In 2003, John Golden, the chief information officer at CNA, the fourth largest insurance company in the U.S., had completed the consolidation of applications, had centralized more than 20 IT groups, and had trimmed systems maintenance costs. He then put a five-part strategy in place to make sure IT could put a lot of muscle in the business units, thus moving CNA forward. Golden's strategy to improve business processes includes having the right partners, doing proper program management, using more comprehensive solutions, making more use of portfolio management, and sticking to a comprehensive delivery system.
For the past four years, Golden has stuck to his IT strategy for CNA. "Its purpose is to make sure we do the right thing for the business. We've been evolving from an organization that did $10 million IT projects to one that does $100 million complex IT projects that will transform the company. These projects involve a business process change in addition to a change in technology. We've looked at it as an investment which would yield a return."
Enterpriseleadership.org recently sat down with Golden to talk about the challenges of carrying out some parts of his strategy. He oversees a centralized IT organization with 1,100 employees, and manages relationships with several partners and offshore IT resources. In 2006, CNA had $10 billion in revenues and assets of more than $58 billion. Here's what he had to say:
EL: What were some of the things you looked for in finding the right partners and in building relationships with them?
JG: We knew that the increase in spending was a big risk. We've found two good partners -- Accenture and IBM. We wanted no more than three partners. It took us longer than we thought to find the right ones. We had to mix their style with ours, to have the right contractual terms, and then to allow them time to deliver. We quickly got a sense of each other's disciplines, and risk tolerances. With one of our partners, we now have a deep risk sharing and reward sharing. It took us a year before we could get here.
EL: How would you rate your program management imitative?
JG: We've hit a homerun with our world class program management. Our project management office is extremely strong. We have the right measures in place for consistently delivering high quality services. That's what I wanted to make sure we did. We're still maturing at the high end of a $100 million program. It's more on the execution piece in the organization with our partners. We have good methodology, good tools, and good expertise. We've really developed a good skill set there. We have good leadership here because our project management office has been very strong.
EL: What changes have you made to your portfolio management strategy?
JG: In 2004, we introduced our portfolio management strategy to make sure we had the right portfolio structure and the tools to support that. It was an area that became problematic because of priority issues. We deserved it. We got the right structure in place that year and the noise went away.
We've gotten better at the way we prioritize, the way we interact with the project team, the way that we schedule our work and the way we make decisions around the investments. We've really improved our day-to-day actions. My organization has also had a strong relationship with the executive committee, including the chairman. My peers have given me a lot of good direction. As a result, portfolio management really excels for us now.
EL: What changes have you made to your delivery framework so you can handle larger projects?
JG: We have a comprehensive delivery framework which has enabled us to be more consistent with what and how we deliver. I thought we really would've excelled in this space. I'm disappointed in my performance here. If you measure our consistent framework on the same scale with CMMI, we do very well. Our delivery rates are in the mid to high 90's as far as scope, schedule, and budget. We've driven a lot of cost out of it to be more effective. We're still relying too much on brute force and too many heroes. However, I appreciate what the employees are doing in that space.
I measure our credibility based on how well we're delivering what the chairman wants. Is it giving us the ability to do things to help the company innovate? Are we able to take on large projects which would move us beyond the realm of IT? Our credibility is very good. However, I'm concerned that as I stretch my team to take on more things outside of the pure IT umbrella, my delivery framework isn't as rock sold as I 'd like it to be. I've started to stress that.
EL: How do you plan to solve this problem?
JG: The owners of the various processes need to make sure they really do have a comprehensive set of measures around those processes. We're very good at the global level. If you look at our scorecard, you'll see that our utilization, our cost of transactions, and the split between maintenance and development all have good numbers. People talk a lot about agile development. Our problem is agile development hitting the big time. We're pretty good at agile development on $5 million projects. When it comes to agile development on a $100 million project, I don't know of many organizations that are really good at it. As you begin to scale, people seem to get less disciplined and less agile. We can't do that. Our challenge is how do we be agile but disciplined on a larger project scale? Each of the process owners has to be able to work together to make sure they understand the new demands and new expectations. Can they scale it? It's not a resource issue, but a process issue.
EL: What increases have you made to your budget for new projects, and what new projects are on your drawing board?
JG: Between 2001 to 2005, our IT budget decreased each year. From 2005 to 2006, 2007, and going into 2008, our IT budget has been growing to support new initiatives. So, we've drastically been increasing what we spend on the business. For 2006, we'll spend, on a cash basis, more than 50 percent of the budget on new work.
Our new projects for claims and underwriting will greatly transform our business. In underwriting, we're completing our work in small business and attacking the middle market. We've had a lot of work going on in predictive modeling and capital modeling. We have a major financial systems roadmap imitative which will take our information management system, called Merlin, to the next level.
EL: How does your IT organization work with the business units?
JG: Some people would call it a federated model, but I wouldn't give it that definition. For investments of several million dollars, I have a team of directors who deal with leaders from each line of business. The goal is to manage those investments and to help these leaders make good investment decisions. We give the leaders the allocations. That's the day-to-day stuff. I don't monitor those decisions daily. I do expect to see a certain return from each investment.
EL: What is your corporate governance model for IT?
JG: The chairman, the CFO, the head of our property casualty business, and me make our major investment decisions, which comprise the bulk of our money. The various business units present their investment ideas to us. We decide how we want to make those investments, which aren't seen as IT projects, but as investments in CNA. They deal with process transformation, the technology piece, and any organizational components.
EL: Can you talk what's happening with Merlin, CNA's business information dashboard?
JG: Merlin, which is built on Oracle and a Business Objects, is a scorecard of standard metrics for the business. It's clearly the information repository at CNA which helps us to determine where the business goes. We create and we align around a given metrics. The production data in Merlin helps the management at CNA to measure how our field operations are performing based their production targets.
The third generation of Merlin will be available in 2008. It will have an additional complement of financial metrics, and operational metrics which can provide the cost per transaction. We've been building and maturing those metrics. Once the metrics reach a level of maturity, we put them into Merlin.
EL: How do you evaluate senior IT professionals to determine if they are a good fit for CNA?
JG: I measure people on capability, character, and chemistry. The first is usually a given. We place a lot of emphasis on ethics starting from the chairman on down. Chemistry is something we've started to focus now. We did a major turnover in the marketplace between 2000 and 2003. Now that we've proven ourselves, we can more selective about the chemistry rapport we want from our employees.
CNA is all about teamwork. To evaluate my direct reports, I enlist the help of an outside psychologist to conduct behavioral interviews and to assess the fit with CNA based on those interviews. My goal is to hire people who understand the values that are important to CNA and who understand how things get done at CNA.
EL: Do you have a formal process for driving innovation?
JG: CNA is a conservative company. We don't get wrapped up in having a chief innovation officer. Of course, innovation is critical to what we're doing here. We do put a premium on it. We believe we've been innovating all along. CNA has gone through the fix, build, and lead phase. We're now building some core competencies so we can lead. Our goal is to differentiate ourselves from our competitors. Our leadership team faces the challenge of how do we bring out those good ideas to move the company forward?
In IT, we use Six Sigma and the IT Infrastructure Library. Unlike some companies, we don't have a dedicated team of Six Sigma Black Belts who we call upon collectively for projects. Instead, we've distributed our certified professionals throughout the IT organization. For example, when we began our claims transformation projects, we asked one of our Six Sigma Black Belts to lead the effort.
EL: What do you get out of your involvement with the Executive Club of Chicago's Technology Group?
JG: I've gotten many things from being involved with this organization. It allows my staff to learn new things by attending the 90-minute talk sessions. I get to help set the agenda for these sessions, as well as other technology things we do. CNA also gets a lot of recognition in the market place. It's also a great recruiting tool for me. It helps me to network with other Chicago CIOs, who want to promote the marketing of IT in Chicago.
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Managing the Business of IT: Maximizing the Power of Service Resource Planning, the Next Step in Business Service Management
Elizabeth M. Ferrarini is a writer from Boston, Massachusetts. Reach her at elizabethferrarini@yahoo.com.
