Modern Middle Manager
Primarily my musings on the practical application of technology and management principles at a financial services company.
Spending Metrics

Monday, January 02, 2006  

I started in on a book called "The Professional Services Bible" by John Baschab and Jon Piot. Messrs. Baschab and Piot have written yet another tome weighing in at 500+ pages. The virtue of their books is that they don't waste time with appetizers before serving the meaty topics. Within the first three chapters they have given the outline for the book and delved into professional services organization, management and benchmarking. Much of the book looks like it can be applied to any business organization.

Benchmarking is one such chapter. Some benchmarks may not be indicative of company success and should be viewed with a dim eye according to Christopher Koch of CIO Magazine. On the other hand, where do you start?

Our company took 3 metrics from the META Group (now a part of Gartner). Those metrics are:
1. IT spending as a percentage of revenue (Koch's least favorite).
2. Ratio of IT support personnel to total employees.
3. IT spending per employee.

We have managed our company to within 10% of META group's banking industry average for #1 and #2, including operational costs (something Koch contends is not included in the revenue metric). #3 confounds me, because I'm consistently 20-30% over the benchmark. I assume it's because we're a small company leveraging a lot of technology. I believe it's because we leverage technology in a big way and senior management agrees. Part of my argument is showing the return for specific revenue-enhancing projects and how they've paid off in a short amount of time.

Looking around on Google, I'm hard pressed to find more (free) information on metrics. One article I came across from 2002 is from Baseline and includes several more metrics.

Koch is correct in that picking benchmarks for the right reason is important and that trust should not be placed in a number for its own sake. I remember hearing Zig Ziglar say once that you will manage your organization to whatever you're measuring. Ultimately I (and the organization) need to ask whether the IT department is worth the 1/13th of every dollar of revenue we get. If we don't contribute more to the bottom line by helping to bring in more money, peel away expenses or mitigate appropriate business risk then we're a sinkhole.

posted by Henry Jenkins | 1/02/2006 06:28:00 PM

Thanku fro sharingl..

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