Overcoming Technology Debt at Non-Profits: A Case Study

Overcoming technology debtBy Jeff Richards
Managing Partner

Life at a Nonprofit

For the past 2-1/2 years I’ve been the interim CIO at the YMCA of Silicon Valley – my fourth non-profit client since 2009. My experience is limited but I’ve seen a trend emerge.

Senior executives at non-profits are usually wonderful people who are very passionate about what they do. They’re very good at focusing on their mission and the services they offer to meet this mission. They have a clear understanding of who their constituents are. More often than not they have spent their entire career at their current organization or one that’s similar.

But for the most part they don’t see themselves as business people. In fact, many of these non-profit executives seem to feel that “business” is a dirty word. I’ve heard them refer to themselves as “social workers,” and say they don’t think that they’re “running a business.”

Case Study Background: A Massive Technology Debt

When I first started working with the Y, I quickly discovered that, like many non-profits, they had been underinvesting in their IT systems for years.

Some of this very paper-intensive organization’s existing IT systems redefined the term “legacy.” The payroll system literally had 1980s-era RPG green screen terminals. The financial system had a 2002 compile date. The CRM system was run by a six-person company that refused to go to the cloud.

In addition, program enrollment was a manual system that required YMCA members to show up in person with a ream of paperwork. HR was almost completely paper-based. Marketing was completely manual and based on direct mail and printed brochures. And so forth.

File Cabinets and BoxesA great example of how bad things were was the incredibly complex pricing scheme that had developed over time for what was the best deal in after-school care in Santa Clara County. When the CFO (who, like me, was from outside the non-profit world) did some analysis on margins it became clear that many locations’ margins had eroded badly and some were running at a loss – a big surprise to everyone. To address this we started to implement Oracle Financials, and used this system to restructure an aged and ineffective GL Account Structure. The objective was to automate the pricing system and have costs land properly so that the day care program would be making informed decisions going forward.

Problem: Getting Buy-In to Bring Systems Up-to-Date

The new day care pricing system was a good start, but what the organization really needed was completely new IT systems from “soup to nuts.” In other words, a multi-million dollar investment.

One of the things I’ve learned is that being a CIO at a non-profit is very different than being a CIO in a commercial organization. As I said earlier the operational executives are usually mission-focused and not business-focused. I realized that the place to take the IT system value proposition was the Board of Directors.

Nonprofit boards are generally populated by successful individuals who are either benefactors or can wrangle donors. These people generally understand the ROI business case of an ERP implementation. Most have personal experience with it and may even have connections in the industry that can be brought to bear.

Because of this, I knew that getting the VPs to approve the necessary investment in IT would be a bear. So instead of fighting this battle, the CFO and I took our cause directly to the CEO and then the Board of Directors – a group of people who understand how to run a business and make money.

Once the Board approved the funding we went back to the VPs and sold them on the benefits that the new systems would bring. Although many were initially resistant to the changes, once they came to the design sessions and started to understand what the systems could do for them, they began to get on board.

Solution: New IT Systems and Business Processes

The YMCA of Silicon Valley’s IT systems are being completely overhauled, one system at a time. This includes:

  • Payroll and HR – We started with payroll because the legacy system was so bad it was causing compliance issues. We brought up ADP’s Vantage Enterprise for a full-blown HR information system, from payroll to benefits, performance reviews and learning management.
  • Financials – Oracle Financials, with the Hyperion Functionality, was implemented to replace the legacy system that had not been supported for over a decade. As part of this implementation we re-did the previously upside-down chart of accounts to make it follow the normal flow of a balance sheet.
  • CRM – Oracle CRM, with some custom portal development on top of it, will be coming up in July. Designed around customer engagement and making interacting with the YMCA easy, this system will vastly improve the non-profit’s ability to provide high-level service to its members. For example, program enrollment will now be self-serve and online…no need to show up in person with paperwork in hand.
  • Marketing – Oracle Eloqa was implemented to provide a platform for improving the Y’s marketing program. With this system they will be able to plan and execute fully automated marketing campaigns, including segmenting customers, sending emails based on peoples’ interests, lead management, and much more.

Results: Lower Costs & Better Service

Addressing the technology debt at the Silicon Valley YMCA has brought numerous benefits, including:

  • Lower infrastructure costs – All of the new systems are cloud-based, eliminating all infrastructure other than desk tops and connectivity.
  • Better customer experience – From the targeted marketing capabilities to the online program enrollment and app-based gym class schedules, everything is designed with the member in mind.
  • Lower customer service costs – The new self-service program enrollment system alone will be about 30% less expensive to administer, and the new lead management system will automate the follow-up process.
  • Higher member engagement – We’re estimating that the churn rate will drop by 10 points as a result of the improved customer experience.
  • Faster month-end close – Closing the books at month-end went from a 20 day project to a 5 day project. This not only greatly reduces the associated labor costs, it also provides better, more timely reports.

Although getting the YMCA of Silicon Valley’s IT systems to this point has not been easy, the benefits of making the investment to overcome the organization’s technology debt have been well worth it.

 

About Jeff Richards

As an inspirational leader with the ability to develop the “big picture” strategy then drive it down to executable tactics for implementation, Jeff leads our Professional Services team. Clients benefit from Jeff’s 25+ years of experience developing and implementing transformative business strategies.

Jeff’s experience spans both industry (including Materials, Operations and IT Management) and consulting. He developed a unique global perspective during his tenure in significant P&L management-level positions in both Asia and Europe.

About CIO Professional Services

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