A Reduction in IT Workforce Size Doesn't Always Equate to Improvement: Monthly Performance Evaluation Data
In the pursuit of cost-cutting and improved margins, IT headcount often faces scrutiny from organizational leaders. This strategy, while seemingly efficient, merits caution in the current climate. Redundant personnel reductions in IT can lead to unforeseen consequences, affecting technology, systems, and the organization at large.
According to data from over 4,000 participating organizations, the median number of full-time equivalent employees (FTEs) responsible for IT processes per $1 billion revenue is 74.3. Organizations at the 25th percentile manage with roughly 43 FTEs per billion, while those at the 75th percentile have over 127.3.
Paring down workforces in functions like accounts payable or payroll can yield positive results due to increased efficiency. However, this approach does not apply universally to IT. The responsibilities within the IT function have expanded rapidly over the years, encompassing:
- Managing the business of IT
- Developing and managing IT customer relationships
- Establishing and overseeing security, privacy, and data protection protocols
- Managing enterprise information
- Creating, implementing, and maintaining information technology solutions
As priorities like cybersecurity, data management, AI programming, IT development ops, and enterprise-wide digital transformation programs gain importance, so too does the IT function's scope.
Championing technologies like automation or AI to streamline high-volume, repetitive processes may help decrease the number of FTEs required for such tasks. Nevertheless, these technologies necessitate development, implementation, and ongoing maintenance, reducing their potential impact in IT.
A prime example is APQC's IT environment, which relies on numerous automated systems sending out alerts and notifications when detecting anomalies. Despite these alerts being automated, a team of skilled IT professionals is essential to monitor, manage, validate, and decipher them. Without an adequate workforce, critical vulnerabilities may arise, posing unacceptable risks to proprietary data.
Prior to making any changes to the IT function, it's crucial to consider factors such as:
- Business strategy
- IT strategy
- IT function structure
- The potential risks and implications (in terms of risk management and human capital management) of any changes
Reducing IT headcount can compromise an organization's ability to manage data and system security effectively. Overwhelming remaining employees with excess workloads can also challenge morale and productivity.
Collaborating with human resources (HR) can help ensure informed, data-driven decisions regarding the IT workforce. HR leaders often possess valuable insight into talent needs across the enterprise, enabling reallocation of resources when necessary rather than unnecessary layoffs.
APQC emphasizes the importance of partnerships between HR and IT leaders, strengthening the foundation for effective workforce planning. By considering business strategy, IT strategy, and workforce implications before making any changes, organizations can avoid short-term "quick fixes" that might result in long-term complications.
Perry D. Wiggins, CPA, serves as the secretary and treasurer for APQC, a nonprofit benchmarking and best practices research organization based in Houston, Texas.
- The median number of full-time equivalent employees (FTEs) responsible for IT processes per $1 billion revenue is 74.3, with the 25th percentile managing with roughly 43 FTEs per billion and the 75th percentile having over 127.3.
- The responsibilities within the IT function have expanded rapidly over the years, encompassing managing the business of IT, developing and managing IT customer relationships, establishing and overseeing security, privacy, and data protection protocols, managing enterprise information, and creating, implementing, and maintaining information technology solutions.
- Championing technologies like automation or AI to streamline high-volume, repetitive processes may help decrease the number of FTEs required for such tasks, but these technologies necessitate development, implementation, and ongoing maintenance, reducing their potential impact in IT.
- Reducing IT headcount can compromise an organization's ability to manage data and system security effectively, overwhelming remaining employees with excess workloads, challenging morale and productivity, and posing unacceptable risks to proprietary data. Collaborating with human resources (HR) can help ensure informed, data-driven decisions regarding the IT workforce, enabling reallocation of resources when necessary rather than unnecessary layoffs.
