Delivering Efficiency and Cost Reduction: Long term tactics

We have spend the past several weeks covering how to deliver efficiency and cost reduction in IT, and particularly how to do it while maintaining or improving your capabilities. In my last post we discussed what are some of the recent technology industry trends that enable reduced costs at the same or improved capabilities. In this post we will cover the first two of the long term tactics that you can leverage to achieve world class cost and performance: quality and a high performance team.

The first and really most important area to tackle is quality. If a factory had a quarter of the output that it produced was defective and became scrap, it could no long compete in the lean manufacturing regime of today’s industry. Yet frequently, IT shops have defect rates of 10%, 20%, or even north of 50%. And much of the time and effort of the IT team is actually spent fixing things as opposed to new work or proper maintenance. You need to regard every defect in your shop as waste and as a cost to you and your business. You should tackle this waste wherever it occurs in your shop. It is not uncommon for more than 50% of large projects or programs to be over schedule and over budget. It is not uncommon to see shops where more than 10 or 20% of the changes result in some other problem, typically impacting production and service to the customers. These areas must be addressed with rigor.
For projects and programs, are you following a robust project methodology? Do you have proper sponsorship and governance? Are you leveraging a strong analysis and requirements management methodology and toolset? Are you taking advantage of modern methodologies that solve the tough parts of a problem first, get good prototypes out early for user review and avoid the big bang and timeliness issues of a waterfall approach? Are you giving your project managers a full toolset along with the industry training and empowerment to make the right calls? If not, then you are likely experiencing issues and delays on more than 25% and perhaps more than 50% of your projects. And that is where your money is being wasted. When a fully staffed project team is waiting for requirements signoff, or when requirements are being changed again, too late in the project cycle, you are burning project monies while the resources idle or have to do rework. By introducing a rigorous process and robust tools and metrics, you will be able to avoid most issues before they start and for those that do occur, you will know precisely why and be able to correct it for the next project.
For your production services, you should insist on at least a 98% change success rate and if you wish to be a 1st quartile shop you need to drive to a 99% or 99.5% change success rate. This means that for every 200 changes only 1 or 2 fail. These success rates can be achieved by ensuring you have an effective but not burdensome change process and you have rigorous change testing and planning (including a backout plan). Have your operations and service management experts participate in and provide guidance to those making the changes (either the application areas or the infrastructure teams). And ensure full root cause on any change that fails with the requisite actions to prevent re-occurance being completed. Publish simple and straightforward reports on change and project success and quality. By measuring quality your team will get the message and place much more emphasis on getting it right the first time. And remarkably, by focusing on quality first, you will get a strong reduction in cost (whereas if you first tried to reduce costs then to improve quality you would make little progress on either). Accompanying this thrust with simple but bedrock true messages such as ‘Do it right the first time’ and ‘Spend it like it is your own money’ go a long ways to get the spirit of what you are trying to get accomplished across. You must mean it though and you must back up doing it right, even if it costs more initially. Remember you are looking to establish a quality culture and achieve longer term returns here.

The other long term tactic we will discuss today is achieving a highly productive and well-balanced team. First, understand that while you are implementing longer term team plans you should leverage some or all of the near term tactics for staffing that I identified in the October 31st post. The long term tactics are straightforward and are based on you attaining a staffing mix that is composed of a balanced mix of top performing individuals who, for your company, are in the right geography and at critical mass sites.

Some key truths that should be recognized and understood before setting out to build such a highly productive team:

– top performing engineers, typically paid similar as their mediocre peers are not 10% better but 2x to 10x better

– having primarily only senior engineers and not a good mix of interns, graduates, junior and mid and senior level engineers will result in stagnation and overpaid senior engineers doing low level work

– having a dozen small sites with little interaction is far less synergistic and productive than having a few strategic sites with critical mass

– relying on contractors to do most of the critical or transformational work is a huge penalty to retain or grow top engineers

– line and mid-level managers must be very good people managers, not great engineers, otherwise you are likely have difficulty retaining good talent

– engineers do not want to work in an expensive in-city location like the financial district of London (that is for investment bankers)

– enabling an environment where mistakes can be made, lessons learned, and quality and innovation and initiative are prized means you will get a staff that behaves performs like that.

With these truths in mind, set about building the team by addressing your workforce strategy (sites and mix); upgrading your recruiting and performance management; and revising your goals and rewards. Then execute these relentlessly while you up the training and coaching. As this begins to bear results you will then need to prune the poor performing managers and filter out the low performing staff.

So build a workforce strategy that matches the size and scale of your company. If your company is global, you will need a global workforce. If it is domestically focused, be domestic but look at near shore engineering locations as well. Establish the proper contractor staff mix based on function (again see the near term efficiencies staff post). Ensure your locations match up to where you can draw talent. For example, minimize expensive in-city locations. Choose instead locations with good commuting, very good nearby engineering universities and vibrant nearby communities. You will be rewarded with better quality engineers and lower attrition. Do you have 12 locations each with 50 to 150 engineers? Consider consolidating to 3 or 4 sites each with 300 to 500 engineers. And one or two should be global or near shore sites. And ensure you set it up so any significant IT function is done in two locations (thus eliminating the cost for BCM and establishing opportunities for work handoff between the sites yielding faster time to market). Establish strong intern and graduate programs with the universities near your key sites. If you are overweight with senior engineers, ensure that your new hires are graduates or junior engineers (even if by mandate). As you compose the plan, engage you senior business leaders to ensure you have support for the changes and potential synergies with other business sites or locations. Ensure they understand you will always locate client-facing personnel with the client, but IT ‘back and middle office’ staff will be where it is best to recruit and retain IT talent.

Make sure your recruiting practices are up to snuff. You should be doing a thorough filtering of technical talent while also ensuring that you are getting someone who can work well with others and has the same key values of quality, initiative and responsibility that you are seeking. Leverage team interview or top-grading practices as appropriate to ensure you weed out those that do not interact well (especially management recruits or team leads). Invariably, management in a IT organization can improve how they handle performance management. Because most of the managers are engineers, their ability to interact firmly with another person in a highly constructive manner is typically under-developed. Provide classes and interactive session on how to do coaching and provide feedback to employees. Even better, insist that performance reviews must be read and signed off by the manager’s manager before being given to improve the quality of the reviews. This a key element to focus on because the line manager’s interaction with an employee is the largest factor in undesired attrition and employee engagement.

Even if you execute your workforce mix and your recruiting and performance management flawlessly and you do not align your goals and rewards (and incentives) you will not get the change you desire. Quite simply, your smartest team members, will observe what you reward, and if you do not reinforce the values you are looking to achieve (productivity, quality, initiative, etc), you will not get the changes desired. So, gather your senior team. Work together to revise and update the vision and goals of your organization. Ensure they are big enough goals (e.g., Not ‘ Save $40M in costs’ instead ‘ Become top quartile in quality and efficiency in IT for our industry and company size by 201x’). And then line up quarterly awards that are very public that reward those who exemplify the values and results you are looking to achieve. The organization will then align their efforts much more keenly to your vision and goals.

Now that you have the foundation in place for long term results, execute and improve every quarter. You will need to begin pruning. And as you add new and better capability to your organization through improved recruiting techniques, you can afford to prune those marginal managers that you couldn’t lose before. This will provide another round of lift for your team productivity as they are replaced with better internal candidates who have grasped the new values and effort or better filtered external talent.

In the next post on long term tactics, we will talk about the metrics and benchmarking you will use to ensure you stay on track an enable you to identify additional and continual improvements. But you are on your way now.

What areas would you change? What pitfalls do you see or have you encountered? Post a comment and let me know. I look forward to your feedback.

Best, Jim


About Jim D

Jim has worked in the IT field for over 25 years and as a senior leader for over 15 years. He has successfully turned around a number of IT shops to become high performing teams and a competitive advantage for their companies.
This entry was posted in Building High Performance Teams, Efficiency and Cost Reduction, Looking Ahead, Vision and Leadership and tagged , , . Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *