Performance Management Chapter-8 PDF

PERFORMANCE MANAGEMENT  IN THIS CHAPTER YOU WILL LEARN Lorwhat are the basic terms of ICT performance management, that KPIs and scorecards are important tools for ICT performance management, what are the main control objects in the ICT area, how you can measure the performance in...

PERFORMANCE MANAGEMENT  IN THIS CHAPTER YOU WILL LEARN Lorwhat are the basic terms of ICT performance management, that KPIs and scorecards are important tools for ICT performance management, what are the main control objects in the ICT area, how you can measure the performance in the ICT area, what are the potentials and methods of Web analytics.  PERFORMANCE MANAGMENT FOUNDATIONS OF PERFORMANCE ANALYSIS BASIC TERMS To control something means to make decisions. Making decisions is a primary management duty. In Germany the discipline to support managers in decision-making is called “Controlling”; in the “English” world this discipline is called “performance management” or “performance analysis”.  PERFORMANCE MANAGMENT This specific category of management support comes from some kind of division of labour on management levels. The manager is (and will always be) responsible/accountable for decisions. The controller or performance analyst is responsible/ accountable for transparency (which is needed to make good decisions). He is somehow a service provider to the management.  PERFORMANCE MANAGMENT Subsequently we will use the terms “principal” and “agent”, thus referring to the so-called principal-agent theory. The one who delegates responsibility for something is the principal. The one, who takes over responsibility from a principal, is an agent.  PERFORMANCE MANAGMENT In complex organizations managers take over responsibility from higher management positions or from the owner of the organization. They are agents. The question for the principal is whether the agent really does what he wants him to do. He also has to establish procedures to monitor and measure the activities of his agents.  CONTROL CYCLE The agent resp. manager takes over responsibility for a specific task or control object (e.g. a project or a process). Because he/she is an expert in that field he/she will be able to do the job better as the principal himself/herself. Or he/she will get the job just because the principle does not have enough capacity or time to do the job himself/herself. However, the principal is the client or customer and the agent is the contractor or supplier.  CONTROL CYCLE Both parties will negotiate a contract in which it is clearly described what the agent has to do and how the principal has to reimburse the work of the agent. Finally there is one question: How can the principal ensure that the agent works in his sense and for his (the principal’s) objectives and the moral hazard is avoided.  PERFORMANCE MANAGMENT Actions & Monitoring: Run corrective actions and monitor the degree of target fulfilment.  PERFORMANCE MANAGMENT Definition of a scorecard This you will find in well known books on microeconomics: A scorecard is a well structured set of indicators which are related to each other and as a whole deliver a complete information about the control object. So it is more precise:  SCORECARD Based on this definition scorecards help the management to control target oriented, are an important management tool, have to be used actively and periodically by the management, have to be fed with planned values, should not have too much indicators (otherwise you will not see the wood because of so many trees. Rule of thumb: Twenty is plenty.), have to concentrate onto those attributes, which are really relevant for reaching the targets, have to be fed with actual values,  SCORECARD Examples of scorecards (in ICT environments): Ticket Management Process (You will find such processes in call centres or service organizations. Customers will send requests and expect that the call centre or service provider gives an answer, initiates a service delivery or eliminates an incident, etc. Those requests are documented in a ticket and this ticket runs through the process until successful completion.) о Number of registered tickets, о Average duration from initiation to completion of tickets,  BENCHMARK Benchmarks serve to compare different but similar control objects. They are often used to compare control objects from different organizations. Objects must be comparable and all objects to be compared must be measured with the same indicators. Example: The (average) duration of a specific project could be appropriate to be used as a benchmark because it can be generated similarly for different organizations. Benchmarks can be management indicators as well as information indicators.  ICT PERFORMANCE MANAGMENT ICT PERFORMANCE MANAGEMENT In this sub-chapter we will consider the main control objects of an ICT organization or ICT service provider. This will help us to better understand the particularities of performance management in the area of E-Commerce. You will find similar structures in other areas of your organization.  PERFORMANCE MANAGMENT CONTROL OBJECTS IN THE ICT AREA First let us consider the different levels of control objects in the ICT area. All types of control objects can also be found similarly outside the ICT area in every business environment.  PERFORMANCE MANAGMENT Elementary objects ICT Service: An ICT service is delivered by your internal IT department or an external ICT service provider. Each service will be controlled by a (small) scorecard, which is contained in the so-called service level agreement (SLA). The scorecards of different services will be similar or even identical but this does not always make sense.  PERFORMANCE MANAGMENT ICT Process: This means an internal process of your internal or external ICT service provider. Do not confuse with business processes. Each process will be controlled with a (small) scorecard. The scorecards of different processes will be similar or even identical if the type of process is the same. However, you will find different types of processes and due to this specific scorecards make sense.  PERFORMANCE MANAGMENT ICT System: This means hardware and software, e.g. application systems. Each system will be controlled with a specific scorecard. From a customer’s point of view system are not so interesting because they are integrated into services. But internally (in the ICT organization) systems are specific control objects. The scorecards of different systems will be similar or even identical.  PERFORMANCE MANAGMENT ICT Project: Projects are conducted to build new ICT services, processes or systems or to improve ICT services, processes or systems. Each project will be controlled with a specific scorecard. For specific projects it may be helpful to add specific indicators to the scorecard.  PERFORMANCE MANAGMENT Portfolio objects We also have to consider groups of the above mentioned elementary control objects. Management does not only have to control each single service, process, system or project, but also the total group of all services, all processes, all systems, and all projects.  PERFORMANCE MANAGMENT ICT Service portfolio (Service catalogue (ITIL)): Sometimes a service portfolio is called a service catalogue or structured list of services. A service portfolio will be controlled with a service portfolio scorecard.  PERFORMANCE MANAGMENT ICT Process portfolio: The process portfolio is often considered as “the” organization or a sub-organization, e.g. a team, group or department. A process portfolio will be controlled with a process portfolio scorecard.  PERFORMANCE MANAGMENT ICT System portfolio (System landscape, system architecture): A system portfolio is often denominated as system landscape or system architecture. A system portfolio will be controlled with a system portfolio scorecard.  PERFORMANCE MANAGMENT ICT Project portfolio: A project portfolio will be controlled with a project portfolio scorecard.  PERFORMANCE MANAGMENT Possibly an ICT organization has defined several service, process, system or project portfolios. There may be a hierarchy of portfolios. Cross-section control objects To integrate an ICT organization completely we also need control objects, which are not covered by services, processes, systems or projects. We denominate them here as cross-section control objects. Important representatives of those control objects are:  PERFORMANCE MANAGMENT ICT resources, e.g. personnel, ICT infrastructure, Information security management, GRC management: Governance, Risk, Compliance. However, there may be additional relevant control objects in this category.  PERFORMANCE MANAGMENT Overall view onto ICT If we consider ICT in an organization then we can easily define different roles with respect to ICT. Most organizations use ICT to support their business processes. So we can have different views onto ICT, the view of the customer of ICT services (IT Demand), the view of the supplier of ICT services to the organization (IT Supply) and the comprehensive view of the owner or top management of the organization (IT governance).  PERFORMANCE MANAGMENT IT Demand о This is the responsibility of the ICT customer or consumer. о The ICT customer has to plan and communicate his needs. о The ICT customer is responsible to use ICT services in his business processes efficiently. IT Supply о This is the responsibility of the internal or external ICT service provider. о The service provider has to make service offerings. о The service provider has to provide ICT services effectively and efficiently.  PERFORMANCE MANAGMENT IT Governance о This is the responsibility of top management. о Top management has to establish the rules of the ICT “game” for the organization (Who is allowed or who has to provide which ICT services? Who is allowed or who has to consume which ICT services?). о Top management has to ensure the long-term survival of the organization, of course including the chances and risks of ICT  PERFORMANCE MANAGMENT PARTICULARITIES OF E-COMMERCE If we want to conduct performance management for E-Commerce then we have, of course, to deal with business and business performance management. And we could use all methods and approaches, which have been turned out to be successful in traditional business areas. However, ICT systems play an important role in the area of E-Commerce. And thus it is clear that E-Commerce performance to a significant part is the performance of the involved ICT systems, especially those application systems which we have already discussed, e.g. online shops or procurement platforms or digital marketplaces, etc.  PERFORMANCE MANAGMENT Let us consider online shops or websites a little deeper. Because a website is an ICT system all methods and approaches of ICT performance management can be used. So we could measure the availability, response times and so on as we can do it for arbitrary application systems. You will find a lot of specific metrics and KPI proposals if you read books about IT service management (Forbes 2016).  PERFORMANCE MANAGMENT However, some things are different from traditional ICT systems and services. First of all, most users are not known to your organization (unless you only consider registered users) because they are not members of your organization (See B2C business, online shop). What are the consequences?  PROJECT PERFORMANCE PROJECT PERFORMANCE Let us start with an often-used definition of a project  PERFORMANCE MANAGMENT This is, of course, the same for E-Commerce projects. However, there are some specific challenges for projects in the area of E-Commerce:  PERFORMANCE MANAGMENT Those projects will often have several project sponsors/awarding authorities, possibly from different organizations, even legal entities. This lets project steering become a serious challenge. We have to care for the setup and management of the steering committee.  PERFORMANCE MANAGMENT Sometimes a project programme (network of interlinked single projects) is initiated and the development of an online shop or a website is just a part of a complex endeavour. We have a mixture of development and customizing due to the fact that parts of the new system are off the shelf software and other parts have to be developed individually for the specific environment.  SYSTEMS PERFORMANCE SYSTEMS PERFORMANCE After projects have been successfully finished the new or modified system, which was the result of the project, has to be transferred to the daily operation, which is either taken over by an internal ICT department or by an external ICT service provider.  PERFORMANCE MANAGMENT Challenges: Boundaries of E-Commerce systems are not so precisely defined as in traditional application systems. E-Commerce systems use to a high degree general infrastructure systems and middleware components. In the case of service oriented architectures (SOA) the services will (hopefully) be used by various systems. Master the clearance regulations for used external services.  PERFORMANCE MANAGMENT Tools from cost accounting: Cost unit accounting Cost distribution sheet Internal service charges: What is the output of our E-Commerce system? How can we measure the output quantity? Who is the (internal) customer of the E-Commerce system and thus has to pay it Can we distribute the output to the different (internal and external) customers and what are the results of this distribution?  PERFORMANCE MANAGMENT SERVICE PERFORMANCE E-Commerce is in the responsibility of sales and marketing management. It depends heavily on ICT but is not at all an ICT activity. However, the E-Commerce management does not want to care for hardware and software. They want to get the machines provided and operated by a specialized service provider.  PERFORMANCE MANAGMENT Definition of services The value proposition: A service is a means of delivering value to customers by facilitating outcomes customers want to achieve without the ownership of specific costs and risks. The value composition: We always ask for the business value of a service: о Service Utility: functionality from the customer’s perspective – what the service does, what the customer gets, fitness for purpose, о Service Warranty: Assurance that an IT service will meet agreed requirements – how well the service is done, how it is delivered, fitness for use.  PERFORMANCE MANAGMENT Challenges Who is the service customer? Who is responsible for the business done with E-Commerce? Who is the user of the service (people inside and outside of the organization)? Who decides the service levels? Who are the partners, which agree on the service levels? How can we measure the realized service levels?  PERFORMANCE MANAGMENT Service Level Agreement (Structure of the document): Basic information: partners of the agreement & signatures, summary/short description/ scope/limits, start of agreement/end of agreement/other due dates, reviews (when, how, who?), responsible contact persons (also in a case of an escalation),  PERFORMANCE MANAGMENT WEB ANALYTICS In contrast to traditional shops or information points the digitized versions in the E-Commerce world allow a detailed measurement of all on-going activities. So the responsible management has many opportunities to measure and analyse, to manage quantitatively.  PERFORMANCE MANAGMENT POTENTIAL OF WEB ANALYTICS Generally: о In an online shop you are able (technically) to monitor and to document the behaviour of the visitors completely and detailed. о You have much better possibilities to analyse than in a real shop. о But care for privacy protection of your (potential) customers. Benefits in detail: о Support management and decision making, о Analyse website usage and optimize website,  PERFORMANCE MANAGMENT о Conduct search engine optimization (SEO), о Optimize online marketing, о Optimize sales process and related processes, e.g. billing or complaints management, о Optimize customer relationships, о Optimize profit, о Gain competitive advantage.  PERFORMANCE MANAGMENT Categories of Web Analytics are: Web performance management (WPM) is the planning, analysis and control of all website related activities and processes as well as all E-Commerce actions to continuously improve the success of your organization. Web content performance management (WCPM) contains the analysis and examination of the content usage or content demand  PERFORMANCE MANAGMENT Web user performance management (WUPM): serves the analysis of visitor properties and visitor behaviour to consecutively optimize visitor and customer focus, customer exploitation, development and loyalty. Additionally WUPM supports the segmentation of customers or visitors.  PERFORMANCE MANAGMENT WEB ANALYTICS AND KPIS If you run a website then there should be targets for it. Targets are corresponding to management questions. Subsequently we list some typical questions related to websites/ online shops. In brackets you will find KPIs or metrics, which show the degree of target achievement or the value of a relevant attribute.  PERFORMANCE MANAGMENT Stickiness: ability to keep the visitor on own website, Slipperiness: ability to get into fast and short interaction with user, Recency: time since last purchase, Prosumer rate (prosumer = producer + consumer): portion of users with active contributions, Integrator rate: portion of users who get integrated into digital value chain, Price for 1.000 contacts: costs to place the advertisement means  PERFORMANCE MANAGMENT Clickmap: A clickmap is like a transparent slide, which is laid over the website and shows how often specific links on this site have been clicked, Heatmap: The heatmap also shows, where users have clicked. But in contrast to a clickmap also clicks onto unlinked text or graphics are measured. So you can determine where the user has expected a link and you can insert it afterwards, User identification with cookies:  PERFORMANCE MANAGMENT Definition of a cookie: A magic cookie, or just cookie for short, is a token or short packet of data passed between communicating programs, where the data is typically not meaningful to the recipient program; the contents are opaque and not usually interpreted until the recipient passes the cookie data back to the sender or perhaps another program at a later time; the cookie is often used like a ticket – to identify a particular event or transaction,