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What Gets Measured Gets Managed

February 28, 2009
by Pam Arlotto
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The importance of ROI, value, and concrete benefits of IT investment

According to the old axiom, “what gets measured gets managed”. The cover story in this month’s Healthcare Informatics, emphasizes the importance of ROI, value and concrete benefits of IT investment. For some time, the industry has forgone this important perspective to “just do it”. There has been a widely held belief that certain things can’t be measured. Without measurement, decisions and priorities are not informed, resources are misallocated, priorities are out of order, and mistakes are often made. The price is too high, as information technology becomes part of the care delivery process, organizational performance is impacted and lives are at stake.

Business cases, with projected ROI and value assumptions, are important at the beginning of a project. But even more crucial, is the ongoing plan to realize value from the IT investment. Metrics should be developed at every stage of a project.

Two types of benefits can be identified: tangible and intangible. Tangible benefits are more straight forward and relate directly to “bottom-line” results or ROI. Tangible benefits involve concrete gains and typically fall into two categories: increased revenues or reduced (or avoided) costs. Intangible benefits are less easily quantified, yet often have greater strategic impact. As IT becomes less transactional, the benefits may become more difficult to define. In the book, Strategy Maps, authors Kaplan and Norton classify IT as an intangible asset along with human resources, market position and innovative quotient. I propose, however, along with Kaplan and Norton, that you can measure anything. In our book, “Beyond Return on Investment: Expanding the Value of Healthcare Information Technology” we provide a framework for measuring tangible and intangible benefits. Measurement doesn’t have to be difficult or require a significant resource investment. It does require skills in “systems-thinking”, observation, estimation and a thorough understanding of your operating environment. The first step in quantifying the seemingly unquantifiable is to understand the business or clinical problem you are trying to solve with the technology. If you can answer these questions:

Why is it important solve this problem?
What operational change will be required to solve this problem? What are the risks of not solving this problem? Who are the stakeholders involved in the problem today?

then you can begin to understand how and what to measure. The next step is to examine what is easily measured using information you already have. This step will provide you significant understanding on the process of measurement, which I will cover in future blog posts. Yet, do guard against the following:

“The first step is to measure whatever can be easily measured. The second is to disregard that which can’t be easily measured. The third step is to presume that what can’t be measured easily isn’t important. This is blindness. The fourth step is to say that what can’t be easily measured really doesn’t exist. This is suicide!”. Charles Handy, “The Empty Raincoat”

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