By: Joanna Young (@JCYCIO)
I learned my lesson from a microphone. I needed one to support an internal meeting once, and some weeks later I was looking at Planned vs. Actual spend for the month and noticed a $5.00 charge. Because it was unusual to see tiny amounts like that, I asked what it was – and sure enough, another unit had charged us for using the microphone. My process improvement brain kicked in quite hard and I asked “do we know how much time it took to create the invoice for the microphone, enter it into the financial system, where it made its way to this spreadsheet?” The answer of course was “no.”
Now, you might ask what the heck I was doing worrying about five dollars. But my CFO radar was beeping, so I asked for a report on how many of these types of internal “micro-charges” were happening inside the company. Turns out there were thousands, and this meant a lot of money and time wasted in non-value added administrative activities. Eliminating chargeback amounts below a certain dollar threshold meant an immediate efficiency result.
Most organizations have a charging mechanism for technology. They range from the simple, like % of operating budget or number of FTE, to the complex, with multiple formulas depending on services and technology.
- Chargebacks should incent the right behavior. Be careful that the method of charging isn’t causing expense or risk elsewhere. Help desk tickets are a good example; if you charge people by ticket, they could associate calling for help with expense, rather than associating it with a positive experience. This drives problems and incidents underground and potentially creates risk.
- Chargeback mechanisms should be transparent and easy to explain. If it takes a PhD in econometrics to figure out how much a business unit will be charged for an application or service, it’s likely frustrating for the unit which can bleed into a negative perception of IT.
- Chargebacks mechanisms and processes should be in proportion to added value. Any business or IT unit’s primary goal is to deliver value at velocity to customers. Administrative processes like chargebacks should be as lean & mean as possible, and support the usage of technology services in support of value & velocity. Checking the processes steps and time spent in entering, tracking, reporting and managing chargeback can illuminate non-value added complexity that is taking time away from delivering value.
- Chargebacks are useless, but understanding total cost of technology is useful. The cost of technology is not the licensing fee. The total cost of operating, upgrading, replacing, training on, making secure (and so on) a system informs where valuable budget dollars are (and aren’t) going.
An analysis of your company’s chargeback mechanism can uncover opportunities to simplify and improve. Just speak into the microphone.