Effective target setting and monitoring progress is at the heart of every successful business and many companies use key performance indicators (KPIs) as their measure of success. But how do you implement IT KPIs that feed into other teams’ targets and ensure that they effectively serve the overall needs of your business? Let’s investigate.
How to set good KPIs
In simple terms, a KPI is a goal that your business is working to achieve. KPIs can either be high level, encompassing the business as a whole, or they can be specific to departments, teams and even individual employees. Above all, KPIs need to be aligned with business strategy, as well as being actionable and measurable. Let’s look at each of these qualities in a bit more detail.
- Aligned with business strategy – There’s no use having a KPI that doesn’t tie in to your overall company goals. For example, if the company KPI is to increase revenue by 25% by the end of the fiscal year, the IT team’s KPI might be to boost project completion rate by 40% within the same period.
- Actionable – Every KPI should have an action plan attached to it which would outline steps for success. For example, in the case of the IT Team KPI above, there should be an action plan for improving efficiency within the team in order to boost the project completion rate.
- Measurable – In order to be able to truly track progress against targets, you need to make sure that your KPIs are measurable. This means including a time frame by which they should be achieved, and as far as possible giving specific metrics which need to be reached. A BI or analytics tool can come in very handy when tracking progress.
The IT KPIs that every business should track
Here are some of our suggestions of the ones that every business should be tracking.
The percentage of projects delivered on time and on budget
This is one of the best ways to track the overall performance of IT businesses. The outcome of this KPI enables decision-makers to understand the types of projects that are achievable within the company’s current resources, and to get a clear picture of where challenges and blockers might lie. They can then make an assessment of the improvements that might need to be made to company processes in order to improve on this KPI, or they might determine that some projects should be discontinued.
Return on investment for IT
ROI is an important metric for many marketing departments, but it is also relevant to IT. It measures the efficiency of your company’s IT spending. But it should be about more than just cost savings vs revenue increases. IT departments should track metrics that cover a whole range of performance measures, including the number of new clients in a given period, customer satisfaction levels and number of referrals.
IT ROI should ultimately be about the benefits delivered by your IT infrastructure, divided by the amount of money invested in it. But note that the benefits will be different depending on your company and the sector in which you operate.
IT Spend Vs Plan
This is a metric that compares your actual IT spend to what you’d budgeted for the same period. Simply put, it helps you to track whether you are budgeting correctly, and whether you might need to make cutbacks on spending before it spirals out of control. This KPI is important because if the department overspends, it might mean that budget cuts need to be made in other areas of the business.
Number of IT employees per customer
While there is no ideal ratio for this KPI, it enables you to track whether you’re effectively serving the needs of end users. Naturally the higher the ratio of employees to customers, the more likely their tasks or challenges will be resolved quicker – but at the same time, the higher your costs will be. This KPI is particularly useful for businesses that are looking to scale, as it enables company leaders to effectively balance needs and resources.
Downtime is the term for the amount of time in which a system is not operational. Naturally, having a very low percentage of downtime is favorable as it reduces the risk of data loss and productivity. High downtime can even result in a loss of clients, so it’s something that’s definitely worth paying attention to, as it impacts the entire business.
When formulating IT KPIs, it’s important to make sure that they are grounded in the company strategy and that they effectively feed into the targets of different departments. That’s why it’s always best to start target-setting at company level, and then to drill down into team KPIs. It’s also worth sense-checking the KPIs with senior leaders from different teams to ensure overall alignment. Only then can you rest assured that your IT KPIs will truly serve your company.