IS Business Alignment

FRAMINGHAM (01/27/2000) - Is the gulf between the IT and business people in your company as wide as the Atlantic? Is alignment a foreign term? Does your CEO view technology as a cost center, blind to its strategic possibilities? If any of this sounds familiar, you should read this story.

READ THIS STORY TO LEARN * Why IT, marketing and operations are tightly aligned at Capital One * How the company cultivates an alignment culture * What qualities Cap One looks for in new hires No part of the financial services sector offers more dramatic growth opportunities than the credit card business. The U.S. economy floats on a wave of plastic-in February 1999, consumer debt reached an all-time high of $569 billion. Credit card companies are in constant competition to get first to market with any new credit vehicle that will attract the most profitable customers. That neat trick is best achieved by perfectly aligning IT, operations and marketing, because when it comes to analyzing the demographics of a potential market while handling billions of daily transactions, nothing does the job better than effective IT.

No company knows that better than Capital One Financial Corp., in Falls Church, Va. The consumer lending giant's motto, "The right product, to the right customer, at the right time," translates into: Use IT to invent a product, employ IT to find the customers and market the product at the precise moment customers believe they need it most. When IT, marketing and operations play well together, the money comes in torrents. At Cap One, revenues have grown at annual rates of greater than 40 percent the last three years.

Marc Cecere, who preaches the gospel of alignment as a vice president at Cambridge, Mass.-based Giga Information Group, defines alignment as "a balancing act of the organizational forces of decision making, leadership, process and reporting relationships." At a properly aligned company, no one on the business side comes up with a bright idea and throws a spec sheet over the IT silo wall with a sticky note that reads, We need this ASAP. Instead, IT is part-and-parcel of the strategic thinking that creates any and all business initiatives. At Cap One, under the leadership of CIO James Donehey, an aligned IT-business culture has thrived. But the success raises a new question. Can tightly meshed alignment continue in companies like Cap One that are experiencing rocketing growth? It's one thing to have a perfectly aligned organization when 500 folks are the entire complement, but it's quite another challenge to elicit ideas from all parts of the company when the workforce reaches 14,000 on two continents.

Faced with the challenges of continuing alignment at Cap One in the United States and exporting the alignment philosophy to the company's United Kingdom office, Nigel Morris, president and COO says, "I've never really thought of how to perpetuate alignment. You create it correctly and forces will allow it to continue and thrive. Otherwise, alignment is destined to be ephemeral. It has to be robust, built into the fabric of the organization." For Morris, alignment, like leadership, isn't something you do, it's something you are.

"Members of aligned executive teams just seem able to finish each other's sentences," he says. Ken Cirillo, vice president of risk operations, thinks aligning an unaligned company would be difficult, at best. "If an organization already exists, people [have been] preselected to function in that organization. Alignment is holistic. You can't do a piece here and a piece there. You must do the whole thing." Cecere is a bit less pessimistic about imposing alignment on an existing organization and compares an unaligned organization to an emotionally troubled person: People can change, he points out. The question is, how badly do they want to?

ALIGNMENT TRAINING Donehey is an active participant in the company's Corporate Assimilation Program (CAP). Training at a company where most employees have been on board for less than a year is no occasional matter. Every couple of weeks as needed, 15 to 30 employees at a time go through the CAP for one week of orientation to the business's overall goals and functions, followed by a second week more focused on their own business functions. Donehey talks to all new hires at every level in the company and does not begrudge the hour or so it takes him every two weeks to talk to the CAP groups, even though two-thirds of all new Capital One employees are assigned to the telephone force and are not considered directly part of his IT shop.

During the CAP, employees learn the company's four precepts of alignment, called the Big Yellow Square. It's a training tool, a mnemonic that makes what seems complex simple. The four sides of the square are flexibility, economic judgment, alignment with the business and support for the company culture. Any idea or practice that distorts the square is an idea or practice that is scrutinized and modified by a project or management team. New employees learn to recognize the signs of a misaligned project. To Donehey, the alignment culture is like an immune system, self-regulating and self-adjusting. "People who don't fit in soon feel ostracized," he says. "Anyone who wants to be a prima donna gets moved to the edge of the herd out to the long grass." Since that's a place where wild beasts presumably have their way with them, trainees understand quickly that learning the four parts of the alignment mantra is in their best interest.

ADVENTURE SEEKERS NEED APPLY Capital One's alignment culture also encourages risk taking. In fact, mistakes made in pursuit of a business idea are celebrated. Donehey tells trainees the story of how the chairman of the company, Richard Fairbanks, brought a guy who had led a failed project to the stage for a round of applause for his courage and creativity. "It's OK to make a mistake here," Donehey says. "You just don't want people to make the same mistake twice. We know an employee can't be innovative without [having] an adventurous spirit." In an aligned company, management believes that when people feel free to take risks, their creativity is unleashed. Employees learn to see possibilities for IT, products and marketing to which less adventurous souls are simply blind.

Donehey, himself a motorcycle rider, believes personal risk takers often make the best middle and upper executives. He's hired employees who rock climb and deep dive in open ocean. But the key question Donehey asks of potential employees is what they do when they aren't working. His favorite answer: I spend time with my kids. "I want people with real lives," Donehey says.

"Workaholics are just pre-burnouts."

Cap One President Morris believes aligned people-the polymaths who can understand IT and business-are hard to find and points to CIO Donehey as the key hire that proved the search for special IT personnel can yield the right people. Morris sees the gulf between the typical IT and business personalities as a matter of human nature. He says, "I believe that if left to their own devices, IT and business people will polarize like ends of a magnet because they see the world through different lenses. Business people don't burst into my office shouting, 'Nigel, I have a new technology!'" To maintain Capital One's alignment culture, Morris wants new hires with passion, energy, verve, intellect and vision. He also likes people who are comfortable with change, growth and challenges, and who can relate a tale or two from their personal history about recovering from a severe personal setback and what that experience taught them. "I want confident self-starters but not rampant individualists. I want leaders who can grow other leaders."

HANDLE WITH CARE That kind of company culture sounds like a terrific place to work for a business-minded IT executive, but Giga's Cecere points out that in large enterprises like Cap One, alignment needs to be handled carefully. For example, while empowering IT workers to make and implement decisions provides flexibility and speed, an alignment program that empowers different IT groups to make their own decisions runs the risk of redundancy as IT tools, e-mail applications and other utilities proliferate uncontrollably.

Morris cautions executives at other companies that alignment itself may not always be necessary. "If the Holy Grail of IT and business integration isn't as powerful as it is in our business, the effort may not be worth it. If all we did was cram widgets down the line, for example, the use of IT would simply not be as important." Morris, a cofounder along with CEO Richard Fairbanks, advises companies looking to align as solidly as Capital One to start at the top. The consensus among executives at Capital One may be that it is impossible to replace a culture devoted to traditional IT and business relationships, but Morris, who constructed an aligned organization from the ground up, disagrees.

He appreciates that "if the CEO doesn't understand the power of information technology, the effort is hopeless." If there is hope in the form of a CEO who does get it, Morris suggests a second step. "After the CEO, galvanize the organization to support the integration and as quickly as possible get rid of people who resist this culture."

Generating that executive team spirit is accomplished through training and financial incentives linked to performance metrics. The top-level executives at Capital One, however, universally believe that good hires respond as strongly to the challenges and pleasures of working with creative and enthusiastic colleagues as they do to T-shirts and barbecues. Morris believes HR's role in perpetuating and growing an aligned company is pivotal because, since alignment isn't a learned condition, HR must find the people who are temperamentally suited. He also suggests the co-location of business functions, putting marketing, sales, operations and IT constituencies side by side, even-heaven forbid-mixing them up cube by cube. The serendipitous opportunities are thereby maximized and no IT person works in a ghetto. In an aligned company, no one is a geek.

In the end, Morris advises executives to remember, "Alignment is a journey and a process; it's not a destination."

Perry Glasser is a former senior writer at CIO.

CAPITAL ONE FINANCIAL CORP. Headquarters Falls Church, Va. Business Credit cards and consumer loans Employees 14,000 Net loans (June 30, 1999) $7.2 billion Net loans (June 30, 1998) $5 billion Annual loan growth rate 45 percent ARE YOU ALIGNED?

You know you're in a nonaligned company when... * Meetings and people are political * People are not focused on what they can do together * People hoard information * People go off by themselves to develop ideas and projects * There's lots of conversation about how "we need to = communicate better" * There's lots of finger-pointing You know you're in an aligned company when... * Your success is a team success * Peer review is of a 360-degree nature * The corporate culture values entrepreneurship-spin-offs and risks are encouraged * Failure is part of a learning process * People are applauded for sharing what they learned from a failed hypothesis * There are no rules or hierarchy about idea generation -P.

Glasser

NEW KID ON THE BLOCK

In her fourth day on the job, a new vice president at Capital One talks about the recruiting experience.

To maintain alignment between the business and IT functions in the face of staggering growth rates, Falls Church, Va.-based Capital One Financial Corp. recently added a new layer of management, a senior business information officer (BIO). The company found Laura Olle and directed her to look across the organization for IT best practices-and ensure those practices were shared among the various business units and ongoing projects in the rapidly growing company.

For eight years, Olle had been at Freddie Mac, the congressionally chartered, independently financed company that makes mortgage funds available to commercial lenders, such as banks. She left there as a senior vice president in business area development in charge of systems development. "I was going to take the summer off and not even look for a new job until September [1999]," Olle says. She was hanging up on most headhunters, but when one suitor mentioned Capital One, Olle was interested. She asked herself, "Can this be as good as it seems?"

Capital One's HR department gave her standardized tests on logic, vocabulary and thought processes. She also analyzed a series of case studies for managers from the business side, even though she was applying for what seemed to be an IT job. "We'd take a real problem and just talk it through," says Olle. Over a period of weeks, Olle met with somewhere between 15 and 18 people, only six of whom were in IS.

Olle points to her interaction with Nigel Morris, Capital One's president and COO, as the highlight of the process that brought her on board. "We were driving from Washington, D.C., to Richmond, Va., and back. That's three hours in each direction. We talked about his and my business philosophies. He wanted to know the kind of people I'd hire, how I'd manage a team, how I'd manage individuals. I don't know another company where the president spends so much time getting the right people."

First challenges? To learn the acronyms for all the different projects in the works. "I don't think I have to learn the alignment culture-it's a core value to me," says Olle. "There are companies with nice people and smart people," says the newly minted BIO, "but never have I seen a company with so many nice, smart people." -P. Glasser

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