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

Jeff Zwier Manager IS Communications, Team Lead CISO Audit & Metrics Analysis ABN AMRO Services IT

Presented at: IQPC / Finance IQ Shared Services for Finance and Accounting Conference The Driskill Hotel, Austin, TX June 23-25, 2007

Presentation at a Glance

Some Definitions Before you Begin Getting Started Designing your Metrics Visualization & Presentation Resources

Metrics for Shared Services

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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 dont 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 Dont Know What they Want, so I Have to Give them Everything

Theres 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 dont 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 not equal

ACHIEVEMENT
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Isolate your Process to Find the 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 creating executive reporting. Is there a single cause of a metrics 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)

TRAP: Dont use history to set the standard for future performance

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).
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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 exceptionally bad) 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, Scorecards and Reports

If you want to. . .
steer enterprise-level or CXO decision making, direct investment, or generally demonstrate value provide a reality check for your shared service management team to guide efficient and effective operations create a snapshot of performance for use in projects or long term analytics
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Then consider. . .
executive communication tools such as dashboards, monthly update presentations. balanced scorecard, guiding principle tables, operational process descriptions with progress indicators. 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

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Developing Metrics for Financial Shared Services: Best Practices, Tips and Traps
Jeff Zwier Manager IS Communications, Team Lead CISO Audit & Metrics Analysis ABN AMRO Services IT

Jeff Zwier
jeff@zwier.net