Consultancy challenge:
TechCo is changing its approach to delivering projects from waterfall management to Agile methodology and is experiencing higher staff turnover. Consultancy expertise: Change management; project management; organizational culture; operations management; workflow design.
Summary:
18 months ago TechCo recruited a new Chief Information Officer (CIO) who was appointed on the basis that she would change the project management operating model from a traditional “waterfall” approach to integrate the Agile framework (with a commitment to using the external provider SAFe for training and staff development needs). For a useful overview of the Agile approach to project management, watch this short video. The implementation stage is now complete, however, the recent change has caused engagement to decrease and a lot of negative feedback from employees. To get the best results from Agile, employees need to be supported in arriving at an authentic commitment to all aspects of the methodology, this is not currently the case.
Organizational context:
Today TechCo is an established SME that specializes in developing mobile apps for utility providers. The Midlands-based company was originally set up as a partnership by three friends (former co-workers at SAP SE) in 1986 in response to the UK governmental agenda for privatizing utilities which commenced first with British Gas followed by Regional Water Authorities and later Regional Electricity Providers. Initially, the company’s mission was to service a gap in the market formed as a direct consequence of the privatization agenda: traditionally, under state administration, the information management of utilities was fulfilled by civil servants employed within the public sector with access to governmental records, whereas after private companies assumed control of these services they found they lacked the technical capabilities and infrastructure to effectively meet the challenge of systematically migrating the limited citizen information they had acquired to create effective customer databases. The company partners, now serving as the Board of Directors, drew upon their shared expertise in product development, which they had gained nearly twenty years of combined experience with SAP SE, to bring new technology solutions and information systems to the utility sector. Since 1986 the company has enjoyed stable growth and cultivated a strong reputation, historically relying on a small number of large clients. In the company’s first decade of operation, a product portfolio was established that concentrated on Business Information Systems (BIS), first providing Customer Relationship Management (CRM) software and later developing Enterprise Resource Planning (ERP) packages; it was during this time the company’s reputation was established for providing user-friendly, innovative software solutions, that were deemed to be cutting-edge, and this fostered a firm client-base amongst major UK utility providers with a strong sense of customer loyalty. In 2009, shortly after Apple’s AppStore launch, TechCo acquired a small research and development lab (AK TechSolutions) which was known within the industry for its legacy of developing applications for the first-generation of Personal Digital Assistants (PDAs). TechCo subsequently established itself as pioneering in delivering customer-facing digital solutions to end-users of utility services, they quickly expanded their product portfolio beyond BIS packages to include developing integrated online account management and customer- support services. Their largest project to date was creating a new online login portal and app for Bulb Energy that synchronizes users’ smart devices with a domestic smart meter reader and thermostat with home automation capabilities. Today TechCo employs 116 employees across the following divisions: product development 58%; marketing and sales 12%; administration 10%; customer support 3%; senior management 2%; support services 5%; human resources 2%; IT support 2%; financial accounting 3%; research and development 3%. The annual staff turnover rate in TechCo was traditionally quite low (6%) with most leavers moving onto higher-paid positions elsewhere and citing their reasons at exit interviews (in order of most frequent) as 1. To pursue entrepreneurial opportunities; 2. To upskill within the sector; 3. To leave the sector entirely. However, in the past 12 months (since the implementation of Agile) the annual staff turnover rate has increased to just under 10% with “lack of clarity in workflow” and “workload intensification” being cited as the most common reasons for leaving, more condemning is half those employees did not have secure employment or enterprise plans to move onto. The divisions most affected by higher staff turnover are product development and support services. Most employees are long-standing (average period of service is 8 years), it is senior employees who are most outspoken against the Agile changes being implemented and state the new system “threatens their professional integrity and sense of identity” while further arguing that the “incremental” nature of the Agile project management methodology “strips staff of the satisfaction of nurturing a project”. Junior staff and more recent recruits are generally ambivalent since they have a sense that Agile is becoming an industry standard, therefore they are open to the idea of change they are experiencing some of the negative atmosphere associated with the change. Presently TechCo is not struggling to attract new clients, sales are healthy, and the company maintains its market share amongst competitors. However, the change to Agile was motivated because over the past decade as consumer access to digital technology has become more widespread, TechCo found their competitors were delivering more projects and faster. It was felt the company risked losing staff and clients to rival firms perceived to be more dynamic and offer greater variety.
From the outset, the project management approach of TechCo can be characterized as following a “waterfall” approach; this simply means development activities are sequenced so one activity ends and feeds into the next (see diagram opposite). Initially, during the firm’s early years operating as a partnership, this involved an ad hoc and informal approach to project management; projects were rarely complex or multifaceted, the partners worked closely together and had involvement at every level of product development. After securing the first long-term contract to provide BIS solutions to major telecommunications utilities-provider British Telecom, the partnership incorporated as a public limited company and, in keeping with the then public sector norms, formally promoted within the company the PRINCE (1989) and later PRINCE2 (1996) project management methods. To this end, the company invested in training one director and a senior team-leader of the support services division, themselves going on to become accredited PRINCE2 trainers and provided in-house training to TechCo employees, with an emphasis that all junior product development officers must complete the PRINCE2 project management training as part of their probation. This remained the situation, and PRINCE2 became embedded in the DNA of TechCo and its product development processes with no expectation that this would change, that is, until approximately two years ago. Project Management at TechCo: The transition to Agile TechCo continues to enjoy stable sales, however, during the 2016-17 business cycle, it became evident to the Board of Directors that competitors were quicker to market with new products and/or updates and features to existing products. This was most apparent because 2016 saw an unprecedented number of household product releases featuring voice integration technology but TechCo was slow to respond, only recently integrating these aspects into their existing solutions, and are yet to develop an end-user mobile application natively designed to utilize voice integration technology. In January 2017 TechCo commissioned a rival consultancy firm to undertake a thorough review of workflow design, processes, and operations. The consultancy firm made three recommendations: 1. To reduce the ratio of product developers to support services by “redeploying” 5% of product developers and increase the overall size of the support services division by 10% while recognizing that this may inevitably incur voluntary redundancies and careful union negotiations.
2. To introduce lean principles throughout the operations of administration, marketing and sales, and human resources while simultaneously merging the IT support and customer support divisions and investing in expanding the research and development division with savings.
3. To replace PRINCE2 with the Agile project management methodology by training all product developers over an 18-month period, with a recommendation to contract SAFe to service training needs.
The TechCo Board of Directors opted to pursue the latter recommendation only, on the basis that this would address what they perceived to be the company’s core challenge, the rate at which they can develop new products, and any attempt to deliver all three recommendations at the same time would have devastating implications for staff morale.
Environmental context: The Utilities Sector Few industries are as crucial to everyday life and the economy as energy and utilities, delivering power and water to homes and businesses, and with this significance comes hefty compliance responsibilities and public relations considerations on the part of providers. Despite the unique importance of these services and a growing population the overall market size in terms of revenue is in general decline and subject to intensifying competition. Ofgem (Office of gas and electricity markets) has reported (Ofgem, 2018) that the cost of gas and electricity to UK domestic users are about £1,117 per year (overall circa £30 billion Bper annum); meanwhile, non-domestic users (including commercial and non-commercial organizations) spend a further £20 billion each year.
