By Tammy J. McInturff

Restructuring can be a daunting task. At LOMA’s Systems Forum, E.P. Rogers, senior vice president & CIO, The MONY Group discussed how MONY restructured and went to a business unit/shared services model.

Rogers discussed the transformation that The MONY Group has been going through. "I think some of the things we are doing are a little unique," Rogers said. "The transformation started a few years ago when MONY reorganized into separate lines of business (LOBs), with the goal of aligning LOB goals with MONY Group profitability targets and overall business plan objectives. Before, we had everything as one big number and it was tough to filter down LOB goals from the top. So MONY broke into separate companies and established shared services organizations that support those companies. One of the driving forces for change in the shared services organizations was that, after the first year, the LOBs could begin using outside vendors instead of internal shared services if they determined the value proposition was clearly better."

Rogers explained that this was not just routine centralization/decentralization talk. It was clear the impact was going to be real. "If the LOBs decided to hire another IT company to do their IT business," he said, "that would have a direct impact on our internal staffing. We had 12 months to get our house in order, change our culture, change the way we did business, make sure our value proposition was strong, our unit costs/pricing was competitive and introduce necessary processes that make us the number one provider choice," Rogers said. "So there was a lot of work to be done."

Rogers explained that the IT team has two distinct missions, a business mission and an operational mission. Their business mission is to create and sustain value-added partnerships with the LOBs and shared services organizations for the delivery of products and services in an environment of continuous business and technology change and heightened competitive pressure. Their operational mission is to use highly skilled IT professionals with a blend of business and technology skills utilizing best practices to deliver competitive value-added products and services. And to shift from the old cost center mindset to a value center mindset.

Whether you are centralized or decentralized, if you have a guaranteed market, the value proposition is not as important. "It helps you get more money than you would have otherwise gotten, but it isn’t a matter of survival," Rogers said. "When you are looking at possibly losing your guaranteed business, then your value proposition becomes much more important. It’s sink or swim. And there is a clear imperative to change."

In order to swim fast and become the provider of choice to the MONY Group, and build new business, the MONY IT team put together a 24-month plan. The plan was based on where they wanted to be in 24 months and what they had to do to protect their existing business and generate new business with the MONY Group and/or outside the MONY Group. "Our ultimate vision is to be able to sell our services on the outside," Rogers said. "If we can be good enough to keep our current customers satisfied, then there is probably a market for us to be able to generate some outside business as well. Last year we generated about $400,000 worth of outside revenue, primarily in the Web arena. And we think we have the opportunity to expand there. The more revenue we can generate on the outside, the more competitive our rates can be or the more likely we can invest in infrastructure, rather than having to absorb infrastructure costs into our rates or get our existing clients to agree to fund them."

MONY’s IT Group laid out 13 core components of its business transformation. "There were things we needed to address in order to really be ready for this new world," said Rogers. "First, we needed a business model to make sure that we knew how we were going to operate and what markets we were going to serve. Second, we had to consider the different kinds of customers we would have in this new world," Rogers said. "For instance, in addition to the Life and Annuities companies, we have other shared services customers like us who are billing the LOBs for their services. MONY IT has about 6.5 million dollars in expenses that come from other shared services organizations that we have to recover in our rates in order to be a viable intity."

The third component is products and services. "We have to be conscious of our rates in comparison with the rates on the outside," explained Rogers. "If our rates aren’t competitive, then we should outsource that activity. It doesn’t make sense for us to continue to provide an unprofitable service. If there are other things where our rate is extremely competitive, we may move our rate up a little and use some of that profit to build, acquire and develop our infrastructure."

The fourth core component is relationship management. "In the old world we used to interact with our customers primarily on a functional basis. The person who ran the data center had relationships with everyone at MONY. The person who ran the application development maintenance area or people developing new projects, had a relationship with his or her unique customers, etc. So, we were all communicating with our customers in different ways. In the new world, we needed somebody to manage our relationships with customers. Someone who becomes a point person the customer knows he or she can pick up the phone and call if there’s a problem. The customer relationship manager will correct the problem or answer the question for the customer or find someone who will. Twenty-five percent of the customer relationship manager’s incentive compensation next year will be based on a client survey gauging how well the customer was served," Rogers said. "We debated establishing full time relationship managers because there are some people who do this really well and others who do not. Also, we are not really big enough to have full-time dedicated relationships for each of the 23 LOBs and shared services as well as subsidiaries. Instead, we divvied up the senior management team of IT. We have some people who manage six or seven smaller relationships. Before we assigned the individuals to their respective LOBs or shared services, we also put together what we considered best practices on how to communicate, the frequency of communication and what information to give them on what basis. We tried to learn from all the experiences we have had over the years."

The fifth component is external pricing. According to Rogers, the first thing MONY IT had to do was find out what the competition was charging for their products and services. "Then," said Rogers "we to put together a pricing structure that we thought would be competitive." The company also had to look at internal costs, which is the sixth component, and how to model and manage those costs. This was a big issue for the IT team because it has a fair amount of expenses that are fixed, such as leases and contracts to which they are committed. Wherever possible they had to create options so that the fixed income would become more variable. "So," Rogers explained, "when our clients say, ‘I can’t afford to pay x amount of money, I need to pay y amount.’ Then we can work together to get to y. This way there are some options of how to lower the cost."

MONY IT also had to consider the skill sets needed for this new world. They had to consider what skills are needed for supporting products, services and the overall business model—things like relationship management, marketing and financial management. "Once we identified the required skill sets, we developed individual training plans for all of our staff," Rogers said. "Most people have a ten day objective some have 15 to 20 days, but we remind them to spend half of their training time and dollars learning the business, not just the newest technologies."

MONY IT’s eighth component is the technology infrastructure. Rogers first asked his leadership team, "What is the technology infrastructure needed to support the range of products and services we offer? How are the bounds of the infrastructure set? How will investments be funded? We really felt like we needed to be proactive and get out front and say this is our infrastructure; this is how we do business," he said. "These are the products that we are committed to—ACORD standards, XML, etc. We want our customers to know that if they are going to buy something that doesn’t fit with the infrastructure, it’s not going to work. So we had to be assertive in that area. Thankfully, our assertiveness resulted in sound business decisions."

The ninth component is marketing and communications. "Here the IT team had to consider how to convince customers that we were adding value for them," said Rogers. They also had to consider how to market the products. "Priority settings is the tenth component," explained Rogers. "A big issue with priorities is that we used to determine what needed to be done on our own. We would meet monthly, develop priorities, put them up on the wall, and measure ourselves against them. But many times the customer would have very different priorities. They would be working on something completely different. So at the end of the month, we would say, ‘well, we didn’t do these ten things because the customer couldn’t support it.’ The client was working on one schedule of priorities, and we were working on another. In the old world that was problematic, but in the new world it could be deadly. Now, we work on what the client determines is important or we lose the business. Their priorities are our priorities."

Measuring service quality is also important. If the customer is worried about ROE, is the customer willing to sacrifice service in order to get their pricing down? "For example," Rogers explained, "if the customer wants 92 percent of the calls answered at level one in the help desk, it is going to cost them x amount of dollars. If they are willing to go to 75 percent of the calls answered at level one, we may be able to save them $500,000. The problem is, if the customer chooses to save $500,000, the first time calls are not answered at level one, everyone is going to want to know why. The bigger problem is not with the management that made the decision; it is the people who are calling the help desk. Those are the people who get upset because their calls aren’t being answered as quickly as they’d like. Then I have to cycle back to management and say, ‘I think you need to communicate what we did here.’"

Reporting is the twelfth component. MONY IT had to evaluate how Service Level Agreements and expenses would be reported—now and in the future. And finally the last component is culture. In thinking about the culture, the MONY IT team had to consider the relationship they have with their customers. Is IT a service provider or a strategic partner? They had to ensure that they are not just an expense, but instead somebody that is going to help the customer reinvent their business and achieve their business goals.

With the new reorganization, The MONY Group has a Life company, Annuities company, Closed Block, Investment company, Distribution company and subsidiaries that share various services such as Human Resources, IT, Purchasing, Corporate services, Finance, Insurance Services, etc.

So why did MONY do this? "We needed to be market competitive," explained Rogers. "To meet the rapidly changing needs of our customers, we had to be more nimble and focus on our unique products and services. Within the IT, the big issue is if we don’t serve our internal customers well we are going to lose their business." So what are the advantages of this and what are some of the challenges? "Clearly there is a greater alignment with the business units," Rogers said. "The first thing we did was dedicate about 20 IT employees to the business areas. We actually moved them into the LOB offices so that they could better understand the business and align IT interests with business objectives. And the advantage to the LOBs is that they have on their side a systems officer—somebody who manages all the technology within that line of business. Our primary face off is that person, and then underneath that, they have some requirements/business analysts who support that LOB exclusively."

"Then we have another organization chart with a box that has 23 people in it; not the data center people, telecom people or infrastructure people, but the people who are maintaining Life systems or building new Life systems. Those people are in a box dedicated to the Life company. So, their world has changed dramatically. From an effectiveness point of view, their business knowledge has increased markedly and they are thus more focused on meeting the Life company’s needs," Rogers said. "Some of the IT staff were reluctant to embrace these changes. Some didn’t want to move, others would have rather been moved somewhere else. But after all the initial stress, it’s working really well and most employees are enthusiastic about the benefits. And the LOBs have more control than before. In the old world, the functional organizations really used to call most of the shots. For example, policyholder services is now a shared service and they determine which system changes need to be made to support the policyholder services organization. In other words, in the new world, the line of businesses are now involved in reviewing all system changes and determining what the return on investment is. They are now asking themselves, ‘How am I going to generate revenue from this change? Am I going to reduce expenses from the change? Is this going to give me some competitive advantage?’ If not, they’re not doing it. So it is much more focused."

Of course, with a new organization come new challenges. According to Rogers, some of the challenges are in the resource management area. "All IT employees used to sit together," he explained. "They worked on anything IT wanted them to work on. In this new world, if somebody is dedicated to the Life but their project load has been delayed and we want to temporarily reassign them to Annuities for a month, we have to get the approval of the systems officer of the Life company. This means we have to reduce the Life bill by that much. So resource management is much more complex."

Major organizational initiatives have been another problem. "You want to do things that are good for everyone," said Rogers. "Some things may be marginally good for the Life company; others may be marginally good for the Annuities company. But in the grand scheme of things they have to be done. So, I have to go out and do marketing. Based on a value calculation we ask each LOB to pay an appropriate percentage of the costs. It isn’t easy but it works."

"Overall," said Rogers, "I think MONY’s new way of operating, has had a dramatically positive effect on us. Of course it has been stressful at times, but, as a company, we are operating more efficiently and delivering more positive results to the entire organization."

Of course change is constant in any business environment, but making large operational changes can be extremely difficult. So how do you make this kind of change? According to Rogers, you need to have a business model that everyone will understand and follow. "And," he added, "expect there will be a lot of questions—like who is going to approve this and who is going to approve that? What form do I have to fill out? Does Mary have to see this first? It is all part of just laying it out on the table and making sure that everyone is ‘on the same page.’"

"You also will want to improve operational efficiency through repeatable processes," Rogers said. "For instance, we had a set of processes that we built over the years and they worked really well. But now it is a whole new game and we need all different processes. Take the technology we use for services requests, for example. We’ve had to create a whole new system that better integrates our LOB partners. The service request database is a Lotus Notes application. If somebody in a LOB has a request, they can go into the Lotus Notes database. The request then automatically gets routed to the appropriate people and then, together, we make a decision about priorities. We try to make it as consistent and easy to use as possible." Training staff is also an essential part of a new organization. A company must first identify new skills required and train staff accordingly. "Within MONY IT," Rogers said, "our new culture really stresses the importance of not just technical training, but learning the business functions as well. If we’re going to be true strategic partners, we can’t be viewed as just techies anymore. To change that view, we need to become more business savvy."

"We have to develop an organization focused on delivering value every minute of every day. There is a lot of leadership involved in this and a lot of change. The only way change happens is by leadership being upfront and reminding people about value. Of course, to do this, we had to restructure the IT organization. We moved good people out of IT into the LOBs and spread good people across other parts of IT," Rogers said. "We were already in a high performance team environment, but we really only had one layer of management. Now, our management structure is pretty spread out."

"We had to improve unit cost over a two-year period. We took about 30 percent out of our expense structure," Rogers explained. "When you do that kind of thing, if you don’t manage it effectively you run the risk that people are not going to be willing to make the change. Thankfully, because we’ve communicated the need effectively, we have seen just the opposite. I think most IT people have bought in very strongly in constantly improving our value proposition."

One of the bigger efforts MONY IT recently completed was to create a product catalogue. According to Rogers, the catalogue includes the amount they are going to charge for particular products and services, which expenses will be bundled and what they need to do to adjust the rate. "For example," he explained, "we may need to make more money in a particular area because we are losing money in a different area. In this case if we think this particular rate is going to be problematic, from a customer point of view, then we need to do something. We’ve also got to recover the expenses of those people who are nonbillable—people like administrative assistants and switchboard operators."

In order to make the change to shared services a success, MONY IT had to communicate to its staff and to the customer. "The programmer, for instance," said Rogers, "now knows that when he or she writes down that he spent eight hours working for the Life company, that a bill for those eight hours is going to the Life company. This way if the Life company questions the bill, the programmer can defend it. So, it isn’t just time tracking the way we used to do it, where each full time employee had to add up at least 36 or 40 hours a week. In the old world it was abstract, because nobody really ever checked it," Rogers said. "Today, it matters. Somebody is going to ask what he or she is being billed for, and rightfully so."

MONY developed a value proposition for each product and service—taking into consideration that the service level may need to be adjusted based on what the customer is willing to pay. The company also had to communicate and secure buying in to technical architecture and associated standards. "This is work in progress," Rogers said. "We have developed the standards and had initial discussions with systems officers, but we need to deploy this further, so more of the organization understands the imperative of sticking within this defined standards."

MONY IT also redesigned its rewards and incentives. "I think one of the keys to having a highly motivated staff who wants to give you 110 percent every day," said Rogers, "is to appropriately recognize and reward those people who demonstrate the right behaviors and attitudes. You want to hold these people up as examples. When you talk about the culture, you have to provide examples of what people have done that is consistent with the culture you are trying to create."

Rogers explained that their product and services model is broken down into four sections. The first part is just commodity service—the help desk, computing data center environment, systems integration, corporate security, and project management. The challenge, according to Rogers, is that there are thousands of companies out there that offer these same services.

The second section is the utility area, which is application maintenance, telecommunications, desktop support, network services, and Lotus Notes support. "There may not be thousands of companies offering these services," Rogers said, "but there are hundreds that do. There are a lot of options that people have, including our customers. So I tell my staff that for us to stay in business we have to be a first class services provider. We have to be ‘the best’ in order to earn the right to try be a business partner, to be involved in MONY Group project management, strategic planning, or research and development. If we’re doing a poor job in the commodity or utility arena, IT doesn’t get to be a partner in the more strategic activities. "

MONY IT has created a chart that they call the ‘wheel of success.’ "It is a chart, that contains the things we have heard from our customers," explained Rogers. "Things we need to do in order to be successful. For instance, we know we have to leverage the new technologies, be proactive and add a sense of urgency and speed to projects. It used to be OK for something to take a 9-12 months, now people want it in a matter of weeks. The demand for speed is incredible. Flexibility and adaptability are a major spoke in the wheel of success because we constantly face shifting priorities."

The ability to learn and grow is extraordinarily important in this world. "Getting good at one thing and sticking with it for ten years used to be the norm," said Rogers, "but today you just can’t operate that way. You need to have a competitive mindset. Every time you do a proposal, you’ve got to consider that the prospective customers may be getting proposals from two, three or more other companies. So our price and our value must be competitive." Any bid over a quarter of a million dollars comes before MONY’s IT leadership team. According to Rogers, the team asks tough questions like…"Do you really need four people for this job? Can it be done with less? Do we have the right resources assigned to this assignment? An outside vendor may be doing the job with two people instead of four and therefore charging less money."

Of course good employees are essential to any successful company. "You can’t get to where you are going without good employees," said Rogers. "People are our primary asset. And so, when we hire people we don’t just look for the person who had the highest GPA. We look for people who are not only smart, but also flexible and adaptable," he said. "They must have a can-do attitude. You’ve got to love what you are doing. I think we have a group of people who create an environment where people are passionate…they care about what they do. They have a lot of energy. They want to make it happen. They are also willing to take risks."

Along with this new world the IT department also has a set of new skills. "We have a list of these new skills hanging up in every work area in IT," said Rogers. The list includes thinking differently and becoming a quick change artist, altering your expectations and accepting ambiguity and uncertainty, committing fully to your job, managing your energy level, behaving like you are in business for yourself, practicing self leadership and seeking and maintaining balance in your life.

"Maintaining balance in your life is difficult," admitted Rogers. "In today’s world the expectations are so high that you need to know when to take a break. Don’t over commit yourself. If you commit to fourteen things then you just can’t do justice to each of them. You’ve got to be your own manager and make sure that you don’t get too involved in too many different things both personally and professionally."

"Critical success factors are being a premiere utility and commodity provider," Rogers said. "We can’t expect to be a partner if we are not doing a good job there. We have to keep our existing customers happy. If we start losing big customers we could lose a customer that is 25 percent of our revenue base. We also want to expand our strategic partnership role, not just be a service provider. And, ultimately we want to sell more services on the outside. To do that we need 100 percent buy-in of the new culture. "

"The bottom line is we need to run MONY IT as a profitable business, a business that depends on delighted customers for its existence. That means we need to both support the profitability goals of The MONY Group and meet or exceed the expectations of our customers."

"When you challenge people to great things, they respond." Rogers said. "So our mission is to build business partnerships focused on results through the rapid delivery of high quality solutions at competitive prices. Until we implemented this shared services world, we used to focus on partnership and results. Now we’ve had to add to that rapid delivery, high quality solutions, and competitive prices. So it has increased the complexity a lot. But I’m pleased to say that our new world is a better place."