Cost is also a 4 letter word in the corporate world !

My first tryst with cost happened a little more than a decade back when the company reins were taken over by the CFO; he replaced a young charismatic CEO who found greener grass elsewhere. The first review meeting conducted by the CFO with score of year of experience announced an initiative to control costs – something he had harped about in the past but was overruled. His predecessor always worked on the numerator (revenue) and not the denominator (cost) when looking at profits and ratios.

Many years later I was facing a sense of déjà vu in another company when the new management which had initially created high costs now under pressure from shareholders started an initiative to cut costs. Fast forward to current business environment when everyone is uncertain of global trends and policies that potentially impact parts of business and resultant revenue and profits – quite a few are preparing to cut costs to sustain impact if any to short-term and long-term operations and business strategies.

Why not cut the flab or get rid of deadwood that the organization may have collected on the way. In almost all such cases of cost containment, it is typically a new set of Managers who initiate the exercise wanting to sculpt the company in a specific way getting rid of legacy. The other interesting fact is that almost all such cases a big name super expensive consulting company – coincidentally the same one in all cases that I have seen – is hired to suggest ways and means to reduce cost. So what’s new in cost cutting ?

Predictably it starts with hiring freeze, HR makes a list of low performers (exception Finance team) travel freeze for everyone except the Management; the inner circle gets discretionary approvals, everyone else is expected to use Audio/Videoconferencing. Cookies and biscuits disappear from meetings, packaged bottled water is replaced by refilled water bottles, control on printing with introduction of network printers, deferred training and development budgets, and last but not the least a cut in IT operating budgets and new projects.

Frugality in times of plenty is a virtue practiced by a few and they stay immune to variability in the market conditions. Working for one such company we celebrated our most profitable year when everyone was struggling with costs in the year of black swans. If that is not part of the organizational DNA, operating expenses should ideally be reviewed periodically and not necessarily wait for a formal cost control exercise. The challenge lies with some types of costs which do not lend themselves to reduction without an impact.

So when as a CIO I was asked to cut cost by 20%, it created an interesting predicament; can I cut manpower supporting business as usual ? Should I get rid of my Project Managers who have delivered successfully in the past ? Shall I ask the support partner to reduce onsite manpower without impacting SLA ? Can I cut network bandwidth across and hope that the business will not notice the resultant impact ? Annual Maintenance Costs are locked in with COTS and hardware vendors, no not much scope there.

Can hardware refresh be deferred ? For desktops and laptops potentially by few quarters, the server upgrades cannot if the transaction volume continues organic growth. New projects can be deferred or pushed into functional P&L, after all if they want the new solutions, they will find a way to justify. In both cases IT took a similar approach to cost cuts with partial success; reduction in operating expenses was marginal since the contracts were already optimized by Purchase and Finance, the deferred capital investment made up for the shortfall.

Decades apart the rest of the company dithered and murmurs of unrest were heard across the companies. The big consultant bill horrified the employees who had seen their friends depart and morale go south across functions. The net resultant saving was something they could have achieved by involving the staff across levels invoking their emotional connect towards their adopted company. The leadership team declared success gloating in the derived glory to gift themselves an exotic international offsite as a reward.

So much for cost savings which were believed to be necessary for survival of the company (read the management team). Mature leaders do not take conventional wisdom at face value, they internalize the opportunity and seek collaboration across layers for sure shot success. E.g. the frugal company that beat profits in a lean year by calling upon all employees to contribute; it enrolled every CXO to the cause not by setting targets, but appealing to help the company and how they did ? It remains a benchmark for the company !

Cost does not need to be a 4 letter word !

Consultants (don't) add value

I was at this social gathering organized by one of the top global consulting companies for their current and potential customers. It had attendance from veteran industry leaders, founders of companies, CEOs and CFOs, sprinkled with a few Venture Capital heads and off-course partners from the sponsoring consulting company. I was the odd man out from IT representing my company; talking to a few known people in the room, introductions were made with some as the discussion veered from world economy to the best wine.

The Black Suits represented a diverse set of industries and functional experience easily mingling with each group and adding to the conversation. Enviously networking at its best, you could pick tips from these suave individuals on how to ease into a discussion and slide off without being rude. Their demeanor would teach many CIOs and CEOs how to conduct themselves in a senior gathering that expects you to merge in without getting technical or talking about IT barring a passing reference to the function you manage.

One of the cases under discussion revolved around a complex merger for a diversified group which was facilitated by the hosts. Everyone applauded the ease with which the deal was consummated, financially and culturally; a Partners remarked about a similar deal gone sour done by competition, stressing on the fact that quality matters when it comes to consulting and a little extra investment is worth the outcome. The wise men nodded and moved on to discuss multiple experiences and anecdotes around consulting that regaled the small gathering.

The comfort of the group with each other and the willingness to share and seek help from various quarters was a bit discomforting; these were industry captains that everyone looked up to. They controlled a large portion of the economy and influenced many strategic directions or shaped policy. They acknowledged the fact that every niche and skill has an expert or master who can do it better, faster, and consistently with successful outcomes. They sought these experts from the outside when they needed them.

That weekend mulling over the few hours spent, the big realization dawned upon me was the difference in the approach to solving problems taken by CIOs. Almost all CIOs believe that they are self-sufficient in their knowledge and skill to solve every problem that needs to be solved or opportunity to be explored using technology. They reach out to vendors and solution providers to discuss options; few subscribe to reports from IT research companies and engage their consultants to assist them. They hire consultants only when pushed by their boss.

Here’s a typical dialogue that happens with CIOs:

·         Do you need help with IT strategy or want to validate it ? That’s why I was hired !

·         Is there a business problem you want us to solve ? I know enough about the business to do that

·         Need help with any of your sticky projects where you’re struggling ? Everything is under control !

·         Are there any skills you need to augment in your team ? I will send my team for training !

It is not just the fact that CIOs are averse to seeking help from consulting companies, they even shun away individual consultants typically retired or out-of-work/in-transition CIOs. They are perceived as threats to their credibility and expertise. Why do you need to hire anyone to help you ? Not sure how many actually had the courage to go and ask their respective boss to seek external help. This is despite the fact that the enterprise may have a history of engaging consultants for various business activities, strategic or operational.

The strong individual is the one who asks for help when he needs it, said a wise old lady; how true it is in the current context of our work lives with the level of disruptions increasing day by day, expectations rising and uncertainty being the only certainty. Discussing the situation with many of peers I heard the same story again and again; no one wants to be seen as deficient in any skill or capability. All CIOs want to be superheroes, know it all and on top of every situation thereby digging holes for themselves to fall into all along.

In this case I hope CIOs will learn from their peer CXOs, it will help them be more successful.

Brand Value or Unbranded Value

Out of the blue I got this call from a friend who I remember was doing quite well as CIO of a large company where he had spent more than a decade. He had decided to hang up his boots and get off the corporate rat race and treadmill to become his own master. Curiosity getting better of me, I asked him about his decision and what prompted him to leave his well-settled and visible corporate avatar ? When did the entrepreneur bug bite him ? How had the first few months been ? He promised to meet and catch up.

We met over a cuppa; he had been asked this so many times that he started narrating his story. His planning had started almost a decade back with financial goals and family commitments post which he had his succession plan executed and made a clean break. I admired his long-term planning; consciously he took no extensions, no being a consultant and lingering on, no special assignments and no burnt bridges too. He wanted to pursue his passion and thus took the plunge; early results had been a mixed bag.

His new venture focused on a vertical which did not have too many people focusing or investing on; his early meetings got him good traction and agreement to work together with almost every stakeholder he met. He had chosen well and used his expertise and knowledge to create options and solutions. He had also thought of offering his experience as CIO to work with other CIOs towards research and analysis, benchmarking, and KPI review or aid any other activity where CIOs needed additional capacity or bandwidth.

Most CIOs he met knew him or knew of him and the success he had created; they would hear him out, agree they needed help but were reluctant to sign him up. The story repeated itself with the same outcome until one CIO candidly mentioned to him: I know you and I know the quality of work you can deliver; but how do I convince my team and management of the value proposition ? They need a credible brand which can withstand scrutiny from any quarters. It is not about where you have been or what you have done or can do.

Many moons later I met another CIO who had trained to become an executive coach; he too had sold his Ferrari and followed his desire to coach and mentor people. He was successful as a CIO and being highly vocal about his views, it made him a popular fixture in conferences. He was getting along with some training, workshops and coaching for aspirant leaders for a couple of companies. His branding was strong and as a mascot for his chosen industry, he wanted to encash the branding. He too had met with similar fate.

Quickly he realized the reasons behind the lack of conversions from proposal to projects. His CIO brand was well known, his consultant skills not so; his potential customers wanted a management consultancy or a research organization to provide the required respectability and branding. Most of them took his inputs and then went along to the tier one providers to provide the slideware that they could use within their organizations. He was disheartened and was mulling the option to join hands with one such firm; if you can’t beat them, join them !

Is branded advice such a big thing that differentiates it from what an independent consultant would offer ? Is the person offering his/her expertise reduced when there is no stamp of endorsement ? The reality is in almost all cases is yes ! Consulting and research houses have wealth of knowledge gained over hundreds if not thousands of engagements available to all their consultants. They are able to use this and also bounce ideas of a group of experts that gives them an edge over a lone ranger. This cannot be replicated by the individual.

If the strategic parts were to be separated with the operational, tactical and execution, there could be some traction that individual professionals branching into consulting could leverage. Collectively some individuals representing a company, their own outfit has a story, alone it’s a nonstarter. There are some who have done this and are gaining traction in the small and medium enterprises; they are not pitching to big enterprises. If you are on your own, think about joining hands with someone.

Hiring Consultants !

CIOs are a lucky bunch, whenever they have a problem of any kind, all types of help is available to them from various sources; IT vendors, system integrators, business school professors, peer CIOs, and finally management or IT consultants big, small, and even individuals, ex-CIOs i.e. retired or in-between jobs. All of them bring different kind of experiences and solutions to the table; some with a genuine interest to help find the best solution, others with a vested interest to sell goods or services.

Recently when I moved to a new industry and assignment, there was a flood of offers to help from the entire gamut of consultants. Can we help you understand your new industry ? Would you like us to do a diagnostic of the current situation ? What about some help with IT strategy ? Can we offer you some interesting research papers on the industry and its challenges ? How are you planning to prioritize the various business pulls and pressures ? Is there an IT governance issue you want to address ? ….

Their insistence, persistence and perseverance created a few moments of shaken confidence ! Did I really need their help to get started ? I asked them for data on similar engagements where they had contributed to the direction and shaped the future for the CIO. My mailbox almost ran out of space ! There were local and global case studies, customer references, engagement frameworks and best practices. I was surprised with some names of good CIOs friends, while others were predictable.

More than a decade ago as a newbie CIO I had gained some benefit from the consultants and IT advisory and research companies; they helped fast track my learning. But these references were amongst the best of CIOs. So I decided to call them to find out why they engaged these consultants; what prompted them to spend, and on what did they invest ? Did they get any insights that eluded them or create a better strategy or help them in their success ? Should I too get some of them on board ?

The answers should not have surprised me but they did; the consultant brought credibility to the plan, documents on current status benchmarked to local and global metrics. The big name consultants were seen as the best options even when they put your words and common sense into fat documents and fancy presentations. Somehow the stamp of authority and approval made the difference to company management with higher acceptance. The CIO had validation of his/her choices and rub-off credibility from such engagements.

Now I am not averse to using consultants or industry experts in areas that need a different level of thinking and problem solving.  To drive company-wide change across different stakeholders can always do with some help ! I have had my share of good and mediocre; authority is not bestowed by the brand or the years, it comes from a deeper understanding of the issues and positive query; whereas the ridiculous ones tested endurance levels not to be recalled again.

In my current context I felt that whatever the consultants wanted to solve is what the company had hired me to do; that was my core competency and what I excelled in. By the time they came to the table I had most of the answers that had been discussed and accepted as the reality and way forward. I tested my hypotheses with a couple of big names; they acknowledged that I was on the right track.

Did I need a validation of my decisions ? I don’t think so and neither did the rest of the business leaders who found the rationale and direction to be credible in its articulation. I believe that the use of consultants is finally a matter of personal choice influenced by the organization culture and the locus standi of the CIO. The past record of success internally or with consultants determines what works better. I think for now I will continue to stay away from them.