Financial Perspective

By Stephen Lipka  |  Posted 11-06-2009 Print Email

Financial Perspective

In the balanced scorecard approach, the top perspective for profit-making organizations is financial (or stockholder) benefits. In other words, the kind of metrics you'll find here are about money. Let's look at three categories of financial objectives, metrics, and achievements.

• Cost-related: This is all about savings. How much money did you save? How much did you reduce the cost of IT per employee? How much did you reduce the monthly and yearly variances from budgets? Some of these, in fact, could be tied to benchmarks. How close did you come to the average IT cost per gross revenue dollar for your industry?

Any improvement you made in cost management, which is indeed an accomplishment, may have helped the company improve its profitability. But important as these achievements may be, they're pretty boring to most.

• Process cost reduction: Rare is the project these days that isn't justified by a projected return on investment. One basis for savings is the reduced cost of some business process brought by a proposed application. Some examples include reducing the cost of invoice receipts by introducing a paperless invoicing and payment process, or lowering the launch cost of a new franchisee by putting a fast-track process into place for clear winners, thus saving review labor.

It's likely you acted in partnership with the business process owner to design the improvement and measure the results in financial terms. Your contribution to cost savings--by virtue of your collaboration--is therefore more interesting to more constituencies.

• Revenue-related: In today's world, IT is a partner in driving the profitability of the company. Beyond partnering with the business to improve efficiency, why not partner to bring new services to the market? Or add an e-commerce channel, a subscription to a database or electronic publication, or free technical support to end-users of your company's product, given and paid for by your product's distributors?

Any new revenue stream made possible by technology falls into this category, and your contribution will generate more excitement.

So how will it play in Peoria? Here's a table of the kind of financial achievements you may have delivered, who your audience is, and which of them will be happy to hear it:

Why the two "maybes?" If your peer organizations are truly partners, and you designed the improvements and the revenue stream with them, they'll be happy and they'll share in the benefits. If IT moves forward without peer organization agreement and participation, however, IT will be perceived as a competitor or threat, particularly if IT is successful.



 

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