How to be a more effective CIO How to be a more effective CIO People, technology, upgrades, status quo vs. potential gains: this series of articles ranges across many areas of interest to chief information officers, asking questions and providing answers. We present them as part of our continuing effort to provide CIO’s not only with technology tools to do their work better but also with some of the best thinking about matters of daily concern. Article contributors are consultants and educators who have spent years in the trenches as well, building out their own knowledge and skill base in the process of executing effective I.T. initiatives. Learn more about assessing technology risk and what to do about it; how to select and motivate technical staff for maximum effectiveness; how to make better decisions; when to upgrade/ replace your technology … or not; how to leverage your own hands-on experience to elevate your executive performance. Take these expert observations and opinions, add your own, and thrive …. Page 1 Calculating Technology Risk: How Much Can You Afford Page 6 Why Some CIOs are Ten Times More Effective than Others If you can calculate risk mathematically in sensitive fields such as insurance, credit and financial transactions, why not the risk associated with installation and use of technology? Educator and consultant Dr. CJ Rhoades reviews the broad field of risk assessment, examines examples of successes and failures, and proposes a comprehensive project management plan. Consultant Harry Joiner writes on the leveraging and appreciation of “human capital,” focusing on means and metrics to encourage employees’ personal and professional growth as key factors in assuring excellence in departmental achievement and the accomplishment of the broader corporate mission. He presents guidelines for keeping employees motivated and which also support executives’ own “professional net worth.” Page 14 CIO Corner: Decisions, Decisions Page 18 Five Secrets to Keeping up with Technology Page 21 The Hidden ROI of Training Page 24 Five Things CIOs Often Forget www.acom.com The CIO’s decision process is complex, made more so in that, usually, he/she must deal with IT people who don’t understand business and business people who don’t understand information technology. Ideally, the decision derives from the organization’s value proposition, assuming it has one, says consultant Harry Joiner. He poses strategic questions for CIOs to consider which, each in its own way, illustrates the need fo, and value of, scenario planning. With corporate success increasingly impacted by the continued advance of information technology, CIOs are always under pressure to “get it right.” Educator-consultant CJ Rhoades identifies the pressures for change and the factors that hazard the process. Presenting a fivepoint roadmap for CIOs, she also counsels that they not to afraid to stick with what they have; that just going for the latest is not necessarily a good strategy…. Companies spend billions of dollars on training every year, unaware that they can spend far less if they qualify for some of the more than $1 billion dispensed annually through state and Federal programs. Consultant Peter Green discusses types of programs that are available and how they work, examples of training sources, and how companies can begin taking advantage of the opportunities presented. The transition from staff to leadership can be a perilous crossing, but the danger can be alleviated if a leader taps into experience and knowledge he/she accrued prior to becoming the boss when it’s needed, says educator and consultant CJ Rhodes. She cites five things IT leaders often forget as they immerse themselves in the high-level issues, contending that bringing such things into decision-making can help avoid pitfalls. Calculating Technology Risk:How Much Can You Afford? Calculating Technology Risk: How Much Can You Afford? By CJ Rhoads Editor’s Note: What are the risk factors of your next technology project? Can it be determined like insurance ratings or credit scores? Maybe so, according to CJ Rhoads’ calculations. As the technology world grows at an enormous pace, more and more of the factors that determine a project’s success (or impending doom) are revealed. Before you spend your first dollar on your next project, why not see if the numbers add up with CJ’s formula? Talking About Risk The word “risk” can strike fear in the heart of the most stoic leader. Katrina, 9/11, floods, fire; this is what often comes to mind when someone mentions the word “risk”. But risk can mean much more than disaster: failed business strategy, unexpected competition, hacker-attacks, information technology that doesn’t work, customers who don’t pay. Many things can disrupt business and cause failure. Consider all of the thousands of ways we might lose business. The thought is enough to send us scurrying to bury our head in the sand. Or maybe the opposite happens: we spend a great deal of time, resources, and money trying to prepare for every disaster we can think of – only to waste the resources (because what we expected doesn’t happen) or worse – we prepare for the wrong disaster and get blindsided by the unexpected. The emotional reaction can be overwhelming. One of my clients, a manufacturer of those little brown prescription bottles you used to get at the pharmacy, reacted strongly to 9/11. Within three months he had built a redundant data center – duplicating every server, every mainframe, every desktop. He spent millions – a huge chunk out of his 50 million dollar operating budget. When it was completed, he felt very secure that his existing business would continue even in the face of a disaster that shut down his information technology. Unfortunately for him, his competitor spent very little on a redundant data center. Instead, the other company spent the year investing in research and development to create a new type of drug container – one that could stand up to the rigors of the postal mail service. With so many insurance companies requiring mail-order prescriptions, the manufacturing technology proved a better investment than the disaster recovery technology. The bottom line is that we want to minimize risk, but we have to draw the line. We shouldn’t spend so much to minimize the risks of each battle that we lose the war. We shouldn’t spend so much to minimize the risks of each battle that we lose the war. Past Attempts to Quantify We can find dozens of “calculations” from data security companies that tell us how much we should be spending to safeguard our systems. Since they are selling the service and would benefit by our spending more with them, we probably shouldn’t rely upon their calculations. Some independent researchers have attempted to provide some overview calculations. The National Bureau of Standards published a Federal Information Processing Standard (FIPS #65), a Guideline for Automatic Data Processing Risk Analysis in 1979 that calculated a metric for measuring computer-related risks: Annual Loss Expectancy (ALE). where : Oi Set of Harmful Outcomes I(Oi ) Impact of Outcome i in dollars F Frequency of Outcome i JDEtips © 2007 Klee Associates, Inc. www.acom.com Back to Index Page Calculating Technology Risk:How Much Can You Afford? Of course, that sounds a lot more complex than it actually is; most people just say that ALE is the rate of loss times the value of the loss. This calculation is a lot more accurate when assessing the risk of a hurricane than it is in assessing the loss of a system due to a denial of service attack or poor project management. It isn’t normally used by itself, but there is a host of economists who use this calculation to put a limit on how much a company should spend on security. CERT (Carnegie Emergency Response Team, a well-known security research group) notes that security costs have diminishing returns. They recommend that we should spend the least amount that we can on it without drastically increasing the risk. COBIT (Control Objectives for Information Technology) is described in a 209 page publication by the IT Governance Institute and provides a comprehensive list of hundreds of key metrics to assess the amount of control and risk for all IT processes. Edwin Covert and Fran Nielsen, in Measuring Risk Using Existing Frameworks, developed a framework for measuring risk that assesses a weighted score in three areas: System Architecture, Network Interface, and System Life Cycle. The problem with all of these methods is that they can assess an organization, but cannot predict the risk of success or failure for any particular project. It occurred to me as I read about Nike, Hershey, HP, and the FBI that any experienced project manager could smell those failures a mile away as well. The Department of Defense maintains a procedure called DITSCAP (DoD Information Technology Security Certification and Accreditation Process), which carries out a series of tasks to maximize security and minimize risks of each system developed or implemented. The assumption is that all projects follow the procedure, and therefore will be risk free and secure. It is not a measurement, but rather a process. This still leaves us without a really good answer for calculating the risk of any particular project. One attempt was called RAM (Risk Assessment Model), which is a software program developed to ask 50 questions regarding the strategic, financial, technology, project-management, change management, and operational risks about any particular project. It must not have been that helpful, however, because the software is no longer in use. So there hasn’t been very much progress on mathematically quantifying the risk of any particular project. Decision makers today seem to have a real problem predicting the future success of a project. I have only to name a few recent examples. The FBI’s $170 million dollar case file project self-imploded, wasting taxpayer resources and setting the government intelligence capabilities back four years. Nike, Hershey, even technology giant Hewlett-Packard have all spent millions on projects that not only failed, but lost money for the business. One of the financial firms I worked for tried to implement an on-line banking system and spent over 30 million dollars on it. They also tried to move a credit application from a mainframe in Wilmington, Delaware, to a mainframe in Arizona. They also tried to implement company-wide project management software. In all of these projects, I predicted failure; with the mainframe move and project management software, it was long before the first million was spent. With the on-line banking system, I could easily see the cause of failure when I conducted the root cause analysis. It occurred to me as I read about Nike, Hershey, HP and the FBI that any experienced project manager could smell those failures a mile away as well. The terrible truth is that all of these disastrous projects could easily have been avoided. The factors that lead to project success are under intense scrutiny in the research and are well known (to the researchers and consultants at least – though perhaps not to the decision makers as the litany of public project failures continues to be heard). A compilation of these factors, from a variety of sources, is listed in Figure 1. More practically, we then use these factors of success in a formula that could predict whether any particular project will be successful prior to the project starting. Mathematical Calculation? “How on earth,” you might muse, “can you mathematically calculate the risk as to whether a project will end in disaster or successfully bring about expected benefits?” JDEtips © 2007 Klee Associates, Inc. www.acom.com Back to Index Page Calculating Technology Risk:How Much Can You Afford? It may seem like an impossible task. The same might have been said in 1759 to Jonathan Dickinson and Gilbert Tennent as they established the Corporation for Relief of Poor and Distressed Widows and Children of Presbyterian Ministers, the first life insurance company. Today, actuarial tables are an established way to calculate how long a person will live. Fifty years ago, one might have said the same thing to engineer Bill Fair and mathematician Earl Isaac in trying to dissuade them from investing $400 (each) in a new company, Fair Isaac, which would mathematically calculate the likelihood that any individual person would pay back a loan. Yet the FICO credit rating score is calculated and published on billions of people and used by millions of companies every day. While the detailed mathematical calculation for your credit rating is a proprietary secret of the Fair Isaac company, a simplification of the equation could be described as: 35Payment History +15Length of Credit History + 10New Credit + 10Types of Credit Used + 30Amounts Owed = Credit Risk Index (FICO score) Like the FICO score, the risk of any particular technology project can be calculated by identifying the primary factors that influence project success. Similarly, we can build a mathematical model that would enable any business executive or owner to calculate the risk of a technology project much like actuarial tables calculate the risk that someone will die or the FICO score identifies the risk of someone going broke. Of course – we have years of data behind the tables for life expectancy and for credit risks. We don’t (yet) have the necessary volume of data regarding project factors and success. As noted earlier, though, we do have a pretty good idea of which factors contribute to the success or failure of a project, as listed in Figure 1. Weight Factor Symbol 10 focused goal(s) Fg 10 small milestones Sm 10 training & support– before, during, after Tr 10 proper planning Pp 10 business process redesign & stable technology Bpr 8 user involvement Ur 8 executive support Es 8 clear business objectives Cbo 6 experienced project manager Epm 6 firm basic requirements Fbr 4 competent staff Cs 3 clear ownership Ow 3 decentralized decision-making Ddm 2 business continuity/disaster recovery plan Oth Figure 1 – Factors of Information Technology Project Success However – missing startup data shouldn’t prevent us from starting with the factors that research has shown influence whether a project succeeds spectacularly or fails miserably. Then, over time, as the calculation compares to the reality of actual success or failure, the factors and weightings can be adjusted to become more and more accurate. We could call this mathematical model the Benefit/Disaster Risk Index (BDRI). Using the symbols in the third column of the Factors of Information Technology Project Success table, the equation might look like the following: JDEtips © 2007 Klee Associates, Inc. www.acom.com Back to Index Page Calculating Technology Risk:How Much Can You Afford? 10Fg +10Sm + 10Tr + 10Pp +10Bpr + 8Ur + 8Es + 8Cbo + 6 Epm + 6 Fbr + 4 Cs + 3Ow + 3Ddm + 2Oth = BDRI It is important to reiterate that these factors and weightings are only a starting point that must be confirmed or invalidated through research and time, just as the original FICO equation had different weightings and factors when it was first proposed in 1953. These particular factors were chosen due to their appearance in several meta-analysis and synthesis studies. In the meantime, however, we can at least get started on utilizing the factors that research has determined make a difference and review our own projects for whether they contain these factors. On a scale of 1 to 7 where 1 is strongly disagree and 7 is strongly agree, the decision maker can create and assess questions relating to each factor for each project. Let’s test the index on a fictitious project to illustrate how this may work. The DEFG Corporation, a mid-sized company, is looking to implement a new piece of software that would make the Accounting department’s job easier, if only they could get the team on board. The management and end-users are all reluctant, as it means changing how they do business now—and they’ve got that down pat. The IT project manager is new and has burned a few bridges already trying to do too much, too aggressively, without first interviewing the end-users to see what their needs are or getting key buy-in. But there is a very detailed plan created by the project manager, including focused goals, intensive training, business continuity, and the cost in total should be less than $750,000. Let’s take a look at Figure 2. Score Question Weight Score X Weight 7 Fg 7 Sm The goal(s) for this project are highly focused. 10 70 The milestones are small (less than $750,000 in effort each). 10 70 6 Tr The users will have extensive training and support before, 10 60 during, and after implementation. 4 Pp This project is being properly planned, including risks and 10 40 contingencies. 3 Bpr The business process aligning to the technology in this project 10 30 is being redesigned. The technology itself is stasble and implemented elsewhere. 1 Ur The users are extensively involved in the requirements and 8 8 evaluation of options for this project. 1 Es The executives strongly support this project. 8 8 6 Cbo This project leads to clear business objectives. 8 48 2 Epm This project is being led by an experienced project manager. 6 12 7 Fbr This projectʼs basic requirements are firm. 6 42 5 Cs The staff working on this project is competent. 4 20 2 Ow The department paying for this project has clear ownership over 3 6 the results. 2 Ddm This project supports or enables decentralized decision-making. 3 6 7 Oth There is a business continuity/disaster recovery plan in place 2 14 Figure 2 – Sample Scored Project The total BDRI score for this project would be: 434. A project that scores a 600 or above will undoubtedly succeed, while a project that scores less than 300 will undoubtedly fail. In this scenario, the score indicates that some factors need to be considerably improved before this project kicks off – most specifically more buy-in from key managements and end-users, as well as ownership of the project by the department that will be JDEtips © 2007 Klee Associates, Inc. www.acom.com Back to Index Page Calculating Technology Risk:How Much Can You Afford? using it, Accounting. Even the most innovative and beneficial projects can fail without support all around. Apply this to a few of your projects. What are the benefit/disaster risk indexes? If you answer that you can’t afford to ensure agreement for all of these factors for every project, then I suppose I would ask; how much can you afford to spend on failures? JDEtips © 2007 Klee Associates, Inc. www.acom.com Back to Index Page Why Some CIOs Are Ten Times More Effective Than Others Why Some CIOs Are Ten Times More Effective Than Others By Harry Joiner, Reliable Growth I’m very fortunate in that both my father and my father-in-law were successful businessmen. Editor’s Note: Harry’s take on how CIOs can stand out from the pack is the culmination of his thinking about how to integrate tangible, bottomline results with the “intangibles” of people-driven leadership. In 1972, my father co-founded an international food trading company that last year was the second largest exporter of US poultry—just behind Tyson Foods. At $400 million in annual sales, his company ships 11,000 truckloads of frozen food to 110 countries each year. And they don’t kill anything. With offices around the world, all they do is buy, finance, sell, and ship product. In 30 years, my father and his partner have built an organization where the people, processes, infrastructure, and compensation systems form a self-reinforcing loop of recurring profitability. Equally successful was my father-in-law—who never went to college, yet rose through the ranks of Citibank to become the CEO of a multi-billion dollar real estate investment subsidiary of a Fortune 20 insurance company. At the pinnacle of his career, he presided over a 450-person organization packed with Ivy League MBAs. By any measure, both men are at least ten times more effective than the average businessperson. How did they do it? Each man has tremendous drive, excellent clarity of thought, a results-driven personality, and managerial courage. But there’s something else. They have the “X factor”— a secret ingredient that allows the direct reports of an Executive to believe in the Executive due to the Executive’s magnetism and selfconfidence. It’s what I call the Great Enabler because it enables managers to accomplish their objectives through other people. When I think of my father-inlaw, sometimes I wonder what motivated Citibank to hire him in the first place. No college degree. No abundance of relevant work experience. Sure, he had some technical knowledge of real estate, but nothing that truly distinguished him from the other applicants. But he had the “X factor” in large enough quantities to be easily recognized in an interview. And the hiring manager wasn’t afraid to surround himself with young lions. That was lucky. For Citibank, that is. What’s the secret of wealth? Without hesitation, both said “Leverage and Appreciation.” Recently I asked these guys “What’s the secret of wealth?” Without hesitation, both said “Leverage and Appreciation”. In the real estate and financial markets, that means buying an asset that costs $100 with a 10% down payment. That’s leverage. Then if the asset value increases by 10% to $110, the investor’s cashon-cash return would be 100%. That’s appreciation. If you do enough of those deals with enough money, sooner or later you’re rich. Great, you say. What do leverage and appreciation have to do with information technology? Since this article promised to tell you why some CIOs are ten times more effective than others, I’d like to apply these concepts to the management of human capital—your company’s most underleveraged asset. Leveraging Human Capital As it applies to the management of human capital, “leverage” means being able to increase your own capacity by delegating to reliable, high-capacity individuals who know how to effectively execute to the letter and spirit of the assigned task. This assumes that you know what, when, and how to delegate, and that you have a sufficient number of loyal delegates to whom to delegate. It’s also incumbent upon you to arrange your team in a way to maximize efficiencies and opportunities for synergy. Human Capital Appreciation As it applies to the management of human capital, “appreciation” means having leverageable delegates whose talents improve with time. Simply put, good hires improve with age and appreciate in value. JDEtips © 2007 Klee Associates, Inc. www.acom.com Back to Index Page Why Some CIOs Are Ten Times More Effective Than Others Now more than ever, CIOs lack the time to micromanage underperformers. The rate of technological and competitive change both inside and outside their companies dictates that the CIO’s direct reports must be able to not only deal with change, but also anticipate it. Accordingly, CIOs need scalable direct reports who are good now and will become even better over time. What is “Scalable”? Scalability determines the extent to which you can build a world-class organization around a given employee. It’s what separates the “A players” from everyone else. A company loaded with scalable A players is “Stockholder Nirvana”. Now more than ever, CIOs lack the time to micromanage under performers. The Three Dimensional Career I have always believed that every worker’s skill set is threedimensional: All workers must have technical expertise; industryspecific expertise; and companyspecific expertise. The degree to which those areas overlap evenly defines the overall expertise of the employee. The evenness of the overlap will determine how well rounded the employee is. Expertise Intangibles Technical Expertise “A” Player Expertise Figure 1: SCALABLE profile with EVEN overlap in TCI attributes However, the effectiveness of the employee—and ultimately the employee’s scalability—is governed by a set of “intangibles”. Figure 1 illustrates the attributes of an “A Player”. Sometimes it is just as important to know what not to look for: Click the following links to see the attributes of: B players (Figure 2): www.ReliableGrowth.com/Figure2.bmp C players (Figure 3): www.ReliableGrowth.com/Figure3.bmp D players (Figure 4): www.ReliableGrowth.com/Figure4.bmp Let’s take a look at each dimension in turn. JDEtips © 2007 Klee Associates, Inc. www.acom.com Back to Index Page Why Some CIOs Are Ten Times More Effective Than Others Technical Expertise This is the area with which CIOs are most familiar. Technical ability includes worker attributes such as programming certifications, demonstrated levels of software competency, comfort with all of the technologies and vendors that are on the company’s current and future agenda, fluency with technical jargon, and so forth. Since most CIOs know how to interview candidates for these skills, I won’t get into this here. Company Expertise For a scalable IT staff member, company-specific expertise concerns the application of information technology that can leverage the company’s strengths and minimize or correct its weaknesses. A truly outstanding applicant will know how most of the following functional areas can influence your company’s overall performance now—and in the future: The CIO who is ten-times more effective than others will always identify A players 1. Company’s image 2. Level of planning/Marketing skills 3. Company’s reputation for quality 4. Company’s reputation for service 5. Accessibility to raw materials 6. Information availability 7. Familiarity with market 8. Company’s market share 9. Market size 10. Market growth 11. Pricing strategy 12. Research and development 13. New product ideas 14. Distribution strategy – domestic 15. Distribution strategy – export 16. Ease of entry 17. Geographical proximity 18. Sales force 19. Advertising and promotion 20. Cost of capital 21. Financial stability 22. Profitability 23. Return on equity 24. Debt to equity ratio 25. Manufacturing facilities 26. Economies of scale 27. Capacity to increase production 28. Ability to deliver on time 29. Technical and manufacturing skills 30. Manufacturing costs 31. Company’s leadership 32. Management aspirations for the company 33. Dedication and skill of workers 34. Entrepreneurial orientation 35. Flexibility and adaptability 36. Staff relations/Administration skills 37. Ability to respond to changing conditions 38. Relationship with suppliers, middleperson 39. Language abilities/Professional qualifications 40. Technical qualifications TQM environment 41. Marketing knowledge 42. Information management/Use of it 43. Technology management Industry Expertise For a scalable IT staff member, industry-specific expertise concerns the application of information technology as it can maximize the company’s opportunities and minimize its external threats. A truly outstanding applicant will know how most of the following external factors can influence your company’s overall performance now—and in the future: 1. Population trends 2. Age distribution 3. Birth, death, and marriage rates 4. Lifestyle trends 5. Mobility trends 6. Population’s level of education 7. Change in buying patterns of typical family 8. Growth of economy 9. Size of market for products, rate of growth 10. Foreign exchange position 11. Stability of currency, convertibility 12. Per capita income, rate of growth 13. Income distribution JDEtips © 2007 Klee Associates, Inc. www.acom.com Back to Index Page Why Some CIOs Are Ten Times More Effective Than Others 14. Balance of economy (industryagriculture-trade) 15. Rate of inflation 16. Stability of government 17. Tariffs 18. Regulations in competitive practices 19. Product labeling requirements 20. Consumer information requirements 21. Product standards 22. Government controls & legislation regulating business 23. Non tariff barriers 24. Ethnicity of the population 25. Changes in consumer tastes 26. Business ethics 27. Social factors in business 28. Change in cultural values 29. Importance of environmental issues 30. Pace of technological change 31. Innovational opportunities 32. Dominant market players 33. Number of players 34. Production capability 35. Price advantages/Disadvantages 36. Distribution advantages/Disadvantages 37. Market segmentation 38. Product quality 39. Product positioning 40. Supplier power 41. Customer Power 42. Threat of substitution 43. Threat of new entrants 44. Intensity of industry rivalry 45. Transportation costs/Availability 46. Distribution within market 47. Extent and reliability of postal and phone systems The cultivating of star employees must be systematic, as it is at General Electric. Obviously, it’s impossible to cover all these subtopics during a single interview. But detailing these issues helps us to see the scope of the skills we need to see in our “peak performers,” both during the interview process and after they’re on the job. The CIO who is ten-times more effective than others will always identify A players who: 1. Understand the technology 2. Have a genuine affinity for the company and its markets 3. Can help the CIO understand and deal with the internal and external issues that keep the CEO up at night All of the issues above—in whole, in part, or in any combination—can keep CEOs awake at night. The Intangibles This is the most important area for CIOs who want to leverage their employees, and it’s also the one most misunderstood by CIOs. The intangibles have a major role in determining the employee’s scalability, and include such traits and abilities as: 4. Understanding Others 5. Managing Negotiations 6. Decision Quality 1. Setting Priorities 2. Results Orientation 3. Managing Vision JDEtips © 2007 Klee Associates, Inc. www.acom.com Back to Index Page Why Some CIOs Are Ten Value-Based Times MoreConsulting Effective Than Fee Models Others Of course, there are dozens of intangible leadership traits, and mainstream Leadership Gurus have begun to invade the IT market with their own definitions. For example, in a recent issue of CIO Insight magazine, Warren Bennis claimed that there are just four enduring characteristics of leaders: 1. Adaptive capacity; 2. Ability to engage others; 3. Voice; and 4. Purpose. In my opinion, that’s just the tip of the iceberg. All GE employees are scored on the basis of the Four E’s: Execution, Energy, ability to Energize others, and Edge. Regardless, savvy CIOs will know their company’s culture and industry before interviewing fresh candidates or promoting from within. For example: The “Success Profile” of a Wal-Mart IT staff member would be very different from that of an IT staff member from a small, high-tech start-up venture. Wal-Mart values hierarchy and has a command-and-control organizational structure. A high-tech start-up venture might insist that every IT staff member play many roles, thereby placing a premium on staff members that can make decisions on the fly. It’s up to every CIO to first define the IT department’s Success Profile for each position. That means selecting the attributes and then defining what they mean. For example: 1. Setting Priorities: Has a bias for action; Spends time on what’s important; Can quickly sense what will help or hinder the accomplishment of a goal; Values time; Creates simple improvements and metrics; Creates focus among team members 2. Results Orientation: Always beats plan and stretch objectives; Consistently one of the top performers; Very bottom-line oriented; Pushes self for results 3. Managing Vision: Sees beyond today; Is future optimistic; Can define their success relative to the longterm; Can inspire and motivate others; Doesn’t shirk personal responsibility 4. Understanding Others: Listens first; Suspends judgment and assumptions until caller has her say; Accepts diversity in others; Relates well to all kinds of people; Shows diplomacy and tact; Uses callers’ emotional balance to close them to their benefit 5. Managing Negotiations: Gains trust quickly; Sees conflicts as opportunities; Can settle disputes with a minimum of noise; Good at focused listening and can understand others quickly; Is cool under pressure; Is appropriately funny and can use humor to ease tension 6. Decision Quality: Makes good decisions based on a mix of analysis and common sense; Most of the person’s decisions turn out to be right over time; May be sought out for advice by others For a comprehensive list of 70 intangible leadership attributes and their behavioral definitions like those above, email me at: [email protected] Knowing how to attract, identify, interview, hire, measure, manage, and motivate a diverse group of scalable star employees will make a huge difference when the CIO must appoint a Business Lead (for example) to drive and communicate the progress of an ERP implementation to senior executives. If this Lead is not a new hire, then the Lead may come from the CIO’s current pool of software developers and system administrators. Either way, the Lead should be able to explain the benefits of ERP within the context of Company-specific and Industryspecific issues. If the Lead fails to do this credibly, then the senior executives might question the competence of the IT team and the validity of the project itself. And in the trenches, the Lead must be able to inspire adoption, especially when ERP solutions represent a discontinuous innovation for the company. JDEtips © 2007 Klee Associates, Inc. www.acom.com 10 Back to Index Page Why Some CIOs Are Ten Value-Based Times MoreConsulting Effective Than Fee Models Others Of Jack Welch and .400 Hitters The cultivating of star employees must be systematic, as it is at General Electric. Throughout his tenure as CEO, Jack Welch understood the baseball axiom that the acquisition of a .400 hitter is always a blessed event unless the team’s batting average is already higher than that. Lesson 1: To radically increase their own leverage, CIOs must manage their organization as nature would, with neither malice nor pity. The business environment is dynamic, and new-hires’ skills and characteristics must always “lead” the trends. The ability to make good decisions regarding people represents one of the last reliable sources of competitive advantage since very few organizations are very good at it. As a result, Welch mandated yearly “Session C” employee reviews, during which all GE employees are scored on the basis of the Four E’s: Execution; Energy; ability to Energize others; and Edge. Welch’s objective was to measure each employee’s performance and their potential against these criteria. Employees from the same business unit are then rated against each other on a bell curve. Every year, the top 20% are lavishly rewarded and promoted, the middle 70% are allowed to stay, and the bottom 10% are fired. Yes, fired. Every year. And Session C still exists today. In his book “Straight from the Gut” Welch recounts how this natural selection process was easy for the first few years. The .150 hitters knew they were bad, and they were summarily asked to leave. But as the collective batting average for the team went up, the process became much more painful. Yet Welch persisted, and the resulting organization became the rave of the Fortune 500. Welch famously believed that if the rate of change in your company is less than the rate of change outside, you’re in big trouble. Knowing that they had to contend with Session C, GE managers would not even consider interviewing a candidate unless they thought the new hire had the characteristics and skill set to create value for at least the next five years. Starting today, begin a systematic process of: 1. Proactively searching out and identifying A players (from within or outside of the firm). 2. Using the most rigorous selection methods to make fewer mistakes and hire and promote only A players. 3. Improving your department’s existing “human capital” by providing employees with evelopmental training, and/or redeploying low performers into roles in which they can excel. 4. Requiring subordinate managers at all levels to embrace a meritocratic approach for the creation of their teams. Remember, this process should be ongoing and not just a onetime initiative. Manage your team as nature would, and your star employees will love you for it and will want to stick around. 400 CIOs were asked... “What are the three most important personal attributes required for success? Ways to Identify a Future Star Over the years I have come to believe that people are a lot like batteries: They are much more powerful when linked together. However, different batteries do different things, and a powerful battery that’s a poor fit with the others is useless. Here are several ways to hitch your wagon to a future star: 1. Know what you need, and ask other department heads what they need from your people. Using the form at http://www.reliablegrowth.com/ideal.pdf, get them to define their ideal first, then a week later, ask them to rate individual staff members with whom they are in regular contact (see http://www.reliablegrowth.com/actual.pdf). Score the fit between the ideal and the actual. Is the gap trainable? See Figure 1 – 4 to appreciate visually the importance of intangibles. 2. Develop leading and lagging indicators of leadership success. Going back to GE’s example, how would you know on the front end if an employee had the ability to energize others? What would be the leading indicators of that? What would be the back end effects of such an increase in energy levels? How can you quantify these leading- and lagging-indicators such that they are Measurable, Objective, Relevant, and Controllable (MORC) by the employee? Assuming all metrics are MORC, link pay to performance wherever possible. You might need JDEtips © 2007 Klee Associates, Inc. www.acom.com 11 Back to Index Page Why Some CIOs Are Ten Times More Effective Than Others to be creative: One CIO gave poker chips to all department heads that his IT staff members served. The department heads were told to give a poker chip to the IT staff member whenever the staff member went “above-andbeyond” the call of duty to serve them. The poker chips could later be redeemed for cash or time off. 3. Hire opportunistically. Post job openings always, not just when you actually need people. You can’t hurry love, nor can you hurry a star hire. You’ve always got to be in the market for talent, able to recognize it, and able to bid aggressively for it before your competitors drive up the price for it. 4. Look outside of your industry. Worry about scalability first, because you can’t coach that. You can train all of the other attributes, and you might be very refreshed by having someone on your team with a perspective that’s completely new to your team. Lesson 2: CIOs who lack the god-given command presence to lead an organization must inject this element into their team by surrounding themselves with talented young lions. And don’t worry about being eaten alive. The skills required of a lion tamer differ from those required of lions. 5. Interview for leadership attributes using the EAR technique: • Example – Find an example of a situation where the person has the opportunity to demonstrate the desired behavior. Then use probing questions to drill down on the situation in which the behavior was used. • Action – Ask the candidate to walk you through what they did to handle the situation. • Results – What was the result of the behavior? Understand that leadership development in IT is not a theoretical issue. In a recent CIO Insight poll, 400 CIOs were asked “What are the three most important personal attributes required for success in your current position?” 43% said “leadership” was required, yet only 40% said that leadership was one of their top three strongest abilities. That means that this frequently required attribute isn’t even in the top three strongest suits of 60% of CIOs. Which brings us to … Care and Feeding of Young Lions On a final note, realize that attracting young lions is only half the battle. The other half of the battle is keeping them motivated. Here are ten ways to deal with young lions: 1. Provide autonomy for them, allowing them to make decisions that affect their jobs. 2. Actively involve them in making business decisions and having a say in what course of action the organization takes. 3. Honestly and openly communicate business realities and changes to them in a timely manner. 4. Do not make them wait for information they need to get the job done. 5. Create a variety of challenges for them. 6. Give them multiple responsibilities to accomplish. 7. Do not bog them down with outdated technology and excessive reliance on paper. 8. Ask them how they would like to be recognized when they exceed expectations, and how they would like to convey recognition for others. 9. Provide recognition in the form of meaningful rewards and incentives that have been requested by them. 10. Conduct business in such a way that people can achieve a sense of balance in their lives by pursuing flexible work schedules, telecommuting, providing alternative scheduling, etc. JDEtips © 2007 Klee Associates, Inc. www.acom.com 12 Back to Index Page Why Some CIOs Are Ten Times More Effective Than Others We also did a comparison of fee models to determine which is the safest. A happy lion is an effective lion. All the better to do your bidding. To take your company’s IT function to the next level, you’ll need to be able to get things done through your people. Hopefully, when you delegate to them, how they handle themselves will be a positive reflection on you. Character and values matter a great deal more than superficial skills and attributes, as anyone who’s been married for more than five years can attest. In conclusion, consider this: In a recent study of manufacturing firms with $1 billion-plus in revenue, Forrester found that companies planned to spend $35 billion on supply chain investments, but that most of that amount would go toward improving supply chain processes internally and with external partners. In fact, technology was not considered a major obstacle to supply chain performance—only 19% of the respondents ranked it as a significant impediment. A sizable 46% named difficulty in changing processes and people behavior as their main roadblock to better supply chain planning. Forrester’s statistic offers a final reminder of the importance of human “intangibles” to your company’s viability. Learning how to leverage your human assets is the greatest single thing CIOs can do to improve their own “professional net worth.” JDEtips © 2007 Klee Associates, Inc. www.acom.com 13 Back to Index Page CIO Corner: Decisions, Decisions CIO Corner: Decisions, Decisions By By Harry Joiner, Founder, Reliable Growth Editor’s Note: We’ve been searching for a while for the right person to start a new feature at JDETips—the CIO Corner. We’ve found that individual in Harry Joiner, an articulate, experienced, strategic IT professional and writer. This article is aimed squarely at our CIO and IT Director level readers, and those who aspire to be in the upper echelons of IT Management. Introduction My wife has promised to buy me a new suit for my birthday. I’m really looking forward to having some new threads, but I’m in a quandary as to what type of suit to buy. Should I buy a summer weight suit? I live in the South where it’s warm nine months of the year, but most of my clients are up North. Should I go with something stylish that will differentiate me, or should I select something more mainstream? I want a distinctive and proprietary solution, but not so much that I can’t integrate with my surroundings. And what type of material should I get? The highest-grade wools are comfortable, but they can be difficult and expensive to maintain. And what fabrics will look good with my legacy wardrobe, yet maintain their functionality in two or three years’ time? Now about the fit: Single or double-breasted? My wife tells me I need to lose a few pounds so I can look great in a double breasted suit, but who wants to buy a suit with the expectation that they need to downsize to wear it? And if I get an off the rack suit, then I’ll need to find a tailor to handle the customization work. Of course, I could always develop my own suit “inhouse”. Not. Being a great CIO is equal parts art and science. Decisions, decisions. It’s a lot like IT, except that CIOs make decisions that can impact the competitive position of their companies. And the pitfalls of making the wrong procurement decision are much worse than simply looking bad. Like having a keen sense of personal style, being a great CIO is equal parts art and science. It means being able to deal with IT people who don’t really understand business, and business people who don’t really understand IT. (And, unfortunately some who understand neither.) It means having a technical understanding of what IT can (and can’t) do, and also means having a grip on where you’re company is going, and what the environment is likely to look like when it gets there. Strategist, Know Thyself The first rule of strategy is for firms to “know thyself”. This is much easier said than done because in many firms most senior executives disagree on what the firm’s value proposition really is. A value proposition is the implicit promise a company makes to customers to deliver a particular type or combination of value. Some executives can’t even tell you that much, let alone agree on what it is for their company. The first rule of strategy is for firms to “know thyself”. For example, Domino’s Pizza’s value proposition was “Fresh, hot pizza in 30 minutes or less.” Simple, and their entire franchise was built on top of that premise. A “franchise” is a proprietary way of doing business that successfully differentiates an extraordinary business from its competitors. In Domino’s case, the type of ovens, the specifications of the raw materials, the store and warehouse locations, the IT infrastructure, and so on were selected and organized around delivering on that promise. Yet most of the time it’s not that cut and dried. Ask ten people in most companies to recite their firm’s value proposition and you may get ten different answers. This situation is especially pronounced in service companies. But there is hope. JDEtips © 2007 Klee Associates, Inc. www.acom.com 14 Back to Index Page CIO Corner: Decisions, Decisions Becoming a Sultan of SWOT But there’s more to SWOT than just using it for self-analysis. •Strengths •Weaknesses •Opportunities •Threats One of the most effective mechanisms for company self-examination is the “SWOT Analysis”. The SWOT Analysis looks at a company’s relative strengths, weaknesses, opportunities, and threats. Understanding these four business elements is essential to helping you understand what type (and how big) of an IT infrastructure you’ll need to support your company’s operating model (or infrastructure). Remember, your firm’s operating model is just the delivery mechanism for your firm’s value proposition. Example: Suppose you are considering an enterprise-wide software package, and your company is Weak in New Product Ideas, but Strong in R&D. Both of these elements are considered to have a High influence on your firm’s performance. What would you do? All things being equal, you might select a software package that facilitates communications between front-line sales and product development. Or, you might select a knowledge management module that allows customer polling, so that new product ideas and alternate product uses are captured and analyzed. Pretty straightforward, right? But there’s more to SWOT than just using it for self-analysis. Since no business exists in a vacuum, SWOT provides a useful eye-in-the-sky view of the firm in relation to its dynamic operating environment. Used thoughtfully, it forces a CIO to make trade offs with regard to certain types of software and hardware functionality on the basis of what are the key success drivers of the business – relative to what’s going on in and around the firm. First you decide what is critical to the fulfillment of your value proposition, and then you invest around those functions. Like Domino’s. Additionally, SWOT provides a clean dichotomy between what’s controllable (the S&W) and what isn’t (the O&T). Additionally, SWOT provides a clean dichotomy between what’s controllable (the S&W) and what isn’t (the O&T) – thereby providing the inspiration behind the CIO’s Prayer: Lord grant me the strength to change the things that I can, the patience to deal intelligently with the things that I can’t, and the wisdom to know the difference. Let’s see why this is so important. DestroyYourBusiness.com I love it when executives who are famous for their clarity of thought (like Peter Drucker) must make sense of emerging technologies. So it was a real delight when General Electric’s Jack Welch not only came to terms with the Internet, but mandated that all GE senior managers drive an initiative called“detroyyourbusiness.com” (DYB). The purpose of this initiative was to force GE’s leadership to develop ways that the Internet could create and/or destroy the value of GE’s franchise. Essentially, DYB was an action-oriented SWOT review on steroids. While internet stock gurus like Mary Meeker and Henry Blodgett were predicting the wholesale downfall of the brick & mortar companies, Jack Welch was analyzing the three functional areas of GE’s business where this technology would create value: • the Buy, • the Make, • and the Sell. JDEtips © 2007 Klee Associates, Inc. www.acom.com 15 Back to Index Page CIO Corner: Decisions, Decisions Figure 1 Figure 1 is my cocktail-napkin depiction of Welch’s model along side a SWOT framework. The numbers represent the functional areas of competitive superiority of four hypothetical firms – yours, and three competitors. Specifically, the functional areas are: 1. Raw materials Purchasing & Refining 2. Sales & Marketing, 3. Further Processing 4. Warehousing & Distribution. The green arrows show the value chain from raw materials procurement down to the consumer interface. For simplicity’s sake I have used the food industry’s Farm-to-Fork analogy. The Buy and Make elements of the model represent the firm’s backend, while the Sell element makes up the front-end or consumer / user-interface. Organizationally, this firm has great flexibility and adaptability. Action item: With your SWOT grid in hand, suppose that … Your Firm has excellent accessibility to raw materials and outstanding company leadership. In addition to excellent internatioal distribution, Your Firm has a low weighted average cost of capital (Return on Assets), but that is because it maintains a conservative debt to equity ratio. This low debt / equity ratio will give the firm some operating agility during the next downturn, and its return on equity should improve further when the firm negotiates a lower rate for its debt. Competitor A has an outstanding marketing knowledge and familiarity with the market, and it has positioned itself as the leader in the highest margin product category. Organizationally, this firm has great flexibility and adaptability, and its entrepreneurial culture has insured its ability to respond to changing market conditions. Competitor B has excellent research & development capabilities and an endless stream of hot new product ideas. It has a world-class TQM manufacturing environment, but its poor financial structure limits its ability to increase production. It also has weak leadership. JDEtips © 2007 Klee Associates, Inc. www.acom.com 16 Back to Index Page CIO Corner: Decisions, Decisions Competitor C has the best distribution network of any of the firms, and this gives it an incredible ability to deliver products on time. Its reputation for service is excellent, and its use of technology is leading edge. Accordingly, its supplier relationships are outstanding. On the negative side, its marketing needs improvement. The opportunities facing the industry include favorable population and lifestyle trends, as well as a promising change in the buying patterns of the typical consumer. The threats facing the industry include declining rates of growth for the industry, increasing regulations in competitive practices, and increasing threats of new entrants and product substitutes. For which firm would you like to be CIO? Does any particular firm appear to be at a significant advantage or disadvantage? If so, what should they do about it? Industry realities like these beg hundreds of vexing questions for strategic planners, such as: • Would a merger between Your Firm & Competitor A create more value than an alliance between Competitors B & C? • Will the Internet allow Your Firm to disintermediate all of the middlemen and distributors that handle its products? How might Competitors B & C react to this? • What happens to Your Firm if Competitor A begins to redefine consumers’ experiences and expectations by offering them a solution that expands the industry’s definition of product scope? • What if Competitor C deems its assets to be more valuable in other industry settings? If Competitors A & B have an alliance, how might this impact supply conditions in the industry? What would happen to Your Firm’s pricing and its ability to finance its growth? • How quickly does the demand function in the industry change? Is there an advantage to Competitor B investing in flexibility or JIT manufacturing capability? These five questions call for Scenario Planning and their answers can rock the world of any CIO. Growth opportunities can come from new combinations inside the industry’s operating environment, as well as uncontrollable changes from the outside. Exogenous changes can be wrought by disruptive technologies, the War on Terror, changes in the tax code, or anything that is essentially an Act of God. In these instances, all an industry’s competitors can do is stay flexible, say the CIO’s Prayer, and adjust their sails. Scenario Planning deals with how Your Firm should manage its alliances, distribution contracts, purchasing agreements, technology infrastructure, and so on given the most likely industry outlook. Which is exactly why it’s so important for the Firm’s leadership to be on the same page with regard to Your Firm’s value proposition and underlying operating model. As Sun Tzu noted in The Art of War some 2500 years ago, your confusion is your enemy’s greatest advantage. The Blind Men and the Elephant Of course, the whole notion of strategy is somewhat misunderstood in business. Sure, many executives are familiar with the works of Michael Porter and Gary Hamel, but since most strategy books take a unique approach to the subject (that’s how you sell books), a problem arises from the fact that many executives have only read one book on strategy at most. Strategy, then, is the classic blind men and the elephant dilemma: It’s different things to different people and they’re all partially correct. So what I’d like to do in the next few CIO Corner columns is dissect a few of the most famous strategy frameworks and present them in terms that will make sense for an IT executive. Then if you have any questions, I’d be happy to moderate a listserv or take your questions either by phone or e-mail at [email protected]. Table 1: Key Activities and Descriptions Case Study: ERP Benefits Realization in Action JDEtips © 2007 Klee Associates, Inc. www.acom.com 17 Back to Index Page Five Secrets to Keeping Up with Technology Five Secrets to Keeping Up with Technology By Andy Klee, President, Klee Associates, Inc. Editor’s Note: What’s tougher to keep up with than stock market fluctuations (or even who’s married to who in Hollywood)? Our ever changing world of technology, that’s what! Why it’s so difficult and how we can learn to keep abreast of the latest technologies without overtaxing our brains is the focus of Dr. CJ Rhoads’ column in this issue. She’s got some secrets to share, so listen up! How wired in are you? Let’s be honest here — keeping up with new technologies is very difficult for four reasons — one of which cannot be controlled, and two of which can be controlled somewhat by the technology vendor and one of which can be controlled somewhat by the buyer. 1. There is constant competitive pressure to come up with new things in order to make money, thus technology is always changing as the “latest and greatest” product to top the market gets knocked down by the “newer and improved” version from a competitor. 2. The hardware and software concepts underlying technology are beyond the knowledge and experience of most people. 3. The terminology used in the industry is fraught with the use of meaningless buzzwords. Sometimes the same buzzword is used by different people to mean different things. 4. Some technology people are disdainful of “regular” people who don’t already understand information systems, and are unable (or unwilling) to “translate” technical terms and concepts, or do so in a patronizing way. (Did you guess that the last two are controllable by the technology vendor, and the second one is controllable by the buyer?) The constant pressure to innovate is a fact of the business. The knowledge level of the decision makers is a major factor, but most business owners - even many CIOs - don’t have the background to quickly and easily keep up with technology. Even if they have the background, they often don’t have the time. These obstacles make the task of keeping up with new technologies almost, but not quite, impossible. Those who manage to do it may have learned the five secrets I’m happy to share with you today. 1. Find a Trusted Partner, and Learn If I wanted to invest in the stock market, but I didn’t know how to do it, I would find someone else — an unbiased stockbroker or investment specialist; someone trustworthy and knowledgeable to help me. I would discuss my goals and dreams with that person, who would in turn help me make the right decision for me about my investments. Technology is no different. If we don’t have the knowledge ourselves, we would find someone trustworthy who has the necessary breadth of knowledge, and rely on his or her expertise. We would want to make sure that person is well-informed and unbiased. Our trusted partner would not have a financial incentive to lead us in any particular direction, so we wouldn’t rely on vendors that sell the technology. We don’t let our trusted partner make the choices, we simply learn from them what we need to know in order to make the right choices ourselves. As we work closely with our trusted partner, over time we become more knowledgeable. Eventually we know enough to make good decisions ourselves. If we relied on our trusted partner too much, or let them make the decisions instead of learning from them, we would continue to be left behind. Similarly, if our trusted partner isn’t taking the time to share the knowledge, then perhaps they aren’t really a good partner. Finding good, solid, trusted partners is not easy, but it won’t happen at all if we don’t look. JDEtips © 2007 Klee Associates, Inc. www.acom.com 18 Back to Index Page Five Secrets to Keeping Up with Technology 2. Recognize Hype Hype is rampant in the technology industry. Vendors can’t avoid hype because the market forces them to promise beyond the capability of delivery. Think about it: If Vendor A tells us something can’t be done, we might go to Vendor B who tells us that it CAN be done — even though in the end it really can’t. By the time we’ve figured out that Vendor A was telling the truth all along, Vendor B has our money and Vendor A has lost the sale. We don’t let our trusted partner make the choices, we simply learn from them what we need to know in order to make the right choices ourselves. Another issue is that vendors expect us, as buyers, to understand what information technology is, and is not, capable of doing. Here’s an analogy. Suppose we live in the United States, and we want to get to Africa. We go to a top notch car dealership - Mercedes Benz, for example. We ask the dealer, “Can this car get me to Africa?” The dealer says “Yes, it sure can.” Dealers who answer this question yes haven’t lied - because the car can get us to the airport, from which we can fly to Africa. The dealers may be taking advantage of the fact that when they said yes, we assumed that the Mercedes was EVERYTHING WE NEEDED to get to Africa. But no car alone can get us to Africa. The car dealers do not worry about planes or boats we might also need because they don’t sell those items. Car dealers would assume we know to purchase those items, and that we will do so at the appropriate time. Besides - we do need a car to get to the airport, don’t we? Is it the dealer’s fault we thought a car could get us all the way to Africa? Expecting a car dealer to tell us that taking a taxi to get to the airport and buying a plane ticket is a better plan than buying that Mercedes is asking a bit much. This is how ERP vendors can be telling the truth when they list all the wonderful benefits of enterprise-wide systems; and still we, as customers, mislead ourselves into thinking we are getting something that we are not. The benefits of ERP systems rely on good processes, good project management, full support at the top and the bottom of the organization, good training, clean data, and effective people, hardware, and software. Can the ERP vendor be held accountable because a customer assumed that what they purchased from the ERP vendor was EVERYTHING they needed to get the benefits promised? We have only ourselves to blame if we actually believed the hype. The bottom line: when a vendor tells us that something can be done, remember that they are never saying that it can be done with their product or service ALONE. People, process, and systems are intertwined, and all of them must work together to gain the benefits. 3. Understand Your Own Hedgehog Concept and Stick to Technologies That Affect It One of the difficulties of keeping up with technology is the sheer number of types of information technologies. Have you ever gone fishing? Did you memorize all the names of every kind of fish first? Of course not! You probably didn’t memorize lists of bait before choosing the one to start fishing, either. To effectively catch a fish, we just need to know which fish are in the rivers or streams where we go fishing. If we are fishing for river walleyes, we need minnows for bait; if we are fishing for stream trout, night crawlers are our best bet. We can completely ignore saltwater fish and their related bait if we don’t go fishing in the ocean. In the ocean of technology, how can we tell what to focus on? Jim Collins talks about a Hedgehog Concept in his books Built to Last and Good to Great. The most successful business strategy is knowing what you are good at and sticking with it, relying on your strengths. Looking at your Hedgehog Concept is the best way to determine which, if any, technologies are relevant. If my company’s claim to fame is customer service, for example, it would be a waste of my time to spend months evaluating back-end financial systems. But Customer Relationship Management (CRM) systems? That’s a different story. I would want to know every CRM solution available. I would read all the magazine articles I could find about CRM. I would know which vendors are selling it, and how stable they were. I would talk to others at conferences about CRM, and JDEtips © 2007 Klee Associates, Inc. www.acom.com 19 Back to Index Page Five Secrets to Keeping Up with Technology know how my competitors’ systems compare to mine. In other words, we don’t need to learn about all the technologies – only the relevant ones. To keep up with technology, we would focus on just those few technologies that are likely to make a difference. The most successful business strategy is knowing what you are good at and sticking with it, relying on your strengths. 4. Pounce Like a Panther When the Right Technology Appears. Panthers have a very effective method for hunting. Not being as big as elephants or as swift as cheetahs, panthers like to climb trees overlooking a path where their prey tend to pass. Then, after waiting patiently, at just the right moment, they pounce down on the prey. This is the moment when inching out on a limb—even if it is a bleeding edge—is the right thing to do. This strategy requires more knowledge and attention to detail. We must know exactly what capabilities we need so that we can recognize those capabilities when they hit the market (and be able to distinguish true capability from hype, of course). But when used effectively, Pounce Like a Panther can provide exactly the right gear to complete the people-processtechnology chain and catapult a business to stratospheric success. 5. When No Pounce Opportunities Appear, Wait Patiently. Keeping up with technology does not mean investing in every new thing that comes along. When we are “pouncing”, a pilot project on a new technology related to our hedgehog concept is warranted. The rest of the time, we should just watch new technologies go by - spending a minimum of time, and not spending any money or effort at all. Most people would agree that these days a six-month study on which word processor to use would be a waste of time (though less than 20 years ago many companies were still doing that). Because 90% of the world has chosen Microsoft Word, we can safely just choose Word. What is less apparent, and just as true, is that (unless a global back-end process is part of our hedgehog concept) a two-year study on which ERP system we should choose is equally a waste of our resources. Just choose one! They all have good features and bad faults, so how we implement them is much more important than which one we choose. We should spend the two years planning how we will use the ERP system rather than researching which one is the best (because none of them are “the best”). Except for specific hedgehog concept areas, we want to buy commodity technology. We should not worry that it is not the latest and greatest. We should not spend a great deal of time investigating our choices. For most technologies, we can safely choose whatever our friends and competitors are using, or even just keep what we’ve been using for the past 10 years. Being bored with existing technology, or impatient for the next new thing, is a lousy reason to waste our resources. JDEtips © 2007 Klee Associates, Inc. www.acom.com 20 Back to Index Page The Hidden ROI of Training: Training Grants, Tax Credits and Incentives The Hidden ROI of Training: Training Grants, Tax Credits and Incentives By Peter Green Editor’s Note: We’ve mentioned several times that it is possible for your company to have its JD Edwards training paid for with State and/ or Federal grants. In this article, Peter Green, “peels back a few layers of the onion” so you can see what is available. Instead of crying, we think you’ll be smiling after you get your first grant. “Return on Investment” has long been a catch phrase on the lips of training executives and financial analysts in corporate America. It tends to raise its head as corporations put plans in place for major training rollouts such as new ERP systems or companywide process improvement initiatives. Many studies and many millions of dollars have been, and will continue to be, spent in efforts to discover the increase in productivity of the workforce in relation to the number of dollars poured into making the necessary training occur. So what kind of an impact can be made to the “ROI Graph” if you cut the cost of training in half? From Fortune 100 corporations to self-operated Mom and Pop startups, every year over $1 Billion is awarded to companies throughout the United States to offset the cost of training new and existing employees. At last count there were over 150 different incentive programs available at the state level, solely for training employees. Every state has its own economic development goals and initiatives in place, a good number of these include funding for companies who partake in the type of training a ctivity that the specific state has determined it would like to support. Awards can vary from Zero to Multi-Million Dollar awards to help lure or keep major corporations within the state confines. It just depends upon that particular state’s policies and objectives. Some states have also been known to go through phases of massive funding or no funding at all of their programs, depending on the current economic conditions and fiscal priorities. But for the most part if a company is about to embark on a training rollout of some kind, it would be wise for them to stop right now and take a look at what funding may be available. ..companies typically find that training grants, credits, and incentives provide a substantial boost to the ROI before the training even begins. How much could this potentially be worth to my company? Every state training incentive has its own qualification guidelines, funds available and program objectives. But for the most part qualified training costs typically include instructor salaries, employee wages during training, development of training programs - both internal and external, materials and supplies, instructional media, equipment used for training and reasonable travel costs. A state may award funding on case by case basis; therefore the award might be determined upon the size of the operation and its value to the state. When processed and prepared properly, companies typically find that training grants, credits, & incentives provide a substantial boost to the ROI before the training even begins. What types of training are included? A common misconception is that many of these types of training incentives are designed for and only apply to the manufacturing industry; however it has been found in most cases that any industry type can apply. It has more to do with the kind of training activity the state wants to see for its workforce, rather than what industry type they are actually employed in. Different industry types require different kinds of training, but in general there are a lot of commonalities in what qualifies for the variety of incentives available. Typical qualified training includes: new technology, new equipment, software implementations & upgrades, total quality management - including Lean Manufacturing, Six Sigma, ISO etc., teambuilding and leadership. JDEtips © 2007 Klee Associates, Inc. www.acom.com 21 Back to Index Page The Hidden ROI of Training: Training Grants, Tax Credits and Incentives In some states, training incentives are linked to job creation, therefore making basic job skills the main focus of what qualifies. A state program may require your training to take place only at a state Technical College. In some cases the state will even design, develop and deliver the training specifically for your company needs. In most cases however, your training can be developed and delivered by any qualified source, including your company’s own in-house trainers, outside training vendors, E learning, Technical Colleges and Universities. Is Federal funding also available? On the Federal side, money is disbursed to each state under the Workforce Investment Act for that state to use in its programs as it sees fit. There has been much talk in Washington D.C. for many years regarding funding for high-tech skills training, but as yet nothing significant has been made available to the general public or business community. What are some of the steps to receiving state funding? In all states with the exception of Georgia (allows a company to look back at the past 3 years of training activity), a company must have a training plan in place to submit to the state for approval, outlining what training is planned and how much it is expected to cost, before the training actually takes place. If the application is successful, the Grant or Tax Credit is awarded at that time but generally not paid out until the training has taken place. This in itself requires that the training go somewhat according to plan, and documented in such a way as to reflect this. Why do more companies not take advantage of these lucrative incentives? Most companies are not aware of what is available to them. This is especially the case in a multistate training rollout where the company will not have expertise with local incentives offered, and where no relationship with those particular state officials exists. Also, a lot of companies today will shy away from incentives available to them due to the belief that the paperwork and the hoops one must jump through is often not worth the return. “Labor intensive” is often a term associated with these state incentives. It is true that every state program is different. It is also true that each one requires a unique understanding of that one program, which therefore requires multiple contacts with those state officials as well as the local employees regarding the actual training activity. Paperwork tends to be extensive and the training has to take place as originally outlined. How can I minimize the effort and maximize the return? Many states will allow multiple year contracts. This allows a company to go through the application and approval process just one time to receive a grant to cover a full 2 or 3 years worth of training. Also if a company has multiple locations in the same state, they can usually group all of their activity together and receive one large award. Alternatively, many corporations will choose to work with a company that specializes in just this one area 4on CIO Cornerof training cost recovery who will handle everything for them. JDEtips © 2007 Klee Associates, Inc. www.acom.com 22 Back to Index Page The Hidden ROI of Training: Training Grants, Tax Credits and Incentives Where do I start? A good starting point is your State web site; this will provide you with information on the various programs available. Talk with the local state officials responsible for administering and approving your local program for important details, nuances and particulars that could help with your application approval. Or contact a company that specializes in the area of training cost recovery who will already have the information and state contacts already in place. “Thars money in them thar hills…” JDEtips © 2007 Klee Associates, Inc. www.acom.com 23 Back to Index Page Decisions, Decisions! Five Things CIOs Often Forget Decisions, Decisions! Five Things CIOs Often Forget By CJ Rhoads Editor’s Note: When you’ve finally reached the top of the summit, it’s easy to forget all the things you saw, and did, to get there. So, as a refresher “course,” Dr. CJ Rhoads shares her vast knowledge once more to give us a ground-eye view of the things often not “seen” from up high, and some common sense reminders that can take any IT leader from good to great when it comes to decision making. After reading this article, you’ll see why she teaches IT Management courses for JDEtips! Leadership Is Tough! When I accepted my first “chief” position (CTO at an e-commerce firm) I thought I knew what I was getting into. I was wrong. I’ve learned a lot about leadership since then –mostly by gaining knowledge from my many mistakes. Today, I see these same mistakes being made by many a CIO. Five Things CIOs Often Forget One: Most Employees Cannot Learn New Systems As Quickly As Techies CIOs might be tempted to cut the training budget to increase the ROI for new systems. Big mistake. Often, new CIOs are chosen because they are pretty good at whatever type of technology is used by the business. New leaders forget that few employees will pick up a new system as quickly as they themselves might. Business research clearly shows training is the most critical factor necessary for a successful project. Most systems are used by people who need a lot more support than a few help screens. Two: There’s More Than One Kind Of Cost Some people (especially CFOs) talk as if there is only one kind of “cost” - cold hard cash. In a new leadership position, CIOs may be pressured by other members of the leadership team into making the same mistake. But they’ve simply forgotten that there are many ways to pay a price. Here are several: • Financial Costs • Resource Costs • Psychological Costs • Marketing Share Costs • Opportunity Costs Yes, financial costs are important. We can’t forget them. But often a new leader will forget that resources cost money, too. An internally built system may end up costing more than an off-theshelf system. It is amazing how often internal salaries are conveniently forgotten in planning. Psychological costs are also real - and often far-reaching. As a VP for Bank One in the late 90s, I was leading an integration project for 16 months with a team of 40 developers and project managers when the project was suddenly, and unexpectedly, cancelled. This cancellation was especially galling to me because fifteen months earlier I had recommended canceling the project when I found that the goal couldn’t be achieved for the estimated costs. If it had been cancelled then, we would have saved 2 million dollars. But more importantly, we would have kept the hearts and minds of those project managers and developers. I never saw anything except half-hearted effort from them after that. Marketing Share Costs are also important. Sometimes we forget the impact of a new system on our existing customers. If a new system is likely to lose more customers than it brings in, the ROI showing how much money it saves is worthless. When Radio Shack went from a simple cash register system to a computerized system that demanded name, address, and phone number for a simple 98¢ cash sale, they lost a lot of customers (including me). Lost opportunities need to be considered as well. We want to weigh the cost of doing this versus that. Sometimes not spending money costs us more than investing in the right project. JDEtips © 2007 Klee Associates, Inc. www.acom.com 24 Back to Index Page Decisions, Decisions! Five Things CIOs Often Forget Three: Bandwidth Is Not Cheap or Unlimited We take bandwidth for granted. Email arrives within seconds after being sent halfway around the world. Videos can be viewed across the Internet. With these marvels, it is easy to forget that many systems simply can’t work on a wide area network. One of my clients (a Fortune 500 conglomerate) implemented an ERP system in 60 different locations. After a few years, the CIO made a decision to upgrade to the GUI version of the ERP system - without even thinking about the fact that a graphical interfaces take up to 20 times the bandwidth of text based interfaces. The CIO could easily use the GUI system (given the huge pipe of a 100 megabit local area network [LAN]); he didn’t think about the limits of the 256 kilobit wide area network (WAN). After they spent hundreds of thousands on the software licenses, they discovered that to make it work they would need to upgrade everyone’s connection to a T-1 leased line. That wasn’t in the ROI! We don’t let our trusted partner make the choices, we simply learn from them what we need to know in order to make the right choices ourselves. We can’t blame CIOs who confuse the relative speeds of LANs and WANs. Vendors often don’t explain the difference, as demonstrated by the graph presented by an actual vendor at a Webcast I attended last year (Figure 1). The graph indicates that bandwidth per user has been growing steadily since 1999 (true). The problem is that the graph has two axes, so what appears to be relative equity between the LAN and WAN speeds is really an order of magnitude difference. We can’t put LAN and WAN speeds on the same chart (Figure 2 shows what it looks like if you try). It would be like showing how a 6 oz glass of water has increased to an 8 oz glass on the same chart that shows how a million gallon swimming pool has increased to a 22 million gallon lake. We just have to remember that not every program works over a WAN. Typical Bandwidth Per User On Two Axes! 25 0.02 0.018 20 0.016 0.014 15 0.012 LAN WAN Internet 10 0.01 0.008 0.006 5 0.004 0.002 0 0 1999 2000 2001 2002 2003 2004 2005 Figure 1 – Typical Vendor graph showing LAN and WAN network speeds. Typical Bandwidth per User 24 WAN & Internet Aren't Even On the Same Chart! 22 20 18 16 14 12 LAN WAN Internet 10 8 6 4 2 0 1999 2000 2001 2002 2003 2004 2005 Figure 2 – How the above graph SHOULD have looked to reflect reality JDEtips © 2007 Klee Associates, Inc. www.acom.com 25 Back to Index Page Decisions, Decisions! Five Things CIOs Often Forget Four: Integration is Always Harder Than It Looks “We’ll just link the two.” How often have you heard that phrase? I’ve heard it from many CIOs who have simply forgotten how difficult it is to link two different systems that were built without any knowledge of each other. There are literally hundreds of “gotchas” that can squirrel the works. To name just a few: • One system stores the ID as a text field, the other stores it as a number. • One system uses serialized dates, another system uses YYYYMMDD date format. • One system puts contra records in the same tables, the other system has a separate table for contra records and combines them when presenting the report. • One system puts calculations in the queries. Another puts calculations in the reports. The worst part is - until we know everything about both systems, we can’t even tell IF the two systems will integrate, much less estimate the time it will take to get them to work seamlessly together. Five: We Can’t Estimate the Unknown Which leads in to another common issue I see: CIOs forget that employees working on iagnosing a problem cannot estimate how long it will take to fix until they’ve identified the cause. Once I forced a poor overworked technician to estimate the time it would take to get the printers to work with a new system we installed. He kept hedging, but I insisted on a timeframe – so he finally said 3 days. Three days later, the printers still weren’t working. The poor man had worked 20 hours a day, and had tried dozens of different options – but none of them worked. (We finally gave up and simply purchased new printers – he had been trying to write a new printer driver, but since he didn’t know why the old printer driver didn’t work with the new system, he couldn’t write the driver to overcome the problem.) Another related tendency for new leaders is to throw people at a problem. After all, aren’t two heads better than one? Well – not always. Once at First USA we had a particularly stubborn problem, and the CIO insisted on a round-the-clock bridge call for the whole team until the problem was fixed. Fourteen people didn’t fix the problem any faster than one person. (I finally talked the CIO into allowing us to give up and install a work-around.) Whenever I am tempted to throw bodies at a problem, I remember Werner Von Braun’s answer when asked by the US government why the increased labor force was not helping to decrease the time it was taking to get to the moon: “Nine women pregnant for one month does not have the same end result as having one woman pregnant for nine months.” Remember What It Was Like Making decisions in a leadership position is much harder than most people realize. Often new leaders must forget many of the skills they learned as they were moving up the ranks because they now must deal with myriad factors they could simply ignore before. But hopefully they won’t forget everything. Remembering these five factors when making decisions will help improve any leader’s decision-making ability. JDEtips © 2007 Klee Associates, Inc. www.acom.com 26 Back to Index Page ACOM SOLUTIONS, INC. ACOM SOLUTIONS, INC. What we do... Automate document and payment processes. 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