Friday, September 03, 2004

Evaluating Vendors - Company Size

In software, the size of the company is important, but not in the way you think. Most big companies cannot compete with the little companies for quality, service and new features. Yes, that's right, the little guy does do software better. The reasons are obvious once you think about it.

Before I begin though, I want to make one caveat. Small companies run by venture capital are put squarely on the big company side of this comparison. This is because VC run companies in general are run the same way as big companies, with big budgets and grand schemes. My definition of a small company for this comparison is a self funded privately held company. Small companies that do well are those that focus on a single product (or single product line) in a niche market. These are the expert specialists to the big company generalists. The Davids to the Goliaths.

Support - Big companies used to excel at support. That was their big selling point. Not anymore. As more and more companies try to save money by outsourcing their call centers to low-wage countries, the support they provide to their customers suffers. Even the companies that haven’t jumped on the outsource bandwagon are still gutting their call centers, replacing real support people for low wage script readers.

Now compare that to the small companies that don’t have a call center. You call them and you get the developers directly or you get the owners directly. These people know what their product or service does better than anyone else because they made it. These are the best people to talk to when you have a support issue. I am not knocking foreign countries or low wage earners; I am knocking the practice of dumping quality support engineers for unskilled or less-skilled labor to save on cost. You don’t get the same level of support from an unskilled or low-skilled script reader that you get from a developer.

Quality - You would think that big companies would have this area covered. You would think that big companies have so much at stake with their reputation that they would never ship inferior products or services. Unfortunately that is no longer the case (if it ever was). Just read some of my earlier posts for examples of this.

Small companies again win out here because this is where they focus their energy. Small companies do not have the budget nor the manpower for flashy presentations or for sponsored weekend “seminar” retreats to sell you on their product. They do not have the luxury of corporate America buying on brand recognition or Super Bowl Ads. The small company focus is on the quality of their product or service.

If you think about it, a small company is a big company without all the sales and management. With a small software company, the percentage of engineering developers to total staff is close to 100% (the company is the engineers). In a small consulting services company, the percentage of consultants to total staff is close to 100% (the company is the consultants). The engineers and the consultants are a company’s core team. They are the producers of the product or service that the company sells and that you are looking for. As we move up in company size, the percentage of core team to total staff tends towards 0. When you employ the products of services of a small company you are getting the most core team for your buck, you are getting the closest to the essence of that product or service.

Stability - The knee jerk reaction is to go with the big company. Think Oracle and Peoplesoft here. How much stability does Peoplesoft have if Oracle finally succeeds in buying Peoplesoft? None. How much stability does Oracle provide when they decide to drop your product line? None.

Granted small companies fail frequently, but so do big companies. Big companies don’t have to fail like Enron to ruin your day. Just a little reshuffle and your critical project is outsourced or end-of-lifed or outright killed. From a customer standpoint, big companies provide no more stability for your needs than a small company.

Price - Almost always, the small company has better prices than the big company. The little guy doesn’t have a fleet of jets to support or a city block of corporate offices. The little guy doesn’t have 7 figure salaries for the top layer of management. The little company needs to be competitive on pricing because they need to gain customers, so they keep their margins thin.

Customization - This is where small companies really excel over big companies. If you want to install and run your big company software, you usually must pay one or more (sometimes many more) consultants for an undetermined amount of time. This price is usually higher than the cost of the software itself.

My experience with software from small companies is that:
  • The installation/customization is of short duration

  • The installation/customization cost, if there is any, is reasonable compared to total cost.

  • They want to hear your ideas for new features. A key competitive strength of the small company is their ability and willingness to implement new and different features quickly.

It doesn’t take a big company to make software. It doesn’t take a big company to make reliable software. It doesn’t take a big company to provide dependable and responsive customer support.

Next time you are evaluating software, think about this before you exclude the small company from consideration. You may just be excluding the wheat from the chaff.

Sunday, August 22, 2004

Slow, Look, Lean, Roll - How to implement change optimally

Organizations can take a page from motorcycle racing manuals when they need to make changes in their processes.

Slow, Look, Lean, Roll is the mantra motorcycle racers use to execute turns at the highest possible speeds for the fastest possible cornering times. Follow these four steps and you will make a perfect turn.

Some background first. Race motorcycles are very fast (200+ mph fast). They are most stable when they are vertical and not so stable when leaning or changing speed. When cornering, a racer leans into the turn to counteract the centrifugal force of the turn. The faster the turn, the more you need to lean. Last point: In every turn, there is a single optimal path or line through that turn. When you follow that line, you are the fastest through that turn. Miss that line and you are making a sub optimal turn.

So what does Slow, Look, Lean, Roll mean?

Slow: Slow means prepare for the turn before you get to the turn. You can’t take a turn at full speed. Decelerating is an unstable event, you want to do that when you are vertical (most stable). You do your slowing before you start your turn so that when you enter your turn you are already at your correct speed.

Look: Look means find your path through the turn and focus on it. The brain is an awesome thing. It does what it focuses on. If you focus on the rabbit or the tree that you don’t want to hit, guess what, you will hit that rabbit or tree. Likewise, when you focus on your optimal path, you will hit that path.

Lean: Now you are starting your turn, you are at the proper speed and focused on exactly where you are going, so now you commit to it and lean into the turn, stick your knee out and lean all the way over, get real close to that ground zipping by.

Roll: You've passed the apex of your turn and you are starting to level out so smoothly roll on the throttle (step on the gas!). Accelerating is an unstable event as well, so you need to do it smoothly while you are in your lean, and increase it as you level out to vertical. When you come out of the turn you are at full throttle, ready for the straightaway.

That's it in a nutshell. Do it right and it is smooth as butter. Come in too fast or lose focus and best case is you make a sloppy, slow turn. There's plenty worse, that will be left to the imagination of the reader.

How does this apply to organizational change?

Slow - prepare for the change before it happens. Do all your research, validation and setup before you make the change. This is where you take the time to make the right decision. This is where you plan and prepare for the actual change from the old system to the new system.

Look - keep your focus on the new system/process. You are not looking for defects or how the old way is better or whether you should go back to the old way, you have made your decision, now you are looking to make this system work. Focus on what the goal of the change is and how this change will get you there. If you need to make adjustments, make them now. Your mission at this point is to make this change work. Do what it takes to make it succeed. Keep track of everything you do and change to make it work.

Lean - this is where you fully commit to the new system. You are transitioning from the old system to the new system. You want to transition as quickly as possible and then get back up and running. You don’t want to take baby steps or half measures. You are changing the organization, so make the change and move on. The quickest way to make the change will be disruptive. It is not business as usual. If you have to take systems down or stop business, do it. You want to be off the old system and on the new system. Transfer and merge and install once and then get back to running the business. One weekend or one week of downtime is much better than a month or a year of half time.

There are many ways organizations can create problems at this step. Phasing in over time or over regions may reduce the risk of a bad decision, but it incurs its own penalties. It requires running both systems with both sets of problems and the added problem of keeping them in sync. It increases the chance that the change will be stopped and reversed. It is much easier for detractors to reverse a decision that is only half done. The time for second thoughts and reversing decisions is in the first step, not here. Another often overlooked penalty of a phased in approach is that the organization misses out on the benefits of the change for all of the left behind/delayed regions.

Make the change completely and quickly and people may grumble, but they will live and the company will be better off. Make a slow change and everyone is grumbling until eventually the change grinds to a halt. Or the weekly migration effort between the two systems becomes so overwhelming that core resources are reallocated away from profit centers. Change is not a revenue generating event, it is a cost. The longer a change takes, the more it costs you. Remember the goal of the change is not the change; it is what comes after/as a result of the change. So make the change quickly so you can get to that result.

Roll - Once you have the new system in place and running, get back to running the business. Do what it takes to smooth the ruffled feathers now and move on. Make sure everyone knows the change is complete and it may have been painful but it is over now and we are getting back to work. Remind everyone why the change was made. The benefits of the change will be evident soon enough and the advantages will make for a stronger organization.

It takes a lot of practice to make a perfect turn. But if you follow the correct principles, you will succeed. Likewise, organizational change is not an easy thing. There will be resistance and there will be problems and skirmishes to overcome. If you follow these principles, you will succeed in your change:

  1. Plan out your change and prepare for it in advance.

  2. Keep focused on what you are doing and why it is important to the organization.

  3. Commit to the change completely.

  4. Move on.

Turns represent a small fraction of the total racetrack, yet they are vital to the outcome of the race. The race is not won on those high speed straightaways; it is won and lost in those fractions of a second it takes to make those turns. Changes in an organization are the same way. Changes have very little to do with the day to day business, and yet they represent crucial opportunities to win or lose.

Tuesday, August 17, 2004

Why is software evaluation so important?

Here are a few real life situations in the news for motivating us to do our homework (and doing it carefully) before making our purchasing decisions.

Here is a software purchasing system that never worked. Ford paid $200 million for a b2b purchasing system to replace their existing purchasing system. After four years and 300-350 people working on the system, it still could not do the job and still could not work with their existing systems.

They are going back to their original purchasing system. Luckily, or smartly, the Ford folks kept the legacy system online the past four years so they now have the opportunity to fall back to it. What is worse than throwing away $200 million and 350 peoples work for four years? Not having a fall back plan in place when the above situation happens.

Here are a couple of government purchases that dont do what they are supposed to do and are impossible to use. Tacoma city officials purchased a new financial system for $51 million. Aside from finding new problems every day, the system does not do revenue forcasting, which was one of the motivations for getting the new system in the first place - budgeting. So instead of getting new and useful information, they are not even able to get the basics.

The Federal government office of the GSA (Federal Technology Service) bought a $46 million dollar financial package to "improve financial management, encourage adherence to procurement rules and increase information flow." Unfortunately, they cannot get it to work. The poor workers that have to use it are bursting into tears on an hourly basis. Why all the problems? One, the system is too complex to use. An example, it takes fifteen steps to save a file. Two, the (extensive) training the employees got was before the delivery of the system and not on the actual system. The system does not match the training they got. The end result is that the bills are not getting paid (1000 unpaid to date) and the orders are not getting processed (100 to date).

These examples are not in the HR field, but the vendors in all three cases are, so these nightmares could be yours. We can do better.

Saturday, July 24, 2004

Evaluating Your HR Software and Solutions

If you work in the Human Resources field, you will have noticed that there are a lot of software solutions out there made specifically for you. There are some very good tools out there at reasonable costs and there are some total dogs at ridiculous prices.

The dogs usually fall into three categories: nutsware, shelfware and reverseware.

I remember reading a press release from a large bank and a software vendor recently that claimed the bank would be saving 10% of their current department costs by outsourcing their HR functionality. The terms of the deal were 1 billion dollars over ten years. Um, huh? 100 million per year for a 10% savings? Whose HR department costs more than 1 billion per year? Major disconnect with reality here.

If your solution costs MORE than what you are saving, you are not saving anything. Unfortunately, this is not a unique situation. You have to wonder who approves these kinds of decisions. This is an example of what I call nutsware - you have to be nuts to do it.

Another example, I am sure some can remember the software deal a few years ago that a certain state entered into for a huge sum that resulted in the state purchasing more licenses than total employees. That's TOTAL EMPLOYEES, not more licenses than employees that might use the software, but TOTAL EMPLOYEES. The ensuing uproar when this came to light caused the deal to be reversed, but most times the client does not get so lucky.

Quick rule of thumb here: If you outsource a solution, make sure that the cost of the solution is less than the cost of the employees that used to perform that function for you. For example, if you are outsourcing your payroll, and you have a 10 person payroll department currently, you had better be paying less than 500k per year for the privilege. Otherwise, your outsourcing initiative is costing you, not saving you. Granted there are other reasons to outsource, but if your goal of outsourcing is to cut costs, make sure it does before you do it.

How many companies pay huge amounts for a software solution, spend huge amounts more to install and customize it and then never even use it? There is a term for this because it is so common. It is called shelfware, because it sits on the shelf (unused).

A variant of shelfware, I call reverseware, is when someone in your company decides to reverse the decision (usually made by a predecessor) and re-implement a function with a different vendor. The motivation for this type of change is usually because that is how they did it at the new managers former company. An example in HR is HRIS software. An HR department decides they can save money by using HRIS package from company A. They take years to customize and get it working. A new manager comes in and decides company B has a better HRIS solution, so throws out company A software just when it has finally been customized properly. Or the new manager decides to outsource the whole HRIS function. Just wait, a new manager will come in and realize that the company can save money by taking over the outsourced HRIS functionality themselves. Reversing the decision again. I foresee lots of reversals in the coming years as all the companies that jumped on the outsourcing bandwagon decide it is better or more cost effective to do their outsourced functions in-house again.

Now, how about the bright side? That is what I want to talk about in this blog.

The bright side is when you buy some tool or implement some HR strategy that results in costs savings AND time savings AND, if you are lucky, some new capability that you never had before. For example, you implement an automation of a task that was done manually. The employee(s) that used to do the task manually are freed from doing the monotonous task, the task still gets done, and here is the good part: because the task is computerized, you can look at the results in ways you never could before. This is a win for everyone. The displaced employee can now focus on analyzing the results instead of focusing on collecting the data. The data is now collected in a consistent way that leads to better data. The company can now make improvements based on real data instead of anecdotal references.

The purpose of this blog is to help you, the Human Resource Professional, to avoid the purchasing nightmares and aim for software and solutions that improve your HR functions.

Tuesday, July 20, 2004

Software for Human Resource Professionals

This blog is for discussing software tools for use by Human Resource Professionals.