We have to do WHAT? How Maritz transformed IT services
Gerry Imhoff, CIO and Senior VP of IT Services at Maritz shares his team’s transformation from an internally-focused, captive IT shared service to a trusted business partner. This series highlights both missteps and successes along the way and illustrates the focus on IT culture, approach and people, NOT technology, that enabled Maritz’ IT Services department to become an organization truly valued by its customers.
We have to do WHAT?
Hindsight, as they say, is 20/20. Four years ago, I can now say we were blind as a bat. How the heck were we going to transform a stagnant IT organization that was under fire from our customers, stifled by rigid processes, and facing a 40% ($18 million) cost reduction mandate, into a viable and valued service organization?
If someone would have told me the answer had very little to do with technology, I’d have looked at them like they had two heads. If they’d said the journey would result in 90 fewer people on the team (a reduction of more than 35%), and 50% of our future staff would have less than 3 years’ tenure at the company, I’d have told them it was WAY more likely that the Cubs would win the World Series.
As a lifelong diehard St. Louis Cardinals fan, it’s difficult for me to acknowledge the Cubs worked their magic, but they did. And so did we. Given I witnessed the successful transformation of our IT organization, I’m thrilled to share that story with you.
The bad, the bad, and the ugly
Four years ago, my division (Corporate IT) was not held in the highest regard by our customers, the Maritz business units. Most of the managers and staff in my organization considered the “customer” to be the technology we supported (servers, PC’s, apps), not the human beings using that technology. And I’d be telling a half-truth if I didn’t include myself in that description.
- We weren’t rude, but it’s fair to say our unspoken vibe read something like this:
- We’re the experts (you have no idea how hard our job is)
- We set the standards (everyone knows giving you options makes things expensive to support)
- We set the dates (sorry if we miss a few, but we’re your only option)
- We’ll try to do a reasonable job taking your needs into account (using assumptions rather than materially involving you in the decision process)
- Sure, we tested it (but expect some hiccups during implementation because we don’t understand your business)
We sincerely believed we were fiscally responsible, and we were, given our mindset at the time. From a high around $60 million in the early 2000’s, we had reduced our IT budget by at least $1 million a year for 10 years running—with the exception of the year we had to invest in an IP telephony system because we could no longer get vacuum tubes on eBay for our 20+ year old PBX. (Thanks for letting me dust off that joke, I haven’t been able to use it for several years!)
At the time, my division charged out (allocated) about 50% of our expenses to our business units, mostly related to hosting and other technologies that could be included as Cost of Goods Sold in our heavily-IT-based products. The remaining expenses (end user, networking, PMO, back office apps) were held at corporate. Our Chairman correctly determined that in order to understand the true profitability of our individual business units, we needed to charge out 100% of the IT service cost, not just 50%. So overnight, Corporate IT’s bill to the business units doubled. I could write 1,000 words about the dynamic that created, but suffice it to say Corporate IT’s popularity didn’t exactly skyrocket.
Several months later, when cries of “Corporate IT is way too expensive” reached a crescendo, executive consultants were brought in to review our “IT expense as a percent of revenue” against competitive standards. I’m sure most of you have relished similar external assessments. Their conclusion? Corporate IT’s services were $18 million too expensive (against a then-base of $50 million).
One bit of foreshadowing—everything I’ve covered so far has demonstrated our inward focus. We were hunkered down in our own little bubble, trying to provide reliable technology, exhausted from getting beat up over cost, and starting to get scared about our business units dabbling with the cloud— without us, the infrastructure and technology experts! Mom, they’re running with scissors!
A-N-Y-W-A-Y, from here, this adventure took two distinct paths. Both very necessary in the end analysis, but very different.
The first path—maligning the name of a perfectly good president
I’m sure you realize that any corporate initiative worth its salt has a code name. This is certainly true for us. The initiative that included our 35% cost reduction mandate was called “Project Lincoln.” While the overall project was launched to give our business units more autonomy from corporate mandates (hence Lincoln, The Great Emancipator), the most tangible aspect for IT was a dramatic cost reduction target. For the three-year duration of the project, the mere utterance of the word “Lincoln” would cause even the most rock-steady technologist to quake in their boots.
»Related content: Hear Jeff Smith, Manager of Financial Systems at Maritz, discuss how this team rose above operational minutiae to better convey the value of IT services and projects. Watch the webinar here.
TBM, before TBM was a thing
Twenty years ago, we were putting a fair amount of IT infrastructure expense into the rent. The trouble was, none of our business units were created equal. One had over 90 small remote offices, with expensive WAN connections sitting in Corporate IT’s budget. Another business unit didn’t use much technology but had several large warehouses, which jacked up their technology-loaded rent.
To fix our wildly inaccurate and justifiably unpopular allocation methodology, about 10 years ago, my IT Finance partner and I had this concept of charging like an outside business. I’ve commented to Apptio that we were doing technology business management (TBM) before TBM was a “thing.” The trouble with our version was that it was incredibly complex, tracking over 100 cost pools—what TBM/Apptio calls “towers” today. It was only understood by the two of us, difficult to modify, and impossible to consume.
Because we were obsessed with detail, we creatively hardcoded things to get around circular references (because, you know, we charge for PC support. So, to have accurate TCO, we had to charge ourselves for the support of the PC’s we use to support PC’s…brilliant!) When our businesses complained that it wasn’t fair that we charged the same $50 per person for telephony when their employees might have 2-, 4-, 6-, or 8-button phones, in the name of detail and fairness, we instituted 4 different prices for telephony depending on the phone type. Again, brilliant, right? We had people turning in 8-button phones (only to have them go unused), and we bought “cheaper” phones with fewer buttons (spending hundreds of dollars each). Note, the expense for these new phones hit our budget, not the business units’ budgets; they just paid the cheaper allocation price.
Why did they have 8-button phones in the first place, if they really just needed 2-button phones? Awesome question. Because they needed an 8-button phone with the old phone system, and when we put in the new phone system 5 years ago, rather than actually ask our businesses about their needs, we just assumed they still had the same requirements. Having to actually talk to customers was icky and took time away from our technical wizardry.
About the complexity…
With respect to our allocation methodology, trying to model changes of any significance took weeks. And even though it was managed by an incredibly detail-oriented and conscientious person who worked 12 hour days and most weekends, it was all in ridiculously complex SPREADSHEETS, which means there were errors.
In meetings, when in-depth review revealed an error, our customers would immediately distrust all the numbers. Monthly, we’d have the managers of various IT functions compile and provide consumption data (server lists, user lists, storage, etc.), after they weeded out which servers weren’t really servers or which users weren’t really users—don’t ask. And of course, this was all documented (cough, cough). Back then, our charges were variable. If the business added an employee, the following month we’d hit them with the associated network, email, help desk, et. al., charges, despite the true cost to Maritz only increasing by a few bucks for an email license.
(Hint: If it makes sense for your business, during each years’ planning cycle, work with your customers to understand their future consumption, set the resulting budget and unit rates, then do “fixed” charging as if their consumption didn’t change throughout the year. Show-back actual consumption in Apptio so they have a view into what next year’s charges would look like if their consumption doesn’t change.
With proper planning, your IT provider costs don’t vary that much from budget within any fiscal year unless something extraordinary occurs—at least that is true in our business. If something unexpectedly material does occur, handle it as a one-off. The amount of noise and completely pointless month-after-month, “I have one less email user than you’re charging me for” conversations that result in hours of research will vanish and your stress level will decline by exactly 28.73%)
The second path – it’s the culture, stupid.
No offense to readers, “Stupid” in the above heading is me, not you. Several months into Project Lincoln, two people in my group started bugging the ever living <expletive deleted> out of me, saying that becoming a valuable partner that our customers would truly trust had absolutely NOTHING to do with technology, it was all about our IT CULTURE.
For months (honestly, probably a year), I listened half-heartedly to their earnest pleas. “Gerry, our approach to the customer is off.” “Our managers need to focus on managing people and not technology.” “We need to establish our core values, and managers need to coach people on those values, the employee’s behavior, and the customer’s perception, not on technical tasks or projects.” What self-respecting, multi-decade technology leader would even consider that new-age crap? Out of sheer brilliance, sheer luck, or sheer exhaustion, I started to not just listen, but hear. Not overnight, but little by little. Well, there was this one overnight thing.
The red wine epiphany
One of the first revelations I had regarding the need for a change in approach I ended up calling The Red Wine Epiphany. That was the phrase projected on the screen behind me when I described it to my organization in a town hall meeting on October 9, 2013. The prior Saturday, my wife and I were sitting on our patio, just the two of us, on a beautiful fall evening. Red wine was consumed. Red wine is good. And this particular red wine evidently had a special side effect: inspiration.
Early the next morning, about 3am, I sat up straight in bed, instantly wide awake, and said to myself, “I’ve got it.” Rather than cower in fear that lack of control over new technologies like the cloud would make us irrelevant, we needed to learn all we could about them and do an amazing job consulting with our businesses regarding how to exploit them. If our partners were running with scissors, we needed to be at their side, and if they stumbled, we needed to pick them up and encourage them to keep running. I didn’t yet get the whole picture about culture’s role in our transformation, but for the first time, I began to embrace my role in creating an organization that would deliver IT services that were truly valued.
Frictionless [frik-shuh n les], adjective, 1. “absence of chafing or rubbing”
One of the two people in my group who had been, figuratively of course, beating me over the head about the importance of IT culture, frequently described his vision of the ideal user experience as being frictionless, or needing to emulate what our users were experiencing at home as consumers. It’s the consumerization of IT. It’s the Amazon shopping experience.
(My, how I love Amazon! Pardon a quick digression as I make a point about this concept of frictionless. About a month ago, I saw an article on Amazon’s new credit card that gives 5% cash back on Amazon purchases, and they were offering a $70 incentive for applying. I jumped on Amazon, searched for “Amazon credit card.” The 5% card was, of course, the first item in the results. I clicked on it, and “Apply Now” appeared on a nice, big, recognizable, Amazon-orange button. The form pre-filled every required field, except one that asked whether I wanted them to check my credit based on my savings account, checking account, or both. Choosing “both,” I clicked “Apply.” Ten seconds later, I was approved. If that wasn’t frictionless enough, the page also clearly stated that my default payment method had automatically been changed to the new 5% card and the $70 incentive loaded to my gift card balance. That, ladies and gentlemen, is the embodiment of frictionless.)
In a 2014 town hall, I first described to my organization what frictionless IT service look like, again using a story. On a Friday that summer, my then-19-year-old son went swimming with his iPhone in his pocket. Stuff happens. We hopped on the Apple website and easily made an appointment at the local Genius bar—two clicks, and we were set for 10:30am the next day. We arrived at 10:28am and were greeted at the Apple Store entrance by a friendly Genius holding an iPad. He asked our last name (the only piece of data required), checked us in, confirmed that in fact the iPhone did experience death by drowning, and advised how much a replacement would cost. Nine minutes later—nine minutes—we were out the door, new iPhone in hand, iCloud already having restored pretty much everything, and the electronic receipt already in my email inbox.
That is the experience we now have as consumers, and that is the experience we, as IT organizations, need to strive to deliver to our customers, internal and external. And while we’re still working to get better every single day with every single interaction, that’s the journey we’ve been on at Maritz. To have our customers express their appreciation, regularly verbalizing to us and to our Board that our shift is completely tangible? Asking us to please consider offering additional services because we’ve proven our ability to deliver? Well, that’s a pretty sweet feeling.
Once that feeling sets in, it’s infectious. No way we’ll rest on our laurels. Once one of our team members sees the delight in their customer’s eyes and realizes it was because they channeled our values and culture to guide their approach, their wheels immediately start turning to figure out a way to create an even better experience with their next interaction. My job satisfaction has done a 180 in the past 2 years—I’m having the time of my life.
Because it’s the culture, stupid.
Watch for my next installment, in which I’ll begin to describe HOW we’ve done what we’ve done with our IT culture. Trust me, it’s more than a poster on the wall (and yes, Apptio has and continues to play an ever-more-important role.) I’ll continue to be transparent about all the stuff I did wrong—maybe you can learn from my stubbornness in hanging on to my former ways. Please leave me a comment on LinkedIn regarding your thoughts on my inaugural blog post—after all, one of the Maritz IT Services’ values relates to honesty and courage. If you don’t share your reaction to my story, how will I continue to improve? Thanks in advance for your feedback or for sharing your own stories.
Read Gerry's next installation "Finding the OFF switch" here.