Developing Metrics for Financial Shared Services:Best Practices, Tips and Traps

Jeff ZwierManager IS Communications, Team Lead CISO Audit & Metrics AnalysisABN AMRO Services IT

Presented at:IQPC / Finance IQ Shared Services for Finance and Accounting Conference

The Driskill Hotel, Austin, TXJune 23-25, 2007

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Presentation at a Glance

• Some Definitions

• Before you Begin

• Getting Started

• Designing your Metrics

• Visualization & Presentation

• Resources

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Some Definitions

• What is a ‘Metric?’

• Why do we use metrics?

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Metrics Design:Before you Begin

• As financial professionals, we are expected to take a thorough, analytical approach to our work.

• Depending upon your audience and objectives, this expectation can lead to somewhat less than ideal results.

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Incredibly detailed, unfocused reporting

Most of your stakeholders don’t care about the details of your operations!

A cautionary tale. . .

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Metrics Design:Before you Begin (2)

To avoid the trap:• Set your reporting objectives• Focus on the basics• Define your audience• Start a dialog

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Getting the Right Response:Reporting Objectives and Types of Metrics

Metrics can be used for. . .

• Executive Reporting– steer enterprise-level decision making, direct investment and

demonstrate value

• Strategic Reporting– provide a “reality check” for your shared services on whether it is

really delivering its intended value

• Operational Reporting– measure the performance of your staff when executing key

operational processes

• Tactical Reporting– create a snapshot of performance for use in special projects

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Focusing on the Basics

• Good metrics are:– Based upon consistent, measurable data– Inexpensive (in terms of time and money)

to collect– Expressed in unambiguous, quantitative

terms that are objectively defined– “Actionable” – there are no ‘FYI’ metrics!

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Defining your Audience: Questions to Ask

• Who wants to know?

• What do they want to know?

• How often do they need to know?

• Why do they want to know it?

• What channel is the most effective way to reach your audience?

• What will they do with your information?

• What behavioral change(s) do you expect as a result?

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They Don’t Know What they Want, so I Have to Give them Everything

There’s always a way to find out more about what your internal or external stakeholders really need. Ask your internal communications or training department to help you create

a survey of potential recipients for your report.

Creating good metrics is a collaborative process – if you don’t already have a good rapport with your customers or managers, your metrics development will be a struggle.

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Ways to Start a Dialog with your Reporting Audience

• Focus groups• Performance objective setting / SLAs• Budgeting• Surveys• User communities / forums• Reactions to industry benchmarks or

commonly referenced research• Account managers / client

engagement professionals

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Designing Your Metrics:Best Practices

• Guiding principles that will help you create the right metrics for the right objectives:– Focus on information, not data– Isolate processes to select the right level of

analysis for your metric– Resist the temptation select metrics based upon

business intelligence tooling requirements or ‘instant dashboard’ solutions

– Select metrics that have clearly defined inputs, outputs and impacts

– Set rating criteria based upon the impact of a metric hitting a certain value, not historic trends

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Data versus Information

• Data– The operational details that

collectively describe the activities of your service.

• Information– Metrics that describe the data

you have available with the context necessary to make good decisions about what your service has been doing.

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In Other Words. . .

• Remember:

ACTIVITY

Does notequal

ACHIEVEMENT

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Isolate your Process to Findthe Right Metrics

• Measure within processes to avoid mixing levels of detail or introducing intervening variables.– Avoid metrics that draw data from across

processes unless you are creatingexecutive reporting.

– Is there a single cause of a metric’s value moving in a positive or negative direction?

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Avoid Tool-specific Metrics

• Would you change the planned layout of your home in order to take advantage of using a particular hammer?

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Inputs, Outputs and Impacts:Use “IOI” for Higher ROI

• Inputs– Clearly defined, objective and stable – both over

time and across actors

• Outputs– Predictable based upon variations of inputs plus

the environment in general

• Impacts– What real change happens to the business (the

bottom line, availability, or other factors) when the value of a metric moves?

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Setting Rating Criteria

• Popular Rating Schemes– Red/Amber/Green

– Report Cards • (A, B, C, D, F)

– Percentage of Perfection• (0-100%)

• How do you determine your rating thresholds?

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Setting Rating Criteria (2)

• History is not often a good baseline for future performance measurement

• Look for objective impacts in order to determine what “red” or “green” status should be

• Stay quantitative– Presence or absence– Volumes, variable costs– Losses, gains, rejections

"History is more or less bunk. It's tradition. We don't want tradition. We want to live in the present, and the only history that is worth a tinker's damn is the history that we make today."

(Henry Ford, quoted in the Chicago Tribune, 1916).

TRAP: Don’t use history to set the standard for future

performance

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Visualization and Presentation

• Dashboards– One to three pages of discrete, clearly defined

indicators.

• Scorecards– Balanced Scorecard summaries across defined

performance dimensions.

• Reports– Operational detail designed for comprehensive

views of service data.

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Dashboards

• Dashboards provide indicators, gauges and simple charts to help senior leaders make strategic decisions– Design principle: Simple

is better!• Use your car as a model

– Make most critical information most prominent

– Many good (and exceptionallybad) examples to choose from online

– Can often be automatically generated from business intelligence tool platforms.

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A Typical Corporate Services Dashboard

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What your COO Would Like to See

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Dashboard Examples

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The Balanced Scorecard

• Completely focused on outcomes (or as Jeff says, impacts)

• Management system with integrated measurement

• A fundamental change in operational management approach

– Far beyond simply defining your measurement scheme

– Not for the faint of heart

• Provides highly effective feedback loop when designed correctly

Source: © 1998 Balanced Scorecard Institute www.balancedscorecard.org Used with permission.

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Traditional Reports

• Helpful for tactical reporting, operational effectiveness analysis

• Not the best solution for changing behavior

• Common reporting traps– ‘Executive Summary’– Often mistaken for service

marketing tools– Data density– Jargon– Produced by subject matter

experts, rather than communicators

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Using Dashboards, Scorecardsand Reports

If you want to. . . Then consider. . .…steer enterprise-level or CXO decision making, direct investment, or generally demonstrate value

…executive communication tools such as dashboards, monthly update presentations.

…provide a ‘reality check’ for your shared service management team to guide efficient and effective operations

…balanced scorecard, guiding principle tables, operational process descriptions with progress indicators.

…create a snapshot of performance for use in projects or long term analytics

…traditional tactical or operations reporting formats.

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Resources:For More Information

• Dashboard Designs and Data Visualization– The Dashboard Spy

• www.dashboardspy.com

– Instant Cognition Blog• http://blog.instantcognition.com/category/visualization/

– Edward Tufte Q&A Forums• http://www.edwardtufte.com/bboard/q-and-a?topic_id=1

• Reporting and Metrics– Article on Reporting for Shared Services (Shared Services Network News)

• www.jeffzwier.com/articles

– Techweb article on KPI development• http://www.intelligententerprise.com/showArticle.jhtml?articleID=51201364

• Balanced Scorecard– What is the Balanced Scorecard?

• http://www.balancedscorecard.org/basics/bsc1.html

Developing Metrics for Financial Shared Services:Best Practices, Tips and Traps

Jeff ZwierManager IS Communications, Team Lead CISO Audit & Metrics AnalysisABN AMRO Services IT

Jeff Zwierjeff@zwier.net

Jeff Zwierjeff@zwier.net