Top reasons why CIOs fail
Background
This article is a manifestation of my actual experience in the corporate world. I came to this country 8 years ago, found some amazing mentors, worked hard, succeeded in software development consulting (my team does custom software/web/app development for Fortune 500 clients, to mid-size companies, to successful startups) and got to speak at prestigious conferences all over the world about how I made businesses and in turn CXOs successful. In no way do I mean to demean executives in general, or anyone in particular. Instead, I humbly envision this article to become a discussion that benefits the Software Industry as a whole.
Motivation
It's important to understand that my lust for knowledge and passion to make my clients successful has made me move my actual residence 4 times in 2 years, and I am one of those people who could be considered insanely passionate about things they do. At the same time, I understand that business pays the bills. At times, compromises need to be made, and the best approach might be delayed in favor of an above-average approach to ship a product in time. Next, we need to be able to scale the success of the product shipped with such approach. Fortunately, my biggest strength is being able to speak the language of a CEO, a CTO, a dev manager, a software architect, all the way to a junior developer. While I believe I could write a book on this topic, this is my humble attempt to summarize some important reasons why executives, and in turn, companies fail to deliver software products on time (in the short-term) and are left behind by the competition (in the long-term).
Defining Success and (in turn) Failure
Most of my CXO friends call me a fortune teller. I have earned this reputation by being able to predict the future of a software project, company, competitor and even a partnership venture. Every time I have predicted the future, my team has worked immensely hard on a consistent basis, to live up to the commitment. This makes me a successful consultant and my team a much sought after team.
So, in my personal opinion, a successful executive is someone who can correctly predict the future. Good, bad or ugly! As long as he can predict, he is successful. It's important to understand that an executive is not someone who has a magic wand and can do whatever the Board expects him to do. In today's competitive world, success can't just be confined to launching a product or being able to execute a plan. Unfortunately, it's more about the accuracy of prediction, ability to ascertaining the impact of the launch and determine how to swing the results in your favor (by staying ahead of the competition) and how to predict the budget accordingly, measure the short-term and long-term ROI, determine the impact on the brand image, and plan for contingencies.
So, what is failure? Well, not surprisingly, you might launch the product and even launch according to the plan, but the product might be a complete failure. On the other hand, the product itself might be a success, but if it cannot keep up with future customer expectations, it may still be labeled a failure. Or if it cannot scale, the product could be considered a failure. Or even worse, competitors could outshine you shortly after launch (say less than a year). Or, maybe, lack of future vision or post-launch plans, or lack of long-term ROI could be another set of failures.
I am sure you know all of this. Why am I repeating these points then? Because in my personal experience, any of these factors listed above could cost the executive not just his job, it might cost him his career. So, it's important to seriously ponder on the points below as I can guarantee you that I have at least one personal story behind every reason I mention below. In my personal experience, only 20% of the executives have had really great success in their jobs, and only 5% of the executives have actually been able to recreate that success more than twice. A very low percentage of executives are able to consistentlyproduce success throughout their career.
Reasons Why Executive Fails
I would like to highlight some key reasons that are usually NOT talked about or are considered unimportant. Ideally, it would have been more accurate to have titled this blog post as 'Top, not so obvious, reasons why Executives fail'. That said, I won't be covering reasons that are widely known. In my personal opinion, these are the reasons that executives fail.
1. Ship it: Two magic words in software development are: SHIP IT. With the exception of the Reality Distortion by Steve Jobs, this doesn't actually work in the real world. We all know that it didn't always work for Steve Jobs either. The business comes up with an imaginary deadline, and somehow, the CXO commits to it. The next thing is finding a few Preferred Vendors to recruit a bunch of developers to ship the product out of the door.
A lot of times the CXO would include some top decision makers who might talk to some of the influencers in the company and agree half-heartedly to the deadline. What's interesting is that the CXO usually feels he is well informed before he makes the decision, and most of the time, few people realize what they were expected to build in the first place. Sometimes, this is true even close to the launch. And, even worse, most of the developers had already predicted the failure of this project the day they started working on it.
Solution: We are told Agile is the panacea for all ills. However, how many of us have really witnessed lip service being paid to Agile. So, I won't be bring it up here.
SWAT Team: Do you have a SWAT team? If yes, great. If not, then getting a helping hand with a team you trust and understands your domain is ideal for taking on an uphill task.
We have a SWAT team and it specializes in delivering projects with almost impossible deadlines and has been successful. However, not every person in my company could work in that mode. Shipping fast is not just a test of mettle, it's a test of patience and perseverance. On top of that, what counts the most is the experience, the camaraderie of the individuals, and their history of success in high-stress situations with close deadlines. Over time, we have solidified a process to help create SWAT teams for the client. We take special care of this SWAT team to make sure the team doesn't get burnt out. Keep in mind, it's a SWAT team :).
2. Outsource It: The CXO makes a well-informed decision - "We know that we have a few large fish to tackle and a few small ones. We know that we neither have the capacity to get this done nor a way to scale our current development staff. Outsource It." Next, find a few Preferred Vendors, get a few quotes and outsource it.
There are quite a few problems with this approach- first, how to determine which bid is the best? Second, how to transfer the business knowledge including domain knowledge in a very timely fashion? Third, does the team really have the bandwidth to deal with ramping up a team, interviewing tons of candidates, managing the delivery and be able to finish the overwhelming deliverables on their side? Fourth, in this stress filled situation, how to retain the actual domain experts as well as the technical experts on the team? Fifth, how to ramp the outsourced team up on the current technology stack?
Outsourcing blindly would rarely alleviate the situation. However, we have successfully made hybrid models work in situations like these. One of the biggest reasons projects fail is because of ramping up a team where no one has a history of working together. This mercenary model fails over something we always do, which is bring in a team of experts who have a history of successes together.
Solution: There is always a delicate balance between what (and how much) to outsource and what to keep in-house. And the bigger problem is who gets to make this decision. It's never an easy answer. However, one thing is clear. In my personal experience, if you are going to outsource, you need to take into account the opinion of someone from outside your company, too. If the decision is made only by the full-time employees of the company, all by their own, there are two problems with that approach. One, since they all understand the domain and code base to a good extent, they might not be able to correctly estimate the ramp-up time for the outsourcing team. Second, they may make decisions on technologies based on their current resources and may fully ignore the fact that consultants might be ramped up on the latest and the greatest technologies, way more than your own team (assuming you hired the right consultants).
3. Offshoring saves money: At some point in time, we all have tried the necessary evil of offshoaring. With the exception of Tech Support, Call Center jobs, maintenance projects and testing, we all have suffered partial or major failures with the offshoring model. Especially when it comes to new development, having only an offshore team is a failure in making. Haven't we heard stories where a critical project was outsourced to an offshore location, and it failed because of lack of SMEs and good developers?
There could be many reasons why offshoring may not produce the desired outcomes. Cultural differences, communication problems, time zone differences, lack of offshore SMEs, lack of focus on quality, loss of onshore talent (due to offshoring critical projects), and many others. It's an unsaid rule that offshoring is just a way to avoid the problem for couple of years. We once delivered a project in 8 months with one rockstar developer. This same project was previously assigned to an offshore company that was unable to finish after years of development with more than 10 developers. We did the math and we were cheaper by an order of magnitude.
Solution: Once, we did a bid against an offshore company. The offshore company's hourly rate was 5 times less than us but they quoted 10 developers for 6 months to finish a project. We quoted 1 developer for just 6 weeks. (Just do the math on who's cheaper). Result? Unexpectedly, the client thought we didn't know what we were doing. 6 months later, the project failed and the client back to us.
4. Preferred Vendors: Some CIOs say it's a necessary evil. It's more practical to have few preferred vendors than to hire from every vendor under the sun. However, locking yourself down to the same preferred vendors is also a challenge.
We were once invited by a visionary executive of a Fortune 500 to help his company out launch a product with an almost impossible deadline. The business wanted to launch the product in 4 months, and IT asked for at least 12. It turns out that the legal process to become a vendor would take anywhere between 3-6 months. In the interest of the client, we chose to work through the preferred vendor (a recruiting company with no experience in consulting) who verbally agreed to just add a 2% fee on top of our consultants. It appeared to be a win-win situation. Our SWAT team was able to save the day, and the client had a successful launch in 4 months. All the credit went to the preferred vendor. We are consultants- We are there to make the client look good, and the last thing we care about is recognition or credit. However, the preferred vendor took that opportunity to put the same consultants on three more teams at this company simulatenously-- so each consultant had four managers instead of one.
Result: Our team was so sought after and had such a good name that the preferred vendor started marking up $75-150 per hour more than what we charged. As a result, most of our candidates went beyond the rate limit set by the client. That enabled them to add a lot of their own recruits. However, the client now pressed for the same quality as ours. Clearly, we would find out about their frustrations soon. It turns out that there was no legal way to bring these guys down to 2% in all new teams. Apparently, the win-win situation had turned into the worst nightmare for the client and us. Even after slashing our margins by 75%, we could not make the rates work.
Who's loss was it? Obviously, the client's. Even worse, the non-compete clause with the preferred vendor wouldn't allow the client to work with us directly. Unfortunately, some executives got blamed for the failure of their respective projects. They were either let go of or they quit. We used our credibility to find some of these executives jobs and they did well wherever they went. However, the preferred vendor continued working at client site.
Summary: Once failed, a preferred vendor has no moral right to continue contracting the individuals responsible for the failure. Upon the second failure, the preferred vendor needs to be replaced. Unfortunately, more often than not, the vendor sticks as long as an executive from the client plays golf with an executive from the vendor. I hope sticking around was directly proportionaly to merit.
5. Right-hand Guy: Most of the time, CIOs have a proven executive who is their right hand guy. In turn the executive has one. Sometimes the chain is long enough that it's actually this n-th (way down in the chain) right hand guy who actually controls all the decisions. The interesting thing about the right hand guy is that at one point of time he was a great developer who created something really extra-ordinary on a technology that's now outdated (something like FoxPro) and that's why everyone in the company knows him. However, FoxPro had nothing to do with Cloud, Scalability, Web 2.0, Internet of Things, and what not. He could also be the guy who may not even believe in Web or Cloud because, during the culmination of his technical learning, it was probably safe to assume Windows is everything.
Well, imagine this guy is making all the decisions. Or, even worse, shooting down every idea that would bring innovation and success in the company. Companies start from a 'Man' phase, then go to a 'Mission' phase, and move on to a 'Machine' phase. Mostly, the right hand guy at one point was the man, then he led a mission and then he almost retired and made a machine out of the company.
Solution: Mentorship from an industry expert, every now and then, is a great way to have a second pair of eyes advise you periodically, and this goes a long way in creating consistent and sustainable success. We have a 'WatchDog' service for our preferred clients where we send in experts for few days every quarter and help them with expert services with huge cost savings.
6. Recruiting: As easy as it sounds, it's the hardest thing to do in our industry. I will be blogging separately about how messed up recruiting could be especially if you really need the right folks who could be depended upon. In this competitive landscape, companies have to differentiate themselves to be able to attract top talent. Opportunities are so many that top developers can really pick and choose. However, imagine that a company was able to hire top talent. What guarantee do you have that they all can work amiably?
I once met a contractor working for a vendor. The vendor's client entrusted him to interview candidates for the client. According to his own admission, the vendor offered him a dollar for every hour worked by candidates who he brought on board. What next? All the positions got filled by this one vendor's candidates. The project was bound to fail. The vendor made the money, and the contractor collected some change. Who lost? The client. And maybe the CIO got fired sooner or later?
Summary: Recruiting gets hard for many reasons. One of the major ones is that recruiters are mostly non-technical, and any developer can talk his way through a recruiters' interview. We have been successful in recruiting because we DON'T have recruiters. We have technical rockstars who interview the candidates for us. I personally interview every guy who gets into the company. We DON'T use job boards to get the best guys. We use our network. We DON'T hire active recruits. We look for passive candidates. We DON'T do bulk recruiting. We help a client understand that he may only need 10 rockstars compared to the open 35-50 positions he has been advised to fill up. And we've proven this successfully over and over again.
7. Budget Politics: Every other manager I meet somehow feels pressurized to use his budget. The simple logic being 'If I don't use it, I will be allocated a lower budget next year'. This, unfortunately, is the reason why so many incompetent recruiting and consulting companies with 100s of millions of revenues exist in U.S. We were once asked to work for a Fortune 500 that had spent 2.2 Million dollars with a big consulting firm and the project was less than 10% done. I finished the project alone in 3 months. The consulting company I worked through was charging the client $125 per hour for me then (I was surely paid way less than that). Do the math. I can't still fathom, in the worst of my nightmares, how could someone mess such an easy project and even worse how can you charge 2.2 Million dollars for something I could deliver in less than 100 Grand.
Solution: Challeging budgeting is not easy. A friend of mine, who runs a much bigger consulting company than mine, once told me how an executive asked them to charge them 4 million dollars in the current year for work that may be delivered by this company next year. Even worse, she didn't even know what she would use them for. However, the more important thing was to use her budget before the end of the year. One really good way of solving this problem is using this budget for quality training. By training, I DON'T mean instructor-led training where they teach you a pre-built curriculum. Mostly, it's a good academic curriculum for some certification and doesn't help much with their current jobs. For our preferred clients, we go on-site, add consultants to their team who code and build software with the latest and the greatest technologies and the best patterns and practices. Once we are done, we train the full-time employees. Sometimes, we allow our consultants to go full-time at the client site if it helps the client's situation. This way you use the budget for something good and improve the team quality and set yourself for success.
8. Competition Denial: Have you ever started eating red meat on a daily basis after being vegetarian all your life? I am sure you haven't. But if you did, your body would be in a state of protein-shock and the ill-effects are obvious. Have you ever been part of CIO initiatives where they move from a 90% outsourced, consulting model to a 90% in-house model? Well, I think it's a welcome move. And I support it to a large extent. However, it must be done right, or the CIO will soon be met with a lot of failures.
I had a friend who was full-time for 25 years at a company, and the last 10 years all he would do was complain about the work consultants did. According to him, he had the best job anyone could ask for because he had power, money, work-life balance and whatnot. However, 2 years before retirement the company went to almost a no-consultant model. Well, guess what? He had to do all the work and since he had no skills left and even worse he lacked the right attitude to complete the work, he (along with most of his team members) ended up being not-happy with the work. The company suffered for almost 2 years after the initiative. The company was so left behind that they finally had to reverse the decision. But it was already too late. A lot of full-timers who were actually the SMEs had left because they had no interest in learning new technologies. Consultants flooded the company but were clueless on what to do for a while.
Solution: SMEs are a must, and so are consultants as they have the technical expertise. The best way to make changes like this is to do a gradual change. The biggest challenge is the buy-in from the consulting companies. Hardly any account manager of the preferred vendor will ever like this. It reduces their revenue and messes up their sales targets. They will try their best to talk you out of this and in the process may even turn hostile and covertly adopt measures that harm your position. It is at this time that smaller companies like ours come to the rescue. The bigger consulting firms have to worry about bench time. We don't. We turn down 3 out of 4 projects we are offered, so we have a vested interest in building a client's team, making it self-sufficient, and coming back for a week or two every quarter while having some full-time consultants at the client site for a long-term basis. This becomes a win-win for us and the client.
9. Playing golf with the account manager: It's unfortunate that a lot of IT decisions are made on the golf course (sarcasm). This is not completely true, because otherwise I would not have any business whatsoever. One key thing to keep in mind is that the cost of that golf game can be measured anywhere from a million dollars, to costing the CIO his job. This is because the account managers that I have gotten to know do the following: They openly talk about the CIO and tell people how no one else can get business from the client just because he plays golf with him. This create a bad reputation for the CIO in other people's minds, especially when, not surprisingly, people in the company do see a lot of recruits from the same company despite the lack of quality. One account manager once told me how he'd fly the CIO out to Vegas for a week while the company paid for him to be at a conference in San Fransisco. I believe him because the CIO only played golf with this guy. I am sure I wasn't the only person he ever told this to.
Solution: Believe it or not, but for that Vegas trip worth 10k the CIO was giving away 6.5 million dollars of business to a recruiting company that never produced any results. At least that could be the perception. This leads to unrest amongst the top producers, and they quit over a period of time. The company fails in the long-run. And this complacence could cost the CIO his job. I knew a top executive who was let go of after 23 years of his career and had not found a job for more than 6 months after being let go of.
10. 80-20 rule: 80-20 rule is really obsolete. In reality, 1% of the CXOs really excel and 99% don't. 20% of the CXOs go good enough, and the rest of the 80% are mostly stagnant or just fail. The ones who do really well as the ones who keep learning, keep trying, are diligent and patient yet innovative, have the ability to take risks and a passion for hiring top talent, and who know how to build a strong team. These are folks who don't just focus on management skills, but also keep themselves sorrounded with technically competent folks. 80% of the CIOs usually trust their right hands guys who are mostly like the toads of a well. 20% of the CIOs find a right balance of people they trust and new people who bring in innovative ideas. These CIOs are more open to trying out new approaches and technologies than their counterparts. Only 1% of the CIOs work through their legal departments to work directly with experts from the industry.
Solution: A big challenge when it comes to hiring experts is that they are independent consultants. If a CIO of a Fortune 500 company needs 10 different experts, it will be a big mess working with the legal department to approve all of these ICs as vendors. The ICs will need to get expensive insurance, and almost all of them won't be able to meet the revenue requirements for working with the client. So the CIO won't even pursue this route if he is in the right sense of his mind. He might try to get them to work via a preferred vendor and with ICs who are experts and get a lot of work. Regardless, they don't like working through preferred vendors that are just body-shoppers. However, we have fixed the problem.
We have been able to bring all these experts under the same umbrella. Now the client can work with just one company and get the benefit of working with all ICs. When I started my consulting company, there was no other company that was even open to partnering with the right experts. They still see the experts as more expensive to hire and hence think of them as competition. To me, it was not about competition or profit. I get excited by producing results. Some people get excited by NOT producing results, as long as they make more money. So, they make money and we get the results. It's a great win-win situation. That's how we don't have any competition.
PS: I had to be candid because the corruption in the private sector leads to failures and these failures are the result of degradation of the country and hence a recession every few years. It's the duty of an executive to keep all the checks and balances in place. In return, the rewards will be great. They will have loyalty of high producing technical talent like that of mine and success will be in their future.