How to Do a Pain Free IT Reorganization

Spend enough years as a CIO, and odds are good that you will preside over the reorganization of an IT department or two. When you sign on with a new company, “overhaul dysfunctional IT organization” may be at the top of your to-do list. Or perhaps a need to slash the IT budget, digest a spate of acquisitions or respond more nimbly to market demands will spur a departmental shake-up.

Whatever the reason, a reorg’s success hinges on the same best practices that underlie any IT-business endeavor. We asked CIO Executive Council members for tips on how to reap the most gain for the least pain from an IT reorganization. Here’s what they advised.

1) Make sure business strategy drives the reorganization. Too often, a reorg is a knee-jerk response to some fleeting external pressure, such as a call to cut costs or better cater to a cranky group of internal customers, rather than a well-thought-out and well-aligned move. “Don’t reorganize just because you’re the newbie, or because it’s been a year since the last reorg,” says Brent Stahlheber, executive VP and CIO of The Auto Club Group (AAA). “Make a change where change is truly needed.”

During Stahlheber’s interviews for the CIO post at The Auto Club, for example, he learned about problems with the decentralized IT organization. “It was clear that it wasn’t working around applications and infrastructure,” he says. “They weren’t rowing in the same direction.” Once Stahlheber took the job, though, he did not rush to reorganize: He spent six months on reconnaissance, talking with business leaders and IT staff to understand the company’s product lines, market environment and business strategy. Only then did he embark on a centralization initiative.

At other companies, the link between an IT reorg and business strategy may be more overt. Cardinal Health’s IT centralization effort, for example, is part of a companywide global integration plan called One Cardinal Health. “[The plan] is about making it easier for customers to do business with us by partnering across our internal business boundaries to offer them integrated services,” says Jody Davids, Cardinal Health’s executive VP and CIO. The first step of the plan was the recently completed IT reorganization, which combined a decentralized IT staff of 1,700, spread across all of Cardinal Health’s business units, into a single, global enterprise IT organization. Over the next five to seven years, Cardinal Health will be moving to a single ERP platform and ultimately to common technologies across the globe.

2) Involve business stakeholders in planning. An IT reorg affects the entire business—not just the IT department—so CIOs should consult with business peers from the start to win their support as early in the effort as possible. Davids kicked off Cardinal Health’s reorg by asking business clients how they perceived IT. Armed with both positive comments and suggestions for improvement, Davids shared their answers with her IT staff, thereby building the rationale for change. Cardinal Health’s executive committee, of which Davids is a member, gave her feedback on the reorg strategy, vision and top-level organizational structure. “I had support from the top, which made [the reorg] a lot easier,” she says.

3) Give IT staff a role in planning. In addition to reaching out to the business side, give front-line IT staffers a formal role in reorg planning so that they can express concerns and help others understand the day-to-day impact of proposed changes. Paul Lawler, senior VP of technology operations at Cendant, says that midway through Cendant’s reorg, he formed an IT employee council made up of one strong team leader from each functional group (operations, project management, end-user services, relationship management and so on).

4) Build a plan—and plan enough time. Executing a reorg can eat up a surprising amount of staff time, both for the CIO and the CIO’s top lieutenants: You’ll need to allot time for meetings to design the new structure, and time to communicate changes to employees and business clients. In some cases, you’ll have to interview employees for newly created roles or train them on new systems and procedures. Davids estimates that during Cardinal Health’s six-month reorg, her 12 direct reports devoted 50 percent to 60 percent of their time to the effort; during a three-month period, her direct reports’ staff also devoted 50 percent to 60 percent of their time to the reorg.

5) Grant critics a voice. During reorg discussions, don’t be surprised if the decentralists come out of the closet, says Lawler. “Suddenly, people who have always wanted to take back control over IT will come out and be naysayers.” In hindsight, Lawler says, it would have been wise to put a naysayer or two on the reorg steering team. That way, they could have raised their objections as part of the team rather than from the sidelines.