Posts Tagged Wal-Mart

Harold Meyerson: Wal-Mart’s strategy of deniability for workers’ safety – The Washington Post

Posted by Michael B. Calyn in Business on November 28, 2012


Harold Meyerson

Harold Meyerson

Opinion Writer

Wal-Mart’s strategy of deniability for workers’ safety

By Harold Meyerson, Published: November 27

Bangladesh is half a world away from Bentonville, the Arkansas city where Wal-Mart is headquartered. This week, Wal-Mart surely wishes it were farther away than that.

Over the weekend, a horrific fire swept through a Bangladesh clothing factory, killing more than 100 workers, many of whose bodies were burnt so badly that they could not be identified. In its gruesome particulars — locked doors, no emergency exits, workers leaping to their deaths — the blaze seems a ghastly centennial reenactment of the Triangle Shirtwaist fire of 1911, when 146 workers similarly jumped to their deaths or were incinerated after they found the exit doors were locked.

The signal difference between the two fires is location. The Triangle building was located directly off New York’s Washington Square. Thousands watched the appalling spectacle of young workers leaping to the sidewalks 10 stories down; reporters and photographers were quickly on the scene. It’s not likely, however, that the Bangladesh disaster was witnessed by anyone from either the United States or Europe — the two markets for which the clothes made inside that factory were destined. For that, at least, Wal-Mart should consider itself fortunate.

The Bangladesh factory supplied clothing to a range of retailers, and officials who have toured the site said they found clothing with a Faded Glory label — a Wal-Mart brand.Wal-Mart says that the factory, which had received at least one bad report for its fire-safety provisions, was no longer authorized to make its clothing but one of the suppliers in the company’s very long supply chain had subcontracted the work there “in direct violation of our policies.”

If this were an isolated incident of Wal-Mart denying responsibility for the conditions under which the people who make and move its products labor, then the Bangladeshi disaster wouldn’t reflect quite so badly on the company. But the very essence of the Wal-Mart system is to employ thousands upon thousands of workers through contractors and subcontractors and sub-subcontractors, who are compelled by Wal-Mart’s market powerand its demand for low prices to cut corners and skimp on safety. And because Wal-Mart isn’t the employer of record for these workers, the company can disavow responsibility for their conditions of work.

This system isn’t reserved just for workers in faraway lands: Tens of thousands of American workers labor under similar arrangements. Many are employed at little more than the minimum wage in the massive warehouses in the inland exurbs of Los Angeles, where Wal-Mart’s imports from Asia are trucked from the city’s harbor to be sorted and packaged and put on the trucks and trains that take them to Wal-Mart stores for a thousand miles around.

The warehouses are run by logistics companies with which Wal-Mart contracts, and most of the workers are employed by some of the 200-plus temporary employment companies that have sprung up in the area — even though many of the workers have worked in the same warehouses for close to a decade. Last year, the California Department of Industrial Relations, suspecting that many of these workers were being cheated, charged one logistics company that runs a warehouse for Wal-Mart with failing to provide its employees with pay stubs and other information on their pay rates. Wal-Mart itself was not cited. That’s the beauty of its chain of deniability.

A small band of these warehouse workers has been demonstrating for the past couple of months to bring attention to the bizarrely contingent nature of their employment and the abuses that flow from it. Their numbers were augmented Friday byactual Wal-Mart employees in stores around the nation, calling attention to the everyday low wages and absence of benefits that the vast majority of the company’s 1.4 million U.S. employees receive.

Other discount retailers — notably Costco and Trader Joe’s — pay their workers far more, train them more extensively, have much lower rates of turnover and much higher rates of sales per employee, according to a Harvard Business Review article by Zeynep Ton of the MIT Sloan School of Management. Costco is a very profitable business, but Wal-Mart maintains an even higher profit margin, which it achieves by underpaying its employees. The conservative economic blogger Megan McArdle estimates that if Wal-Mart held its profit margin down to Costco’s level, its average worker would make about $2,850 more each year — a considerable increase in a sector where workers’ earnings average less than $25,000 a year.

But Wal-Mart neither pays its own nor takes responsibility for those who make and move its wares. For America’s largest private-sector employer, the emergency exits are always open.

 Harold Meyerson: Wal-Mart’s strategy of deniability for workers’ safety – The Washington Post.

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Cagle Post – Political Cartoons & Commentary – » Black Friday

Posted by Michael B. Calyn in Opinion, Perspective on November 22, 2012


  

JOHN TOTH

Black Friday

 

Here it comes again – Black Friday. After giving thanks on Thanksgiving Day for all of the good things in our lives, many of us mix it up for those bargains just a few hours later.

And that’s how the holiday season begins.

It is a physical sport – like football without referees. The only rule is to get to that cherished product on sale before someone else, and hold on to dear life.

Pat Bagley / Salt Lake Tribune

Retailers know how to get us going. They put a few items on sale below their cost to lure us in, and then only provide a few per store. The trick is to get to it before anyone else does.

The bloodsport used to start early in the morning on the Friday after Thanksgiving Day, but now lots of retailers are opening on Thankgiving night. So, if you want to get that big screen TV for $199.99, you better scarf down that turkey and dressing, and get ready to rumble.

I’m all for maximizing sales, but people have gotten hurt or killed in the process of getting theese bargains.

NBC News from last year: “Violence erupted at Black Friday sales across the U.S. with one bargain-hunter left critically injured after being shot during a robbery and 15 other people injured when an angry shopper used pepper spray.”

In 2008, Wal-Mart marked its PS3 (Play Station 3 game system) way down. At its Long Island store, a crowd of 2,000 gathered in front. Things got out of hand five minutes before the scheduled early morning opening. They trampled a 34-year-old employee to death.

Last year, a man was found dead at Target in South Charleston, West Va. after suffering from heart problems. Instead of reporting the incident, shoppers stepped over his body to get to their desired merchandise.

You can Google the different incidents like I did. Google popped up 27.9 million results in .29 seconds. I tried to look at every page to research this column, but sort of ran out of time. Just kidding.

My friend and fellow writer James Barlow recently described Black Friday to his Australian friend: “Black Friday is the herding of the shoppers into department stores and anyplace else where you can buy Christmas gifts on the day after the U.S. Thanksgiving Day. Stores offer major discounts on their junk. People line up like cattle, then charge like spooked buffalo, over and through anything and anyone to plunder the gifts.”

I must admit that I have never woke up early, or stayed up late, to get a discount on something on a specific day. I’ll either buy it at a higher price later when it’s more convenient, if I want it that bad, or go without.

But, many people think it’s a lot of fun to score a big ticket item for half price after waiting in line for three hours in 38-degree weather. The chase is as much fun for them as landing the prize.

And, there are those of us who partake in a leisurely Friday morning after sleeping in and miss out on all the fun.

 Cagle Post – Political Cartoons & Commentary – » Black Friday.

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Daily Kos: Walmart: America’s real ‘Welfare Queen’

Posted by Michael B. Calyn in Economics on October 11, 2012


Walmart: America’s real ‘Welfare Queen’

by Paddy Ryan

Walmart sign on store.

Walmart, one of the richest corporations in the world, refuses to pay its employees a livable wage or provide any form of decent healthcare, increasing reliance on government assistance, and the need for a social safety net.

At over $446 billion per year, Walmart is the third highest revenue grossing corporation in the world. Walmart earns over $15 billion per year in pure profit and pays its executives handsomely. In 2011, Walmart CEO Mike Duke – already a millionaire a dozen times over – received an $18.1 million compensation package. The Walton family controlling over 48 percent of the corporation through stock ownership does even better. Together, members of the Walton family are worth in excess of $102 billion – which makes them one of the richest families in the world.

What is shameful is that CEO Mike Duke makes more money in one hour, than his employees earn in an entire year. Yet, Walmart – which employs millions of people in its stores, distribution centers, and warehouses – continues to abuse its employees and refuses to pay them a livable wage. The company has frequently been charged with wage theft claims by workers who point to the most common forms of wage theft: the refusal to pay proper overtime, the refusal to honor the minimum wage, and illegal paycheck deductions.

Meanwhile, Walmart routinely blocks any attempt by workers to organize, using anti-union propaganda and scare tactics, firing employees without just cause, failing to provide any form of decent healthcare coverage or a livable wage.

To make matters worse, these abusive Walmart policies have increased employee reliance on government assistance and the need for a government funded social safety net. In fact, Walmart has become the number one driver behind the growing use of food stamps in the United States with “as many as 80 percent of workers in Wal-Mart stores using food stamps.”

Wal-Mart’s poverty wages force employees to rely on $2.66 billion in government help every year, or about $420,000 per store. In state after state, Wal-Mart employees are the top recipients of Medicaid. As many as 80 percent of workers in Wal-Mart stores use food stamps.

Walmart’s employees receive $2.66 billion in government help every year, or about $420,000 per store. They are also the top recipients of Medicaid in numerous states. Why does this occur? Walmart fails to provide a livable wage and decent healthcare benefits, costing U.S. taxpayers an annual average of $1.02 billion in healthcare costs. This direct public subsidy is being given to offset the failures of an international corporate giant who shouldn’t be shifting part of its labor costs onto the American taxpayers.

Wal-Mart workers’ reliance on public assistance due to substandard wages and benefits has become a form of indirect public subsidy to the company. In effect, Wal-Mart is shifting part of its labor costs onto the public.

via Daily Kos: Walmart: America’s real ‘Welfare Queen’.

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Outlook Is Bleak Even for Recent College Graduates – NYTimes.com

Posted by Michael B. Calyn in Economy, Editorial, Education, Employment, Jobs, Social, Society on April 26, 2012


Many With New College Degree Find the Job Market Humbling

Jessica Hill/Associated Press

Graduates at the University of Michigan commencement ceremony in Ann Arbor in April.

 
By CATHERINE RAMPELL
Published: May 18, 2011

 

The individual stories are familiar. The chemistry major tending bar. The classics major answering phones. The Italian studies major sweeping aisles at Wal-Mart.

 

Now evidence is emerging that the damage wrought by the sour economy is more widespread than just a few careers led astray or postponed. Even for college graduates — the people who were most protected from the slings and arrows of recession — the outlook is rather bleak.

Employment rates for new college graduates have fallen sharply in the last two years, as have starting salaries for those who can find work. What’s more, only half of the jobs landed by these new graduates even require a college degree, reviving debates about whether higher education is “worth it” after all.

“I have friends with the same degree as me, from a worse school, but because of who they knew or when they happened to graduate, they’re in much better jobs,” said Kyle Bishop, 23, a 2009 graduate of the University of Pittsburgh who has spent the last two years waiting tables, delivering beer, working at a bookstore and entering data. “It’s more about luck than anything else.”

The median starting salary for students graduating from four-year colleges in 2009 and 2010 was $27,000, down from $30,000 for those who entered the work force in 2006 to 2008, according to a study released on Wednesday by the John J. Heldrich Center for Workforce Development at Rutgers University. That is a decline of 10 percent, even before taking inflation into account.

Of course, these are the lucky ones — the graduates who found a job. Among the members of the class of 2010, just 56 percent had held at least one job by this spring, when the survey was conducted. That compares with 90 percent of graduates from the classes of 2006 and 2007. (Some have gone for further education or opted out of the labor force, while many are still pounding the pavement.)

Even these figures understate the damage done to these workers’ careers. Many have taken jobs that do not make use of their skills; about only half of recent college graduates said that their first job required a college degree.

The choice of major is quite important. Certain majors had better luck finding a job that required a college degree, according to an analysis by Andrew M. Sum, an economist at Northeastern University, of 2009 Labor Department data for college graduates under 25.

Young graduates who majored in education and teaching or engineering were most likely to find a job requiring a college degree, while area studies majors — those who majored in Latin American studies, for example — and humanities majors were least likely to do so. Among all recent education graduates, 71.1 percent were in jobs that required a college degree; of all area studies majors, the share was 44.7 percent.

An analysis by The New York Times of Labor Department data about college graduates aged 25 to 34 found that the number of these workers employed in food service, restaurants and bars had risen 17 percent in 2009 from 2008, though the sample size was small. There were similar or bigger employment increases at gas stations and fuel dealers, food and alcohol stores, and taxi and limousine services.

This may be a waste of a college degree, but it also displaces the less-educated workers who would normally take these jobs.

“The less schooling you had, the more likely you were to get thrown out of the labor market altogether,” said Mr. Sum, noting that unemployment rates for high school graduates and dropouts are always much higher than those for college graduates. “There is complete displacement all the way down.”

Meanwhile, college graduates are having trouble paying off student loan debt, which is at a median of $20,000 for graduates of classes 2006 to 2010.

Mr. Bishop, the Pittsburgh graduate, said he is “terrified” of the effects his starter jobs might have on his ultimate career, which he hopes to be in publishing or writing. “It looks bad to have all these short-term jobs on your résumé, but you do have to pay the bills,” he said, adding that right now his student loan debt was over $70,000.

Many graduates will probably take on more student debt. More than 60 percent of those who graduated in the last five years say they will need more formal education to be successful.

“I knew there weren’t going to be many job prospects for me until I got my Ph.D.,” said Travis Patterson, 23, a 2010 graduate of California State University, Fullerton. He is working as an administrative assistant for a property management company and studying psychology in graduate school. While it may not have anything to do with his degree, “it helps pay my rent and tuition, and that’s what matters.”

Going back to school does offer the possibility of joining the labor force when the economy is better. Unemployment rates are also generally lower for people with advanced schooling.

Those who do not go back to school may be on a lower-paying trajectory for years. They start at a lower salary, and they may begin their careers with employers that pay less on average or have less room for growth.

“Their salary history follows them wherever they go,” said Carl Van Horn, a labor economist at Rutgers. “It’s like a parrot on your shoulder, traveling with you everywhere, constantly telling you ‘No, you can’t make that much money.’ ”

And while young people who have weathered a tough job market may shy from risks during their careers, the best way to nullify an unlucky graduation date is to change jobs when you can, says Till von Wachter, an economist at Columbia.

“If you don’t move within five years of graduating, for some reason you get stuck where you are. That’s just an empirical finding,” Mr. von Wachter said. “By your late 20s, you’re often married, and have a family and have a house. You stop the active pattern of moving jobs.”

 Outlook Is Bleak Even for Recent College Graduates – NYTimes.com.

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Wal-Mart’s shame grows worse – Wal-Mart – Salon.com

Posted by Michael B. Calyn in Ethics, Finance, Legal, Money on April 25, 2012


WEDNESDAY, APR 25, 2012

Wal-Mart’s shame grows worse

The executive at the heart of the company’s scandal made a fortune advising other businesses on corporate ethics

 

BY ANDREW LEONARD

 

Eduardo Castro-Wright

(Credit: Reuters/Sarah Conard)

 

Bloomberg is reporting that Eduardo Castro-Wright, the Wal-Mart executive fingered by the New York Times as the man at the heart of a huge international bribery scandal, has stepped down from his position as a member of the board of directors at MetLife.

One has to pity poor Bloomberg reporter Andrew Frye, squelched by the constraints of his employer’s by-the-book writing guidelines from expressing his natural aghast incredulity at Castro-Wright’s well-compensated sinecure as “a member of MetLife’s Governance and Corporate Responsibility Committee.”

MetLife’s governance committee “oversees the management and mitigation of risks related to failure to comply with required or appropriate corporate governance standards,” the insurer said last month in a proxy statement. Castro-Wright, who also served on the compensation and investment committees, was paid $259,124 for his work at the insurer last year, including $145,000 in cash and $112,502 in stock awards, the filing shows.

Fox-guarding-hen-house clichés don’t come close to expressing the hypocrisy that rewards misbehavior with such largesse. Right about here, someone should be shrieking: This is what’s wrong with corporate America! This is why we shouldn’t be allowing the CEO class to influence government policy. This is why the fact that Wall Street hates Obama should be considered a badge of honor!

Yes, yes, I know, we’re not supposed to convict the innocent until proven guilty, but I defy anyone to read the Times’ masterful piece of investigative reporting and not come away convinced that Castro-Wright built his successful career at Wal-Mart by bribing government officials in Mexico to speed the approval process for building new Wal-Mart stores. In fact, the very news that Castro-Wright was forced to resign from the MetLife board is an eye-opening admission. Normal American corporate governance practice allows disgraced CEOs to keep milking the board-of-directors gravy train for years after their dishonor is exposed.

It is amusingly enraging now to go back and look at the hype the business press poured on Castro-Wright as he ascended the ladder.

From Fortune, in 2006:

Eduardo Castro-Wright, the new CEO of Wal-Mart Stores USA, turned Wal-Mart’s publicly traded Mexican subsidiary, Wal-Mex, into the country’s best retailer and a jewel of Wal-Mart’s $56 billion international arm.

To make that happen, Castro-Wright’s team slashed prices and expenses, squeezed suppliers to get products into stores faster, and used smaller store formats (dubbed Bodega Aurrerá). He also showed a knack for public relations, defusing criticism by emphasizing jobs and low prices when merchants protested the construction of a Wal-Mex store near an archaeological site.

A “knack for public relations” — a.k.a.: alleged repeated violations of the Foreign Corrupt Practices Act. (A law, by the way, that Wal-Mart attempted to water down via heavy lobbying.)

From the New York Times, 2012:

In September 2005, a senior Wal-Mart lawyer received an alarming e-mail from a former executive at the company’s largest foreign subsidiary, Wal-Mart de Mexico. In the e-mail and follow-up conversations, the former executive described how Wal-Mart de Mexico had orchestrated a campaign of bribery to win market dominance. In its rush to build stores, he said, the company had paid bribes to obtain permits in virtually every corner of the country….

Wal-Mart dispatched investigators to Mexico City, and within days they unearthed evidence of widespread bribery… [But] neither American nor Mexican law enforcement officials were notified. None of Wal-Mart de Mexico’s leaders were disciplined. Indeed, its chief executive, Eduardo Castro-Wright, identified by the former executive as the driving force behind years of bribery, was promoted to vice chairman of Wal-Mart in 2008.

Not only was he promoted, but he received cushy directorships at companies like MetLife, where his responsibilities included overseeingcorporate governance.

On second thought, maybe it is isn’t necessary for Bloomberg’s Andrew Frye to have the opportunity to go all apoplectic on Castro-Wright. The facts pretty much speak for themselves. In the United States, the rewards for bribing your way to success include getting paid a quarter of a million a year to advise other corporations on how to behave responsibly.


Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

 Wal-Mart’s shame grows worse – Wal-Mart – Salon.com.

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Borowitz Report – Fox News Names Pepper Spray Person of the Year

Posted by Michael B. Calyn in Humor/Parody on December 14, 2011


POSTED DECEMBER 14, 2011

Fox News Names Pepper Spray Person of the Year

First Food Product to Snag Top Honors

 

NEW YORK (The Borowitz Report) – The Fox News Channel made history to today my naming “pepper spray” its Person of the Year for 2011.

Fox anchor Megyn Kelly noted the historic nature of the nod, indicating that pepper spray was “the first food product, essentially” to receive such prestigious recognition.

“From Tahrir Square to lower Manhattan to UC Davis to Walmart, brave little pepper spray was there,” Ms. Kelly said, adding, “I’m tearing up a little right now, which I guess is the effect that pepper spray has on people.”

“It truly is ‘the little crowd control weapon that could,’” she added.

News of the award stoked speculation that pepper spray might soon be given its own nightly show on Fox.

According to one network source, one format being considered would involve a canister of pepper spray interviewing members of the so-called “Occupy” movement, and then spraying them in the face.

Borowitz Report.

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Board of Director project investment oversight

Posted by Michael B. Calyn in Business on November 30, 2011


IT Value | November 14, 2011 | CFO.com | US

Why Your Board of Directors Can’t Sleep on IT

CFOs and CIOs often don’t know the costs and the drivers of IT expenditures or the progress and ROI of IT projects. And that’s when bad things can happen to good companies.

Larry Tieman

While many companies and their CIOs today are working hard to make IT part of their business’s strategy, the most successful companies are making IT integral to the business’s strategy at the board level.

When a company decides it needs to transform its business through IT — its processes, products, or go-to-market strategies — it often needs to look outside for that expertise. Some will turn to one of the major consulting firms to help develop the appropriate strategy; others will engage a CIO to lead the transformation, and the CIO may then hire a consulting firm with an implementation capability. The next step — and one that’s not taken often enough — is to add IT oversight expertise to the board of directors.

Board members usually have neither the technical savvy nor the time to oversee the complicated implementation of a transformative IT strategy. Yet major IT-enabled business projects are risky, and failure can have a significant impact on profitability. By relying solely on consultants, the CIO, or some combination of the two, the business is limiting the information and perspectives it can receive and setting itself up for trouble.

The Cost of Bad Advice
Usually, the consultants’ advice is excellent, but not always. At American Airlines (AA) in the late 1980s, one of the major strategy consulting companies was engaged to help reduce IT costs and increase the return on investment of IT projects. The consultants’ advice, boiled down, was to allocate the IT investment to each business unit and let that unit decide how to spend the money.

It would take the airline two years to recover from the disaster that ensued.

When the business departments were given their IT budgets, many submitted project bids to outside companies, but integrating these projects into AA’s existing systems required in-house expertise (and resources) for which the contractors seldom planned. And since there were no offsetting reductions in overall IT head count and infrastructure costs, the total IT spend for the company rose substantially while project success declined dramatically.

The vendors and contractors engaged by the units warned the unit heads that AA’s IT department would object to these projects because they undermined IT’s control. This argument effectively negated the IT leadership’s warnings. The airline needed someone sitting on the board to question the risks, the plan gaps, and the wisdom of these initiatives. But there wasn’t, and most of these projects were expensive failures.

Proof of Failure
There are many companies that have suffered for want of board-level oversight. The FoxMeyer Drug board probably did not understand the risks involved in the major SAP ERP implementationit undertook in 1996, at which time FoxMeyer was the second-largest drug distributor in the United States. FoxMeyer ignored the signs that the project was going astray, and bid out future contracts based on the cost reductions the company expected to receive and never did. It suffered huge losses, filed for bankruptcy, and was eventually sold.

Was Hershey’s board adequately briefed on the risks of a big-bang implementation of a new fulfillment system that caused $150 million in lost shipments for Halloween 1999? Doubtful. And shouldn’t the Kmart board have urged its leadership to invest in its supply chain, as Wal-Mart, Target, and Kohl’s were doing, or at least questioned executive management on the lack of investment? The consequences for Kmart were dire, and in 2002 it was forced to sell off 250 stores.

But these are examples of things going wrong. They’re dramatic, but board-level oversight of IT may be even more important to ensure that a company is using technology to drive innovation.

Many years ago, FedEx assigned several of its board members to act as an IT oversight committee. This group reviews major IT projects and strategies, and reports to the full board. The FedEx board has some outstanding technical minds to serve as the core, and other board members with financial and business expertise (some skeptical of the value of IT). In this way, the FedEx committee provides oversight of the strategic IT function without eating up the full board’s valuable time.

The Board’s IT Responsibilities
There are several realities (some unpleasant) that corporate boards should understand about their company’s use of IT.

• IT’s strategic role needs to be explicit to be effective. As discussed in “IT: Business Asset or Strategic Liability? Your Choice,” corporate boards should recognize that IT is alreadypart of the business strategy, whether once upon a time a deliberate decision was made or not. Boards should question the CEO about the company’s IT strategy, how that strategy is enabled, what opportunities have been identified, and how much progress has been achieved. Boards also should ask about IT trends in the industry and what key competitors are doing or could do. Boards especially should be asking what innovations would change the industry and undermine the business model (think iTunes, Amazon.com, and Priceline.com).

Boards should be on the lookout for potential impediments to success. Who controls the resources, the budget, and has decision rights on how those resources and budget are used? When decision rights are not aligned with corporate priorities, IT investments do not deliver business value.

• The link between corporate priorities and IT projects is often vague. The process of making IT investments is seldom transparent. Corporate boards should ensure that there’s an accountable governance process to determine which IT projects are staffed and funded. In particular, boards should ask the CIO how projects are aligned to corporate objectives, and ask the CFO what the expected benefits are and how those benefits will be harvested.

• The total cost of IT usually is unknown. Few CIOs and fewer CFOs know what’s being spent on IT, where it’s being spent, and if the projected value is being achieved. (Most CFOs doubt it, justifiably.) It’s rare that a company is getting the full benefit of investments that are almost always larger than thought.

Boards should know how much of the IT spend is dedicated to maintaining existing systems, and how much is spent on supporting new projects that have committed to cost reductions or increased revenue. In many companies, the cost of maintaining existing systems is 80% of the total IT budget. That leaves very little for investment in innovation and new business projects. Added to the fact that most projects are not aligned with corporate priorities, the sad truth is that there’s very little money being spent on projects that actually could do the company some good.

Boards should ask the CIO for a plan to increase the percentage of the budget going to new projects with revenue or cost-reduction commitments looking for at least a 10% improvement. At the same time, they should be very skeptical of those plans and numbers because most CIOs don’t know their true costs and cost drivers.

• There’s a lot of redundancy and waste in IT. Few CIOs keep an accurate inventory of applications, databases, and hardware. Fewer still can accurately map applications to computers, and applications to business owners and business processes. A large company will have hundreds of servers, mostly underutilized, and some not used at all. How many redundant systems does the company have? What computers are running those systems, and how many programmers are supporting them? How much is being spent on maintenance and license fees for the commercial software, the other technical software on the computers (e.g., operating systems), and the computers themselves?

Some of the system redundancy and cost is due to business units buying or building systems without knowing what other units already possess. Some of the redundancy and cost comes from poor IT practice, such as inadequate procurement oversight. And customer and employee data is probably replicated in hundreds of databases on different computers because that’s easier than centralizing it. Boards should insist that IT assets be as transparent as possible. The total IT spend and how that spend is distributed are a proxy for how efficiently the company uses IT assets and how well IT supports the business.

Not a Board of Geeks
Boards can assess a company’s IT efficiency and competitiveness without concerning itself with technology. At the board level, IT is a business function with a key strategic role. What is IT’s role in this company and industry? Is the role being met, and what needs to be done? These questions will usually lead the board into significant business-strategy discussions and help ensure that the company is properly positioned to take advantage of technical innovations and spending money and resources appropriately.

 Board of Director project investment oversight.

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