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April 2014
Efficiency versus Effectiveness
Gerald Shields, IT Practice Director

 

The question of IT efficiency is one most IT executives no longer mind discussing. They may tout their cost for a particular service and demonstrate their cost in relation to industry benchmarks provided by services like the Gartner Data Center or the Computer Economics Report, both of which are credible third-party assessments. Expense analysis, comparing operations to peer organizations, provides valuable insights and is a vital part of the IT dashboard. Measuring and analyzing IT efficiency demonstrates if IT is doing things right from a resource and cost perspective.

 

A recent Forrester study reports that 87% of U.S.-based businesses say they couldn't operate without IT, a statistic that raises the obvious question of what the other 13% do. It isn't a surprise to anybody that IT is critical to almost any business these days. Although IT efficiency has been a focus for several years, the demand can't be satisfied by efficiency alone-IT effectiveness must also be addressed.

 

Efficiency versus effectiveness is not a subject IT organizations generally discuss. They prefer to talk the nuts and bolts, the bits and bytes of their business, whether it's a resounding debate on the value of cloud computing or the best platform for mobile applications. Yet, as IT organizations have taken on an increasingly larger and more strategic role within their companies, a role that comes with a greater slice of the corporate budget, the pressure to justify their cost and position within the company has increased. Successful CIOs have learned to balance the needs and desires of a demanding user base with a limited budget.

 

"61 percent of companies list IT efficiency as a top priority." - Gartner Research

 

While efficiency measures if you are doing things the right way, effectiveness determines if you're doing the right things. When measuring efficiency, IT organizations generally look to outside data for comparison. For effectiveness, the IT organization must look inside the company to get the answer. The primary sources for measuring effectiveness are the executives, internal customers and users of the IT services. Effectiveness shows how well IT is performing for their users within the organization, which is IT's ultimate responsibility. To improve IT effectiveness, CIOs should focus on how they can help other business areas perform their mission, how they can get closer to their customers, and find practical yet effective solutions.

 

It is easy for CIOs to focus on efficiency, as there are a wealth of concrete, third-party benchmarks like the ones mentioned above to use. Focusing on effectiveness, looking inside the company to determine how well IT is serving its internal customers, requires a different approach.

IT effectiveness is based on the perceived value surrounding five key components of IT delivery:

  • Governance
  • Project Delivery
  • Support and Maintenance
  • Availability
  • Innovation

An effective IT organization must pay careful attention to each of these components to deliver effective service and must listen to the internal consumers within their company. No matter what benchmarks IT may achieve, if the department's customers don't believe there is effective value delivery, then there is not.

 

Few IT organizations seek to truly understand internal business units' perception of IT's impact and the importance the business units place on the five components of IT delivery. This insight is critical to becoming an effective IT organization that impacts the business. It's easy for IT to focus on one component, such as availability, but that pigeonholes the IT organization as a just utility provider. CIOs might boast of a 99% availability record, but if the users don't perceive a greater value in IT than as a utility provider, they'll only care about the 1% of the time the network is down.

 

To become a truly effective IT organization, it is vital to understand the customer's expectations and how you're performing according to those expectations. IT organizations must find a method that is simultaneously easy to administer and intuitive from both the IT and user perspective. One method we have found that is both useful and widely applicable is the RATER method, as outlined in Valarie Zeithaml's Delivering Quality Service. RATER measures IT's value in Reliability, Assurance (knowledge, quality and credibility of the staff), Tangible (physical aspects of IT's communication, documents and processes), Empathy (does IT relate to user concerns and issues) and Responsiveness. It is a qualitative and quantitative method that can help provide customized solutions to improve IT effectiveness.

 

In our experience with effectiveness, we've often discovered the "perception" gaps are bigger than the "reality" gaps. That is to say, IT's customers-and often, the IT organization itself - see the difference between IT's effectiveness as it stands and where it should be as greater than it truly is. Whether real or perceived or somewhere in between, however, such gaps must be addressed. We suggest taking firm and direct action to bridge them by:

  1. Confirming the Joint Strategic Agendas that IT should be working on with the business.
  2. Identifying an intuitive method to understand perception v. reality-such as the RATER system mentioned above.
  3. Engaging in a dialog with key IT stakeholders, executives and line managers to understand their expectations and how capabilities line up (both in reality and perception).
  4. Working with key IT partners to develop a plan to address any "reality" or "perception" gaps.

In the last 15 years, the amount of the average corporate budget devoted to IT has risen dramatically, as have the expectations of IT's customers-the functional leaders and the end users. The proper mindset for any CIO is to produce greater value to the organization, to be effective as well as efficient, and to engender the idea that IT is a good value, not just a necessary expense.

 

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MandAMergers & Acquisition Integration: The Nolan Approach
   

Without comprehensive assessment and careful planning, mergers and acquisitions can result in customer attrition and operational inefficiency rather than growth and prosperity. In order to maximize cost synergies while minimizing disruption to valued customers, financial institutions must not simply eliminate redundancies - they must also ensure that the best people, processes, and technologies have a place in the new organization.

 

When executed successfully, mergers and acquisitions enable banks to quickly and effectively grow their footprint and fuel profitability. The Nolan Merger and Acquisition Integration offering provides the critical insights and clearly defined processes that enables these organizations to:

  • Reduce operating expenses through cost synergy
  • Create a seamless transition for customers and staff
  • Enhance profitability through decreased unit costs
  • Maximize retention by understanding customer needs and proactively managing transition events

 

To learn more about our approach to Mergers and Acquisition Integration, click here

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