implement corrective measures (e.g., either put NT deployment back on its original
schedule or accelerate the software development process by increasing development staff).
 Trend analysis can be used to reveal recurring difficulties that are not detected by ongoing performance
monitoring.
E.g.: Senior management has imposed a standard employee-to-consultant ratio for all functional areas;
it is the same for accounts payable as it is for the IT organization. A trend analysis, possibly spanning
several years, might reveal that the realities of the IT business consistently force the IT organization to
either violate the standard or shut-down important activities because sufficient numbers of technical
personnel can’t be hired. The analysis would tell management that the problems of the past are likely
to recur unless the standard for IT is changed.
 Performance reviews (a.k.a., performance audits) can provide IT and senior management with
objective, often comprehensive, assessments of the performance of a major function, activity, system,
or process. Performance reviews (audits) are not financial audits, although they may include financial
elements (e.g., a functional performance review might include evaluation of the adequacy of budget
resources to accomplish business objectives).
These are some of the routine, and not so routine, tools and techniques used in the practice of performance
management.
Introduction To IT Performance Management And Measurement, Lesson 6 of 13
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4. IT Performance Management - How to get started
Measuring performance isn't easy; too often, performance measurement initiatives falter because:
 those charged with planning and implementing the initiative had little or no prior experience with
performance management and measurement (often, with the best of intentions, they repeat common,
predictable, and sometimes fatal mistakes)
 management’s information needs were not identified in advance, and a well-thought-out conceptual
framework and implementation plan was not developed (in one case, after a year’s work, the first
performance report was submitted to senior management two months late; the designers were told "this
is not the information we need to see")
 too much performance information materialized too soon (the organization’s capacity to assimilate,
interpret, and react to it was overwhelmed)
To help assure the success of a performance management initiative:
 understand management’s information needs
 have a clear picture of what you are trying to achieve and how you will do it
 involve people who have actually established and managed performance management systems
 study what other organizations are doing - learn what works and what doesn’t
 manage expectations - make sure all key participants understand and agree on what will be
accomplished and when
 use a limited pilot to gain experience (in other words, confine your mistakes to a small area that you
can fix quickly), and demonstrate early results
Performance management initiatives can materially improve the way an organization plans and conducts its
business; careful preparation and a disciplined approach can make it happen.
Next, we will briefly discuss some of the other things you need to know.
Introduction To IT Performance Management And Measurement, Lesson 7 of 13
Part III.
Five Things You Should Know Before Undertaking An IT Performance Management Initiative
Before undertaking a performance management improvement initiative, you should be aware that:
1. they are often implemented in concert with other management improvements
2. improvements take time and sustained management commitment
3. adequate resources must be made available
4. the IT organization will need to learn new management techniques
5. some of the approaches recommended in current literature can be risky
Introduction To IT Performance Management And Measurement, Lesson 8 of 13
1. Performance management improvements are often implemented in concert with
other management improvements
IT Performance management initiatives are often implemented by organizations that want to fundamentally
shift the focus of management decision-making from a preoccupation with staffing levels and costs to a
balanced focus including key "outcomes". Outcomes are results expressed in terms of the real difference that
an organization’s work makes on the way business is conducted and what the organization achieves.
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To accomplish this, organizations sometimes undertake a radically different approach to planning and
management. This can include development of:
 Strategic Plans, containing (1) a mission statement, (2) a set of strategic goals covering the
organization’s major business areas / programs and functions that are linked to the responsibility /
program activity structure in the budget, and (3) a description of how the organization intends to
achieve these goals.
 Annual Performance Plans that link the strategic goals and business objectives with the day-to-day
activities. These plans are developed as part of the budget preparation process, become key factors in
making budget decisions, and are adjusted to reflect budget decisions (e.g., if the IT organization
planned and proposed to implement 5,000 NT workstations and senior management decided to provide
funding for only 2,500, the plan would be reduced to 2,500).
 Performance Reports, accompanying the annual budget request, to senior management. This tells
management what was actually accomplished during the preceding fiscal period.
 An IT Investment Management Approach is adopted to assure the "best" IT decisions are made. (See
our tutorial, "The IT Investment Management Approach", for more information on this topic.)
Introduction To IT Performance Management And Measurement, Lesson 9 of 13
2. Improvements take time and sustained management commitment
Effective organization-wide performance management initiatives take time to design, develop,
prototype, and fully implement; they also require sustained commitment from top management.
Consideration of the following questions will give you an idea of why time is needed to plan and implement
performance management in any organization:
 How well are we measuring outcomes and results now, if at all?
 If it is such a good idea, why aren’t we doing it already?
 What performance will be measured? How? When do we need to do it?
 How will we "link" strategic goals and business objectives to IT projects / activities?
 How will we use performance information once developed?
 How prepared is the organization to make changes based upon evaluation of its performance?
 What do our managers and staff (central as well as IT) know about developing, analyzing, and
interpreting performance measures? Do they possess the knowledge, skills, and abilities to implement
and maintain a performance management system?
 Do we have the systems and technology necessary to routinely gather, process, and analyze
performance measurement data? What is needed?
Answering these questions at the outset can be a sobering experience; yet, they are indispensable to
formulating a successful implementation plan. Once the questions are answered, senior management buy-in is
often secured by developing a solid business case. Buy-in includes recognition and acceptance of the fact that
this is a long-term undertaking and that unwavering top management support is essential.
Introduction To IT Performance Management And Measurement, Lesson 10 of 13
3. Adequate resources must be made available
Information is rarely cheap or free. Organizations that want to reap the full benefits of performance
management must be willing to commit the necessary resources. This includes:
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design and maintenance of the process
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development of management and staff knowledge and skills
dedication (eventually) of staff to perform the necessary analyses
acquisition, or development, of the technology to capture and store large amounts of current and
historical data
changing budgeting practices and procedures, along with budgeting systems capabilities
The resources committed should be in proportion to the needs and benefits.
Introduction To IT Performance Management And Measurement, Lesson 11 of 13
4. The IT organization will need to learn new management techniques
Performance management can yield knowledge and information about the organization not previously
available.
The ability to pinpoint potential, and actual, performance problems will force IT management to come to
terms with issues in a new way (for example, what will the CIO do if a trend analysis reveals that his "star"
software development project manager’s key deliverables are always six months, or more, late). It will also
require a more businesslike approach to IT project and activity planning, control, and reporting.
Many technically trained professionals will need to learn, or relearn, management skills and techniques that
they never viewed as integral to their jobs.
Introduction To IT Performance Management And Measurement, Lesson 12 of 13
5. Some of the approaches recommended in current literature can be risky.
As we have already noted, performance management and measurement are sophisticated management tools
that can yield significant benefits to the organization. A review of approaches discussed in some current
publications reveals that quite a few are based more upon academic theory than solid implementation
experience.
For example: A recent article discussing how to develop performance indicators advises readers that the best
approach is to "empower" operational staff by having them conduct "self-directed....brainstorming sessions" to
identify performance indicators, measures, and metrics.
As anyone with extensive performance management system experience knows, the likely outcome of such a
random approach will be long lists of things that might be measured (mostly inappropriate) but little that is
useful in terms of what should be measured. That is not to say that operations management and staff should
not be involved; their participation and acceptance is essential to the success of performance management
initiatives. However, such efforts must be carefully structured, directed, and supported by expert guidance.
Random, ill considered efforts produce little that is useful and can quickly undermine the credibility of the
initiative.
The moral: Evaluate the source before you act upon the advice.
Introduction To IT Performance Management And Measurement, Lesson 13 of 13
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Tutorial Recap and Conclusion
In this tutorial, we have seen that:
 Senior management often believes that IT organizations are wasteful and inefficient, based upon a
track record of chronic cost overruns, late deliverables, etc.
 The purpose of Performance Management is to assure that IT projects / activities achieve their planned
level of performance and deliver intended results on time and within budget; this is "non-technical"
performance management
 IT organizations that maintain adequate performance management systems take a significant step
toward restoring credibility
 Performance management improvement efforts are often part of an overall effort including other
processes, e.g., budgeting
 Performance management involves the routine, and non-routine, measurement of key aspects of IT
project / activity performance
 An important benefit of performance management is the ability to detect incipient performance
difficulties and correct them before they become problems
Performance management initiatives can materially improve the way an organization plans and conducts its
business. Success requires:
 time, and a sustained management commitment
 adequate resources (analyst, training, process, and system)
 careful planning, and a disciplined implementation approach
If you are responsible for developing and implementing a performance management initiative:
 thoroughly research the literature
 carefully evaluate your sources; many suggest questionable approaches
 work with someone who has actually designed, implemented, and managed a performance
management system - you can avoid years of wasted effort
Next Steps
You can:
 test yourself through the on-line quiz.
 give us feedback to help us improve the tutorial, or suggest additional topics
 submit questions about this or related topics or contact us for additional information
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Quiz
Take this quiz to see how well you understand what you've learned.
Note: Please answer all questions for the most accurate score. Unanswered questions are scored as
incorrect.
1. The goal of performance management is:
A. to assure that organizations link plans to strategic goals and business objectives
B. make funding decisions in light of project/activity benefits and outcomes that support those goals and
objectives
C. actively manage projects and activities to assure that the intended benefits are realized as planned
D. all of the above
2. Adequate performance management brings credibility to the IT organization.
True
False
3. Non-technical performance measures are intended to replace technical performance measures in an
IT organization.
True
False
4. Which of the following methods are used to assess and predict non-technical performance:
A. configuration management
B. trend analysis
C. fault management
D. all of the above
5. Performance management can be defined as "taking action after performance problems significantly
affect the business".
True
False
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