Jan 14 2008

Come Together

CIOs leading consolidations must overcome resistance from two groups: affected IT employees and agency officials.

CIOs leading consolidations must overcome resistance from two groups: affected IT employees and agency officials.

Molly Rauzi’s IT staff in Denver honed their skills and specialized as a result of an IT consolidation project.

When Molly Rauzi took the job of deputy CIO of the city and county of Denver in 2004 to help lead an IT consolidation, the biggest hurdle she faced didn’t involve servers or software contracts. It was melding more than 200 workers from 20 disparate information technology departments into a single Technology Services division.

“They had to understand how they fit together, and that meant involving facilities planners and lining up training so they felt invested in right away,” she says. “They weren’t just moved and ignored.”

Instead of easing workers into the new department, Rauzi challenged employees with new assignments. IT employees who had been wearing several hats in support of a specific agency were reallocated to Technology Services along IT process lines, such as enterprise applications, operations or the project management office.

“We consciously encouraged people to try a new set of challenges,” recalls Rauzi, who was recently named Denver’s CIO. “It might take advantage of the same skills they had been using, but not with the same people they had been used to dealing with.”

Like Rauzi, many IT executives leading consolidations seek out innovations to convince employees to embrace the change. Consolidation better aligns IT with business processes and forges strong teams. But the truth is that the conversion also inevitably leads to organizational conflicts involving both the IT employees being moved and the agency officials losing control of their IT resources. CIOs reveal what they’ve learned the hard way about change management, bolstering morale and rebuilding bridges to internal business customers.

Resistance to Change

The pain of reorganization has been worth it to Michigan, saving the state more than $100 million in the first two years alone and leading to creation of a more nimble and streamlined IT organization. For example, former CIO Teri Takai points to the Center for Geographic Information, which has grown to include 45 systems specialists who can tackle projects quickly.

Looking back on the state of Michigan’s IT consolidation, former CIO Teri Takai says one misstep was underestimating the pushback from employees, legislators and agency executives.

“It’s a massive change,” she says. If reorganization can help IT workers realize their potential, it also can be seen as a threat to individuals’ authority and job status. Often, people who are agency IT leaders are forced to find new positions with less clout in the centralized organization.

Takai, who recently assumed the post of California CIO, readily admits that the Michigan Department of Information Technology (DIT) made personnel mistakes early on that hurt morale. One was too quickly creating a help-desk organization based on geography rather than organization or expertise. “It was a nightmare,” she says. “Someone who was an expert on working with state police was sent out to corrections and was lost. We shouldn’t have tried to blend from day one.”

In retrospect, she says, it would have been better to phase in the change over time as DIT grasped the agencies’ needs. “Each organization and their personnel had an informal set of processes, and we broke those,” she says. “People didn’t know whom to call, and we had trouble getting service levels up to where they had been.” In response, DIT launched a service delivery improvement initiative.

Like most centralized IT organizations, DIT set out to create a strategic plan to share with agency executives and legislators. Besides clearly signaling where the state’s service-oriented organization is going, Takai says, “it helped create an identity for employees who had been stripped of one.” Other identity-building efforts include publishing a newsletter and recognizing DIT agency employees through awards programs. Employees also find that training options are better at DIT than they were in individual agencies, and Takai says recruitment is easier because prospective employees see a broader array of possibilities than they would in a single agency.

In Denver, Rauzi’s team prepared a communication, education and marketing campaign geared toward uneasy or reluctant staffers who saw their work identity tied to the agencies they had traditionally supported. One thing employees appreciated was that the new agency strongly emphasized training.

Rauzi concedes that initially shifting the employees too far physically from the agencies had a negative impact on customer service. “We had to make adjustments to improve collaboration capability and increase how often we met with agency staff,” she says. Technology Services also created account manager positions to provide agencies with a single point of contact with the department.

Staffing Status

Stephen Fletcher, CIO of the state of Utah, achieved staffing flexibility by getting workers to relinquish their civil-service procedural protections.

Stephen Fletcher, CIO for the state of Utah, closely studied Michigan’s experience before launching an IT consolidation late in 2005. “We decided to build trust and support first and make it a longer process, a longer transition,” he says. “We could have done a big bang the first year, but that would have been a really terrible first year. It would have made the agencies mad as heck, because it would have turned them upside down.”

Utah’s new Department of Technology Services (DTS) has left workers situated in their agencies while it defines service levels, and it expects to have those in place by July. Seeking flexibility in how he could deploy workers, Fletcher pushed for a change from merit status, which offers civil-service procedural protections, to “at-will” employment status. “There might be people that I need to use, but they couldn’t be reassigned because of work rules, so they would just be sitting on the bench,” he says.

“Our governor and legislature wanted us to be more nimble and responsive,” he explains. “To do that, I needed the freedom to promote, to hire, to reassign people, to fire people, if need be.”

The Utah Legislature had the power to make new positions created in the department at will, but the changeover for current employees had to be voluntary. Fletcher and his staff held several brown-bag lunches with employees and played up the potential for quicker promotions, interesting work and additional training. He also offered $4.5 million in step-raise incentives, which the agency later made up in cost efficiencies, he says.

Employees told him they wanted to be sure that they would be protected from capricious managers. “I made sure all firings must be approved by me personally,” Fletcher says. “And with that protection in place, almost everyone accepted it, including the managers.” Eventually, DTS convinced 91 percent of state IT employees to voluntarily make the switch.

Fletcher believes flexibility in other areas is crucial as well. For example, the prison system is a different enough environment that he decided not to consolidate its help-desk staff. “I may not get as many efficiencies there as far as desktop support,” he says, “but it’s great that the legislature left it up to the CIO to make those decisions on a case-by-case basis rather than forcing us to do it even if it doesn’t make sense.” Along with this flexibility, he adds, comes the accountability of explaining the business case for each decision.

Working With Agency Executives

Although bolstering IT employee morale is crucial to the success of a consolidation, building new relationships with agency executives is equally important, CIOs say. And usually the sticking points involve service levels.

Deputy directors of agencies often perceive a loss of control when the technology organization is centralized. Previously, they have had a large say about IT projects and now find their IT employees working for someone else and their IT spending requiring approval from the state CIO. “I try to convince them that they still have a voice in the way the state uses technology,” Takai says. “I don’t want them to feel disenfranchised.”

To that end, her agency created the Michigan Information Technology Executive Council, made up of the number two person from each agency. DIT meets with them five times a year to hear about their priorities. It also holds quarterly meetings with the agency leaders to ask what is working for them and what needs to be changed.

Sometimes a focus on metrics can clear up misunderstandings about service and improve relationships. Kyle Schafer, appointed West Virginia’s chief technology officer in May 2005 to lead a consolidation, began hearing complaints from cabinet heads that his department wasn’t meeting its service-level agreements, although his agency’s statistics said otherwise. His staff attached surveys to 20 percent of the trouble tickets and got clear responses about customer satisfaction and timeliness of response. “I bring the results of those to meetings with cabinet secretaries,” Schafer says. “We not only have our own statistics, but have input from customers, which doesn’t end the griping, but it does put a damper on it.”

Often agency executives complain that they don’t have much recourse when centralized IT organizations fail to meet agreed-upon service levels. “I tell them that this is not a new model,” says Denver CIO Rauzi. “They get services from other internal organizations, such as purchasing or legal services, that don’t fall under their line of business. How do they address issues when they don’t get good service from those organizations?”

CIOs stress that the complexity of managing the transition to a centralized IT organization cannot be overstated. Yet they all firmly believe their workers are better situated to respond to the needs of internal customers and constituents. In fact, Utah’s Fletcher doesn’t even call what Utah is doing a consolidation. “We call it an optimization, because I think consolidation has a negative connotation. It implies that people are going to get laid off. What we are doing is optimizing processes and service offerings.”

Tips From the Trenches

  • Former Michigan CIO Teri Takai recommends CIOs conduct a complete assessment of cultural impacts on both employees and agencies before they centralize.
  • Utah CIO Stephen Fletcher suggests assigning staff resources to help agencies understand the potential of IT tools to change their business processes. A bad business process with good IT tools is still a bad business process, he notes.
  • Several CIOs recommend adopting a partially “federated” approach. Any IT employees working on agency-specific applications should remain employees of those agencies, while employees working on applications or services common to several agencies move to the central organization.
  • Molly Rauzi, Denver’s CIO, suggests that in negotiations with agencies about transferring staff and contracts to a centralized IT group, get finance people to help do it. They are more familiar with what things actually cost and can look objectively at the agency operations.

Show-Me State CIO: Show Me the Money

When Missouri CIO Dan Ross took the job in 2005 to lead an IT consolidation, he moved all IT funding for state government into the Information Technology Services Division (ITSD).

Most consolidations leave funding in state agencies and establish service catalogs and metered rates to charge agencies, not unlike a utility. But Ross recalls sitting through too many long meetings with CIOs trying to justify costs.

“We did not want to have that relationship with the agencies,” he says. “We also did not want to give IT vendors the opportunity to try to convince the departments that they could do the same thing cheaper, because they often do not make an apples-to-apples comparison.”

Resistance to the unorthodox funding scheme didn’t come so much from agency directors as from the next level down, the budget directors who were responsible for securing ever-increasing amounts of income for their agencies’ IT projects. “They felt like they’d lost their only child,” says Bill Bott, the state’s deputy CIO for operations. “We had to work with them to ease their fears.” One way ITSD mollified agency executives was to ask for their help in creating a new type of service-level agreement. Bott got agency staffers to identify key IT products and services and create meaningful metrics around them.

Nowadays, Bott says, he and Ross regularly discuss performance issues with agency executives, “but we never argue with them about money.” As it stands, the department must convince legislators to approve more funding.

The Pace of Change

In Illinois, IT consolidation is just one part of a larger move toward efficiencies through shared services in a state government that was facing a $5 billion deficit in 2003. The financial crisis lent a sense of urgency to the reorganization, says Doug Kasamis, acting CIO for the Bureau of Communications and Computer Services (BCCS). BCCS is part of a new organization called Central Management Services (CMS), which handles procurement, legal and other administrative services.

Despite identifying $529 million in savings from its rapid shift to a shared-services model, Illinois officials also recognized that the pace of change had a downside. By implementing several major initiatives all at once, Kasamis says, they avoided some of the natural roadblocks that can be erected by people adverse to change. But the speed of the process made some employees uncomfortable.

A 2006 independent assessment of the state's shared-services initiative by two University of Chicago graduate students found that the state overlooked the importance of consistent communication with employees. “Some employees did not understand the reasons for the change or they did not realize the benefits to them individually,” notes the report. “Other employees knew that if they decided not to cooperate, they ran little risk, pursuant to the collective bargaining agreement, of incurring immediate penalties.”

“We realize now that we could have done a better job of communication,” Kasamis says. To improve its outreach efforts, BCCS established an internal newsletter and scheduled monthly performance meetings with agency CIOs and business leaders.

Kasamis is optimistic about how the transition is proceeding. “Although we've had our share of pain, we have done a very good job of driving out costs,” he says. “We were able to squeeze $119 million out of state IT spending through things like better contracting, better governance, oversight of discretionary IT funding and use of fewer outside contractors. Now we have to refine our process maturity.” - David Raths