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The Big Fix
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The
Big Fix
How Toyota's CIO radically restructured her entire approach
to IT and regained the trust of the business.
BY THOMAS WAILGUM
At
Toyota Motor Sales USA's headquarters in Torrance, Calif.,
there's a circular patch of manicured earth that separates
the IS building and corporate headquarters. A brook winds
its way through lush flowers and pine trees, and a terraced
path connects the two buildings.
For many years, this was about the only thing the two groups
shared with each other.
For the business execs at Toyota Motor Sales (TMS) peering
across the courtyard at the Data building, the deep black
windows were a symbol of IS's opacity. These executives
felt that IS was unresponsive, and they had little clue
where the money was going. "One of the complaints was
that we spent a lot of money on IT projects, and [the business]
was frequently disappointed with the results," recalls
Bob Daly, group vice president of Toyota Customer Services.
Daly says badly handled projects-such as a delayed PeopleSoft
ERP implementation and a protracted parts inventory initiative-led
to finger-pointing between the two factions.
Meanwhile, behind the darkened windows of the Data building,
Barbra Cooper's IS staff was buried under the weight of
six enterprisewide projects and could barely keep their
heads above water. Called the Big Six, they included a new
extranet for Toyota dealers and the PeopleSoft ERP rollout,
as well as four new systems for order management, parts
forecasting, advanced warranty and financial document management.
Feeling besieged, the IS group made the mistake of not explaining
to the business all the things it was doing and how much
it all cost. It was a classic case of mismanaged expectations
and fractured alignment.
By late 2002, Cooper realized that if she wanted to win
back the respect of the business-and remain in her post-she
would have to make some radical changes. A conversation
with Toyota Motor Sales' CEO, in which he questioned the
sharp incline of IS's spending curve, stopped her in her
tracks. In her 30 years in IT, Cooper had developed something
of a reputation for coming in to clean up other CIO's messes.
Now, she had to take a long look in the mirror and fix herself.
And in the summer of 2003, that's exactly what she set out
to do.
This is the story of how Cooper completely upended the structure
of Toyota's IS department in six months in a bid to weave
IT functions more closely into the daily business operations.
The process was painful: She changed IS employees' jobs,
exposed all of IS's shortcomings and forced her staff into
the business offices. But just over a year into the new
plan, IS and the business are now standing shoulder-to-shoulder
when planning and implementing IT projects. And Cooper is
still CIO of Toyota Motor Sales.
The Bad Old Days
When Cooper joined Toyota Motor Sales in late 1996, her
reception was lukewarm. She was an outsider in a company
that prizes employee loyalty. Employees with "only"
five years of experience, including CFO Tracey Doi, call
themselves "newbies."
Cooper was surprised to find that IS was so isolated and
primitive. "I would describe it as almost 1970s-like,"
she says. Business units were buying their own IT systems
because in-house IT couldn't deliver. There were no PCs
or network management. And basic IT disciplines-such as
business relationship management and financial management-were
largely absent. "No one understood the cost of delivering
IT," she says.
The little face time that IS did have with the business
managers was more in an "order taker" role rather
than a "let's build the solution together" partnership.
Relationship managers Cooper inserted in each business unit
were powerless to effect any real change.
Worse, business execs cut deals with their go-to guys in
IS for project approval and funding, with no thought to
architecture standards, systems integration or business
benefits. "Every creative person around here went running
with their list of their ideas to their key IS contact who
they knew the best," recalls Doi.
Before Cooper could rectify the situation, she found herself
and her staff buried under the Big Six technology projects.
And Cooper's senior managers seemed to have free rein to
do those big projects with an open checkbook. When asked
how his new job was, Ken Goltara, whom Cooper hired in 1997
as corporate manager of business systems, recalls saying
at the time, "It's great. People never ask me how much
things cost; they only ask me when I'm going to get it delivered.
That's the only thing people care about."
On the business side, Toyota Customer Services' Daly says
that most projects started out with vague statements about
what the new system would do. And then, they were disappointed
when the project didn't quite meet their (often unarticulated)
expectations. Jim Farley, who was working as the Midwest
general manager of Lexus in 1999, recalls the anxiety around
the Dealer Daily initiative, an extranet designed to allow
Toyota and Lexus dealers to interact with headquarters,
factories and other parts of the company, as well as fully
integrate with the dealer management systems. The Lexus
dealers were anxious because the earlier rollout for the
Toyota extranet had not gone well. IS did not sufficiently
train the dealers on how to use the new system, so naturally
they had problems with it.
"We were all so nervous," Farley recalls. "As
much as people [in the dealerships] hated the old system
[an AS/400 satellite-based system], they were pretty scared
about" the new initiative. As it turned out, Farley
says, IS heeded the lessons it learned on the Toyota rollout,
and the rollout for Lexus extranet in 2002 went much more
smoothly.
The Big Squeeze
Starting in 2001, Japanese executives were feeling squeezed
because of a tanking domestic Japanese market and lukewarm
results from its global units. Toyota Motor Sales USA, though,
had increasing sales and market share. Japan needed to rely
more on its American division's profits, and from across
the Pacific, the parent company started to look more closely
at U.S. spending habits.
All domestic departments soon felt pressure from senior
management. IS, in particular, was a black box for the executives.
"They hadn't a clue on technology," Goltara says.
"They just knew it's this big thing."
Both Japanese and U.S. management wanted to know more about
IS's runaway costs, which had doubled after Cooper's arrival
and, at its peak, tripled. And Toyota Motor Sales President
and CEO Yuki Funo wanted Cooper to tell him where the ceiling
of IS's spend was.
Executives were saying, "Is everything in IT this size
and this much of a challenge? My God, that's a lot of money,"
Cooper remembers.
Meanwhile, she could no longer ignore the distant rumblings
from across the courtyard that had worked their way down
into the rank-and-file business staff. To them, IS had become
an unresponsive, bureaucratic machine.
So Cooper started soliciting informal feedback from a wide
range of businesspeople. What she discovered was an accumulation
of "very painful projects for both IT and the business,"
she says. "Clearly there was not enough communication
and education on our part."
In late 2002, Cooper hired an outside consultancy to interview
TMS's top 20 executives. She wanted their honest opinions
of how IS was doing. The results didn't provide all the
answers to IS's ailments, but she certainly saw the hot
spots. "Parts of [the survey results] were stinging,"
Cooper says. "But you can't be a CIO and not face that."
That Vision Thing
Cooper speaks in a measured cadence with a Midwestern twang
that is actually a blend of accents picked up from her nomadic
youth as a military brat. You get a sense that every word
that comes out of her mouth has been precisely chosen. There's
a carefulness about her. She's also a voracious reader.
Her staffers say she is always dropping business magazine
articles on their desks and forwarding them e-mails on important
IT research.
So no one was surprised when Cooper spent many introspective
weeks in 2003 formulating her vision for a new IT department.
What she developed was a strategy for a decentralized and
transparent IS organization that focused all of its energy
on the major business segments.
In summer 2003, she called her senior IS staffers into her
conference room and presented her vision on her whiteboard.
Some of the managers were excited by the prospect of change;
others were less so. "I didn't like it," recalls
Goltara. Cooper says she was not surprised by Goltara's
visceral reaction. "But it was clear that [his job]
was not a sustainable role," Cooper says. Goltara's
job as head of all applications and software "was an
inch deep and a mile wide," Cooper says, meaning he
had too many business-side constituents to serve and too
little time to do that.
The first thing Cooper did was set up the Toyota Value Action
Program, a team of eight staffers responsible for translating
her vision into actionable items for the department and
her direct reports. Using the executive's survey results
and Cooper's direction, the team winnowed the list down
to 18 initiatives-including increasing employee training
and development, gaining cost savings, making process improvements,
ridding IS inefficiencies and implementing a metrics program
(see "Metric Heaven," this page). Each initiative
got a project owner and a team. Cooper insisted that each
initiative have a mechanism to check its success.
The most significant initiative called for improved alignment
with the business side. At the heart of this new effort
would be a revamped Office of the CIO structure-with new
roles, reporting lines and responsibilities.
As part of the rehaul, Cooper took top-flight personnel
out of the Data building and embedded them as divisional
information officers, or DIOs, in all of the business units.
These DIOs are accountable for IT strategy, development
and services, and they sit on the management committees
headed by top business executives. The DIOs' goal is to
forge relationships with tier-one execs (Daly, for example)
and tier-two execs (VP-level).
The DIOs weren't alone, though. Business operation managers
and relationship managers from IS sat alongside the business
folks. "I still believe in managing IT centrally, but
it was incumbent on us to physically distribute IT into
the businesses," says Cooper. "They could provide
more local attention while keeping the enterprise vision
alive."
The difference between the previous relationship managers
and the new DIOs is that DIOs have complete accountability
and responsibility for the vertical area they serve. Goltara,
for instance, now heads up a smaller group of internal customers-which
includes Toyota, Lexus and Scion-as well as all of the vehicle
ordering systems, logistics and dealer portals. "I
now have more vertical responsibility, and my responsibilities
are deeper, from cradle to grave," Goltara says. "From
Toyota to Lexus to Scion, I'm it."
A Little Kicking and Screaming
Change can be scary for anyone, especially during an upheaval
of an entire 400-person IS department. Cooper changed the
jobs of 50 percent of her staffers within six months, yet
no one left or was let go. Some took on new responsibilities;
others took on expanded or completely new roles. Cooper
says some mid- and upper-level staffers were initially uncomfortable
with their new roles, but she says she spent a lot of time
fostering a new attitude about the change.
"I dragged them into the conversations kicking and
screaming," Cooper says. "But I said to them,
'Unless you think of what it means to change on this level,
you will never make it happen."
Similarly, IS senior management held a town-hall meeting
to announce the changes and deal with questions. Staff members
did express some concerns at that meeting and subsequent
monthly staff meetings.
"With any big change, the unknown is always a concern.
And it was harder around the areas [of IS] where people
had worked for a long time," says Zack Hicks, national
business administration manager in IS. "People wanted
to know more information about what was going to happen
to them. They wanted to know the specifics of their new
positions or the changes to their current positions."
The key, Cooper and Hicks say, is that all IS staffers were
brought into the development of the new organization early
on. Indeed, most IS staffers had played some part in the
Total Value Action Program. "We didn't go off into
a corner and pop out with a new org chart," Hicks says.
Cooper says the organizational structure today is "almost
unrecognizable" to the IS employees she inherited when
she first arrived in 1996. Yet there has been very little
turnover (Hicks says less than 3 percent a year). One key
element was rotating IS people into other parts of the company
and bringing businesspeople into IS. Hicks, for one, came
to IS from the business side.
For the first time, Cooper also tied part of the senior
IS managers' bonuses to their success in meeting the goals
of each of their annual plans. These managers are judged
on 10 areas and on how well they meet the objectives in
those areas-for example, meeting project-based goals (whether
the project was done on time, on budget) and operational
goals (implementing new governance and portfolio management
processes).
To further strengthen the IS-business bond, Cooper chartered
the executive steering committee, or ESC, to approve all
major IT projects. The committee consists of Cooper; Cooper's
boss, Senior Vice President and Planning and Administrative
Officer Dave Illingworth; Senior Vice President and Treasurer
Mikihiro Mori; and Senior Vice President and Coordinating
Officer Masanao Tomozoe. By exposing IT's inner workings
to the business side at Toyota Motor Sales, Cooper hoped
that this new transparency would lessen IS's role on IT
project vetting and monitoring, and increase business's
responsibility.
"Barbra shouldn't be asked to make value judgments
about whether or not a project is worth it to the company,"
Daly says. Project sponsors (with their DIO at their side)
have to come back at set intervals, and provide status updates
on how each project is doing.
The executive steering committee now controls all of the
project funds in one pool of cash, and it releases funds
for each project as each phase of the project's goals are
achieved. Everyone in the company can look at which dollars
were (and were not) going to be spent, the pool's administrators
can sweep unused funds out, and other projects can go after
those funds. And there are no more spending swings; projects
are regularly paced throughout the year.
Who Moved My Cheese?
Not everyone welcomed the revamped IS department with open
arms.
To begin, many business executives didn't want to participate
in the new approval process that required them to seek funding
through the executive steering committee. Instead, those
executives tapped lower-level business sponsors who worked
with IS on business case development and implementation.
But then, if a project ran into trouble, those high-level
"executives would scatter like cockroaches," says
Goltara. No senior-level business execs were willing to
take IS project responsibility. After about six months of
this, Cooper demanded that a higher-level business executive-a
corporate manager, VP-level or above-back each IS proposal.
Now, the ESC won't approve a project unless that support
is there. "There's equal skin in the game now,"
says Goltara.
Goltara says he no longer has to sell the ideas. "It's
the VP of distribution, or the VP of marketing," he
says. "I'm sitting there, but [the ESC members] are
not even looking at me. The committee members are grilling
the business executive to see if he can support the business
benefits."
But some business execs are still skeptical of the DIOs
and business operations managers living in their offices.
Doug Beebe, who took on the DIO role for the Business Support
Systems (ERP, HR, finance, purchasing, legal, IS, corporate
communications) and the Affiliates divisions (private distributors
around North America), was greeted with skepticism by some
business managers. Many of his customers felt ignored during
the Big Six run-up, and Beebe says he is still working on
mending those relationships.
Another challenge for Cooper was dealing with the uncertainty
in her IS department after such a massive change. Employees'
fears centered around changes in their responsibilities
and reporting relationships. Before the overhaul, for instance,
Bently Au had been responsible for privacy and security.
After the reorganization, disaster recovery was added to
his responsibilities. "I was a little bit overwhelmed,"
recalls Au. He says that middle managers were pretty stretched
out during and after the restructuring, but follow-up training
has helped him and other midlevel managers make the stretch.
A Gift to the Business
The three DIOs, meanwhile, have been learning on the job-essentially
creating their roles as they nestle in with the business.
So far so good, several business executives say. Daly says
that having Karen Nocket, who took on the DIO role in Toyota
Customer Services, in his management meetings has quelled
any IS backlash before it can begin. In late 2004, a critical
customer service function went down, but Nocket was there
to brief the management committee on what happened and how
it was getting fixed.
"Having Karen in the management meeting cut off all
of the speculation and finger-pointing that sometimes emerges
in that situation," Daly says.
Another executive who's a firm believer in IS's new operating
model is CFO Doi. "Putting more senior people in as
DIOs has been a huge benefit because there's a higher level
of respect for individuals that are partnering with you,"
she says.
Doi's DIO is Beebe, and after spending five minutes with
the pair, it's easy to see why theirs is a successful collaboration.
They sometimes finish each other's sentences, and there
seems to be a layer of trust between them. The duo recently
collaborated on a financial planning system that rolled
out in early 2005. The existing system was outdated and
could not handle the company's growth. Unlike previous years,
Doi's finance group worked on the business requirements
before selecting a system. "Before, we would have told
IS six months into our planning process, 'Hey, you know
what we're doing? We've got this great project. And we've
already picked a vendor,'" says Doi.
This time, after Doi's group solidified the business requirements
for the financial planning system, IS got involved. And
all of this happened before any presentation to the executive
steering committee. Even so, the project was bumpy, Doi
says. Her finance staff had a difficult time getting used
to the changes in the workflow necessitated by the new software
system. And configuring the system so that it worked properly
took a lot more time and effort than either IS or finance
bargained for.
But because Beebe and his team worked with Doi's team the
whole time, Doi says she is confident the bumps will be
smoothed out. And she knows exactly whom to go to.
IS has also won more fans in corporate headquarters because
of the new metrics. One industry metric all the business
execs understand is how much each Toyota vehicle costs to
manufacture. Now they know how much IS costs per vehicle,
and each division head also knows how much all of his IT
costs him. "I have a much better understanding now
as these projects are moving through the approval process
of how much it's going to cost in total," Daly says.
Toyota Motor Sales' board was particularly delighted with
one number: In 2004, IS was able to give back to TMS 16
percent of the costs of running IT projects, a give-back
that ran in the multimillions. And Cooper reports that the
Japanese parent company is interested in her revamped IS
model and wants to apply some of the techniques over there.
"Barbra's stock is high," says Daly.
IS staffers now spend a lot more time traversing the courtyard
between Toyota Motor Sales' business offices and the Data
building. It's a change that the business side welcomes.
"Projects are much more thought out now than they ever
were before," Daly says
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