These days it's imperative to be able to show the value of IT investments, but it isn't always obvious which performance indicators will best display that value. To choose the most suitable indicators, it is critical to know the characteristics of effective metrics, writes Jim FitzGerald, senior consultant at BMC Software.

There are five variables that an effective metric exhibits, FitzGerald writes in a post at Network World: It is linked to the business goal, means something to the customer, measures one event or condition, is not difficult to measure or report and offers a specific outcome that can be used in making decisions. FitzGerald cites "percentage of IT budget supporting projects" as an example of an effective metric. It is linked to the goal of fast response to business needs, which is important to company leadership and customers. It shows the value IT brings and is not too hard to measure. And finally, it offers management insight into the ability of IT to respond to business needs.

It's best to use no more metrics than necessary but not so few that you have insufficient data to make sound decisions. The most effective metrics will likely change over time, so you have to be prepared to swap them for new ones.

It can be helpful to place metrics in categories that show you are handling the full scope of a situation you are focused on. You also want to keep your target audience in mind. FitzGerald provides a table of categories of metrics and outlines seven steps to develop a metrics strategy, reproduced here:

1. Select a business goal.

2. Determine how IT supports this goal or in which specific focus areas (processes or activities) IT needs to improve. Analyze the focus areas in parallel.

3. Determine the maturity of the process or focus area.

4. If maturity is too low, determine the scope of metrics needed to measure progress.

5. Review current metrics to make sure they meet the characteristics of valuable metrics.

6. Select new metrics, if needed.

7. Review metrics for effectiveness, completeness and aging.

For more:
- see Jim FitzGerald's post at Network World

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