Building The Business Value of IT People 21 May 2003 Portland SIM Chapter Rick Poppell, Vice...

Building The Business Value of IT People

21 May 2003Portland SIM Chapter

Rick Poppell, Vice President

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Entire contents © 2003 Gartner, Inc. All rights reserved.

IT – Provide Value?Some Facts

• In US over $250B spent on Information Technology (IT) projects, with approximately 20% outside traditional IS organizations.

• 30% of IT projects, once started, never come to a fruitful conclusion.

• 51% of IT projects exceed budget by 189% while delivering only 74% of the originally stated functionality.

• World-class IS organizations complete nearly 90% of their Application Development projects within 10% of budget & time estimates.

Source: Gartner


The Value of Human Capital Management

Why is HCM important?

• On average, organizations spend ~50% of their IT budget on HCM related issues, failure to optimize the HCM budget will negatively impact IT spending

• Growth in IT spending is decreasing forcing organizations to do more with less

• The variance in performance between solid and outstanding performers can be as high as twenty fold in some key IT positions

• The role of IT is change requiring new competencies and behaviors from IT staff


What’s Keeping IT Leaders Awake At Night?

• Determining current enterprise capability Skills Inventory Organization Assessment Competence Assessment

• Optimal organization design & business alignment Does organization design align to current or desired processes? Will organization design support IT Strategy Address outsourcing/offshoring/contracting

• Attracting and/or retaining the “right” IT talent Critical business knowledge – hard to find, difficult to train or replace Key technical skills

• Emerging Technology• Database or data warehouse• ERP


Outsourcing/Offshoring/Contractors

Survey data indicates that 89% of companies outsource at least one IT function to some extent

IT functions may choose to outsource for a number of reasons: Focus on core competencies Train existing staff for emerging needs Improve time to market Reduce costs – convert fixed costs to variable

However, potential risks associated with outsourcing should also be considered in deciding whether to outsource: Technical – Being forced to stay with a current architecture because the vendor does not support the company’s new needs Business – Losing the capacity to make quick IT decisions or being unable to terminate/convert the contract easily in the event of an merger or

acquisition Economic – Discovering unexpected costs during the contract


Increased BVIT

Business Partner – Seeks to understand business need, provides alternative solutions

TransactionalTransactional – – Delivers on customer defined requirements, order taker

Consultative – Understand both business and technology, provides proactive solutions

Strategic Leadership – Setting the strategic direction of the Enterprise

Climbing the IT Value ChainClimbing the IT Value Chain

The Changing Role of IT

Where are you today?

Where do you need to be?

Increased Competencies & Integration of the Primary HCM Processes


Efficiency Measures

The “value” perception of IT increases as you internalize work processes and increase the capability of the organization

Areas of Focus


Business Value of IT PeopleCharacteristics

Clear and articulated IT Strategy in support of a Business Strategy Clear and articulated Mission, Vision and Values Strong, ongoing communications (360 degree) Formal and coordinated alignment with business units (BUs) (Often

through an IT Business Office) Project management office (PMO) and competency centers Identified and formalized work processes Formalized role definitions – people understand the requirements of

their job and their part in the IT process• Position Description (Job Characteristics, Project Complexity, Education &

Experience)• Required business, behavioral and technical competencies• Formal career paths


Business Value of IT PeopleCharacteristics

Formalized career development process in place Performance management system in place, supported by a

measurement culture Rewards (cash and non-cash based) that align to individual goals

and desired behaviors

Alignment is key!

HCM Strategy and Governance

OrganizationStructure

Job FamilyAnd RoleDesign

ResourceManagemen

t

ResourceOptimization


Business Value of IT – HCM Model

Aligning key Human Capital Management elements is the

key to success.


IT Operating Framework



ResourceManagement


BusinessAnd IT

Strategy

BusinessResults


HCM Model - Purpose


IT Operating Framework

BusinessAnd IT

Strategy



ResourceManagement


Purpose Purpose Purpose Purpose Understand degree

of business alignment

Identify required IT functions

Build a process-aligned organization structure

Define job families Define clear roles,

skills and competencies

Define career and progression paths

Getting the right people in the right roles

Maximize utilization of people

Effective use of contractors and outsourcers

Reinforce behaviors

Manage and measure performance

Sustain professional development

Reward and Recognize


Areas To Address Organization Focus Business Linkage

• Key Roles• Formal Process• Business Office

Role of the PMO Who “owns” the

resources? How does work get

accomplished• Cross-functional teams• Dedicated individuals

Work Process Drives AlignmentHow Does IT Work Flow Through The Enterprise?

Customers

Customers

Customers

IT Community

Bu

sin

ess

Off

ice P

M

O

Project 1

Project 2

Project 3

Biz 2

Tech.

Resources

COE


Survey participants were very positive regarding the success rate of their recent reorganizations. Key to success participants named included: Planning thoroughly and thoughtfully (i.e., is it necessary or are there other options?) Keeping the lines of communication open as early on as possible Learning from past experience (what worked, what didn’t) for future improvement

IT Reorganizes A Lot

Frequency of IT ReorganizationPrior Two Years

0 Times32%

3 or More Times

5%

1 Time40%

2 Times23%


CentralizedModel

FunctionalModel

DecentralizedModel

IT organizations are usually not always completely Centralized or Decentralized, however some take on characteristics that drive them to

operate to one of the extremes. An appropriate balance should be sought between flexibility and control based on the business needs, IT

strategy and IT culture.

Corporate/Divisional Model

Process OrientedModel

Organization Design – The Swinging PendulumOptions and Impacts

Efficiency Effectiveness


The Federated or Hybrid Model

Pros Responsiveness Business Awareness Local Control and Prioritization of

Applications Leverage Existing Systems Reduce Redundant Applications

Cons Managing Inter-Departmental

Dependencies Limited Career Development

Opportunities Limited Enterprise Learning

Critical Success Factors Strong Governance Processes Business Unit/CIO Cooperation Matrixed PMO

DivisionOfficer

DivisionOfficer

VPMIS

VPMIS

DivisionOfficer

DivisionOfficerDivision

Officer

DivisionOfficer

Characteristics

Business Units retain control of proprietary systems CIO manages shared services and enterprise applications CIO responsible for enterprise architecture and governance

Characteristics

Business Units retain control of proprietary systems CIO manages shared services and enterprise applications CIO responsible for enterprise architecture and governance

CorporateOfficer

CorporateOfficer

ApplicationsDevelopment

ApplicationsDevelopment Applications

Development

ApplicationsDevelopmentApplications

Development

ApplicationsDevelopment Governance

And SharedServices

GovernanceAnd Shared

Services

CIOCIOBusiness

UnitCIO

BusinessUnitCIO

ITDirector

ITDirector

Decentralized Functions Centralized Functions


Which PMO Makes Sense For Your Organization?

1. The Repository Model Source of standardized project methodology, tools and knowledge

2. The Coach Model PMO assumes willingness to share some project management activities and responsibilities across organization functional units and uses the office to coordinate communication

3. The Manager Model Concentrates Project Management Capabilitiesand Responsibilities within the PMO and may provide the direct management of projects

1. The Repository

Model

2. The Coach Model

3. The Manager Model

Models May Combine Overtime

The PMO can take on different functions within the organization, over time the functions can evolve from a repository approach to a manager approach.


Building Consistent Position Definitions To Support Resource Development and Utilization

• Career Development Planning• Succession Planning• Resource Planning

• Recruiting — Interviewing• Project Staffing Requirements• Management Coaching• Training Plans

• The Right People in the Right Roles• Insource vs. Outsource• Resource Availability• Training to Fill Skill and Competency Gaps

Career Paths

Skill and Competence Requirements

Employee Assessmentsand Development Plans

Job Families

•Employee and Enterprise Data


Career Path Progression Within Job Families


Skills & Competencies

Skills - What I do... Specific ability related to market based or internally developed

products and services• Relatively easy to identify and develop

• Relatively easy to develop through training

• Poor predictors of long term performance

Competencies - How I do it... Competencies are characteristics of an individual that are

observable, measurable, and predicative of performance within a given role or job.

• Harder to identify and develop in an individual

• Can be developed through a combination of approaches (e.g., training, coaching, feedback)

• Better predictors of long-term performance


The Restaurant Experience

What makes a “good server” vs. an “outstanding” server?

15% Tip 20% Tip


Competencies of Today’s Technology Professional Holistic View

Knowledge ofEmerging Tech.

Bus. RequirementsAnalysis

Project CostMgmt.

InformationSeeking

Client Partnership

Problem Solving

Bus. ProcessKnowledge

TechnicalConsulting

Bus. ProcessModeling

Behavioral Business Technical

Change Advocacy

Results Orientation

VisionaryLeadership

BusinessEnterprise Knowledge

Strategic Bus.Planning

Financial Mgmt.Knowledge

InformationSys. Knowledge

Foundation Arch.Knowledge

Enterprise ResourcePlanning

Leadership

Individual Contributor


Understanding Current CapabilitySkills Inventory

What skills are possessed by individual employees?

What level of experience does each employee have for each skill?

When collected together can we get a consistent organization view?

What are our organizational skills strengths and weaknesses?

IndividualSkills

IndividualExperience

CollectiveReporting

OrganizationView

• Current Technology Skills

• Prior Technology Skills

• Emerging Technology Skills

• High Level Competencies

• Years of Experience By Skill

• Date Skill Last Used

• Level of Proficiency By Skill

• Supervisor Validation

• Consistent Skills Categories and Lists

• Complete Organization View

• Strongest Capability By Skill

• Weakest Skill

• Training Direction

• Opportunities for Contractors or Outsourcing


Staffing Strategy and TimingQuestions to Answer

Strategy

3+ years

Planning

1-to-3 years

Execution

1-to-6 months

Deployment

1 month

ResourceAssembly

1 year

• Where will our enterprise be?

• Whatbusinesseswill we be in?

• What kind of people will we need?

• With whom will we partner?

• What kind of investments must we make?

• What will bethe role of the IS organization?

• What skills, knowledge, proficiency, competencies will we need?

• What should we focus on?

• What delivery models shall we use?

• Where are our gaps?

• Which skills should we build? Buy?

• Do we have prof’l devel-opment plans?

• How many people shall we prepare?

• With whom will we work?

• For whatwork do we have the right skills?

• Which gaps can we fill?

• Which gaps can we not fill?

• Who and what gets priority?

• Whom shall we assign to what role?


Resource Optimization

Resource optimization is achieved by ensuring your key HRprocesses are developing and rewarding the right behaviorsresulting in desired business results.

Key HR processes included: Performance Management Career Development Reward

• Cash• Non-Cash

Succession Planning Selection


Performance Management and Career Development

DEVELOPMENT

Performance Management

• Specific time period for evaluation of performance (short term) • Linked to compensation• Development of critical competencies for current role and achievement of desired performance results for performance year

Career Development

• Defined timeline (long term)• Linked to employee growth• Competency gap analysis and development to close gap for achievement of career goal

Win-win occurs when development for business need (performance) supports development for employee desired career goal.


Linking Pay To PerformancePaying For What People Do And How They Do It


Developing a Total Reward Strategy for IT

Total Reward

Long-Term Incentives Stock option Restricted stock Deferred cash

Annual Variable Pay Premium pay Annual incentives Project milestone Project completion Cash recognition (spot award)

Base Pay

Benefits Pension 401(k) Healthcare Disability Vacation

Perquisites Company car Commute service On-site amenities Health club

Non-Cash Recognitions Pat-on-the back Public recognition

of achievement Tech toys

Total

Rem

uneration

Job matches skills/ Job matches skills/ competenciescompetencies

Performance feedbackPerformance feedback Job securityJob security Personal growthPersonal growth Career advancementCareer advancement

Culture Work

Environment

Affiliation Reward

Career Reward

Indirect FinancialReward

Direct Financial

Reward

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