Operations Transformation (1)

In the first arc of my Practical Transformation articles, I will be focusing on Operations Transformation. The current plan is three articles on cost reduction and three articles on operations quality. I will also have some interludes if I decide to write about random topics.

Operations Transformation Levers

Running an IT Operations group is focused on executing across a set of IT Support processes. In the end, the concept of transforming that is not all that complicated. You basically have your labor cost which you then use to deliver a defined set of work. So, if you want to reduce your costs in operations you either need to reduce your cost of labor or reduce the amount of work you are doing. I usually break the way to do that into these three cost levers:

·???????? Drive down labor cost through skilling and routing

·???????? Automate repetitive tasks

·???????? Destroy the demand (eliminating the work altogether)

While cost reduction is critical, Operations Transformation is not a race to the bottom in terms of quality. Just like in the Digital Transformation of the business, your goal in the IT Transformation is always to drive up quality and drive down cost. In my experience, sacrificing quality to save money is a short road that ends up with you getting replaced. Maintaining the quality metrics I will discuss in other articles is critical throughout this process.

In today’s article though we will address driving down labor cost which is the first lever for Operations Transformation. But before we go into the technique for that we need to address the cultural barriers you will face in the transformation.

Climbing the cultural barrier

?It is a bit ironic that while the entire purpose of an IT department is to deploy technology, the department itself is largely driven by human beings. And human beings in general really, really do not like to make themselves redundant in their jobs unless they have a high level of trust in their management. One has only to read the press and see the announcement of yet another tech layoff to realize why that trust in management is in short supply these days.

This lack of trust is also exacerbated by the generally low turnover in many IT departments. In my experience people have a deep need to believe their work is important in some way. And the longer you do something the more you have to convince yourself it is valuable to do. So, when you try to eliminate or move their work, they will provide you a thousand reasons why their work is way too critical to ever be done by anyone but them. You end up in a never-ending battle over every process no matter how minor or repetitive.

Overcoming that resistance takes a real focus and understanding of your people. You must evaluate them one by one and drive to their underlying motives for working. My experience is that people doing operational work in IT fall broadly into two categories. They are either in operations because they have a passion for it (20-30%) or they are stuck there when they would rather be on a Product team (70-80%).

The first step in all this is to take the product-oriented folks and promise them a role in the Product teams if they can just transition what they are doing. This is where trust and change management come in. You must identify the Product team they are going to and then create a clear timeline for them to get there. The key here is that the employee has a desire to change since they prefer Product work anyway. You leverage that desire to get them to quickly document and transition their work to other resources.

This first resource move lowers cost and increases quality on the Product side. Often companies utilize expensive onshore contractors in their product development teams. Replacing them with long term operations employees nets you a cost savings as well as a more dedicated employee in a critical product role.

For the smaller number of operations-oriented folks, you must build a new operations culture that supports the transformation. ?You need to reassure them that they have a critical part in the new transformed organization but just in a different role. Operational employees should be people dedicated to constantly driving process excellence and reducing cost, not resources working day to day tickets. You need to convince them that their value lies not in their ability to do the process but in their knowledge and understanding of the processes. That knowledge and understanding becomes critical as the operations transformation unfolds.

Skilling and Routing

In my younger days I spent almost a decade working with call centers. And one thing I learned about advanced call centers is that skilling and routing is one of the main ways to drive cost savings without impacting quality. In a call center every call is analyzed and routed to the correctly skilled resource to serve that call. And the cost and availability of each skill level is optimized in the organization. As I spent more time in IT operations, I realized that the exact same techniques could be applied there.

As the Operations Transformation starts you will use your operational employees to take the operations work and break it into complexity tiers. Driving down labor cost is about applying skilling and routing in an IT environment. It is about finding the right resource to do the right work. Every process in IT should be examined and assigned a skill tier. Is this a Tier 1 process which can be handled by an IT Help Desk executing a script? Is it more a Tier 2 process that can be handled by a moderately skilled IT worker with a knowledge article? Or is it a complex Tier 3 task that requires a true technologist?

In an organization that has not really focused on this tiering I think you see a lot of the work being distributed out to people in lumps of work that includes easy, medium, and hard work all being performed by the same resource. This is what I would call a “hero” organization where you have a set of expensive super-users who know everything and support everything. The reason you end up here is that it is easier. If you use high skill resources for all tasks, then your need for process and documentation is smaller.

The issue is that this is inherently inefficient. The cost of operations resources is not a linear curve, it is an exponential one. From a cost perspective, a Tier 1 resource (helpdesk) costs 25% of a Tier 2 (technical support) resource who in turn costs 25% of a Tier 3 resource (developer). Sure, a more experienced worker can always do less experienced work moderately faster than anyone else, but they cost four times as much.

The process of cost optimization in an Operations Transformation is one of relentlessly simplifying work and pushing it to lower cost/lower skill resources. You will notice I did not say the process is replacing workers with cheaper resources. If you do that your quality will nosedive. You must break out the easy work and send it to less skilled resources. Then break out the medium complexity work and send it to moderately skilled resources. Then you will have a pool of truly difficult technical support work left. That work needs to go a small pool of technical experts and eventually to the Product teams so they will fix their products and get them to work.

The drive to constantly shift work to lower cost resources is really where your experienced operations-oriented employees come in. While your lower skilled workers are focused on day-to-day operations your employees are now freed up to focus on how to better stabilize operations work and lower its cost.

This approach will yield you multiple benefits. First, your operations employees are now doing highly valuable work that utilizes their skills versus repetitively executing a process. There may be some resistance at first to this change, but my observation has been that most employees adjust and take pride in their work once they see the value.

The next benefit is that you will see work executed faster. When the different tiers of work complexity are all bundled into a single person that person tends to use the simpler work as “filler”. So even though a task may take five minutes the person may not get to it for days until they have a gap in their more complex work. Once you unbundle the work a dedicated resource is executing the lower skill tasks faster and cheaper.

A final benefit of this constant drive to shift work to lower cost resources is that you will gain a high awareness of what your operations cost are. As you define your work and document it you are going to begin to see opportunities to automate functions or eliminate them altogether. But you can’t do that until you attack the operations bucket and really start to define what is in it.

A final note

For some of the people reading this article I am sure they are just thinking “well I just outsourced the work and that was much easier”. When you outsource operational work to a vendor, especially with a declining price contract, you are essentially just outsourcing the skilling and routing improvement process to them. And they inherit all the issues I just described. If they cannot climb the cultural barrier with your existing employees, then you have a poorly implemented transition with quality falling because the right process information was not transitioned. And if the vendor can’t get the work differentiation part of this method to work, they are absolutely going to get the “using lower skilled(cheaper)” part to work to make sure they make their margins. Using cheaper resources without differentiating the skill level required again lowers quality. So regardless of if you outsource or not, you as an IT leader must understand and participate in the process described here if you want it to be successful.