“Out of control.” “No value.” “Too late with too little.” “Disconnected from the business.” Those are all common comments about failing IT organizations. Management magazines tell of chief information officers (CIOs) unable to cope in the boardroom and IT organizations spending the bulk of their resources on projects totally unrelated to business strategies. Unfortunately, the stories are all too often founded in fact and accompanied by news of the replacement of yet another CIO.
So, let’s assume you’re the shiny new CIO, ushered into the corner office by the chief executive officer (CEO) and chartered to “fix this mess.” After the CEO pats you on the back and tells you how glad he is to have you on the team, what do you do? Is there a reliable formula for a successful turnaround? Are you going to get the bonus or the boot? That will largely depend on what you do in your first month.
There’s a formula for this critical first month that will work in almost every IT turnaround. It has worked for me in three major companies and a spin-off.
Troubled IT organizations exhibit five basic symptoms. They’re chaotic, unfocused, poorly led, demoralized and alienated. Each symptom has a root cause and, fortunately, a remedy.
This is what nails most CIOs. Chaos offends the inherent sensibilities of chief financial officers and leads to the old adage that the chief financial officer (CFO) is the natural predator of the CIO. CFOs are paid to protect the financial assets and reputations of their companies. Cost overruns, unpredictability, failure to deliver promised results, and reports that are obscured by incomprehensible verbiage all threaten the CFO’s ability to assure the CEO and the board of directors that the company’s coffers and reputation are safe. The CFO must react in order to eliminate chaos, and that reaction often leads to the elimination of the CIO.
CEOs, likewise, are under intense pressure from the board and shareholders to deliver predictable results. CEOs get nervous when CIOs don’t meet schedules and overrun budgets, and they will remove the source of that irritation: you.
Financial chaos occurs when the authority to spend money is disconnected from the accountability to adhere to a budget. Generous spending authority is delegated to surprisingly low levels within the organization that have little visibility and fewer controls. No one knows how much money is being spent, who’s spending it, what’s being received or how to get the situation under control. The cure is a three-step process:
1. Ask the CFO to appoint a key person to help you gain control of and manage IT finances. This person must report to the CFO. You must hand over 100 percent of the IT financial reporting to this person and make this person your most trusted adviser. Don’t allow anyone not reporting to this person to be involved with anything remotely financial. Having an independent finance person reporting on IT gives you instant credibility.
2. Tell your direct reports that staying within budget is their ticket to play. They don’t win bonus points for simply making budget; they just get to keep their jobs. Allow some time for them to bring their budgets under control, but don’t be overly generous. The CFO isn’t going to give you much slack either.
3. Immediately remove all spending authority below the lowest level that you’re holding responsible for budget accountability. Enlist the purchasing department as your control mechanism; it must be able to prevent employees from issuing purchase orders that don’t correspond to your new financial controls.
You’ll quickly hear from the business leaders that IT isn’t supporting the key strategic thrusts of the company and, generally, isn’t delivering value. These business leaders get paid based on the successful execution of the CEO’s strategies, and they get really steamed about anything threatening their net worth. You must become a part of this senior team, and you need to use its playbook. Quickly get your resources refocused on key strategies.
1. Use your new finance person to find out who’s doing what. Build a list of active IT projects, including project name, the business-unit project sponsor, approved budget, spending to date and key milestones.
The list will show that your people are working on too many projects, they’re working on the wrong projects, spending doesn’t line up with the strategic projects, there aren’t identifiable business sponsors or too much work is going into very minor activities. You’ll find lots of little projects hidden under the guise of maintenance. Kill them immediately.
You’ll find 50 per cent of your total development budget spent on “maintenance.” Cut it in half, and let your team know you don’t want any tears or failures. Pay your maintenance manager to deliver appropriate service levels at ever-decreasing costs.
2. Make a list of the few projects – no more than five – that are truly strategic and well aligned with the CEO’s vision. Validate your list with your staff and your new finance person. Then talk with the business-unit heads. Ask them if you’ve got the list right. Replace any of the five with more important projects, but don’t add a sixth.
Lastly, talk to the CEO. The key message is that you’re going to stop all development on projects other than these five and you’re going to focus all your resources on them. This takes guts. But keep this in mind: If you’re successful on all the little projects and fail on the big ones, you’re history. If you get the big ones right, the little ones won’t matter and you’ll probably collect an embarrassingly large bonus.
3. Communicate the process to your management and staff. Some will be nervous if their projects don’t make the top five. Reassure them, but don’t promise them what you can’t deliver: absolute security. After all, no one is promising you job security.
Here comes the tough stuff. By this time, you’ll have a feel for which senior IT managers are going to make it and which aren’t. Don’t fire anyone – yet. Go to the senior human resources (HR) executive and ask for a key HR person to be assigned to IT. The person must report to the senior HR executive but will be supporting you.
Have your direct reports do a 360-degree assessment of the IT managers, including yourself. Look for a balance of leadership types. You’ll want someone to balance your style. If you’re intuitive, you need a detail-oriented counterbalance. If you’re into process and detail, look for an ideas-oriented leader. Discuss the 360-degree assessment with your team and the CEO. Let them know what you intend to do after seeking their input. Then, do what you have to do. Don’t put off unpleasant actions. Wait too long, and it becomes impossible to do the deed.
You’ll find evidence of alienation everywhere: Customers don’t attend project meetings. Mistrust and even anger characterize interactions between business and IT. There’s a pervasive lack of communication between IT and the business side. This problem has to be addressed upfront and quickly.
1. Personally accept responsibility for fixing the problem. Ask the CEO to let you address the executive management committee and then acknowledge the problems honestly. Use the refocused project list to show that you’re sensitive to the company’s strategic initiatives. Have your finance person report on your financial accountability actions. Have your HR person report on the 360-degree evaluations and your plans to build new leadership skills.
But don’t make promises at this stage. You’re not expected to have all the answers yet, and to pretend that you do would destroy the credibility you’re trying to build. Your success will depend on your ability to build trusting relationships at this senior level. Trust is built on doing what you said you would do, every time.
2. Use your team, your finance person and the HR staff, and even outside consultants, to develop a balanced IT scorecard. Keep it nontechnical and concise. Shop the scorecard with the management committee members and your key customers. Use it to brief the CEO on a monthly basis.
So in the first month, build your senior team, seize control of spending, refocus your resources, select a morale-building milestone and create a balanced scorecard. It’s a packed schedule for one month, but it’s doable, and you’ll never get a better opportunity to get started right.