Strengthen GovernanceBy Peter High | Posted 03-14-2011
The New Normal: Proceed with Caution
If you believe what many economists are now saying, we have emerged from a prolonged economic malaise and the United States is poised for growth. Good news surely, but IT leaders have suffered right along with other executives in the corporate suite during these bad old days. The recent downturn cost a lot of talented IT leaders their jobs.It seems, then, to be an appropriate time to ask: "What can IT leaders do today to prepare for the next downturn?"
Having worked with a great number of CIOs on the principles of World Class IT (introduced in my book, World Class IT: Why Businesses Succeed When IT Triumphs), I have learned that the most successful executives focus their organization's efforts to ensure that they plan for the proverbial "rainy day," while simultaneously encouraging innovation. There are four main areas on which these leading executives typically focus:
- defining the present and future state;
- strengthening governance;
- motivating employees; and
- investing in the future.
Defining the Present and Future State of IT
It is critically important to develop and maintain a skills inventory of the people in your department. First and foremost, this requires defining taxonomy relative to those skills. Then, it's essential to have all employees document the skills they currently possess. This skills inventory should be refreshed whenever there is a new hire, and through each evaluation cycle, providing an "as is" picture of the skills of your staff.
Develop a workforce plan reflecting the skills the IT department will need in the future based on where the company is headed, business and IT strategy, and so forth. This is the "to be" state of the staff's skills. The gulf between the "as is" picture and the "to be" state should then be evaluated; this will drive your training, recruiting and vendor-engagement strategies.
Meaningful evaluations must be conducted to identify your best employees. "As a leader, the worst thing you can do is treat unequal people equally," says Michael Capone, corporate vice president and CIO of Automatic Data Processing (ADP). "Remind your best people of the value they bring to the organization. This is the way to motivate them to do extraordinary things during difficult times."
Likewise, it is critically important to have an "as is" and "to be" understanding of the IT infrastructure that is in place; both scenarios should be represented in your infrastructure road map. By plotting software, hardware, applications, networks and such into a road map--and maintaining that road map--you will have a clear picture of which components of your infrastructure are on the verge of being implemented, which are being maintained and added to, and which should be retired.
The CIO and other IT leaders must make it part of their jobs to engage in regular, formal and informal communications with their business-side colleagues. This is important in order to get a preview of strategy before it is fully formed and to engender trust with business colleagues. It will also enable you to suggest ideas to the business.
Weaving IT into the fabric of the strategic plans of the business is critical. IT leaders must push business leaders to articulate their plans in a uniform manner. This way, IT can easily digest those plans and use them as valuable inputs to the aforementioned workforce plan and infrastructure road map. It is especially important that IT leaders make themselves strategically relevant when times are good.
"If you were not relevant in the business strategy before a downturn," Capone says, "you are not going to become relevant during times of crisis."
Once the business articulates its plans, IT should contemplate what those plans collectively indicate in terms of IT imperatives. Sample questions to consider: What are the business intelligence needs of our company's various divisions now? What will our needs be in 12 months? In 24 months? How do these needs impact the IT investments we need to make today in order to support that long-term vision?
Economic downturns and financial duress tend to lead enterprises and industries to toughen up their governance practices. All too often, we see these tightened controls relax again once dollars start to flow and budgets for IT projects increase. It's smart, though, to retain rigorous governance practices in good times. This way, when the next downward cycle hits, your IT organization will already have its practices fine-tuned, and it will not have to scramble to create processes applicable to distressed times.
David Smoley, senior vice president and CIO of Flextronics International, says one key to his team's success has been imitating the "lean" practices of his business partners. "In getting closer with our business colleagues, we have adopted their practices, which have translated into better governance practices," he says. Although Flextronics, a provider of vertically integrated advanced design and electronics manufacturing services to original equipment manufacturers, recently announced record earnings, Smoley is in the midst of a global optimization campaign to continue to ensure that IT is operating as efficiently as possible.
This begins with having a solid prioritization process. By standardizing around criteria, it is possible to generate a true one to "n" list of projects across business units. The following criteria are of greatest importance to consider in building your prioritization process:
- strategic fit;
- return on investment;
- project interdependency; and
- project risk.
You'll also want to bolster portfolio-management practices. This includes having the right people in place, perhaps in a program-management office, and the right processes in place to ensure that data is entered in a timely fashion. It also includes investing in tools that will provide a window into the health of the portfolio, and allow for quick action to course- correct when necessary.
Duane Anderson is CIO at Marquette Group, an advertising agency that delivers qualified, local customers to national brands by designing integrated media strategies, and USMotivation, which focuses on incentive strategies, group travel and creative communications.
Says Anderson: "We evaluated our IT portfolio and found we were focused on too many smaller projects that didn't always align with our strategic goals and move the company, or our customers, forward.
"With senior leadership buy-in, we focused on a smaller number of high-impact projects and included these as part of our annual strategic planning function to ensure the most senior-level focus. This has allowed us to really move the dial on strategic efforts, such as growing our revenues non-linearly with costs and greatly increasing our customer-facing IT efforts."
Likewise, project management and execution must be contemplated. This requires having a robust development life cycle in place with stage gates at which projects can be continually evaluated. Although there may be different "flavors" of the life cycle to accommodate projects of different sizes (in terms of budget and timing), some principles should be common across all development efforts.
For example, ensuring that projects are developed on-time, on-budget and on-scope is essential. These three metrics should be your baseline to determine the efficacy of the project-management and execution practices.
As part of your good governance efforts, you'll want to focus on developing robust vendor-management practices. If you don't already have solid project- and portfolio-management practices in place, it is almost impossible to manage vendors to assure the highest level of value.
Flextronics' Smoley asserts that improved vendor-management practices have been a major factor in his team's success: "We rely on our vendors to a great extent, and we have developed practices to ensure that we get the most out of them, while also treating them like true partners rather than like vendors." Rather than having the company's sourcing department take over this process, Smoley's team is involved in RFPs, contracting, onboarding and managing external partners to ensure that the relationship is always managed with value in mind.
Motivate Your Best Employees
In the process of defining your organization's present and future state (see #1, above), you and your leadership team will have identified your best employees. It is especially important during downturns to motivate these employees. It is precisely during times of strife when the best employees are most needed--not only to ensure that work is accomplished efficiently and effectively, but also to motivate their fellow employees. This process begins at the top.
You'll need to focus on compensation and recognition to motivate such employees. Compensation might be difficult to maximize during a downturn, of course, as budgetary constraints can necessitate that employees forgo bonuses or salary increases. That's why a comprehensive recognition program is needed.
Good work should be identified and celebrated, and it is important that such celebration happen in a manner that makes employees comfortable and, therefore, motivated. (You may be surprised how often the manner in which an employee is recognized -- pulling a shy employee up in front of hundreds of people, for instance -- might turn what is intended to be a special moment into an unpleasant one.)
You'll also want to focus on a range of retention activities. These can include providing mentoring and career-planning forums; offering training so employees feel that they are improving their skills; and assigning the best employees to do the most interesting work.
Tough times require strong cross-IT communications to deal with potential angst among employees. Uncertainty can breed discontent, and you'll want to counter this with a solid, regular flow of information, including the creation of forums through which anxious employees can ask questions.
ADP's Capone, who has the IT departments of many different business lines reporting through to him, speaks of the need to create consistent communications across the company: "We have used a variety of media in order to get our message out across IT, whether it is through Enterprise 2.0 tools like blogs, or old-fashioned but effective Town Halls. The key is to communicate often and consistently."
Invest in the Future
When your enterprise finds itself deep in the midst of major cost-cutting, it's easy to forget about innovation. This is a mistake. In good times and bad, IT must have a solid process through which new ideas can germinate.Innovation is the number-one topic that arises in my numerous conversations with IT leaders. The problem is, after spending a long time in cost-cutting and survival modes, many IT organizations have lost their innovation "muscles," so to speak.
In rebuilding a culture of innovation, you need to assure your staff that, should they spend time on innovative ideas that ultimately fail, this will not reflect poorly on them. Attempts at innovation, by definition, will sometimes lead to failure, and it is important that you view these as opportunities to learn.
Too often, innovation is viewed as an expensive and daunting undertaking. It's seen as something your product-development people do to create products and services that consumers crave. But innovation is essential throughout an organization in order to encourage growth. Capone advises CIOs to "zealously tie projects to business value, and focus on ideas that are competitive differentiators."
If you want to remove roadblocks to innovation in your organization, keep these three key factors in mind:
- Innovation can be small in nature.
- Innovation can be internally as well as externally focused.
- Innovation can be related to processes as well as products and services.
So, how do you generate ideas? By fostering an environment in which all team members are encouraged to contribute ideas. In addition, you'll want to create a repository for new ideas that also houses the vestigial analysis of potential costs, benefits and business drivers behind each idea.
Implementing these four business practices will keep your organization ahead of the competition during bad economic times and position your enterprise to excel as the economy recovers.
Peter High is president of Metis Strategy, a boutique IT-strategy consultancy based in Washington, DC. A contributor to CIO Insight, Peter is also the author of World Class IT: Why Businesses Succeed When IT Triumphs, and the moderator of the podcast, The Forum on World Class IT. He can be reached at email@example.com.