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03.09
How
Technology Leaders Can Thrive in Tough Times
Slashing staff
may not be the answer
By Gary Perman
As
anxiety and
uneasiness continue into the second quarter
of 2009, companies are looking for ways to trim
spending and improve their bottom line. Even
though technology often encompasses a small
percentage of a company’s cost expenditures,
executives inevitably turn their attention to
technology budgets as a target for cost cutting.
According to Gartner analysts,
the number one cost-reduction option that
executives should prepare for involved people,
either in the form of hiring freezes, job cuts
or eliminating layers of management. Yet,
Gartner still expects technology spending to
grow by small amounts during 2009. Caution will
likely be the business direction at many
companies, affecting IT as well as other
departments.
It may seem inevitable to some
that staff pay the price during a budget crunch,
but the short term dollars saved reducing head
count or putting more work on an already
overworked staff could ultimately cost a
technology department exponentially more.
"People are looking to manage
their costs in IT and technology. But the last
thing these departments want to do is lose
embedded knowledge. That would be hard to
salvage," states Andi Mann, research director at
Enterprise Management Associates.
During the Dot Com bubble, tech
budgets grew rapidly. When the bubble burst,
those budgets burst as well. Since that time,
chief information officers (CIOs) and their tech
teams have improved the performance of tech
departments by streamlining applications,
reducing infrastructure costs, improving
governance, consolidating vendors and
outsourcing many activities.
Technology now dovetails tightly
with operations in ways that weren’t possible a
decade ago. For instance, manufacturers use IT
to manage supply chains and business operations
depend on IT for financial accounting, payroll,
asset management, e-commerce and HR. Tech
capabilities have fostered new sales channels,
defined new customer segments and even helped
create new business models.
These factors make reductions in
tech spending more complicated than ever.
Simplistic cuts, applied across the board, may
endanger critical business priorities from sales
support to customer service. That potent message
should resonate even among corporate officers
anxious to find quick savings.
CIOs and chief technology
officers, of course, should continue to make
their operations more efficient, especially in
areas that show signs of dilation. Reducing
pockets of unproductive expenditure now
will bring savings that help meet corporate cost
targets. Still, except in the direst of
circumstances, turning off technology spending
or reducing staff during a downturn is
counterproductive. When business picks up, you
may lack critical capabilities. Besides, many
technology investments can improve profitability
now and after a recovery. When business and IT
executives jointly take an end-to-end look at
business processes, the results can have a
tremendous impact on technology cost reduction
efforts with minimal affects to staff.
So what ideas can IT leaders
use to manage their costs and thrive?
1. Create opportunities.
The trick is to scan for and create
opportunities. Smart CIOs will make sure their
teams remain the bloodline to good services and
innovations that save money. When the next
problem comes up, technology must be ready to
handle it swiftly. “Rather than just trying to
weather the storm, figure out how to thrive in
this environment and the company will do well no
matter what the future holds,” says Wilson Zehr,
chief executive officer at Cendix, a software as
a service (SaaS) company.
It may also be wise for CIOs to
skip incremental improvements that don't have
huge value. Stick close to your budget and make
sure any upgrades are not just tied to savings,
but to savings across the entire company. The
fact that conditions are changing opens up
opportunities for resourceful firms to outsmart
larger competitors who, during a downturn, carry
on business as usual or are unable to adapt
quickly — except to fire employees.
Innovative leaders can partner
with business development and gain market share
by taking it away from competitors unable to
adjust to the shifting market conditions. Now is
the time to be aggressive in the marketplace.
Actively seek out new business by adding extra
services to give you an edge over competition.
Improve customer service
internally and externally. Look for ways to
become a leaner, more cost-effective and
efficient operation, better positioned to do
well when the market improves. Be imaginative.
Companies who survive and even prosper during
hard times must be able to look beyond the
present, to overcome the constraints of
tradition, to see the company from a new
perspective, and to do business differently.
2. Improve operating
leverage. CIOs need to be focusing only on
programs, projects and actions that add value
and are taking the business in the right
direction. “Employees know when management is
being wasteful and when they are focused on the
wrong things. Working on the right stuff and
being both accountable and transparent is
critical,” says Gary Smith, Managing Partner at
The Consultant's Connection in Hartford,
Connecticut.
Assess the moves your
competitors will be taking and build a strategy
to outflank them. Position products and find the
holes. “One of the things that we technology
folk rarely look at is our achievements. This
can be on projects that made money or saved
money for the company,” says Peter B. Giblett,
head of IS Development at The News Group. He
continues, “There is one area of IT that is
currently in boom, which is business
intelligence and its associated specialties:
data warehousing, ETL (extract, transform and
load), and data integration. The reason for this
is that businesses need to use business
intelligence technology to spot their best
opportunities in business.”
Learn how to use industry tools
to assess your own product portfolio, remove the
lemons and become more competitive. If you are
the one in the department facing the challenge
of expanding service without increasing the
budget - business is still expecting tech to
deliver. Business expects this without having
extra money to do it, so you have to find
creative ways. For instance, SaaS will continue
to grow in popularity, partly as a result of the
economic downturn. The cost savings are huge.
Blair Mandryk, global IT manager
at Haworth Inc., a Holland, Michigan-based
office furniture maker, had been looking to cut
his technology costs long before the recent
events began unfolding. Mandryk had already
begun using
VMware Inc.'s virtualization technology to
reduce 450 physical servers to 100 boxes. “Areas
that our technology department won’t want to cut
due to the upside profit potentials for the
company include storage projects. There also is
expected to be continued demand for business
intelligence tools, to help users better
evaluate every investment and
business risk. In addition, technology
requirements may grow in ironic ways; for
instance, if
PC replacements scheduled for next year are
put off because of economic concerns, help desk
calls from users having problems with their
systems likely will increase,” he said.
3. Don’t be caught
under-staffed. Options include hiring
specialists, freelancers, consultants and
part-time employees. Some managers and
executives believe the myth that hiring becomes
easier during a recession because the talent
pools overflow with laid off people. This is far
from the truth. The reality is that there are
more unqualified employees filling the
pool and finding a needle in a haystack becomes
more time consuming, difficult and increases
delays –which all translate into a very
expensive process, rather than a cost savings
solution.
Beware of overworking technology
employees. Even the most eager go-getter can
burn out when faced with an impossible workload.
Talk to your team, find out who does what, and
make sure your expectations are realistic. Your
staff might already be too small. “In lean
times, look at the core tasks that have to
happen and work out who are the required staff
to meet this base requirement. This is no
different than planning a project and having the
budget cut. You have to sort out what can be
done with the new budget. From there you do what
you can with the resources you have, once the
core services and tasks have been established to
keep this scope as much as possible,” conveys
Jeff Theunissen, chief technology officer and
infrastructure specialist at QLD Health.
4. Good customer service
cannot be overstressed. This is especially
important as internal and external customers’
buying power or willingness to spend is lessened
during tough economic times. Studies show that a
customer’s perception of service is fixed
primarily in terms of time. Three examples are:
waiting time to obtain service; reaction time to
deliver service; and length of time of the
service. In banks or stores, or phoning in
orders or for information, prospective customers
will walk out or hang up if their time
perception is strained. Understaffing will
negatively impact customer service.
According to management
consultant Donald Blumberg, author of
Managing Service as a Strategic Profit Center,
customers will temper their time demands when
they see employees busy helping other customers.
But they will not be so tolerant when service
people are chatting with one another or on the
phone while waiting customers are ignored.
5. Increase training. A
mistake companies can easily make during a
recession is to cut training budgets. Training
is best conducted during slack periods —
especially low-cost, on-the-job instruction and
broadened skill acquisition. Also, local
community colleges offer a number of free
classes that teach and upgrade trade and office
skills and supervision techniques.
If you can't hire new staff, the
best thing you can do is to make your existing
team more valuable. Provide opportunities for
current employees to train in new skill areas
and encourage them to take them. Your company
will reap the benefits and your employees will
appreciate the challenge and the chance to
broaden their skills. When good times return,
training is also another positive retention
strategy that increases succession management
and builds employee loyalty.
6. Get employees involved in
tactics and implementation. During lean
times people get nervous and worried about the
security of their jobs. They need to know what
is going on with the business, what they can do
to support the operation and how their
contributions are helping. They deserve the
truth and will pledge their loyalty to the
managers who are open and honest with them.
Rather than initiating layoffs, Sal Gonzalez,
co-owner of R&D Plastics in Hillsboro, Oregon
asked for ideas and input from his staff. His
entire operations staff agreed to take a fifteen
percent salary cut, including the executives.
This did two positive things: It prevented
layoffs and employees saw that management was
willing to take pay cuts as well, which had a
significantly positive effect on employee
loyalty and production.
If layoffs or a significant
reduction in work hours are unavoidable, let
employees take a lead role in designing the
program. Shortened hours, job reassignments, job
sharing and other alternatives may surface. Meet
with staff regularly to exchange ideas on
boosting productivity and other issues. Create
an incentive for good suggestions and foster a
team spirit for survival. Remember that
employees need to feel they are important to
your company and that their work is challenging
them to their fullest capabilities.
Develop a "culture" of doing
more with less. Get every person in the company
thinking about how to do more with less. If you
can maintain this as a core piece of your
culture it will also help when things are less
lean. Scott Simmons, vice president of
operations at Climax Portable Tools in Newberg,
Oregon has been installing lean thinking and
lean processes among all departments of his
company. In order to become successful with
lean, he has had to sell the idea to every level
of the company. Training has increased to teach
everyone from the janitor to the executive about
the cost saving advantages of lean thinking. The
cost savings can be in the millions of dollars,
can prevent layoffs and can even increase staff.
I had the opportunity to sit in
on one of the mock lean training exercises that
his design manager was conducting for their
operations. Key staff members from various
departments were going through the hands on
learning lean process, step by step — including
inventory, product development, process
improvements and machine tool changes. The
introduction to lean working principles
throughout their company has saved them millions
of dollars. The introduction to lean has also
allowed them to bring work in-house which they
used to outsource — thus containing costs and
increasing profits. “If your organization is
already lean and mean then you can focus on
continuous improvement! Lean methodologies and
Six Sigma are areas that can guide you to the
top! If you must reorganize then you should
conduct a complete value stream map of the
department or system that you are in charge of.
You will be surprised at how many processes and
activities that you will find that are
redundant, wasteful and useless. Systems evolve
and procedures that were once key are many times
deemed useless due to system changes, technology
upgrades, or product reforms,” says David
Steinhauer, Six Sigma Black Belt, General Mills.
7. Communicate. If you’ve
noticed, a prominent theme throughout these six
ideas is communication. Keep your management
team included in all decisions. When possible
keep your employees updated on what short and
long term plans you are making for them and the
company. Bob Nehauser, CEO of NCS Corporation
adds, “When staff members are listening to the
gloom and doom on the news and/or seeing friends
and colleagues losing their jobs they can be
subject to survivor mentality, which slows down
productivity and makes them feel crummy, of
course.”
“The single best practice you
can use at any time, recession or boom, is to
communicate with your employees. This includes
frequent open and honest communications to large
and small groups of employees as well as
individual one-on-one communications. One of the
most important communications skills a manager
can employ is active listening. Engage your
employees and actively listen to them. I find
that this practice offers inspiration and
opportunity to the manager to facilitate
positive changes that will lead to increased
employee satisfaction, improved team
performance, and, ultimately, improved
productivity,” adds Darren Sprout, professional
services delivery manager at MicroAge.
While economic downturns are
admittedly difficult and increase the obstacles
technology departments face in trying to survive
and grow, it is not axiomatic that companies
have to slash staffing and resources.
Resourceful leaders can seize available
situations while creating new opportunities and
take steps during today's hard times to lay the
groundwork for tomorrow's prosperity.
Gary Perman
is a certified recruiting professional and owns
PermanTech,
which specializes in recruiting technology
executives, managers and engineers. He also
hosts a
technology management blog. Gary is also
the Chair of the Technology Management Chapter
of IEEE Oregon. He can be reached at
gary@permantech.com or 360-835-2205.
Comments on this article may
be submitted to todaysengineer@ieee.org.
Opinions expressed are the
author's.
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