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
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Developing Metrics for Financial Shared Services: Best Practices, Tips and Traps
One of the most difficult tasks shared services managers face is measuring and demonstrating value returned to their organizations. How can you capture your value in terms that are quantifiable, meaningful to your senior management and useful as performance and analytical tools by your service leadership team? In this presentation, Jeff Zwier shares some of the tips, best practices and pitfalls he has learned while developing performance and analytical metrics for shared services operating within a global financial services team, including • Designing metrics that encourage the right responses from senior management • Types of metrics and when to use each • Principles of basic performance dashboard design • Determining the right level of analysis to support performance management and demonstrate cost savings
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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
• 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
"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