April 2, 2007 By Chad Vander Veen
The answer is as uncertain as it is complicated. And when technology pits CIOs against public employee unions, the battle can be bloody. So the question becomes: In today's world of technology, automation and outsourcing, how do CIOs forge relationships with the very unions created to prevent them from doing what they've been asked to do?
It's been under way for decades outside of government -- the downsizing, the relocating, the outsourcing. And many of these employee nightmare scenarios spring from the influx of technology that marches forever onward, streamlining enterprises and doing jobs that once required human beings.
Just as consumerism has driven business to become available 24/7, the public also demands their government be similarly available. Combining this increased demand with diminished budgets means CIOs often have no choice but to pursue a technology strategy that cuts costs while increasing efficiency. But the dark side of such technology endeavors can be that employees, once certain about their job with government, could become obsolete. And so, employee unions intervene to protect their members from the technological onslaught.
In recent years, government IT deployments -- from outsourcing to automation -- have made headlines. Some have been spectacular successes while others resulted in failure. In many of these situations, a CIO tried to strike a balance between the good of the government and the good of the employee -- all while facing an administration hungry for results and a union determined to keep its members employed.
"It's not the employees' fault. They are where they are; we put them there," said Virginia CIO Lem Stewart, who knows outsourcing's challenges. "What I try to do, if there is a significant effort under way -- like the one we're involved with that had an impact on some 900 employees -- I get them involved very early in the discussions and use them in an advisory capacity to help construct what would be transitional issues related to employees in the world of outsourcing."
Stewart oversaw one of the largest IT outsourcing projects in state government history. Under his watch, Virginia outsourced its entire IT infrastructure and two-thirds of its IT workers to Northrop Grumman. The resulting Virginia Information Technologies Agency has been heralded as a model of government IT outsourcing.
But Stewart didn't have to face any union challenges. He said he understands the difficulties presented by unionized IT shops, however, and offered his take on what it took to make his effort a success.
In this particular case, he explained, employees formed an advisory group that served as a liaison with the team that was negotiating the new partnership contract. "So we took into account what their concerns are, what the risks are," Stewart said, "and ultimately constructed what employees felt was -- while it was a transitional thing and a significant change for them -- fair and reasonable. It came out exceptionally well for us. We weren't expecting to get 67 percent of our staff to join the new partnership the first week. I attribute a lot of that to the fact we responded early on and incorporated those concerns and issues."
The Pennsylvania Project
Do these words of wisdom hold up when the CIO must manage a union that is potentially hostile to such a project? Former Pennsylvania CIO Charlie Gerhards echoed Stewart's advice. An outsourcing effort in Pennsylvania began in 1997, when then-Gov. Tom Ridge suggested the state's 17 data centers -- operating among 14 different agencies -- be consolidated into a single, privately run operation. But the state had to contend with the American Federation of State, County and Municipal Employees (AFSCME) -- the nation's largest public employee union.
The Pennsylvania outsourcing effort would be a test played out on the national stage. During a project that would displace nearly 200 public IT employees, was it possible to reach an agreement with the country's biggest union?
"I had several dozen people directly affected by the announcement we were going to outsource," recalled Gerhards, who was a data center director at the time. "I can tell you there is a lot of angst by employees, and it's a very sensitive time. They had been used to a lot of security, and now there was a possibility they would no longer be employed by the state."
Like Stewart, Gerhards said it was vital that state leadership acknowledge the upheaval the project was going to cause. An ounce of prevention, so it goes, is worth a pound of cure. In Pennsylvania, the prevention was an open line of communication with affected employees.
"Part of getting through to displaced employees is to show sensitivity, that you understand this is a life-changing event. I used to spend a lot of time listening to people who were very upset, some very emotional about it," Gerhards said, adding that this was a major event for employees -- even more so in government than in the private sector where it happens routinely. "People, when they sign on to government, they have the expectation they're going to be there for an entire career if they choose to. This is something that threatens that, and people react in many different ways."
The union element posed a significant challenge in negotiations, but, in a lot of ways, it acted as a catalyst for the project. This was because the Pennsylvania data centers operated with two systems, IBM and Unisys. If the state had tried to work an insourcing project, the union would likely have demanded employee placement based on seniority. Such a strategy would become problematic if, for example, the most senior employees were trained on IBM machines and were suddenly told to operate a Unisys system.
"If we were going to use state employees to do it, we couldn't choose who would be the operators of that data center. The operators would have been chosen from seniority," said Gerhards. "We could have gotten into a situation where we have employees who have no operating knowledge of what they're about to do, but because of the collective bargaining agreement, you're forced into having those people in those positions. So that's the awkwardness you get into. Certainly if you don't have a union, you have none of those concerns. And certainly that has to be figured into your decision-making."
For Gerhards, like Stewart, focusing on employees was the key to success. Although the state did not insource, the Pennsylvania outsourcing project required that existing state employees be given the choice of retraining to work with the outsourcing company, in this case KPMG. In the end, all but one of the 180 state employees opted for retraining. Though certainly far from ideal for employees, the compromise between the public and private sectors illustrated how critical it is for both CIOs and unions to be flexible -- a characteristic that is increasingly important in a world of rapidly changing technology.
How do unions and technology coexist? Again, like effective CIOs, the solution is to maintain a focus on employees. And while CIOs must also consider the state's needs, unions must be prepared to shed their stodginess as technology-driven changes like outsourcing become more common.
Gary Storrs, a labor economist with AFSCME, said when dealing with CIOs, the best union strategy is to keep the focus on what is beneficial for employees while striving for harmony with the employers.
"Of course, we try to maintain good relations with our employers where possible, and also advocate strong labor-management partnerships," Storrs said. "Our core position is that truly involving workers -- as assets to be developed rather than as costs to be cut -- is going to produce better results than automating, or reorganizing away their jobs."
For Storrs, the Pennsylvania example is still the outlier. He said he suspects most of these efforts have been or will be unsuccessful.
"Efforts to automate state functions, or for that matter, to automate business functions in private industry, have a very high failure rate and very frequently experience cost overruns and performance problems," he said. "While I can't particularly prove this, I strongly suspect that part of the bad reputation of governments at dealing with technology is because their failures are with public money and thus more high-profile. I would also argue that, far from being an internal government problem, many of the failures we have seen involving governmental technology change have actually been failures of privatizing companies."
Storrs may be at least partially correct. It seems that for every successful technology deployment, there are many more failures. Connecticut will long be remembered as an example of everything that can go wrong with an outsourcing project. Barely a year into the $1.35 billion project to outsource all of the state's IT functions, everything went haywire. The failure was blamed on a range of issues, from the project's size to political and bureaucratic resistance. But many involved will likely agree that Connecticut was an example of an outsourcing project that treated employees like assets instead of people -- a strategy that riled unions to the point where effective communication was impossible.
"I don't know that we would support things that we perceived as largely intended to shift work away from our members, but I can imagine us supporting changes that would help many members do their jobs better, even if there were some downsides," Storrs said. "We would support systems that enabled our members to apply their own skills and judgments or freed them up to use their skills more efficiently. But we would be unlikely to support systems that literally replaced workers' judgment with computer algorithms, or one-size-fits-all approaches."
Part of the problem CIOs face with outsourcing, despite union and employee objections, is whether the efforts are actually worthwhile. They all pencil out, of course, otherwise one would hope they wouldn't be attempted in the first place. But what about in practice? In Employment, Privatization and Managerial Choice: Does Contracting Out Reduce Public Sector Employment -- found in the Journal of Policy Analysis and Management -- authors Sergio Fernandez, Craig Smith and Jeffrey Wenger examined what effect outsourcing has on government employment.
The authors examined data from two International City/County Management Association (ICMA) surveys -- one from 1997 and one from 2002. More than 1,200 governments responded in each survey. In the end, the paper found that privatization of government work correlates to a drop in full-time government employment.
"... for-profit service provision has a negative impact on the size of the full-time public work force and a positive effect on part-time employment," the authors concluded. They also found that, in general, "... contracting with private for-profit firms precipitates a shift in the composition of the work force from full-time civil service employees to more part-time workers. By off-loading a program with a large and unwieldy payroll and replacing it with a contractual arrangement and less expensive part-time employees, public managers may reduce labor costs."
In terms of policy, it would seem that outsourcing to private companies often makes sound fiscal sense. However, the authors acknowledged that, "... there is little reason for believing that public employees and their unions will become any less apprehensive about the impact of contracting out on public employment."
So where does that leave CIOs? Where does that leave unions and their employees? Larry Olson, who recently stepped down as the chief technology officer of Texas, has years of IT experience both in and out of public employment. For Olson, the trick is finding ways to set politics aside and reach a common ground with the union and with employees. It's a mistake, he said, for CIOs and unions to be rivals.
"In a lot of cases I really don't think they have to be competing interests," Olson said. "I guess as an organization, a union might see it as competitive because they might actually lose members. For the employees, it doesn't have to be competing."
Whether it's employee transfers, retraining, or in the worst cases, eliminating positions, these situations require effective leadership. For a CIO, this often means sidestepping bureaucracy and keeping an open, honest dialog with employees and union leaders.
"If, at the beginning, you make sure there's good, strong dialog, and you're transparent about it, you can work together. My experience is the more you increase the collaboration with all the people affected, and if there's a union, be very open and up front, at least they understand you're trying to do something, and they're not going to look at building roadblocks all the time," Olson said. "I think part of the secret to doing these things right is that you don't see it as competing but you see it as a common interest."
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