Evan Schuman's StorefrontBacktalk

Although this number might be a good benchmark for “traditional” IT organizations, many franchisors’ IT groups also have some accountability for franchisee systems. Even if the majority of retail IT is outsourced between the franchisees and different service providers, the chain is often held accountable for managing the service providers, managing the deployment of technology, or dealing with escalations when a franchisee does not feel the service provider is meeting its expectations.

This approach may not seem like a lot of work, but those of us who do this for a living can tell you that it adds up fast. As a simple example, I have had as many as three people 100 percent allocated to dealing with franchisee escalations alone.

Knowing this fact, it is important to consider these additional resources and costs when you are determining the budget necessary to operate a franchise-based IT team. If you don’t, either your corporate systems or your franchisee support systems may not get the adequate amount of funding and attention. It is also important for the chain’s executive leadership to understand these needs and not simply allocate their IT spend similar to other non-franchise-based systems.

Challenge #3: The budget process in many companies is broken.
There are exceptions, but almost every company that I have worked for has used a broken budgeting process. Most IT people are familiar with a drill similar to this one:

• Step 1: Solicit your business partners on which IT projects they would like to do next year.
• Step 2: When few, if any business partners respond, create your own list based on your understanding of their needs and priorities.
• Step 3: Take a wild swing at what these projects will cost and which resources will be allocated with no information beyond that of the project title.
• Step 4: Create an arbitrary line in the sand of what projects can be done for the expected budget and resource constraints.
• Step 5: Review the list with your executive committee or IT steering committee. Emphasize the fact that the limited resources and budget will mean that not all IT needs can be addressed. Know that no matter how big it is–or what color it is–your business partners will likely be unable to see the line you draw between what will get done and what will have to wait.
• Step 6: Don’t worry too much when your budget is cut but expectations remain the same. You know that they were only wild guesses to start with and that the business will change its mind a dozen times about what it does or doesn’t want to do before the end of next year.
• Step 7: Try to figure out how to execute a different set of projects (from those that were budgeted) within the confines of resources and budgets set when life was different.

Clearly, this process is broken. I’m not sure what can really be done to address this problem. The obvious answer is to apply more discipline and accountability to both the budgeting and the prioritization processes. That being said, I don’t believe many companies have the DNA to support that level of discipline. For those that do not, are they doomed to deal with this type of process? I will open it up to readers for their advice. How have you improved this process? What can companies do to reduce this “churn”?

What do you think? Love it or hate it, I’d love to gain some additional perspectives. Leave a comment, or E-mail me: Todd.Michaud@FranchiseIT.org.