CFOs – How Much Should You Be Spending on IT Staffing?

By Randy Mysliviec, Managing Director, RMI

No question about it – digital transformation is real, growing fast, and should be garnering your attention for many reasons. Making technology work for your company is an important investment and people are a big part of any IT strategy. An important question every CFO should be asking of IT is, how many people do you need to execute our digital transformation strategy and support our IT needs? An equally important question to ask is ‘why’ do we need that many people? The purpose of this article is not to determine exactly what those answers are for your company, but rather to help you understand some tips and techniques to get to those answers with precision.

Our institute has been studying the science of how we use human capital for project-based work in IT. In particular, we are developing more reliable standards and norms for utilization of IT personnel and the processes and systems in place used to maximize use of our human capital. This is the science of Resource and Workforce Management which I will refer to simply as RM from here on in. While the IT industry as a whole has made good strides in this area over the past decade, a lot more is needed to get to real breakthroughs in not only knowing what it really takes to get the job done, but also how to continuously optimize investments in your IT workforce.

Better RM has many benefits including:

Improved utilization of human capital to slow the growth of IT spend for staffing. In a 2021 Flexera IT spending report, IT spend industry wide is increasing overall and much of that new spend is going to people. In our studies of IT organizations, we find that many firms don’t have the necessary processes and systems to continuously optimize use of existing staff, before making the decision to hire more people or third parties. This is fundamental to a good structured RM process in IT.
Improved project outcomes – in a 2016 Gartner PPM conference presentation, it was shared that more than 35% of every new IT project that year would fail on some level, cost, timeliness, or quality. Our own research indicates issues with project performance remain a challenge. Gartner identified a key driver for failures was the inability of those firms to staff the right person with the right skills at the right moment in time. We agree! This is the essence of good RM and can drive meaningful improvements in project outcomes while lowering costs overall.
Lower attrition – for many reasons, attrition of existing IT talent is becoming more of a challenge, in addition to recruiting of new talent. Employee engagement with the rising millennial population requires new approaches to talent management and RM can play an important role in this regard.
Adapting to a flex workforce – from recent studies we know that nearly 40% of our project-based work in IT is getting done with gig economy workers. Good RM discipline provides for better optimization of our total workforce to incorporate flex workers when it makes economic sense.

So how do you determine if your organization is good at RM? There are many ways to do this. In a nutshell I would say it’s all in the data, but here are a few data points to explore:

Utilization of people – there are industry benchmarks to provide comparisons available from a number of industry research organizations including our own. A more important data point from our perspective is that in roughly a dozen years of consulting to project-based teams on this issue, 100% of the time we have uncovered meaningful amounts of under-utilized resources in those same enterprises – 100% of the time! That is because we rarely find teams where they really know where 100% of the time goes with precision. This is a great place to start – do you really know where 100% of the time of your current staff goes? A related question is are they working on the right things (nice to have vs. must have)? How much time is spent on the projects that need to get done vs. time spent for meetings, training, PTO, admin, and other necessary or unnecessary things? Only a comprehensive look at this and a continuous focus on minimizing the unproductive expenditure of time can produce the data needed for transformation change.
Disciplined RM processes in place with adequate compliance – it is common in enterprise IT to find well engineered project management and quality processes, but not so common to find what should be equally well engineered RM processes. Note, in today’s environment it is not good enough for RM to be buried in a project management process flow. Your team should first get really good at RM, and with that foundation be able to better execute a project or quality process. Do you have documented RM processes? Trained RM personnel? Defined metrics and governance with a goal of continuous improvement in things like utilization, time to staff projects, and project performance? Are expected business outcomes in line with expectations?
Resource sharing – the professional and consulting services industry took on the issue of organizational silos some time ago and has made great strides in breaking down those silos. This was because when your people cost is recovered via billable work, market forces are the main driver for efficiency improvements. The norm in that industry now is for transparent sharing of resource and skills data, and deployment mechanisms for resources outside of the direct people managers, to unlock any siloed resources. Enterprise IT has lagged in this regard but the advantages cost wise are too substantial to ignore any longer. If you have reliable utilization data, you should look at overall utilization, and for inconsistencies in departmental utilization of people. This will put a spotlight on areas for improving utilization, and the processes focused on improving it.

If you are doing all these things, that’s great and you are in a very small group of over-achievers when it comes to resource management. If I have convinced you to look into your RM capabilities, we can offer many ways to help: