Many CEOs and owners of medium-to-large enterprises are daunted by the prospect of change, to the point that they would prefer to persist with what they have, even when they know it’s costing them efficiency and even money. When it comes to change, and the risk that can entail, ‘better the devil you know’ is a surprisingly common mantra, even for large public services.
And with high-profile Information and Communication Technology projects that don’t meet targets prone to becoming litigious, the stakes are high.
What we endeavour to communicate quickly when talking to new and potential clients is that most businesses have elements that are already working well and should be retained. Very often, it’s unnecessary – indeed, undesirable – to throw out an existing system and start from scratch. It’s better to analyse, find the best of what you have and implement a programme of enhancements and improvements. This approach streamlines the change process and leads to efficiencies in all applicable parts of the business. Flow-on effects are often improved performance, cost savings, and better team morale.
CEOs typically know exactly what every division of the business is costing; IT, for instance, can comprise between 8 percent and 15 percent of an organisation’s expenditure.
What are the practical solutions that any senior manager can consider to reduce IT spend? Here are eight ideas:
- When considering the replacement of an existing IT system, don’t think just in terms of the specific problem you identify. Rather, think broadly about the opportunity for the organisation. Off-the-shelf applications such as payroll/HR and EREP applications are rich in functionality; often, several systems can be replaced by just one. System rationalisation has benefits including lower long-term costs, seamless integration (fewer interfaces to manage) and standardisation of use.
- Understand the problem before you look for a solution. Too many IT solutions are designed within the confines of what is known, not what is possible. It’s often wise to present your business problem to the market and ask vendors to offer solutions, rather than requesting a solution designed by the organisation.
- Understand in real terms (money, time, organisational disruption and change, and the effort of people) the precise cost of installing a new system. Too many business cases focus solely on dollar-cost and do not account for the other factors that determine the success or failure of a project – buy-in and commitment.
- Plan your implementation of the new system from scratch. Many projects commence with an unrealistic deadline. A valid expression within project management circles: You can have it quick, you can have it cheap, you can have good quality, but you can’t have all three.
- Organisations have a tendency to dedicate insufficient resources to projects. The two common failings are a) believing that a person can meet their usual responsibilities and give time to the project (they can’t), and b) putting people on projects because they are not wanted elsewhere. Projects succeed when the best people are working on them.
- Systems testing (the process of proving that the system performs as it ought to) is typically not emphasised enough. This is a discipline in its own right and is a business process that should be carefully planned and meticulously executed. Many organisations will test major processes without testing the many exceptions and/or variants within them.
- Training and change management. These are two areas that tend to be under-provided-for in projects. Change management is essential during the implementation of a new system, because jobs, and the skills a business needs, will change after the system goes live. Planning and providing for this is essential to project success. Training is the last step, and there are numerous examples of projects failing due to poor adoption by end users.
- Rationalise applications. Often organisations pay maintenance costs for applications that aren’t being used or that could be consolidated into other systems. The opposite can also be true; enterprise applications can offer benefits, but a best-of-breed system can provide the same functionality at a lower cost.
A real-life example based on our work with the New Zealand Fire Service:
By early 2010 the New Zealand Fire Service had several frustrations relating to its procurement and accounts payable function, and engaged Probity Consulting to conduct a review.
At the time, the Fire Service’s suppliers sent invoices directly to over 600 business units across the country. The finance team had limited visibility of financial commitments until the approved invoice was received by the accounts payable team in Wellington. The second problem was the inconsistency in conformity with the procurement process, in particular the completion and approval of purchase orders.
Probity assisted the Fire Service with the design of a solution that included a review and rewrite of procurement policy and process and, more importantly, the implementation of a fully electronic, paperless accounts payable solution. This solution used the best new technology available to redefine and then solve the problem. The tangible benefits to the Fire Service included:
- Positive return on the investment due to staff reduction (from seven people to three)
- Elimination of physical storage of invoices, with consequent cost savings and environmental benefits
- Improved management of financial resources, with Fire Service now having full, almost instant, visibility of its forward cash commitments
The implementation of this initiative had far-reaching consequences for the Fire Service. It was a significant change in the way the organisation approved and processed payments, and affected many frontline staff. This project epitomises the value of broad thinking, effective project planning, hands-on change management and effective training.
The key was finding a balance between a number-eight-wire approach and the limousine version of change management; you don’t want to cut corners that will end up costing down the line, but neither does any CEO want to spend just as much on consulting services as he will end up saving.
Barry Carruth is managing director of Probity Consulting.
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