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.
|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.
|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.