Click here to view the enews archives.

enews

Page 1 2 3 4 All

Every profession has its heroes. Baseball has Babe Ruth. Literature has James Joyce. For-profit business has Peter Drucker. In fact, business professionals looking for guidance and inspiration are inundated with heroes. Bookstores and libraries offer row upon row of books, tapes, and CDs from gurus who have advice on just about every aspect of making a profit. But where are the overhead heroes? This seems to be one category of management counsel where icons are in short supply.

One critical step we took: We stopped focusing solely on satisfying C-level executives and business unit leaders.

The overhead business concerns coping with bureaucracy and being responsible for a necessary expense that’s rarely viewed as a source of competitive advantage. Whether its function is accounting, human resources, information technology, or marketing, running a unit that’s considered overhead is among the most frustrating corporate jobs there is.

Working as a chief information officer (CIO), leading a corporate information technology group, and advising other CIOs on how to run their IT departments, I feel the overhead manager’s pain. Perhaps because IT is one of the most costly support functions to run, it’s also a lightning rod for management criticism. American companies typically earmark anywhere from half to three-quarters of their annual equipment budgets for IT.

But it’s the rare company that’s happy with the results. Most business unit leaders are mystified by technology, and spending so much money on systems that don’t seem to make a difference irritates them. CIOs are unhappy because they find it difficult to communicate IT’s value to the business and to deliver a level of service quality that’s satisfying to end-users. CEOs are unhappy because all they generally see is the high cost and a return on investment that’s hard to measure.

Over the past four years, our IT department at Booz Allen Hamilton has tried some new approaches to improving IT service effectiveness, controlling cost, and understanding and articulating the business value of IT. One critical step we took: We stopped focusing solely on satisfying the people we call clients — C-level executives and business unit leaders who are mostly concerned with IT alignment and cost control. Instead, we adopted what we termed Market-Driven Management, which involves continuing to serve our clients but reemphasizing our responsibilities to our end-users, the people at our firm who are the technology consumers and, more often than not, the revenue generators. As we see it, supporting salespeople on the road, clerks entering orders, or (as in our case) consultants at client sites anywhere around the world translates into sales, revenue, and, eventually, overhead bonuses.

And there is good news. Our management ideas seem to be working. Moreover, we believe that what we have learned about overhead management in our quest to improve how we run IT has relevance for all types of support functions.
 
Profit Center Solution
Before looking at how our IT department has responded to the perennial problem of overhead management, it’s useful to look back at how IT departments dealt with this challenge in the past. In the early 1990s, many IT organizations tried to become profit centers. In a weird way, this made sense. If being a cost center wasn’t working, why not try turning the support service into a profit center?

IT departments by the score worked hard to shed their negative overhead status by seeking revenue streams in a variety of ways. For example, homemade software applications, in such categories as sales force automation and customer management, were spiffed up for sale to other companies, and in direct competition with better-known brands offered by leading software makers. Large banks marketed credit card systems to small banks, while securities firms peddled trading systems to anybody. Some IT departments even sold excess computer capacity or unused data center floor space to other firms.

strategy+business is published by the global commercial consulting firm Booz & Company.