Five Steps to Make Your Productivity Soar

By Larry Dignan Print this article Print

Don't see your company's name in the list of the most-efficient users of information technology? Here are the basics to follow to try to get in shape for next year.

Your company isn't in the Baseline 500 and your boss wants to know why. Or maybe your Information Productivity is down from a year ago or, even worse, it's in negative territory. What do you do? Paul Strassmann, who created the metrics that rank the companies that manage information best, outlines the steps you can take to boost your efficiency.
"You need to look at the organization from the top down. Then when you go into your financial review, instead of looking at the information-technology operating budget, you can look at the company overall."

Forty percent of public companies in the United States don't manage information well—and your firm may be one of them.

In all, 930 companies out of 2,324 failed to generate a positive score when the numbers were crunched for this year's Information Productivity ranking, which is the basis for the Baseline 500.

So if your company is hanging with the laggards, what can you do?

Paul Strassmann, the creator of the Information Productivity metric, outlines five steps that companies can take to improve their information management.

1 TRIM THE FAT. Information Productivity is calculated by taking a company's Information Value-Added—the value added to a company's economic performance by good information management; it equals profit minus the cost of capital invested by shareholders—and dividing it by sales, general and administrative (SG&A) costs, or the expenses related to managing information. So if your costs are out of whack, your Information Productivity will be, too, Strassmann says.

"You need to look at the organization from the top down. Then when you go into your financial review, instead of looking at the information-technology operating budget, you can look at the company overall."

The fix: Look at your company's expenses to find out what's weighing it down. Benchmark those expenses—looking out for pricey plants and factories, excess inventory and bloated SG&A costs—against those of three competitors. That exercise will provide you some clues about where there's trimmable fat. Technology projects can then target inefficient areas, say, high inventory levels, through automation or the streamlining of processes such as shipping and receiving.

"You need to look at the organization from the top down," Strassmann explains. "Then when you go into your financial review, instead of looking at the information-technology operating budget, you can look at the company overall. It's an opening shot you can use to get attention in the budgeting process."

2 FIND THE LEAKS. While benchmarking against peers can identify trouble spots, you'll have to get dirty to find out how and why the current situation exists. Knowing you have too much inventory is one thing; correcting it is quite another. "You have to crawl under the truck and see where it leaks," Strassmann says.

When Strassmann was chief information officer at Xerox in the early 1970s, he had to figure out why Japanese upstart Canon was taking business even though at the time it had inferior copiers. "We were laughing at them, but they were eating our lunch," he says.

After some investigation, he realized that Canon was offering better customer support and throwing representatives at accounts to fix copiers. Meanwhile, Xerox was putting its money behind marketing and financial analysis while neglecting customer service. He also discovered that the company's financial analysis unit was hogging the technology budget to the tune of $3,000 a year per worker. Customer service spent a mere $300 a year per worker on technology.

Strassmann's solution? "I reversed it," he says. "It wasn't easy, but the financial analysts were spending more on I.T. per person than their salaries." The result was improved customer service, which allowed Xerox to fend off Canon "at least for a few years," he adds.

3 CUT YOUR LOSSES. Since a key factor in Information Productivity is costs, companies need to know how to cut losses on projects that aren't delivering, such as a project to install a customized inventory management system that's years overdue and hundreds of thousands over budget.

If management spends too much time trying to fix the project, the time and costs involved will quickly add up and eat the savings the project was expected to generate.

The solution is to either eliminate the project or scale it down to something manageable and less expensive. Either solution will save money.

"Cutting your losses is the quickest way to improve Information Productivity," Strassmann says. "That rule accounts for everything."

4 KEEP YOUR (GOOD) PEOPLE. Retaining quality managers is vital to improving Information Productivity, as every executive profiled in the Baseline 500 can attest. To Strassmann, technology has largely become a commodity that you can outsource to India, Bucharest or anyplace in between. But people with solid corporate knowledge—especially the ability to see where technology will help a company seize a new business opportunity—are priceless.

So how do you keep your talent? Challenge them by giving them big goals and projects. Chief information officers need to think about the I.T. department's workers and their resumes.

Are you providing them with the opportunity to grow their knowledge and build their careers? If the answer is no, it's highly likely they'll leave for greener pastures.

Just as important as keeping your star performers is ditching your underperforming workers. Weed out people who have no interest in developing their careers. Why? Ultimately, these hangers-on will become obstacles for your company as pay rises and their technology skills don't.

5 INNOVATE. Innovation is the trickiest Information Productivity cure of the bunch because executives are divided into haves and have-nots. After all, if you're a CIO at a company with negative Information Productivity, your main mission is trying to make operations more efficient, not innovative. The spoils of innovation go to the chief information officers with the most efficiency. "The CIO who has Information Productivity of 125% compared to one with negative 20% is a different animal," Strassmann says.

Sure, you could theoretically find innovative ways to make the company more efficient, but that's like putting in a new kitchen while the roof of your house is caving in. Big projects promising returns of 300% don't matter if the overall business is struggling.

For the information management haves—the ones that have Information Productivity of 100% or better—innovation is a different story. To these efficient companies, innovation may be the way to improve dramatically, perhaps reaching the level of

No. 1 company Chesapeake Energy Corp., which has Information Productivity of 775.7%.

The way to go about innovating is to find a function or key business goal—such as faster checkout in a retail store, millisecond response time or near-100% system reliability—and then see how you can use technology to reach that goal. "Innovation has to be seen in the context of the business," Strassmann says. "Before you shoot, you have to understand what the target is."

This article was originally published on 2005-10-19
Business Editor
Larry formerly served as the East Coast news editor and Finance Editor at CNET News.com. Prior to that, he was editor of Ziff Davis Inter@ctive Investor, which was, according to Barron's, a Top-10 financial site in the late 1990s. Larry has covered the technology and financial services industry since 1995, publishing articles in WallStreetWeek.com, Inter@ctive Week, The New York Times, and Financial Planning magazine. He's a graduate of the Columbia School of Journalism.
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