Bold business initiatives don’t pay off on paper. People either make or break them.
Indeed, IT departments often have to be reinvented and employees retrained so that intrepid companies can pave new paths to fortune. According to our survey of this year’s CIO 100 honorees, only 13 percent say they’ve deployed their people in a bold manner. But if your staff isn’t structured to support a new strategy, if they lack the necessary skills or resist change altogether, failure, if not guaranteed, is a strong possibility. That is why considering staffing is so critical before implementing new ideas.
CIO recognized several of this year’s honorees for the bold, unorthodox changes that they made to their IT organizations.
So Long, Civil Service
Nearly four years ago, the state of Delaware dissolved its underperforming IT department and hired CIO Tom Jarrett to rebuild it. Jarrett (at Governor Ruth Ann Minner’s behest and with the legislature’s blessing) also eliminated the civil service system that guaranteed IT workers job security and regular, albeit marginal, raises. Every employee had to reapply for a job in the new Delaware Department of Technology and Information. Workers who were rehired got salaries competitive with the private sector in the area but had to meet performance goals to keep their jobs.
Jarrett cut 90 percent of the old department’s senior and middle management positions, and replaced the remaining ones with new functions and titles. He and his team then met with each of the department’s 200 employees to tell them whether they had a future with the new agency.
Although there was no IT employees union defending their jobs, those who weren’t rehired were guaranteed a job elsewhere in state government. In the end, 79 percent of the staff survived.
Jarrett says that since the transformation, his staff has finished all of its major projects on time and on or under budget. But his personnel practices have created a rift between the department and other state agencies that are still on the civil service system. Lynn Hersey-Miller, the department’s chief program officer, says that her team is perceived as pushy because they have performance goals to meet. IT workers are also resented for their higher salaries. “If one of my folks makes a mistake, I’ve heard people say, ’You shouldn’t be making those kinds of mistakes with the money you make,’” she says. “It’s just a difference in culture.”
But it’s made a difference in the state of Delaware.
Before Jim Craig joined real estate developer Cooper Communities as vice president of information systems in 2000, the company’s business units had given up on their IT department. Some were, in fact, hiring their own IT workers because the corporate IT group couldn’t get itself organized to address the business units’ needs. Craig at first considered cleaning house, but he decided that would be taking the easy route. And that, he says, is not his style. Instead, he chose to light a fire under his existing staff, because he believed that they had both the passion and the potential for success.
Craig laid the groundwork for the transformation by creating an internal service-level agreement for the help desk. He also began to track network uptime, as well as the efficacy of the software development process. Then he posted charts illustrating the latest network and help desk stats. He mounted one in the IT department, and he hung one on a bulletin board on the main floor of Cooper’s headquarters—in full view of all the company’s employees.
The charts revealed that more help-desk calls than anyone had realized were left unresolved because the volume of calls was so high and the help desk was understaffed. The metrics also revealed the necessity of establishing a triage system for prioritizing calls. In addition, the IT staff discovered (as did everyone else) that it wasn’t very good at estimating the amount of time and money needed to develop internal software.
Not surprisingly, the IT staff was frustrated, which is what Craig wanted them to be. He then helped them create performance objectives for themselves and tied their raises and bonuses to achievement of these objectives.
Employees found the accountability threatening, but Craig explained that these steps were necessary to get business leaders to trust IT with strategic initiatives. Such projects, he added, would be more satisfying to work on than the repetitive job of maintaining existing systems.
Almost five years later, only two members of Craig’s original team have left the company, and the staff has secured the business’s confidence. Their newfound good reputation helped Cooper’s commercial property investment business win two leases worth more than $2.5 million in its new corporate headquarters, by providing the tenant with IT services. Cooper’s business units have now surrendered their personal IT workers, and the metrics Craig established, now webcast companywide via a corporate portal, show a stable network, a responsive help desk and accurate time and expense estimates on software projects.
Development for Customers, Not Developers
In 2002, Carlson Marketing Group (CMG) embraced a new business model. The company ceased building one-off marketing solutions for customers and started mass-customizing them. To support this transformation, Chuck Clabots, CMG’s former vice president of information management, services and products (he left in June to become a principal with The St. Pierre Group, a management and technology consultancy), united nine IT departments that were organized to cater to specific clients. The combined IT shop was structured around the 27-plus marketing services CMG sells, such as loyalty programs or merchandise fulfillment.
To accommodate this new business model, the IT department had to change its approach to application development. Instead of building each tightly integrated application from scratch, it had to build them from components that could be easily configured and integrated depending on a client’s needs. Clabots adopted the Rational Unified Process (RUP), an iterative software design methodology, as well as the IT Infrastructure Library (ITIL), a set of best practices for delivering and managing high-quality IT services. RUP provides processes for business analysts to define customer requirements for each service, which developers then turn into software components. The department uses ITIL to diagnose and solve problems with applications that are in production.
Adopting the new approach required developers, who were used to building applications their own way, to learn a specific process. It also required greater interaction with clients in order to examine their business processes, rather than simply obtaining the functional requirements for a system and then developing a prototype.
Because CMG had the nerve to turn its business model upside down, Clabots says the privately held company has maintained its profitability despite declining gross margins.
Same People, New Jobs
In 2003, after years of mediocre financial performance, Fireman’s Fund decided that the way to become more competitive was to make life easier for the agents who distribute its insurance policies. This shift to a more aggressively sales- and customer service-focused business meant that the IT department—including 200 programmers heretofore mainly devoted to maintaining disparate legacy policy processing and underwriting systems—had to quickly get better at designing and developing systems that provided a competitive advantage and differentiated Fireman’s Fund from other insurance agencies, such as applications to help agents get quotes to customers faster.
So CIO Fred Matteson outsourced 200 maintenance jobs to IBM, while 30 additional workers took other jobs with IBM. A few employees left the company. Matteson set about turning the remaining 250 employees into insurance business experts who were also well-schooled in Web-based technologies.
Matteson redefined the jobs of his staff so that workers were performing higher-level functions—such as architecture planning, application design, project management and managing relationships with the business. “These aren’t just new names for old jobs,” says Matteson. “You must really do and act and think and plan differently.”
For example, programmers who became application designers no longer do any programming. Instead, they plan how to design cost-effective features for the business systems that will generate more money for the company. The coding is outsourced, and the product managers oversee the outsourcers.
The business analysts now work directly with employees in sales and underwriting to determine system requirements. The product designers also translate business needs into a technical design suitable for the company’s new service-oriented architecture (earlier systems used a client/server model). Employees versed in Information Management System (a legacy database-management system), Cobol and DB2 were baptized in Java, .Net and strategies for vendor management.
As Matteson says, “The classic IT shop must look different a few years from now, or else it will become irrelevant to the business.”
And he’s translated those words into action.
Senior Writer Meridith Levinson can be reached at email@example.com.