The solution to the labor intensive problem was a vision to build a Web-Based cash management system that would address the entire problem the department faced. The idea was met with approval at the corporate headquarters in Carmel, Indiana. After McNutt received authorization from his immediate supervisor and a concurrent sign off from the internal auditor he was able to pursue the development of the Web-Based solution. Many advantages were apparent to management especially the fact that Conseco Finance general ledger interface could be integrated into the new system. He had full support from the accounting department and the treasury unit with in the organization and eventually chose to use an in-house division named Codelinks to create the system. It took the team a total of eight months to develop the system most importantly because Codelinks was located in India. The development of the program had a few of its own problems beyond the fact of the software programs were in a remote location; there was not any dedicated staff for the project, the individuals that assisted with the project still preformed their daily tasked and as a consequence the project lost focus from time to time. Despite the constraints the method of development succeeded in producing a product that was user friendly in a window based data system and all input on screen prints changes was completed via the internet, input was given from each of the key departments and program changes incorporated.
The new program streamlines the wire transfer process and eliminated mistakes, phone calls, authorization problems, photocopies and overnight deliveries. Codelinks believed the product was so well constructed that marketing the product in the future had been planned. The streamlined system also saved the company money an estimated $60,000 annually as well as eliminating one and a half positions in McNutt’s group. Formal training on the new system was not planned because they agreed the menu driven system would not require training and Codelinks had prepared a user manual as part of the contract for the program.
The Web-Based wire transfer project supported the organizational goals for improvement of process controls. It also saved the company money and the business unit had successfully integrated their system within the financial divisions of the corporation based on their own decision making abilities, again which supported the company goals. When we consider the project as a whole there were not really any dramatic changes but more simply process improvements. The advantages of the system are numerous: the system became more reliable, the menu-based system required all the necessary data on the form before it could be transferred, phone calls were eliminated, automatic download to the Bank of New York could be preformed, spot reviews could be conducted for quality assurance purposes, division and branches had instant access to information, photocopies were eliminated, overnight shipments were eliminated and St. Paul Division had access for information on the general ledger days earlier.
There are some disadvantages to consider however, if the system went down was there a back up plan? When they cut over to the new system, could they really afford to be without trainers and a support team? Will the system work with out error or conflict? Was there a way for Codelinks to add a data acquisition system to the program for back-up purposes? Careful consideration of these issues will be addressed in the analysis portion of the case study.
Analysis
The corporate culture of Conseco changed with the arrival of former GE head-honcho Gary Wendt in June of 2000 (ironically, Wendt would quit in October of the same year – www.cfo.com). Wendt’s goal was to refocus the company and give more decision making power to newly defined strategic business units. It was under Wendt that Conseco corporate was restructured to only include the Cash Management, Capital Management, Legal, and Corporate Finance groups (Thompson and Strickland C-665). The dramatic cultural changes came about because Wendt felt that after so many years of debt-financed acquisition, the company needed to alter its strategy of growth through acquisition and recommit itself to internal and external process excellence. These changes resulted in a more flattened organization. A organization in which employees at all levels were educated in the goals of their specific business unit and where year-end bonus compensation was tied to the meeting of business unit goals (Thompson & Strickland C-665). The managers of the SBU’s were given the freedom to make strategic business decisions. This very freedom is what allowed Robert McNutt to pursue the creation and implementation of an unbudgeted web-based cash management system, though it could be argued that the decision to go forward with the new system was not truly an option. The textbook makes clear that McNutt’s team was short of staff and was overworked (Thompson & Strickland C-661 & C-662). That fact being stated, the Cash Management team had to come up with a way to automate the wire-transfer system or they were “sunk” (a key success factor). Also, McNutt was under “top-heavy” pressure to make sure that whatever systems he put in place complied with the corporate objectives of cost-cutting and process streamlining.
The strategy that was implemented by Cash Management group was to streamline their processes. The objectives for the project were simply to eliminate the cumbersome and tedious manual processes, and evolve into the new system. Implementation of the strategy to achieve this objective appeared to be well thought out and widely accepted within the centralized corporate structure. As stated above the other key factor was the monetary compensation tied into the success of controlling overhead costs. This focused low-cost strategy was starkly different than Conseco’s previous two decades of pursuing broad differentiation through continuous acquisition. Even though technology based systems have a way of decentralizing organizations, in this instance the web-based technology by its very nature connected the wire transfer users within the system, providing instant feedback for one another. The execution of the strategy proved to be beneficial in many aspects nonetheless, it is the collective opinion of the authors as to whether the long term strategy accommodated the last task of the strategic plan, monitor and evaluate the implementation. It appears management may have been inexperienced at the inherent problems of switching from a manual system to a Web-Based system and the tremendous support that is often required for the long term success of such a project.
Several driving forces made themselves evident throughout the case study. For example, corporate goals needed to be satisfied at every business unit which, in turn, affected each worker within the business unit. The skilled and educated workforce within the cash management group not only were a precious commodity, but were a hard working cohesive team willing to go beyond just their normal workload to contribute to the success of the Web-Based system. An additional driving force was the opportunity to streamline the process for wire transfers whereby they could meet the corporate goals for cutting overhead cost. This business unit was forced to advance technology or loose human resources, become overburdened with work and loose monetary compensation in the form of year-end bonuses at the same time.
In order to further the Conseco analysis in terms of quality management, the 1992 Baldrige Award Criteria has been applied to the Cash Management group to evaluate seven key aspects of the organization. Effective use of the tool allows for continuous process improvement. The results are as follows in Table 1:
Table 1: 1992 Baldrige Award Criteria applied to the Conseco Cash Management Group
A total of 860 points out of 1000 points possible was awarded. Although the corporate objective for process improvement was clearly stated in the case, a key factor would be to evaluate and continue improving the system. One must be prepared and plan for that type of ongoing improvement. Analysis of the points given shows that the latter appears to be overlooked as was the concern for human resources. Since there was no evidence provided in the case study about Conseco’s relationship with its customers, the author’s presumed (from the corporate logo and mission description given at ) that customer satisfaction is not a big objective within the organization. The analysis provided a strong point in the area of strategic planning which was exemplified by McNutt’s vision for the new system. This analysis tool was used based on the fact that this was a service organization and best fit the analysis as taken from chapter 12 in the Thompson and Strickland text.
Recommendations
For the most part, the implementation of the new system met with the authors’ approval. There were however, a few things that we thought could have been done better. They are:
- The outsourcing of the software development portion of the project to Codelinks in India. We believe that although McNutt stayed true to corporate cost cutting objectives by utilizing the off-shore software development services of Codelinks, he ultimately did his own highly trained and highly educated employees a disservice. One could argue that employee motivation was a big part of Gary Wendt’s shifts in strategy. If that were to be the case, McNutt’s decision to outsource could be viewed as being ultimately against corporate strategy. It is therefore the authors’ recommendation that any additional software development projects be handled internal Conseco resources.
- Lack of specific, full-time project manager led to increase project implementation time and possible unnecessary cost overhead. Dedicating the appropriate amount of resources (even if only one or two people) to the job on a full time basis could have been motivating to the cohesive team spirit already intact and surly would have expedited the project. It is therefore recommended that henceforth, for any new large-scale projects, a full-time project manager be either hired, or if that is not possible, an existing staff person with the appropriate skills be redeployed as full-time project manager.
- Lack of a specific field training program prior to cut over of the new system will prove to be costly thus outside of corporate cost-cutting objectives. Providing the proper training and creating facilitators at some of the larger offices would provide the appropriate user support to assure that cut-over to the new system will not be difficult and will be accomplished in a time-sensitive (and thus more cost-effective) manner. It is therefore recommended that henceforth, for any new large-scale projects, a training and support committee be established whose sole responsibility it will be to facilitate project implementation.
Additional Findings
Insurer Ratings from (4/30/2004)
2004 Earnings expectation to be on the low end of the initial $175-$200 million projection due to lower interest rates and higher mortality rates in the first quarter than expected. (CBS Marketwatch 4/30/2004)
Facing more the $6.5 billion in debt, on 12/17/2002, Conseco Inc. filed for what would become the 3rd largest bankruptcy in US history. The company emerged from the BK on 9/10/2003 a smaller, leaner, restructured, and arguably more focused organization than before. ( 4/27/2004)
Conseco Inc. sold off Conseco Finance (formerly Green Tree Financial) in June of 2003. The company has been re-branded as Green Tree Servicing Inc. ( and others 4/30/2004)
Sources
Strategic Management: Concepts and Cases by Thompson and Strickland, Thirteenth Edition, ISBN: 0-07-244371-5
Insurer Ratings pulled from:
2004 Earnings Estimation pulled from:
BK and Green Tree Servicing information pulled from several sources including: , , ,
