Last Saturday, I
have written about the Dutch, parliamentary Ton
Elias Committee and its investigation into the failure of numerous
governmental ICT projects.
This extremely sloppy and superficial investigation only
seemed to push paper around and did hopelessly fail at looking for the real
reasons, why so many governmental ICT projects fail.
After I finished my article last weekend, I had on
Monday a very interesting discussion with my colleague Jeroen Gietema; except
for being an excellent and amiable ICT consultant with expert knowledge in
financial business, he is co-author of the small, but interesting management book
series The Project Saboteur. On top
of that, he has years and years of experience with change processes at the
government and in the financial industry.
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| Jeroen Gietema, Co-author of The Project Saboteur series of management books Click to enlarge |
Today, I asked Jeroen to speak out frankly about the
topic of change and explain why so many goverment (ICT) projects failed
hopelessly in achieving their main goals.
The following article is an integral representation of
our ‘interview’, for which I thank Jeroen very much.
Jeroen:
In governmental ICT
projects, you need to look at the context in which a software supplier is acting.
That is always a personal context – for instance where the account manager of
the supplier is involved – but also a corporate context.
The
main corporate context is always that a commercial company wants to make
profits and wants to achieve continuity for a longer period.
Depending
on how the national ICT market is, at the time of the assignment, the company
will try to extend or not to extend the assignment. That has to do with direct
yields from the project and other opportunities beside the current project,
which could yield more money possibly.
State
officials, civil servants and employees of commercial companies often go
through organisational change projects. And then certain eternal truths are
highlighted: the change project should almost always lead to diminished numbers
of personnel. In nine out of ten times, the business case for a change project is
personnel reduction.
Irrespective
of whether you take McKinsey, PWC or KPNG, they all sing the same ole’ tune.
Personnel reduction is the only real business case that these companies have.
But as a matter of fact, this is exactly the business case which almost never
gets realized.
These
companies argue, however, that their business case does get realized in a
profitable way indeed. Still, at the bottom line, one will see that the expenses
of the McKinsey consultants and the costs of outsourcing of employees have
almost never been added to the final financial result of the project. The
reason is that the costs of outsourcing and firing personnel are dramatically
high.
There
is a simple calculation for that, to prove my point.
I
suggest that we have two companies, which want to go through a merger. Both
these companies have an ICT-department. One ICT-department has a 60 year old
manager and the other department has a 35 year old manager. It makes sense that
these ICT departments will be merged together and that one of the two managers
has to step down, for the point of being superfluous.
The
manager that probably will be forced to step down is the 60 year old manager,
who has about five years to go before his retirement. How much money will this
man cost the merged company, when it pays him until his retirement, do you
think? This is what many companies do these days.
Say,
that it will cost you a total amount of about €500,000 during five years. The
cash value of this is about €480,000 (at the current interest rates).
However,
when I want to lay off this man, I need a consultant from an outsourcing
company. This guy will probably cost me €250,000 annually and this kind of guys always
manages to get themselves a contract for a whole year: €250,000!
So I have to pay this 250 grand now and when I say
goodbye to my 60 year old ICT manager, I have to bring a large bag of money too:
perhaps 20 to 30 times his monthly salary. Including the fees of the
outsourcing consultant, this lay off will at least cost me also 500 grand and probably
a bit more..
When the ICT manager has worked at the company for
a long time (more than 20 years for instance), his resignation will cost me
between €500,000 and €1 million. This already happens to be a very poor
business case, as it costs more money to fire the man than to keep him at the
job for five more years, until his retirement.
And there is more: when I fire this man, quite a
lot of knowledge walks away from the company.
Ernst: Perhaps you should hire him back as a freelancer
then, after he has been fired?!
Jeroen: That could very well be. The second thing that
happens, is that these people start their resistance against the project in the
days that they have left, as genuine project saboteurs.
They resist against everything and silently refuse
to share their vast knowledge – which is always very useful knowledge, gathered
in years and years of experience – among their colleagues. This is a double
whammy, which makes the merger inefficient, as you cannot disclose all
available knowledge, in this situation.
In other words: the added value of the merger
diminishes strongly, even when the merger itself is a success. Such success,
however, is definitely not a no-brainer, as a merger of two departments often
leads to the situation that the ICT systems of both departments all remain
operational. Then you have a merger without merging the available computer
systems. This costs double the money.
The
solution for this conundrum starts with not hiring McKinsey, KPMG or PWC, as
these people always come with an unachieveable business case.
The
second thing that you should do, is to keep the “superfluous” manager (or
personnel) in service. Instead of firing them, you use these people to prepare and
train the other people at the department, through a master / student relation
for knowledge transfering.
In
the example of our ICT manager, you let him coach the other workers, making him
important in the process, instead of futile. You could even make him
projectmanager for the transition, with a guarantee that he can stay the full five
year period until his retirement or that he can go with a solid early
retirement arrangement, at the moment that his knowledge has been transfered
successfully.
What
will happen? The process of the transition will actually accelerate, as this
experienced ICT manager with 20+ working years, from the example, had always been
the most qualified guy to hamper the transition process.
By
making him important, he will stop doing so. This has to do with the Pyramid of
Maslow. This Pyramid actually goes very deep in explaining the motivations of
people.
.jpg) |
| Pyramid of Maslow Chart courtesy of commons.wikimedia.org Click to enlarge |
People
in the lower stages of the Pyramid have interests, like making money to feed
themselves and their families and to let their children go to college. The
upper stages of Maslow focus at self-esteem and self-achievement.
When
you make someone important, by letting him transfer his knowledge to his
colleagues, you add to his self-esteem. So I save serious money in the process
by keeping this guy and actually making him important!
Summarizing:
when you have a business case for change, you need to get the human factor out
of it (i.e. personnel reduction), as making a profit on this is exactly the
thing that you won’t achieve… ever!
However,
you should take the human factor into consideration, in order to force yourself
to investigate how you can mobilize these people in a positive way. Positive
people are enthusiastic to participate in the change project. This is the
conundrum that you need to solve.
Every
change project where executives fail to do so, is dead-on-arrival. You see that
happen at almost every merger and at all systems and departments which should be
merged together.
This
is my statement and this is where things go horribly wrong, nine out of ten
times, at government change programs and large ICT projects. Employees have
great interest in their jobs being continued. Executive managers should never
forget about that.
I thank Jeroen for his elucidating insights in change
processes.
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