Can You Really Run Your IT Department Like a Business?
January, 2006
It’s the continuing saga we’re all faced with…can I run my IT department like a business? Some would argue you never can…my response is they’ve never really tried. To get to your own answer on this topic, you’ll have to take a quick ride with me back in time. In late 1999, I served as IT Director to a Fortune 500 company and I frequently conducted annual reviews of staff. On the last Friday of every month, I had to drag myself, my briefcase and all my paperwork to a meeting where I was repeatedly slaughtered with verbal criticisms…month in and month out. With papers in tow…I would walk in, sit down and explain my evaluation results…and every time I finished, I would hear the same rebuttal -- “ You IT guys are all the same…you’re always coming to us wanting more money…and yet you produce no revenue whatsoever. What do you think we’re made out of -- money!? You ‘guys’ are nothing but a cost center…so stop asking for more money. This is a FOR PROFIT company…and don’t forget it!” -- Tail tucked between my legs, I would slither out of the room hoping for a quick and painless death. The problem was they had a good argument. Were they right? Were we just a cost center drinking up money and resources? It seemed life would remain this way…until I decided I had had enough. It was either figure out a solution…or jump off the nearest bridge. Since I don’t like to swim, I set out on a quest to not only unravel the riddle…but to prove, on paper, the value of my staff raises…as well as find new ways to actually produce revenue for the company. For the next six months my team and I worked very hard to devise a plan of attack…and that’s exactly what we did. At the end, we came to an important realization… You can run an IT department like a business… if you’re willing to measure its value. We’ve all heard the saying “You can’t manage what you can’t measure”. Well, it’s true…but it also comes down to another saying “ The devil’s in the details”…and unless you’re willing to tackle the details…the former will never be realized.
Much to the chagrin of my managers and IT staff, we instituted a new system of management…all of it measurable. Here’s how it worked.
There are five measurable units, Time, Priority, Scope, ROI and Completion. Notice all of these are somewhat intangible…so at first you would be hard pressed to believe they can be measured…but they can…we did it…and hears how we did it.
Step 1 - Time
Measuring time is a daunting task. When unable to pinpoint the exact time it takes to perform a certain task…you must estimate. I know, this doesn’t sound very scientific…but in order to create the value of time…you have to start somewhere. Sometimes you can’t definitively measure the value of time…but that’s not to say you can’t ‘feel’ the value of time. So the question goes like this: “Upon completing this project, will employees be more productive?” Yes or No. If no…stop! Don’t go to the next question. Project closed…do not pass GO…just go back to work! If the answer is yes, the question then becomes how much more productive will staff be? 1 minute an hour, 10 minutes a day? If this impacted everyone in a company, you could calculate the value of the endeavor using the following formula: (e.g.: 1 minute saved per hour x 100 employees x $15 per/hr. x 240 work days in a year calculates as: [ .25 (cents) x 100 x 8 x 240 = $48,000 ].
There you have it. If you tell your boss you can increase employee productivity one minute per day…he or she is not going to get very choked up…but when you tell the boss it reduces payroll by $48,000 per year, well, now you’ll have someone’s very close attention.
Step 2 - Priority
This is a biggie…we used a point measurement scale of 1-10…but use whatever works for you. It’s simple…just sit down with your staff and determine where the project ranks in relationship to other projects/endeavors. Assign a value to the project and stick with it. One of the side benefits of this approach was getting staff truly engaged in their own success. Instead of issuing my own mandates, good employees would often times come to me with their own great ideas. We would sit down together and write out the project scope. This was always a great team builder exercise I continue to use today. Besides, who better to determine what projects should be introduced than the very people doing the work. Yes, there were plenty of “corporate” projects always underway…and we did the same with those projects as well. Only difference was the scope was already provided to us. And when bigger projects stepped in the way of smaller projects, we would simply put the smaller projects aside…and resume when the bigger projects were finished.
Step 3 - Complexity
Same rule here as for Priority. We assigned a points value between 1-10. The benefit here was it forced everyone involved to think through to the end result. Scope details were broken down to a series of smaller tasks that could be tackled. “Just go do it” went by the way of the dinosaur and we began breaking down big projects into smaller workable goals. This allowed us to engage more readily and with less mental blocks that can derail the start of projects…especially large projects.
Step 4 - ROI – Return on Investment
If you buy 1,000 widgets for $1,000 and sell 1,000 widgets for $2,000, you have an ROI of 100%. If only everything were this simple, right?. On IT projects, we used the same strategy. How much will the hardware or software cost? How many labor hours to install or ramp up? How many training dollars need to be invested? What about the old equipment being replaced? Can we resell it? How much productivity gain will be realized (See Step 1). If costs in year one are $100,000 and productivity gain is (from workers) $50,000 annually…and life expectancy of the hardware is five years…you just earned an ROI of $200,000. It sounds much better arguing your case for $100,000 if you’ve opened the conversation with the statement “this will generate a return to the company of “$200,000.” And the process works!
Step 5 - Completion
You might not think so…but putting a completion date on a project can be the single most important part of the project. The reason? Increased productivity. By putting completion dates and times on projects (we actually would measure tasks in time zones depending on where the employee lived) so there was never any excuse as to why a project was done on time. Also, there are employees who thrive on the challenge of meeting the goal…and others who demand of themselves completion on time. Most people lose interest in their jobs from boredom…so we always provided lots of goals to keep everyone enthused and on task. This in turn increased productivity among the entire group…and often times was the leading topic of conversation at IT meetings (e.g.: “How many projects did you finish this month?”, “How many points have your earned?”) Interestingly, it was always the less productive staff who were always trying to get a read on what the “producers” had completed for the month.
In the end, implementing this system was at first very painful. I worked very long hours for six months putting all the pieces in place…making adjustments, determining the measurement units and putting new pieces in place.
End benefits included:
A) Employee’s determined the rate at which they themselves would qualify for reviews and raises. If they didn’t meet certain point standards…they did not receive positive reviews or pay increases.
B) The company stopped rewarding raises on tenure alone.
C) Non motivated employees simply quit the company freeing up time and reallocating resources and funds to new staff or already established more productive staff.
D) Watching people get excited about completing “their projects”…not the company’s projects.
E) Watching the look of shock on senior manager’s faces when reporting how much money the IT group saved the company each quarter.
F) Actually moving away from “managing” a dynamic group of people to “leading” a dynamic group of people.
G) We now had a measurement system that through point monitoring automatically identified who weaker team members were…and gave us the ability to instruct, correct, lead and demote…whichever required. Those unmotivated or detached from the process simply lost interest and quit or realized they would never see more money and resigned.
Bottom line… You can run an IT department like a business… if you’re willing to measure its value.
At DataTitan, we stay abreast of the latest developments in the IT industry and we operate our company with you and our mutual goals in mind. For questions call DataTitan today at 210-403-9429.
John Tomblin is General Manager of DataTitan.
For additional information call 210-403-9429.
