What’s the biggest obstacle to change in any large organization? Management.
Says who? A manager: Tom Shelman, chief information officer at Northrop Grumman, the defense equipment manufacturer.
Is his eight-year tenure as CIO based on his technical prowess? Partly. Is experience part of it? Sure. But, the two-part secret of his longevity, to Shelman at least, is simple.
Swear unswerving devotion to the dollar, and overcome resistance from the managers who don’t share your allegiance.
“The thing I have held sacred year after year is managing the numbers,” he told peers gathered at IT Financial Management Week in Miami earlier this year.
Sure, there are CIOs under him managing $200 million budgets. And he spent more than $600 million with his vendors last year. But ask Shelman, and he’ll tell you those aren’t the tech folks’ budgets at all. They belong to … chief financial officer Jack Stumpf.
“It’s Jack’s checkbook,” Shelman says. “You get to spend it as long as Jack allows you to.”
The best way to pry that checkbook open is not just to live within your means, but to shrink the means. Over the years, the company has bulked up by acquisition—16 companies, including nuclear aircraft maker Newport News Shipbuilding and aeronautical systems supplier TRW. Integrating operations means cutting dollars—and getting managers to go along. Even if you do not know exactly where the cuts will come from.
Flash back to Northrop Grumman’s $1.5 billion purchase of Litton Industries in 2000. Shelman, Stumpf and a small group of executives were huddled at a Hilton in Los Angeles to determine the benefits of acquiring the advanced electronics and information systems developer. The midnight commitment they would be making: To shave $58 million off the combined information-technology budgets.
And who was “they”?
“Me and the CFO,” e.g., Stumpf, Shelman says.
Would anyone else know? Not until later.
Their methodology? Commit to cuts that amounted to 80% of the savings achieved in previous acquisitions. That would leave Shelman a “20% pad” to work with.
The biggest roadblock: the managers that reported to him.
“Every one of them said it couldn’t be done,” he said.
You can fill in the blank here. Of course, it was done.
First, Shelman had to find out who was interested in staying on board and who wasn’t.
Winning over front-line managers—the folks in charge of data centers, networking, telecommunications—is a must.
“You can’t get the people to follow you in the organization until the leadership is following you,” Shelman says.
Shelman’s task—in common with many other CIOs who want their tenures to last—had to be to demonstrate that resistance is, in the end, always futile.
Litton had 26 CIOs, all of them after Shelman’s job. Not too long after the merger was complete, not one of them would still hold that title.
Most left the company, though some have stayed on as managers in different capacities. After all the large acquisitions Northrop has made in the past decade, only one CIO of an acquired company—Diane Murray, in the Mission Systems Sector—has remained at that rank.
Once he knew who would stay on the new playing field, Shelman could go through his 400-point checklist of targets for potential savings, and determine where software and hardware could be consolidated, telecom contracts overhauled and the like.
Which brings us back to that $58 million. No savings occur unless you start with what Shelman calls “a powerful promise” to the keeper of the company pocketbook. And then you deliver on it.
Does that mean you don’t care about your staff? Not in Shelman’s view. It’s all about challenging them to find big, rather than small, ways to make a difference.
“I would say if you’re not going to make a powerful promise, if you’re not going to make a commitment to it, then,” he asks, “why do this stuff?”
