When Westpac broke the news to staff on January 31, 2000 that it intended to outsource its IT operations, the initial reaction was one of confusion and dismay. "We take pride in the work we do here, and we know for certain that we're doing a great job," many staff said in a variety of ways. "You obviously disagree, because otherwise why would you want to shake up what we believe is an entirely satisfactory status quo? What do you mean we're not doing things well?"
Things became even more tense as the weight of the news sunk in. With Westpac restrained from offering too many concrete reassurances by commercial in-confidence considerations, dismay in many staff quickly transformed into a sense of fear all too often expressed as anger. That angst and hostility led to nine months of intermittent turmoil, culminating in threats of industrial action and a conciliation conference at the Australian Industrial Relations Commission.
It was a lingering disease whose symptoms were a roller-coaster ride of ups and downs and for which the only cure was communication, communication and - oh yes - still more communication, with a lot of listening thrown in. "Sometimes you need to just listen when you're responding to the emotion because it's not a time when logic is going to prevail in the conversation," Westpac CIO Mary Ann Maxwell says. "So you respond to the emotion and you communicate. Continual communication is vitally important."
Yet on the face of it, things should have gone much more smoothly. Westpac did have a great team in place and it was determined to preserve the intellectual capital, skills and people who were providing the services in-house. Maxwell says the bank was clear throughout the process that the key to the success of the outsourcing was the people. "We said to IBM: Â'It is very important to us that you preserve, through this process, the intellectual capital and the skills and the people that we have doing the services that we're doing internally today'."
In that spirit, Maxwell says, Westpac put a heavy focus on achieving an appropriate package for its staff in moving to those new opportunities. Unfortunately, as in any organisation when it comes to the terms and conditions and benefits that people had available to them, some were more appealing to some people than to others.
"We had a very broad base - this opportunity covered around 1100 people. What was important to those 1100 people was not universal or consistent in terms and conditions and opportunities and work environment and those sorts of things. Obviously, you're not going to please everyone all of the time," Maxwell says. "But we were trying to come up with a reasonable package that covered most people's concerns."
Yet the IT team's best efforts to reassure staff during the long negotiation process came unstuck. It was difficult to say much, clearly and unequiv- ocally, to staff whose ears were rendered deaf by fear and in a climate where uncertainty necessarily existed until the deal was done.
"Some staff were very upset and part of that came out of a little bit of a feeling of anger, a feeling of betrayal, a little bit of fear," Maxwell says. "One of the first reactions from many staff was to say: Â'But we're doing a good job, and obviously you don't think we're doing a good job if you think someone else should do our work.' "Also Westpac to its credit has a number of employees who have been with this organisation for a long time, who are incredibly loyal to the organisation. For a lot of them, Westpac has been part of their lives since they were 18 years old. So I think there was the fear, sometimes expressed as anger, that they were going to be moved out from underneath the protective wing of the bank, which is the place where they were quite comfortable," she explains.
It's hardly surprising, then, that with Westpac planning to send its IT department to work for another enterprise as part of an outsourcing deal, employees were entering uncertain territory.
Experts say the key to orchestrating a successful transition for the IT staff from old company to new is being straightforward about what is going to happen and providing support for employees who are affected. Everything from preparation to the big goodbye should be done with the knowledge that whatever you do will inevitably cause stress within the department - and that those same folks will still be working for your organisation, only under a different flag.
While Westpac's outsourcing initiative was driven partially by cost, the main motivation was a desire to refocus the bank appropriately on those things that it believed would really bring shareholder and community value over the longer term. The decision to outsource arose from a review of Westpac's IT direction, designed to determine where it would focus its efforts over the next three, five and 10 years as it looked to evolve into an e-enabled organisation.
Nor was the bank determined to outsource at all costs. Maxwell says when Westpac went to its board in late January, it was on the basis that it wished to actively pursue the right outsourcing opportunity, not that it was determined to outsource come hell or high water. "It's a very important distinction," she says. "We were looking for the right opportunity. We were not just trying to see who the last man standing was because we were going to do this at any cost."
Westpac was equally clear that many of the more important IT functions would remain in-house. "In broad brush-strokes, these are the things that we said we wish to keep in-house: to drive the strategy and architecture and to develop and maintain those systems which run our organisation and also, ultimately - if done right - give us a competitive advantage," Maxwell says. "So IT strategy and architecture remain in-house; systems development has remained in-house, along with a few other things like security policy - very much driven by the appropriate focus worldwide on the privacy of people's information and data."
The rest would be outsourced as part of Westpac's strategy of becoming the leading e-enabled financial services institution in Australasia. The bank has a robust Internet banking environment, which is continually evolving and which customers are enthusiastically adopting. For instance, there were 500,000 customers for its Internet banking services by December 2000, representing a fivefold growth rate in less than 14 months. Likewise, its online broking service had hit 55,000 customers by the same date from a standing start of nothing at the beginning of 2000. Outsourcing would help it keep building on these early successes.
However, there was also another significant reason for the outsourcing: the bank was looking to achieve cost savings that would allow it to fund the organisation's evolution.
The outsourcing review began some time before Maxwell joined Westpac from US-based Countrywide Credit Industries, where she was executive vice president, corporate support services. Indeed, Maxwell bought many years of diverse experience to Westpac in the development and delivery of corporate business systems for the insurance, banking, health care, consumer product and public utility industries. She had previously held the positions of senior vice president and CIO, Foundation Health Systems; vice president, information systems for Zenith Insurance Company; and senior vice president IT, Maxicare Health Plans.
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