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Avon Products and Guardian Life Insurance: Successful Management of IT ProjectsIt’s deja vu again at many companies when it comes to track records in using IT to help achievebusiness goals. Consider the following ;At companies that aren’t among the top 25 percent of IT users, three out of 10 IT projectsfail on average.Less than 40 percent of IT managers say their staffs can react rapidly to changes in businessgoals or market conditions.Less than half of all companies bother to validate an IT project’s business value after it hasbeen completed.Those are just a few of the findings from a survey of IT managers at about 2,000 companies,including more than 80 percent of the Fortune 1,000, released in June 2003 by the Hackett Group inAtlanta. However, top-tier IT leaders didn’t reach the top of their professions by being softies.Indeed, a vast majority of them regularly rely upon hard dollar metrics to consistently demonstrateto top brass the business value IT investments are expected to yield. That’s what sets them apartfrom so many of their colleagues. “Good business-case methodology leads to good projectmanagement, but it’s amazing how many companies fall short here,” says Stephen J. Andriole, aprofessor of business technology at Villanova University and consultant at Cutter Consortium. Thelack of good project management at such companies may also lead to business units taking on ITdevelopment projects without the knowledge or oversight of a company’s IT department. Businessunits may initiate such “rogue projects” because they see the IT department as too slow, or a sourceof too much red tape and extra costs. Avon Products. “We apply all of the analytical rigor andfinancial ROI tools against each of our IT projects as well as other business projects,” says HarrietEdelman, senior vice president and CIO at Avon Products Inc. (www.avon.com) in New York.Those tools include payback, NPV, and IRR calculations, as well as risk analyses on everyinvestment, she says. The $6 billion cosmetics giant also monitors each IT project to gauge itsefficiency and effectiveness during the course of development and applies a red/yellow/green codingsystem to reflect the current health of a project, says Edelman. A monthly report about the status ofprojects that are valued at more than $250,000 and deal with important strategic content is presentedto senior line managers, the CEO, and the chief operating officer. In addition, Avon uses aninvestment-tracking database for every IT project to monitor project costs on a rolling basis. Theapproach makes it easier for the company’s IT and business managers to quickly determine whethera project should be accelerated, delayed, or canceled and assists the finance organization inforecasting requirements. Guardian Life Insurance. Dennis S. Callahan sys he has “put a strongemphasis on governance” since becoming CIO at The Guardian Life Insurance Company(www.glic.com) two years ago. Callahan has done so, in part, by applying NPV and IRR calculationsto all IT projects with a five-year cash flow. “The potential fallout from inaction could result in lossof market share,” says Callahan, who was promoted to executive vice president recently. SoGuardian’s approach to IT investments “is very hard-dollar-and metrics-oriented, with a bias towardaction,” he says. Still, Callahan and his team do have a process for incorporating “soft” costs andbenefits into their calculations. They do that, Callahan says, by encouraging their business peers “to change. Same thing with cost avoidance if we invest in a project that’s expected to help us avoidhiring 10 operations staffers to handle going business transaction volumes.” Callahan also keepsclose tabs on capital spending throughout the course of a project. New York-based Guardian has aproject management office that continually monitors the scope, time, and cost of each project valuedat more than $100,000, according to Callahan. Guardian also has monthly reviews of variances ofscope, time, and costs on all projects costing more than $100,000. Using return-on-investmentcalculations to cost-justify and demonstrate the value of IT investments to senior management isonly one of the techniques top IT leaders use to win project approvals, say Callahan and others. “Weapproach everything that we do in terms of payback.” President and CEO Dennis Manning and otherboard members “really relate to that kind of justification,” Callahan says. “So, we turn that into hard-dollar returns and benefits for application development and infrastructure investment.” One of thebiggest things we do in demonstrating value to the CEO and the board is showing that everythingwe do reflects the company’s business strategy,” says Rick Omartian, chief financial officer forGuardian’s IT department.Case Study QuestionsWhat are the possible solutions to the failures in IT project management in manycompanies described at the beginning of this case? Defend your proposals. [10 marks]What are the key ways that Avon and Guardian assure that their IT projects are completedsuccessfully and support the goals of the business? [ 10 marks]3. If you were the manager of a business unit at Avon or Guardian, what would you expecttheir IT groups do to ensure the success of an IT project for your business unit? Defendyour suggestions.
Avon Products and Guardian Life Insurance: Successful Management of IT ProjectsIt’s deja vu again at many companies when it comes to track records in using IT to help achievebusiness goals. Consider the following ;At companies that aren’t among the top 25 percent of IT users, three out of 10 IT projectsfail on average.Less than 40 percent of IT managers say their staffs can react rapidly to changes in businessgoals or market conditions.Less than half of all companies bother to validate an IT project’s business value after it hasbeen completed.Those are just a few of the findings from a survey of IT managers at about 2,000 companies,including more than 80 percent of the Fortune 1,000, released in June 2003 by the Hackett Group inAtlanta. However, top-tier IT leaders didn’t reach the top of their professions by being softies.Indeed, a vast majority of them regularly rely upon hard dollar metrics to consistently demonstrateto top brass the business value IT investments are expected to yield. That’s what sets them apartfrom so many of their colleagues. “Good business-case methodology leads to good projectmanagement, but it’s amazing how many companies fall short here,” says Stephen J. Andriole, aprofessor of business technology at Villanova University and consultant at Cutter Consortium. Thelack of good project management at such companies may also lead to business units taking on ITdevelopment projects without the knowledge or oversight of a company’s IT department. Businessunits may initiate such “rogue projects” because they see the IT department as too slow, or a sourceof too much red tape and extra costs. Avon Products. “We apply all of the analytical rigor andfinancial ROI tools against each of our IT projects as well as other business projects,” says HarrietEdelman, senior vice president and CIO at Avon Products Inc. (www.avon.com) in New York.Those tools include payback, NPV, and IRR calculations, as well as risk analyses on everyinvestment, she says. The $6 billion cosmetics giant also monitors each IT project to gauge itsefficiency and effectiveness during the course of development and applies a red/yellow/green codingsystem to reflect the current health of a project, says Edelman. A monthly report about the status ofprojects that are valued at more than $250,000 and deal with important strategic content is presentedto senior line managers, the CEO, and the chief operating officer. In addition, Avon uses aninvestment-tracking database for every IT project to monitor project costs on a rolling basis. Theapproach makes it easier for the company’s IT and business managers to quickly determine whethera project should be accelerated, delayed, or canceled and assists the finance organization inforecasting requirements. Guardian Life Insurance. Dennis S. Callahan sys he has “put a strongemphasis on governance” since becoming CIO at The Guardian Life Insurance Company(www.glic.com) two years ago. Callahan has done so, in part, by applying NPV and IRR calculationsto all IT projects with a five-year cash flow. “The potential fallout from inaction could result in lossof market share,” says Callahan, who was promoted to executive vice president recently. SoGuardian’s approach to IT investments “is very hard-dollar-and metrics-oriented, with a bias towardaction,” he says. Still, Callahan and his team do have a process for incorporating “soft” costs andbenefits into their calculations. They do that, Callahan says, by encouraging their business peers “to discuss how an investment can impact market share and estimate how those numbers are going tochange. Same thing with cost avoidance if we invest in a project that’s expected to help us avoidhiring 10 operations staffers to handle going business transaction volumes.” Callahan also keepsclose tabs on capital spending throughout the course of a project. New York-based Guardian has aproject management office that continually monitors the scope, time, and cost of each project valuedat more than $100,000, according to Callahan. Guardian also has monthly reviews of variances ofscope, time, and costs on all projects costing more than $100,000. Using return-on-investmentcalculations to cost-justify and demonstrate the value of IT investments to senior management isonly one of the techniques top IT leaders use to win project approvals, say Callahan and others. “Weapproach everything that we do in terms of payback.” President and CEO Dennis Manning and otherboard members “really relate to that kind of justification,” Callahan says. “So, we turn that into hard-dollar returns and benefits for application development and infrastructure investment.” One of thebiggest things we do in demonstrating value to the CEO and the board is showing that everythingwe do reflects the company’s business strategy,” says Rick Omartian, chief financial officer forGuardian’s IT department.Case Study QuestionsWhat are the possible solutions to the failures in IT project management in manycompanies described at the beginning of this case? Defend your proposals.