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Scholten’s School of Collaboration

The enactment of a federated IT governance model is producing sustainable results at The Principal Financial Group.

After 23 years with The Principal Financial Group (Des Moines, $116.3 billion in assets under management) "Principal is still the place I want to be," says Gary Scholten, senior vice president and CIO. Though he expresses interest in "someday" teaching, the children's sports coach and employee mentor seems to have already taken on the educator role.

Among the words of wisdom that Scholten delivers to new IT employees are the following: "Don't do anything that you aren't passionate about." And Scholten seems to be practicing what he preaches. "Working effectively with members of IT has been very rewarding," he says.

The technologist joined The Principal in 1980 after graduating from the University of Northern Iowa (Cedar Falls, Iowa) with degrees in mathematics and computer science. He also holds a minor in business management. Although his tenure with The Principal has been spent in a technology capacity, Scholten has worked within "almost all of The Principal's business lines," he relates. The breadth of his experience was fully-leveraged in November 2002, when Scholten was named corporate CIO for the carrier.

He is now charged with accountability for technology within the entire corporation-an awesome task, since The Principal has seven major US locations, as well as bases in 10 countries. "Providing IT support to multiple countries is challenging," Scholten concedes. "Language can be a barrier, but the impact of local laws, customs and infrastructure creates even more challenges." Although he oversees the central IT that supports The Principal's business infrastructure, Scholten's work load is lightened a bit by seven business CIOs who report to him. Still, a challenge for the CIO is balancing the needs of the enterprise with those of the individual lines. Lucky for him, both are beginning to converge.

Federated Governance Model

In August 2002, The Principal established its federated governance model, so that each of the business units plays a part in influencing enterprise IT governance decisions. The base of the paradigm is the CIO Working Group-chaired by Scholten and comprised of the businesses' CIOs. "Establishing this group leverages a great corporate asset: outstanding IT leadership," Scholten explains.

The Principal has enacted this strategy to avoid a mistake commonly made by other carriers. "Lots of companies have cut budgets and done it in a way that doesn't feel sustainable," Scholten says. "Instead of cutting capacity, Principal has focused on governance and used that as a springboard to be more cost effective."

The strategy is especially helpful when it comes to the support of The Principal's commitment to a common customer experience. In order to achieve its objectives, "extensive integration of systems between business lines" is necessary, Scholten explains. And Principal is well on its way toward that goal. The carrier currently maintains a common customer operational database, a common in-house-developed contact center application, a consolidated customer and marketer data warehouse and centralized support for a common Pivotal (Vancouver, B.C.) sales automation tool. Additionally, "there is considerable integration between those CRM-related systems," Scholten says. And it's not only IT that is recognizing the fruits of its labor. Business leaders are beginning to see the value, as well. "Our mid-year IT shared services survey showed historic highs for satisfaction," he adds.

The Principal's cross-business-unit portfolio focus has also produced lucrative returns. That is due, in part, to the involvement of stringent project initiation criteria. At The Principal, project reviews are made by the CIO Working Group and business unit heads. The paradigm also employs the tenets of good project management on an ongoing basis. Scholten reports that, so far, "the review of 'in-flight' cross-business-unit projects resulted in the elimination of $10 million in project expenses. It has also improved success rates of cross-business and infrastructure projects."

In addition to more stringent project initiation criteria, an increased realization of project success is linked to a purchasing methodology designed to maximize vendor relationships. "Principal has utilized skilled negotiators and a purchasing methodology for several years," Scholten says. "The methodology includes using Principal standard contract wording when possible, electronic bidding and predefined decision criteria."

Although vendor relationship management is important during the formation of a contract, at The Principal the practice does not end there. "Ours is a full vendor lifecycle approach," Scholten says. "It involves identifying a relationship manager, development of a relationship strategy specific to the vendor, development and communication of a quarterly vendor scorecard, and management of maintenance agreements."

To further ensure a project's success, "Our standard practice is to build specific results and service-level agreements into the contract," Scholten says. "If a vendor delivers substandard service, we will invoke the remedies built into the contract."




Senior vice president and CIO, Principal Financial Group (Des Moines, $116.3 billion in assets under management).

WORK HISTORY: Gary Scholten has spent his entire 23-year career within Principal Financial Group. He has worked in almost all of its business lines.

SIZE OF IT STAFF: 1,850 employees and about 150 contractors.

INTERESTS/HOBBIES: Coaching soccer and basketball, running, family activities, personal computing.

LAST BOOK READ: "Who Says Elephants Can't Dance: Inside IBM's Historic Turnaround," by Louis V. Gerstner, Jr.

ADVICE: "Be accountable for your career, and your results, and look to learn from every situation."

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