Once the crucial element in determining whether a business initiative was possible, technology is no longer even on the critical path. Dramatic advances have made technology so agile and powerful that it can accomplish virtually anything a company requires. According Karl Taylor, Senior Vice President and CIO of CVS/pharmacy, ten years ago, integrating an acquisition into the corporate IT infrastructure took 24 months to complete. Today it takes just 4 months.
“Before you could do only what the technology allowed or enabled,” agrees John Schoenherr, Vice President at Oracle Corporation. Today, technology is no longer on the critical path.
Now, the gating factors are business and operational controls. And many companies are struggling with this, because until recently business tools have not been available to help companies objectively and consistently identify, assess, mitigate, and monitor risk action plans to improve its business processes. With the advent of sophisticated risk management solutions, however, that is changing.
Why is Balanced Scorecard not enough?
At the SIMposium 2005 conference for financial and technology executives held recently in Boston, balanced scorecard was a hot topic among the participants. The balanced scorecard approach can be enormously useful in connecting performance to corporate objectives, but it is imperative that companies avoid the dangerous pitfalls of implementing this strategy, most notably metric overload and tunnel vision.
Case in point: In response to a request for its key performance metrics, one large insurance company proudly presented an eight-inch binder of pages chock full of data in eight-point type. While impressive, the level of detail was so overwhelming that the company was suffering from metric overload.
Tunnel vision occurs when support departments like IT, finance and legal zoom in too closely on their own metrics and fail to take a broader look at how their performance influences the success of its clients, namely operations. An IT organization that effectively measures its performance against SLAs but is unable to gauge how it contributes to corporate objectives is falling short.
To integrate the balanced scorecard approach effectively across functional silos companies need to add another important discipline to their planning and analysis: risk management.
Closing the gaps with risk management.