How IT Leaders Can Thrive in Tough Times

How IT Leaders Can Thrive in Tough Times
Slashing IT staff may not be the answer… by Gary Perman

As anxiety and uneasiness continue into Q2 of 2009, companies are looking for ways to trim spending and improve their bottom line. Even though IT often encompasses a small percentage of a companies’ cost expenditures, executives inevitably turn their attention to IT budgets as a target for cost cutting.
According to Gartner analysts, the number one cost-reduction option that IT executives should prepare for involved people, either in the form of hiring freezes, job cuts or eliminating layers of management. Yet, Gartner still expects IT spending to grow by small amounts during 2009. Caution, will likely be the business direction at many companies, affecting IT as well as other departments.
It may seem inevitable to some that staff pay the price during a budget crunch, but the short term dollars saved reducing head count or putting more work on an already overworked staff could ultimately cost an IT department exponentially more.
"People are looking to manage their costs in IT. But the last thing IT departments want to do is lose embedded knowledge. That would be hard to salvage," states Andi Mann, Research Director at Enterprise Management Associates.
During the Dot Com bubble, IT budgets grew rapidly. When the bubble burst, those budgets burst as well. Since that time, CIO’s, and their IT teams have improved the performance of IT departments by streamlining applications, reducing infrastructure costs, improving governance, consolidating vendors, and outsourcing many activities.
Technology now dovetails tightly with operations in ways that weren’t possible a decade ago, for instance; manufacturers use IT to manage supply chains, business operations depend on IT for financial accounting, payroll, asset management, e-commerce, and HR. IT capabilities have fostered new sales channels, defined new customer segments, and even helped create new business models.
These factors make reductions in IT spending more complicated than ever. Simplistic cuts, applied across the board, may endanger critical business priorities from sales support to customer service. That potent message should resonate even among corporate officers anxious to find quick savings.
CIO’s, of course, should continue to make their operations more efficient, especially in areas that show signs of dilation. Reducing pockets of unproductive expenditure now will bring savings that help meet corporate cost targets. Still, except in the direst of circumstances, turning off technology spending or reducing staff during a downturn is counterproductive. When business picks up, you may lack critical capabilities. Besides, many technology investments can improve profitability in the now as well as after a recovery. When business and IT executives jointly take an end-to-end look at business processes, the results can have a tremendous impact on IT cost reduction efforts. With minimal affects to staff.
So what ideas can IT leaders use to manage their costs and thrive?
1. Create opportunities. The trick is to scan for and create opportunities. Smart CIO’s will make sure their teams remain the bloodline to good services and innovations that save money. When the next problem comes up, IT must be ready to handle it swiftly. “Rather than just trying to weather the storm, figure out how to thrive in this environment and the company will do well no matter what the future holds.” Says Wilson Zehr, CEO at Cendix, a SaaS company.
It may also be wise for CIO’s to skip incremental improvements that don't have huge value. Stick close to your budget, and make sure any upgrades are not just tied to IT savings, but to savings across the entire company. The fact that conditions are changing opens up opportunities for resourceful firms to outsmart larger competitors who, during a downturn, carry on business as usual or are unable to adapt quickly -- except to fire employees.
Innovative IT leaders can partner with business development and gain market share by taking it away from competitors unable to adjust to the shifting market conditions.
Now is the time to be aggressive in the marketplace. Actively seek out new business by adding extra service to give you an edge over competition.
Improve customer service internally and externally. Look for ways to become a leaner, more cost-effective and efficient operation, better positioned to do well when the market improves.
Be imaginative. Companies who survive and even prosper during hard times must be able to look beyond the present, to overcome the constraints of tradition, to see the company from a new perspective, and to do business differently.

2. Improve Operating Leverage. CIO’s need to be focusing on only programs, projects, and actions that add value and are taking the business in the right direction. “Employees know when management is being wasteful and when they are focused on the wrong things. Working on the right stuff and being both accountable and transparent is critical” says Gary Smith, Managing Partner at The Consultant's Connection in Hartford, Connecticut.
Assess the moves your competitors will be taking and build a strategy to outflank them. Position products & find the holes... “One of the things that we IT folk rarely look at is our achievements. This can be on projects that made money, or saved money for the company,” says Peter B. Giblett, head of IS Development at The News Group. He continues “There is one area of IT that is currently in boom, which is business intelligence and its associated specialties; Data Warehousing, ETL, and Data Integration. The reason for this is that businesses need to use business intelligence technology to spot their best opportunities in business” Learn how to use industry tools to assess your own product portfolio, remove the lemons, and become more competitive. If you are the one in the IT department facing the challenge of expanding service without increasing the budget - business is still expecting IT to deliver. Business expects this without having extra money to do it, so you have to find creative ways. For instance, SaaS (Software as a Service) will continue to grow in popularity, partly as a result of the economic downturn. The cost savings are huge.
Blair Mandryk, global IT manager at Haworth Inc., a Holland, Michigan based maker of office furniture, had been looking to cut his technology costs long before the recent events began unfolding. Mandryk had already begun using VMware Inc.'s virtualization technology to reduce 450 physical servers down to 100 boxes. “Areas that our IT department won’t want to cut due to the upside profit potentials for the company include storage projects. There also is expected to be continued demand for business intelligence tools, to help users better evaluate every investment and business risk. In addition, IT requirements may grow in ironic ways; for instance, if PC replacements scheduled for next year are put off because of economic concerns, help desk calls from users having problems with their systems likely will increase” he said.
3. Don’t be caught under-staffed. Options include hiring specialists, freelancers, consultants, and part-time employees. Some managers and executives believe the myth that hiring becomes easier during a recession because the talent pools overflow with laid off people. This is far from the truth. The reality is that there are more unqualified employees filling the pool and finding a needle in a haystack becomes more time consuming, difficult and increases delays – all which translate into a very expensive process, rather than a cost savings solution.

Beware of overworking IT employees. Even the most eager go-getter can burn out when faced with an impossible workload. Talk to your team, find out who does what, and make sure your expectations are realistic. Your staff might already be too small. “In lean times, look at the core tasks which have to happen and work out who are the required staff to meet this base requirement. This is no different than planning a project and having the budget cut. You have to sort out what can be done with the new budget. From there you do what you can with the resources you have. Once the core services/tasks have been established to keep this scope as much as possible” conveys Jeff Theunissen, Chief Technology Officer and Infrastructure Specialist at QLD Health.
3. Good customer service cannot be overstressed, especially as internal and external customers’ buying power or willingness to spend is lessened during tough economic times. Studies show that customers’ perception of service is fixed primarily in terms of time in a customer's mind. Three examples
are: waiting time to obtain service; reaction time to deliver service; and length of time of the
service. In banks or stores, or phoning in orders or for information, prospective customers will
walk out or hang up if their time perception is strained. Understaffing will negatively impact customer service.

According to management consultant Donald Blumberg, author of ‘Managing Service as a Strategic Profit Center’, customers will temper their time demands when they see employees busy helping other customers. But they will not be so tolerant when service people are chatting with one another or on the phone while waiting customers are ignored.

4. Increase training. A mistake companies can easily make during a recession is to cut training budgets. Training is best conducted during slack periods -- especially low-cost, on-the-job instruction and broadened skill acquisition. Also, local community colleges offer a number of free classes that teach and upgrade trade and office skills and supervision techniques.
If you can't hire new staff, the best thing you can do is to make your existing team more valuable. Provide opportunities for current employees to train in new skill areas, and encourage them to take them. Your company will reap the benefits, and your employees will appreciate the challenge and the chance to broaden their skills. When good times return, training is also another positive retention strategy that increases succession management as well as build employee loyalty.

5. Get employees involved in tactics and implementation – During lean times people get nervous and worried about the security of their jobs. They need to know what is going on with the business, what they can do to support the operation, and how their contributions are helping. They deserve the truth and will pledge their loyalty to the managers who are open and honest with them.
Rather than face initiating layoffs, Sal Gonzalez, co-owner of R&D Plastics in Hillsboro, Oregon asked for ideas and input from his staff. His entire operations staff agreed to take a fifteen percent salary cut, including the executives. This did two positive things; One, it prevented layoffs and two; employees saw that management was willing to take pay cuts as well, which had a significantly positive affect on employee loyalty and production.
If layoffs or a significant reduction in work hours are unavoidable, let employees take a lead role in designing the program. Shortened hours, job reassignments, job sharing, and other alternatives may surface.
Meet with staff regularly to exchange ideas on boosting productivity and other issues. Create an
incentive for good suggestions and foster a team spirit for survival.
Remember that employees need to feel they are important to your company, and that their work
is challenging them to their fullest capabilities.

Develop a "culture" of doing more with less. Get every person in the company thinking about how to do more with less. If you can maintain this as a core piece of your culture it will also help when things are less lean.
Scott Simmons, VP of Operations at Climax Portable Tools in Newberg, Oregon has been installing Lean thinking and Lean processes among all departments of his company. In order to become successful with Lean, he has had to sell the idea to every level of the company. Training has increased to teach everyone from the janitor to the executive about the cost saving advantages of Lean thinking. The cost savings can be in the millions of dollars as well as preventing layoffs and even increasing staff. I had the opportunity to sit in on one of his mock lean training exercises that his design manager was conducting for their operations. Key staff members from various departments were going through the hands on learning lean process, step by step– including inventory, product development, process improvements, and machine tool changes. The introduction to lean working principles throughout their company has saved them millions of dollars. The introduction to lean as also allowed them to bring work in-house which they used to outsource – thus containing costs and increasing profits. “If your organization is already lean and mean then you can focus on continuous improvement! Lean methodologies, Six Sigma are areas that can guide you to the top! If you must reorganize then you should conduct a complete Value Stream Map of the department or system that you are in charge of. You will be surprised at how many processes and activities that you will find that are: redundant, wasteful, and useless. Systems evolve and procedures that were once key are many times deemed useless due to system changes, technology upgrades, or product reforms.” David Steinhauer, Six Sigma Black Belt, General Mills

6. Communicate. If you’ve noticed, a prominent theme throughout these six ideas is communication. Keep your management team included in all decisions. When possible keep your employees updated to what short and long term plans you are making for them and the company. Bob Nehauser, CEO of NCS Corporation adds “When staff members are listening to the gloom and doom on the news and/or seeing friends and colleagues losing their jobs they can be subject to survivor mentality, which slows down productivity and makes them feel crummy, of course.”

“The single best practice you can use at any time, recession or boom, is communicate with your employees. This includes frequent open and honest communications to large and small groups of employees as well as individual one-on-one communications. One of the most important communications skills a manager can employ is active listening. Engage your employees and actively listen to them... I find that this practice offers inspiration and opportunity to the manager to facilitate positive changes that will lead to increased employee satisfaction, improved team performance, and, ultimately, improved productivity.” adds Darren Sprout, Professional Services Delivery Manager at MicroAge.

While economic downturns are admittedly difficult, and increase the obstacles IT departments face in trying to survive and grow, it is not axiomatic that companies have to slash staffing and resources. Resourceful IT Leaders can seize available situations while creating new opportunities, and take steps during today's hard times to lay the groundwork for tomorrow's prosperity.


Gary Perman is a certified recruiting professional and president of PermanTech, which specializes in recruiting technology executives, managers and engineers. He also hosts a technology management blog.