Being a Lean IT Group—and Continuously ImprovingBy Peter High
Being a Lean IT Group—and Continuously Improving
By Peter High
When Rob Lux joined the Federal Home Loan Mortgage Corporation, popularly known as Freddie Mac, in October of 2010, the U.S. government-sponsored enterprise was already starting to claw back from the depths of the economic malaise that plagued the mortgage industry. Like a lot of CIOs then, Lux had to operate with a slimmer budget, but he also found the constraints were well suited to dreaming up creative ways to help the McLean, Va., company be innovative. As a result, IT continues to play a large role in the story in how Freddie Mac is coming back from its financial struggles.
Freddie Mac was in the news for a lot of wrong reasons in 2008 and 2009. You joined since that time, and have been part of the solution. Can you speak a bit about the company and IT department that you found and the transformation you have led?
Rob Lux: I joined in late 2010. Freddie Mac and the entire mortgage industry were still feeling the effects of the economic turmoil of 2008 and 2009. Freddie Mac was, and still is, in conservatorship. The major challenge was to develop and deploy a plan to move ahead.
To give us a path forward, we created a three-year IT strategic plan that would prepare us for whatever the future held. Freddie Mac's technology is critical to the mortgage industry. So we have a responsibility to properly maintain, preserve and improve our IT infrastructure.
We transformed IT by benchmarking ourselves against best-in-class IT organizations, setting targets, and constantly measuring progress. Our IT strategic plan focuses on four main areas: planning, delivery, operations and our team. This targeted approach has allowed us to achieve dramatic improvement in a very short time.
In order to enact the cultural change that was clearly necessary, how much of a leadership change was necessary within IT? How did you manage that change?
Cultural change always starts at the top and we had to ensure our leaders were committed to the necessary change. For example, in the past, IT's performance was benchmarked against itself. In other words, if costs got reduced 5 percent from the prior year, it would be a success. Instead of benchmarking ourselves against ourselves or against Fannie Mae, we benchmarked IT against the best financial services firms. What we found was that we didn't compare favorably.
Rather than keep this unpleasant news to ourselves, we shared the information with everyone—our executive management, the board of directors and every person in IT. We then stated that our goal was to become one of the best IT organizations.
Not every IT leader supported this level of transparency, and some tried to rationalize away the findings. These leaders didn't want to change and soon opted out of the organization.
We had to recruit change agents to help lead us on the journey. We were fortunate to attract a number of top-flight IT leaders to Freddie Mac. All of them have a passion for action and a commitment to excellence and team.
We also have been successful at growing leaders from within. Several of our current IT officers were here when I started and have stepped up to help lead the change. This mix of new and existing leaders gives us a strong, balanced team.
What role has IT played in Freddie Mac's comeback? For instance, what sorts of initiatives have you undertaken in the past year or two?
IT is a critical enabler for most financial services firms. It's no different at Freddie Mac. IT represents nearly 25 percent of our Freddie Mac team and has delivered multiple projects to transform, not just Freddie Mac, but the entire mortgage Industry.
For example, in 2011 IT delivered a project to standardize mortgage data across the industry. In the past, property appraisals were delivered on paper and the standards for the quality and condition of a property weren't as well defined as they could have been. The project allows us to receive millions of appraisals in electronic form with much more detailed and accurate data.
In 2012 IT delivered a project to align the way servicers work with borrowers to help families stay in their homes. And in 2013 we delivered a project to enhance purchase certainty for our seller-servicers. This means we get the information we require to be certain that loans we are purchasing are good. This, in turn, helps us provide more liquidity to the housing market, which helps more families receive home mortgages.
Being a Lean IT Group—and Continuously Improving
It is often said that constraints add to one's ability to innovate. Did you find that the constraints in the early years of your tenure—in terms of budget, people and the like—led to some innovative outcomes?
We have taken the approach that "crisis is an opportunity." Crisis pushes you to do innovative and creative things which would never be possible when everything is running fine. Many IT organizations without our constraints attempt to do "grand design" or "big bang" transformation projects, where they invest hundreds of millions of dollars in large, multi-year efforts. This approach carries high risks and often leads to dramatic failures.
We decided to only invest in projects that could deliver results in months, instead of years. IT delivered projects that are foundational and then quickly build upon them with follow-up releases. This also allows us to quickly identify troubled projects and take action before they fail.
I know that you have embraced the consumerization of IT. How has it applied to your IT operation and to Freddie Mac more generally?
It was my intent to make a shift and have IT provide our employees with the technology they need to do their jobs. Just like you see people being productive at your neighborhood Starbucks, IT is providing technology to allow people to work from any device, from anywhere, at any time. We now have campus wireless, support BYOD [bring your own device] and have deployed technology to allow people to be productive outside of the main campus.
What are your priorities for the year ahead?
We have spent the past three years focused on improving IT's ability to plan, deliver and operate, while also enhancing our team. Our journey is very aligned with how you describe in your book World Class IT. We became more effective at managing projects and our portfolio by improving our planning and delivery capabilities. We built, maintained and enhanced a robust IT Infrastructure. We strengthened our team by recruiting, training and attempting to retain world-class IT people. Our focus was mainly inward on improving IT.
This year we will be focusing more outward. We are going to work to enhance our relationships with our business partners and get them more engaged in Freddie Mac's technology strategy. We will also develop deeper partnerships with those external vendor partners who can assist us in enhancing our IT capabilities.
About the Author
Peter High is president of Metis Strategy, a boutique IT-strategy consultancy based in Washington, D.C. A contributor to CIO Insight, High 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.
To read his previous CIO Insight article, "Beck Blalock's Big Dare," click here.