Employee Pitfalls
According to Simon Walker, a director of US-based consultancy Clynes Hales Walker, CIOs should be considering constantly the way the environment is changing and their responses to that change. There are too many old school CIOs who remain far too focused on hardware and software, and not nearly enough on people issues, he says, in a world where too many employees are more loyal to their own career prospects than to their company. And increased use of contractors has also vastly increased operation risks, he says.
"For operational risks you need to screen employees as much as screen software for viruses. The internal threat of disgruntled employees stealing intellectual property and maliciously tampering with data and that type of thing is a much higher risk these days than software failure," Walker says. "The profile is all changing and the CIOs have to keep up to date with the changing profiles. It's a matter of continual education . . . There is no finish line, you just have to continue studying throughout your career, and keeping up to date
"There are huge risks if you outsource too far - as some organisations I suspect may - and outsource [technology development] so that the external organisation holds your intellectual knowledge. Then if that company goes belly up you have suddenly lost all your intellectual knowledge, through no fault of your own."
Pleiter says when it comes to the measurement of risk, the more CIOs can begin to articulate back into the business an understanding of where the risks lie then use models to quantify those risks and generate leading indicators to events that appear to correlate with losses, the better management will be informed about those risks. It is that knowledge they need to begin making informed decisions, and which will ensure those informed decisions take into account the necessity to mitigate operational risk.
There is technology to help. Aberdeen Group believes organisational size and digital complexity now often mask the linkage between a business decision and its operational consequences. As a result, even the most brilliant decision makers are unable to grasp the full impact of their choices without technical assistance.
"Although business has always been intricate and cross-functional, only a few aspects were truly unpredictable. Contrast that with the daily instabilities of today's big business: fluctuations formerly reserved for international currency markets now pervade the day-to-day activities and well-established relationships of commerce," a recent Aberdeen white paper says.
"Against this backdrop, a new technique, corporate performance management (CPM), promises to deliver the perceptiveness and agility managers require for effective decision making. CPM presents managers with an integrated, analysable view of the entire enterprise. To balance the enterprise and prevent operating units from clashing, CPM uses metrics and key performance indicators (KPIs), underpinned with analytics, to calibrate management actions with broader enterprise strategies. CPM unabashedly borrows the best concepts from management theory, injects causality into the Balanced Scorecard, and gives decision makers an analytic lens into strategic decisions."
Aberdeen Group believes attaining excellence under CPM will require an amalgam of new and existing technologies, both of which are analytic and transactive in nature. On the plus side, it says CPM is accretive; each technical building block increases the value of each of its predecessors. CPM is flexible; the methodology can absorb small-, medium- or mega-doses of technology, depending on the company's available resources. And CPM promises to be a boom market. Aberdeen expects CPM-related spending to near $US5 billion by 2005.
Covering the five disciplines of CPM - corporate objectives, accounting, reporting/analysis, prediction and optimisation - the Aberdeen white paper says CPM requires a corporate culture and technical platform that presents workers with the business and financial import of any action. Helping the enterprise to observe and balance the actual with potential short- and long-term effects of decisions, CPM can boost a corporation's financial and operational performance by:
- Creating corporate and market knowledge - using scenario-driven analysis, metrics, KPIs and optimisation techniques to discover the most efficient use of capital resources, including cash, people, material goods and intangibles
- Increasing the quality of business decisions - providing role-based information that employees at each operating unit and level can use to understand the financial and operational consequences of possible courses of action
- Reinforcing common goals - adopting a common internal language to ensure that the corporation coordinates its tactical decision-making processes with overall enterprise strategies.
Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.