Maintaining Your IT Edge in 2017:The Importance of the PMO and Good Governance
As the first quarter of 2017 ends, many CIOs and senior IT leaders are already shaking their heads, wondering how they’ll meet the demands of their customers, retain their staff and maintain their edge. Although innovation, rapid development and forward thinking strategies are all critically important, the foundation of IT success is and always will be good governance. Your PMO, vendor relationships and governance model are some of the most important vehicles providing the structure and processes to effectively navigate and manage the world in which we work.
Roadmap to better governance
For the average IT organization, one in six projects goes so badly it threatens to affect corporate stability. One of the primary reasons this is such a common occurrence is that companies don’t devote enough time and resources to ensuring their PMO and governance strategies are mature and effective.
Establish and mature the PMO – First and foremost, a well-functioning PMO supports a robust demand management process capable of assessing the demand, risk and capacity of the proposed and ongoing efforts. Without a mature PMO making fact based decisions becomes an art rather than a science. When a significant part of your company’s budget is on the line, this is simply unacceptable. By working to streamline processes and implementing more rigorous, fact-based decision making strategies, companies can improve their project success rate, reduce costs and foster innovation.
Implement project behavioral coaching – Project behavioral coaching helps companies improve their success rate by targeting the underlying foundation of a successful project: people. By coaching the humans behind the project to think more analytically and encourage behaviors that promote success, companies can reduce risk and improve outcomes.
Leverage project analytics – Decisions should be made objectively and supported by hard data whenever possible. A critical step in ensuring that the PMO is equipped with the tools it needs to lead projects effectively, the company needs to implement systems to capture and analyze data. This means employing new innovations like IoT and predictive analytics.
Formalize the governance process – IT leaders must identify all governance objectives, procedures and challenges from the top down in order to ensure that the team is working cohesively. It is extremely important that business leaders understand and contribute to project planning and governance to make sure the project is aligned with business goals. By considering all key stakeholders and documenting clear governance processes, companies can better organize their operations and decision making.
Vendor management is critical – Governance can mean many things, but one of the most important components is good vendor and relationship management. In today’s highly decentralized IT world, effectively managing technology often means managing vendors. Harnessing the value and innovation of your delivery partners is a key win of a vendor management office. Understanding how to be a good service provider and integrator to your business partners provides the foundation for meeting expectations at a minimum and opening the door to exceed expectations.
The IT department’s role in the modern workplace is rapidly changing. Technical skills and infrastructure are not as important as they once were. Instead, IT leaders that want to be able to deliver the service their customers need and maintain their edge in the coming years need to develop stronger systems of project management, governance and vendor management. By implementing strategies that allow them to make decisions more effectively, respond to challenges more rapidly and develop better relationships with vendors, companies will stay competitive and be prepared for the future.
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The very foundation of IT is constantly evolving, forcing rapid development of infrastructure and services. If an organization does not act quickly to capitalize on new innovations, it will quickly fall behind the curve, lose potential revenue, and waste resources. Having a nimble IT department that can quickly implement new technologies helps keep the company competitive, improves efficiency, and creates a more effective support system for the business.
Technology is moving faster than ever
As we progress through 2017, technology is progressing at a faster rate than at any point in history. This means that companies that don’t keep up with the pace of progress will be left behind. As IT becomes an even more important part of practically every business, it becomes increasingly critical that companies devote the resources necessary to support the business. This means both improving existing services and infrastructure and investing in new ideas that are the future of IT, such as automation and IoT. CIOs must constantly look forward and act quickly in order to drive business goals and support the company.
Fast IT is cost effective
About 45 percent of IT projects experience cost overruns.1 This is due in large part to projects running over schedule or being otherwise poorly planned. This also does not take into account opportunity costs of projects that aren’t finished rapidly. IT projects that save money and make the company more efficient should be implemented as soon as possible to maximize their benefits. Every day of lost cost savings is money that can never be recovered. Projects that are streamlined and brought to market faster drain fewer resources and cost less overall. Implementing complex new solutions takes significant resources; companies should strive to make the process as efficient as possible.
Stay ahead of competitors
Building a fast IT organization isn’t just about keeping up, it’s also about getting ahead and staying ahead. Forward-thinking organizations that act quickly have a significant competitive advantage over companies that are still using yesterday’s technology. New watershed technologies like IoT and automation haven’t even begun to be fully exploited, even by the most advanced companies.
The fate of a company can rest on the next disruptive innovation. The CIO plays an extremely important role in ensuring that new technologies and information systems allow the organization to race ahead of the competition. By taking steps to maximize the speed of IT transformation, IT leaders can better prepare their companies for the future.
1 Michael Bloch, Sven Blumberg and Jürgen Laartz, Delivering large-scale IT projects on time, on budget, and on value, McKinsey & Company Insights, April 2012.
Contracts are the bedrock of good vendor relationships. They provide the basis for collaboration, dispute resolution, payment and many other critical components of vendor management. This makes developing, managing and reviewing contracts one of the most important roles of the vendor management office. In order to optimize VMO and get more from your vendors, it is important to develop effective strategies for contract administration.
In order to optimize your contract management strategy, it is important to first understand potential challenges. Mismanaged contracts can cost a company dearly, and the VMO must stay proactive in order to secure the best agreements for the organization.
Postponing contract renewal preparation – More time means more leverage for contract renewals. Many companies don’t give themselves enough leeway to prepare for RFPs, negotiations and other aspects of contract renewal because they are disorganized and don’t have a workflow system in place. This can often leads to staying in suboptimal agreements with incumbent providers.
Not regularly reviewing contracts – Contracts should be regularly reviewed to ensure vendors are delivering on promises and that the terms are matched to real business results. By consistently reviewing contracts, companies will be better prepared to get what they need when it’s time for contract renewal.
Incomplete or disorganized documentation – Documentation forms the legal and practical basis for a contract. Companies that don’t keep their documents in readily available and organized forms will have little leverage when vendors renege on their agreements.
Optimizing your contract administration strategy
Create secure contract repository – Accessing, reviewing and referencing contracts should be simple and secure. Many companies store contracts in multiple locations, don’t have access control and don’t offer a way to view contracts remotely. This creates several problems. First, it is insecure. Contracts could get deleted or leak. It also creates problems when stakeholders need to access the documentation to review contract terms or conduct negotiations with vendors. A centralized repository with access control eliminates these problems and ensures contract documentation is always accessible to those who need it.
Proactively manage contracts – By staying one step ahead, the VMO can gain leverage over vendors and negotiate better agreements. Contract management systems can integrate workflow and help companies anticipate milestones. This makes the process of contract administration more organized, better preparing the company for contract events and renewals.
Tie analytics to contracts – Analytics are a critical for ensuring vendors are delivering on their agreements. By implementing metrics that measure the performance of vendors, both in a technical sense and in terms of how well they drive business goals, companies can make sure that their agreements are optimized.
Contract administration is one of the most important functions of the VMO, and companies that don’t implement strong contract management systems and processes will inevitably end up paying more for sub-par service. By integrating organized systems to store and retrieve documentation, measure analytics and proactively manage contract events, the organization will be better prepared to negotiate effectively and meet the needs of the business.
Attrition is Expensive – How to Make the Right Hire the First Time
When an employee leaves a company, it not just time consuming and burdensome, but it is also expensive. Consider the costs associated with the departure of a team member. First and foremost, there are time, effort, and resources dedicated to recruiting and backfilling the vacancy. This includes costs associated with advertising the position on Linkedin, recruiting and interviewing candidates, and subsequently onboarding and training a new hire. There are costs associated with lost productivity, not to mention the cost of the knowledge and experience that walk out the door. Colleagues may need to step in and temporarily backfill the role, which has costs associated with reduced productivity across the organization. Finally, it can take a new hire months to get fully up to speed and productive in his role. In a study conducted by the Center for American Progress, the cost of losing an employee may be up to 213% of the salary for a highly-trained position. For example, if an executive is making $120,000 a year at your organization, your true loss could be upwards of $250,000. Clearly, it is critical to make the right hire the first time.
How can organizations make the best hire? In working across leading Fortune 1000 organizations, I have come across some key factors that trend in organizations with reduced attrition rates.
Write an honest job description. I have found two trends in job descriptions. One is the overly generic posting. The other is the “pie in the sky” posting. It is not benefiting you, your recruiters, or your candidates to operate off a three-bullet-point job description that provides little insight into day to day responsibilities, team structure, and organizational culture and challenges. A detailed job description will help your HR team better tailor their searches and improve the overall quality of results by arming them with enough information to ask the right questions. On the flip side, do not be unrealistic, expecting to find a unicorn for every role. Focus on the key responsibilities, communicate the critical skills required for success, and ensure that your job descriptions are thorough, but also realistic.
Use unconventional interview practices. Everyone can reiterate their resume verbatim and talk about specific examples of triumph and despair in their career. Everyone has researched “What are the toughest interview questions?” and read up on the smartest and most creative ways to respond. You need more information than this to be able to make the right decision. One successful tactic is to bring in a panel and have the candidate give an executive presentation that they have had time to prepare in advance. Ask them to role play a scenario so you can witness them in action. Give them a problem and ask them to whiteboard how they would approach the solution. We have all been trained how to tackle interviews and respond to canned questions. Bringing candidates out of the typical interview “comfort zone” and evaluating how they respond will provide a better overall picture of how effective they may be when forced to think on their feet.
If you want it done right, sometimes you should not do it yourself. A critical summation is that you need to find the right talent, which is why you should consider working with high quality recruiters who have very specific industry knowledge. This is extremely important in technology, where specialized knowledge is critical to verify that candidates have the skills and experience necessary to succeed. By partnering with specialized firms, you reduce the burden of lengthy internal recruiting cycles and eliminate the risks of failed hires and attrition.
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The IT sourcing lifecycle is rapidly evolving. Traditionally, sourcing a new service could take over a year after requirements were outlined, an RFP was made, contractors responded and negotiations took place. Today, this is no longer a viable process. As the pace of technology dramatically quickens, companies must adapt by shortening their sourcing lifecycle, focusing on outcomes based transactions and streamlining their processes. This will allow them to meet new challenges faster and more effectively.
Problems with the old sourcing cycle
In the past, most IT sourcing has been reactive, ad hoc and excessively drawn out. This ultimately leads to solutions that are outdated, overpriced and don’t sufficiently meet business needs. In order to do better, organizations must identify their problem areas and work to address them.
Vendors kept at arm’s length – Many companies simply don’t put the necessary time and effort into building good relationships with their vendors. This can make it difficult to work with them effectively when new solutions are needed.
The RFP process takes too long – The only right speed for IT is faster. Companies live and die by innovation and optimization. Taking over a year to source a new service or work out better terms is simply not acceptable anymore. Quicker and more nimble competitors will rapidly eat up market share if your RFP process is outdated.
Vendor sets requirements – Many IT leaders that go into negotiations unprepared will allow the vendor to tell them what they need. Given that the vendor is working in their own interests and not those of the client, this is not an optimal situation. An organization without the necessary resources devoted to defining requirements and negotiating with vendors will get services that are overpriced and underperforming.
Better sourcing methods
In order to more effectively source IT services, companies need to rework their sourcing cycle from the ground up. This means devoting the necessary resources to defining requirements, building relationships with vendors and standardizing processes. This will help ensure that services delivered to business units meet strategic goals.
Build better vendor relationships – Having strong working relationships with vendors can benefit the organization in several ways. First, a vendor that understands its clients needs and knows its people will be better able to craft an effective solution. Working relationships can also help organizations source a good solution faster, as vendors already understand the company’s systems and requirements.
Speed the sourcing cycle – Increasing speed-to-value has become one of the core goals of every effective VMO. Companies that roll out new services or upgrades faster will immediately begin taking advantage of benefits and improving their efficiency, profitability and competitiveness. In today’s fast paced marketplace, this can mean the difference between obsolescence and survival. In order to speed the sourcing cycle, companies should have a strong VMO team with working relationships with trusted vendors. They should also streamline the process by creating templates for RFPs, demand requirements and other key components.
Focus transactions on outcomes – The VMO should redefine metrics not just to focus on technical specifications, but rather on tangible business outcomes. This can help prevent the “Watermelon effect” when vendors appear to be hitting their requirements, but end users are still unhappy. IT leaders should talk to stakeholders across the company to see what they really need from the solution. They should then use those requirements to negotiate with vendors.
Sourcing is one of the most important functions of the VMO. A company’s ability to innovate, increase profitability and stay competitive depends on their ability to negotiate with vendors and bring new functionality to production faster. This means that the VMO must strive to improve its competitive sourcing lifecycle by implementing standardized processes that speed the sourcing cycle and deliver business focused outcomes.