You might expect Cisco Systems to know something about what IT can do for business. Every day they tell clients and prospective customers how the latest internet technologies can transform their lives – raising productivity, lowering costs and driving growth. But do they practice what they preach?
Amazingly, Cisco has only focused on the performance of its IT systems for the past seven or eight years. In the earliest days, the emphasis was on productivity. The aim was to use IT to remove administrative and bureaucratic burdens on employees so they could spend their time doing their “proper jobs”. IT did what it was asked, but its success and ongoing performance was measured using traditional financial indicators and operational measures of service levels.
“Our view now, however, is that while these numbers are important, they do not measure the relevance of the IT department to the company as a whole,” admits Nick Earle, vice-president of EMEA in charge of planning and operations. “They approach IT as a standalone department, but its real value is as an enabler of Cisco’s business plan.”
Two years ago, the company introduced a worldwide process improvement programme, which included IT. “We started to measure the performance of our IT in terms of its relevance to the business plan and our target growth,” he explains. “One of our main challenges was to improve the productivity of the sales reps. We found that the average rep spent eight or more hours a week doing things other than selling. So last year we set a target to give two hours a week back to the rep – time they can spend in front of customers.”
Three areas were identified where reps “wasted” their time: searching for data; claiming orders made by their designated customers; and checking their commission statements. “The IT department now has the task of eliminating these activities from the reps’ lives,” says Mr Earle. “In negotiation with CIOs, these projects become a priority because they are seen as a business priority.”
The performance of the IT department on these projects is measured by a single key indicator: minutes saved per week per employee. Collecting the data for this metric was an important issue. “All the data we need is automatically collected from all the operational data readily available on the entire network,” Mr Earle explains. “In the case of our key indicator, we analysed how long it took reps on average to do each of the three non-value-added tasks, and then we measure how many times sales reps do them each week.
Even more radical is how Cisco is adjusting its organisation internally. The IT employees who work directly on the business systems (such as marketing and sales applications), are being organisationally “merged” with the business process teams, breaking down the barriers that normally exist between the IT department and other business units. Igor Pistelak, director of operations for EMEA, says: “The measurement of these employees’ activity is directly tied to the measures of productivity, cycle times and business effectiveness, as well as the traditional IT measures of time-to-deliver versus commitment, cost versus budget and quality of the delivered systems.”
But the employees responsible for IT infrastructure and services do not escape the new regime either. “We are going in the direction of mapping the availability and performance of those services to the business processes they support,” says Mr Pistelak. “For these employees/teams, we will continue to measure based on infrastructure availability and performance versus service level agreement. This mapping will allow us to build agreements that link directly to business measures.”
For Mr Earle, the management structure behind this improvement programme is vital to its success. “But it all starts with the business plan,” he warns. “For example, say a key part of our plan is to grow revenue by 15 per cent with a flat head count. That means increasing productivity. The business process operating council (BPOC) is the top level in the company that manages business processes and the drive to improve productivity comes from it. In collaboration with the CIO, BPOC decides the priorities and targets for the IT department and is regularly updated on progress.”
To monitor performance and track the key IT indicators, Mr Earle uses a balanced scorecard. “We use a spreadsheet,” he says. “It is the job of someone on my team to collect the data – it takes a few phone calls and e-mails – which we put in a spreadsheet to produce the scorecard. If you get the metrics right, the tools do not matter.”
Software, he argues, can get in the way of effective performance management. “Tools measure things accurately, but people measure trends. I am often asked how safe it is to rely on self-reported data, but it does not matter if our key indicators are absolutely accurate or not. What matters is the trend, how they change over time.”
What also matters is the action taken as a result of the scorecard monitoring. “The scorecard sets the agenda for monthly management meetings,” he adds. “Because it uses mainly leading indicators, rather than lagging ones, using the scorecard is like looking out of the windscreen rather than the rear-view mirror. We can see where the business is going and take action to meet our goals.”
For Mr Earle, the goal is to give the Cisco sales force more time for their customers. “If we can give back just two hours per rep per week, worldwide we could increase revenue by several hundred million dollars at no cost.” It’s the kind of story that Cisco’s own sales reps would love to tell their clients.
