Leveraging the Organization

During times of cost reduction, it is an excellent time to look at the IT resources across the company to determine if IT is organized properly and leveraged. There may be IT resources in the business units or they may be decentralized. Ensure there is a valid business reason for this structure. Consider if you can leverage resources across the organization to reduce overall costs. Ensure you do not have duplicate functions in other parts of the organization. By leveraging enterprise-wide competencies and skills, you can reduce staff who are unnecessarily embedded in the business units.

Top Tip 1: Span of control

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"To reduce costs, flatten your management team and increase the span of control of managers. Ideally I like to see 6-8:1, but 15:1 is possible for one to two years if necessary."

—Dave Brady
Starkey Laboratories

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Top Tip 2: Shared services

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"Although it can save money, creating a shared service environment is a tremendous culture change for an organization. If you are coming from a distributed environment with organizations geographically dispersed, proceed with extreme caution. The obstacles in both IT and the business are huge."

—Lina Shurslep
Navarre Corporation

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You can also leverage skills in the business. For example, during an implementation the business often develops super users, or individuals with a knack for technology and the business. You maybe able to leverage these valuable resources and it may save you from hiring a business analyst. In another example, a company uses a pull system rather than a push system for report generation to reduce IT labor. The users were instructed to get reports and information on the Intranet rather than sending reports and clogging up e-mail in-boxes.

Evaluate if a shared services model would save costs. Bringing IT resources under a single point of control reduces waste created by policy differences and nonstandard operations. However, proceed with caution because moving resources out of the business units can be a political challenge. You have to guarantee service will improve rather than become less than the current level.

Unpaid Time Off | ORGANIZATION SIZE

If supported by the company, enforcing a policy requiring unpaid time off provides short-term cost reduction. Although it has an impact on employee morale, recognizing that the alternative is layoffs helps gain employees’ acceptance. It can be a scheduling challenge, as IT provides coverage for the business, so you will need to rotate unpaid days off so that key employees are not gone at the same time. Alternatively, you could set a time frame for the number of days off that each employee must take as long as you approve and stagger the requests. Due to their unique skill sets, many employees in IT are often on call for off-hour problems and it can get dicey if you need to contact them on their forced, unpaid day off. This would be a good detail to communicate in advance. Project schedules and deadlines are also impacted and would need to be revisited. Of course, delaying projects would delay benefit realization as well, so even this option has ramifications. Employees that cannot afford the day off may also look for other employment options and a negative impact to morale is a distinct possibility.

Consider temporary staff reductions by offering sabbaticals, long-term time off, or vacations without pay. IT employees who have been working extra hours, those wanting to go back to school, or those starting a family may find this to be an attractive option. You can negotiate items such as keeping benefits and health coverage in exchange for occasional support, if needed. The employee often returns with increased energy, motivation, and productivity for a win-win solution.

Top Tip 1: Primary and secondary responsibilities

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"You need to have a primary and a secondary person for every application. Make sure the secondary person is as knowledgeable as the primary. You need to plan now for the eventuality of future layoffs or reductions."

—Colleen Mlecoch
Amherst H. Wilder Foundation

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Eliminate Open Positions

The quickest and easiest action to take to impact short-term cost reductions is to freeze hiring and eliminate open positions. Of course, this will only be a cost reduction if the positions were included in the budget. To cover the business need that probably does not go away as easily, you may need to reassign the employees, make organizational changes, re-prioritize through the governance process, change project schedules, or train employees. Therefore, even eliminating open positions has some costs or productivity hits associated with it.

Early Retirement

To avoid layoffs, many companies ask employees to consider retiring early with an additional monetary incentive. The advantages of this are that you do not need to pay unemployment costs and the cost of the incentive package is short term. There are difficulties when offering early retirement. The number of employees accepting the offer could be a drain on your pension plan and long-term individuals that take the offer and whose IT and business knowledge are valuable are difficult to replace. Today, many organizations are facing major training issues and turnover costs as the baby-boomer generation is leaving the work force. Additionally, employees with years of experience are not always willing to pass their knowledge on to a young replacement.

Schedule Changes

Investigate reducing the hours that you provide services in order to reduce wages. For example, if you have a 24/7 help desk, you could discuss options with the business to reduce costs and provide less coverage.

Consider shifting workers from full-time to part-time. This could be accomplished by either targeting job functions or by asking for volunteers. This option can be helpful as you retain the trained employees and re-engage them full-time, if necessary