FOA-R--99-01339-240--SE December 1999 ISSN 1104-9154 User Report
Risk Management Perspectives on the Y2K Problem A Technical, Support or Strategic Issue?
Maria Broberg Wulff, Camilla Andersson, Jan Knoph och Birgitta Lewerentz
DEFENCE RESEARCH ESTABLISHMENT Division of Defence Analysis 172 90 STOCKHOLM SWEDEN
FOA-R--99-01339-240--SE December 1999 ISSN 1104-9154
Risk Management Perspectives on the Y2K Problem A Technical, Support or Strategic Issue?
Maria Broberg Wulff, Camilla Andersson, Jan Knoph och Birgitta Lewerentz
Issuing organization
Document ref. No., ISRN
Defence Research Establishment
FOA-R--99-01339-240--SE Date of issue
Project No.
Division of Defence Analysis
December 1999
E 1676
172 90 Stockholm
Project name (abbrev. if necessary)
Confronting the Millennium – A risk study
SWEDEN Author(s)
Initiator or sponsoring organization
Maria Broberg Wulff, Camilla Andersson,
Swedish Agency for Civil Emergency Planning Project manager
Jan Knoph and Birgitta Lewerentz
Maria Broberg Wulff Scientifically and technically responsible Document title
Risk Management Perspectives on the Y2K Problem – A Technical, Support or Strategic Issue?
Abstract Sweden has been internationally acclaimed as one of the forerunners in handling the Y2K problem. The Swedish model is a decentralised one, based upon a strong reliance on each sector to handle its own problems. In this report the Y2K risk management work in two vital sectors, power supply and telecommunications, is analysed and discussed. Representatives of three organisations - The Swedish National Grid, Vattenfall and Telia - have been interviewed. The information obtained has been structured by the use of four parameters: responsibility, review & control, incentive, and competence. These parameters are used to analyse co-ordination of actions and motivation of the employees, which are two fundamental management tasks. We have found fairly elaborate Y2K projects in each organisation. Most of the parameter dimensions seem to have been extensively addressed. We have also identified three approaches in managing the millennium task: risk management, crisis management and business opportunity. The three organisations have different perspectives on the Y2K problem. The Swedish National Grid focusses on the technical problem, Vattenfall on the support problem and Telia on the strategic problem. All three organisations seem to employ efficient procedures in their Y2K work. Good risk management practice, therefore, may reflect things like the organisation’s size, business area, market situation and previous experiences of similar tasks.
Keywords Y2K problem, millennium bug, risk management, crisis management, Swedish
National Grid, Telia and Vattenfall Further bibliographic information
Language English
ISSN 1104-9154
ISBN Pages 25 p.
Distributor (if not issuing organization)
Distribution: FOA:
1
Price Acc. to pricelist
Dokumentets utgivare
Dokumentbeteckning, ISRN
Försvarets forskningsanstalt
FOA-R--99-01339-240--SE Dokumentets datum
Avdelningen för Försvarsanalys
December 1999
172 90 Stockholm
Uppdragsnummer
E 1676
Projektnamn (ev förkortat)
Inför Millennieskiftet – En riskstudie Upphovsman(män)
Uppdragsgivare
Maria Broberg Wulff, Camilla Andersson,
ÖCB Projektansvarig
Jan Knoph, Birgitta Lewerentz
Maria Broberg Wulff Fackansvarig Dokumentets titel i översättning
Perspektiv på riskhantering av Y2K — Tekniskt, stöd eller strategiskt problem?
Sammanfattning Internationellt har Sverige uppmärksammats som föregångsland i hanterandet av Y2K problemet. Den svenska modellen är decentraliserad och grundar sig på en stark tillit till att varje sektor klarar av sina problem. I den här rapporten analyseras och diskuteras riskhanteringsarbetet med Y2K i två vitala sektorer: elkraft och tele. Företrädare för tre organisationer — Svenska Kraftnät, Vattenfall och Telia har intervjuats. Den erhållna informationen har strukturerats efter fyra parametrar: ansvar och granskning, kontroll, incitament och kompetens. Dessa parametrar används för att analysera samordningen av åtgärder och motiveringen av personalen, två grundläggande uppgifter för ledningen. Vi har funnit väl utarbetade Y2K projekt i var och en av organisationerna. Flertalet parametrar tycks i stor utsträckning ha hanterats. Vi har även funnit tre sätt att förhålla sig till millennieproblemet: riskhantering, krishantering och affärsmöjlighet. De tre organisationerna har skilda perspektiv på Y2K problemet. Svenska Kraftnät fokuserar på ett tekniskt problem, Vattenfall på ett stödproblem och Telia på ett strategiskt problem. Alla tre verkar tillämpa effektiva processer för sitt Y2K arbete. God krishantering kan sålunda reflektera sådant som organisationernas storlek och affärsområde, marknadssituation och tidigare efrarenheter av liknande uppgifter.
Nyckelord
Y2K-problemet, riskhantering, krishantering, Svenska Kraftnät, Telia och Vattenfall Övriga bibliografiska uppgifter
Språk Engelska
ISSN 1104-9154
ISBN Omfång 25 sid.
Distributör (om annan än ovan) V.1.3
Distribution: FOA:
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Foreword In October 1998 the Swedish Agency for Civil Emergency Planning commissioned FOA to make a study called “Confronting the millennium – A risk study”. This study is about the handling of the millennium problem within the sectors of power supply and telecommunications. The FOA study has an organisational perspective. It is divided into two phases by the turn of the millennium, the former phase with a risk management perspective and the latter with a crisis management perspective. In a preliminary study, carried out during the summer of 1998, a report titled “Power Supply and Telecommunications – Preparedness for the transition to the year 2000” was presented. It comprises a general description of the millennium problem and the way it was handled in Sweden, both by the Swedish government and by power supply and telecommunications authorities.1 In this report the risk management perspective of the Y2K problem is in focus. It is an extended version of a paper “Y2K A Glimpse of Swedish Risk Management” intended for the web site of the Swedish Agency for Civil Emergency Planning (www.ocb.se). The project will deliver its final and third report in spring of the year 2000. Within the project Camilla Andersson has followed and structured the governmental approach to the Y2K problem, Birgitta Lewerentz has taken part in most of the interviews and in the analysis and structuring process together with Jan Knoph and Maria Broberg Wulff (project manager), the latter two being the main authors of this report. To this report Maria Hedvall and Petter Wulff have contributed with many valuable comments, criticisms and suggestions. We also owe thanks to Douglas Dérans, Jan Foghelin, Per Larsson, Ulf Pettersson, Jan-Erik Svensson and Peter Westrin for improving our manuscript in many ways. We owe special thanks to the opponent Erik Bjurström for his valuable recommendations. Without the generous participation of the representatives from The Swedish National Grid, Vattenfall and Telia this study would have been impossible to carry out. A reference group with Bengt-Ola Nilsson and Leif Zetterberg from the Swedish Agency for Civil Emergency Planning, Folke Pärnerteg from the Swedish National Grid (and Douglas Dérans from FOA) served as an excellent testing ground for our preliminary ideas and results.
1
Andersson, C.; Broberg Wulff, M. Power Supply and Telecommunications – Preparedness for the transition to the year 2000, FOA-R—98-00909-240—SE, 1998 in Swedish.
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CONTENTS 1. BACKGROUND...............................................................................................................5 2. OBJECTIVES ..................................................................................................................7 3. METHOD .........................................................................................................................9 3.1 RISK MANAGEMENT .....................................................................................................10 4. THE SWEDISH Y2K MODEL......................................................................................11 4. 1 THE NATIONAL LEVEL .................................................................................................12 4. 2 THE SECTOR LEVEL - POWER SUPPLY AND TELECOMMUNICATIONS ...............................13 4.3 THE ORGANISATIONS STUDIED .....................................................................................14 5. DIFFERENT PERSPECTIVES ON THE Y2K PROBLEM........................................15 5.1 FROM RISK MANAGEMENT TO BUSINESS OPPORTUNITY..................................................16 5.2 A TECHNICAL PROBLEM - CO-ORDINATING PATTERNS AND MOTIVATING MECHANISMS ..17 5.3 A SUPPORT PROBLEM - CO-ORDINATING PATTERNS AND MOTIVATING MECHANISMS ......18 5.4 A STRATEGIC PROBLEM - CO-ORDINATING PATTERNS AND MOTIVATING MECHANISMS ...19 5. 5 SIMILARITIES ..............................................................................................................20 5.6 THE PROJECTS’ LOCATION WITHIN THE ORGANISATION .................................................22 6. CONCLUSIONS.............................................................................................................25
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1. Background The millennium problem is the failure of certain computer programs and semiconductor chips to function properly after the end of the twentieth century. In modern society such programs and chips are used everywhere from public administration to industrial processes. Should, for example, the supply of power and telecommunications fail, the consequences would be economically devastating. Hence, the Y2K problem can be seen as a fascinating set up for a large-scale experiment in risk management. The Y2K problem is unique in contingency planning since we know well in advance when disturbances might occur, i.e. from January 1, 2000, a date the arrival of which cannot be delayed. Therefore there is a predefined time span for prevention and mitigation of the consequences of such disturbances. Furthermore the risks for disturbances are global, concern all sectors in the highly industrialised countries and are high or even most likely to occur if nothing is done. The Y2K problem is of a type unprecedented in human history and was not taken seriously from start given the size and complexity of the efforts needed to prevent it.2 Should disturbances occur, the consequences could be devastating for the economy of modern societies and ruinous for companies. This situation gives the scientific community an excellent opportunity to identify important criteria for finding optimal risk management strategies, for instance in the infrastructure sector. Sweden handled its resources to confront ”the millennium bug” in an excellent way according to the GartnerGroup3, which for 1998 rated Sweden among the second best prepared nations in general, just a little behind the USA, and among the twelve best countries regarding infrastructure risks4. Some of the activities, which have merited this high ranking in handling the millennium problem, will be analysed in this report.
2
C.f. Shoup, Larry. Managing the Risk of Year 2000: How to protect your organisation from over spending, failure and litigation. www.year2000.com/archive/janis.html 1999-11-15 15:05 3 GartnerGroup is a worldwide business and information technology advisory company. One of the focus areas is Year 2000 global rating for compliance progress. 4 GartnerGroup, Year 2000 International State of Readiness, US Senate Testimony, March 5th 1999.
5
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2. Objectives We are studying the handling of the millennium problem within the power supply and telecommunications sectors. The main objective is to analyse the way some organisations have dealt with the problem, in order to improve our knowledge of risk management. Of special interest are their attempts to co-ordinate action and motivate employees to cope with the tasks of the Y2K problem.
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3. Method This study has an organisational perspective. Three key organisations are studied; two within the power supply sector and one within the telecommunications sector. The three organisations chosen are the national power grid agency and the largest companies in power supply and telecommunications respectively. There is a reason why only one organisation is represented on the telecommunications side. This organisation has a double role as user and administrator of the national network, whereas in the power supply sector user and administrator are separate entities. During the spring and summer of 1999 we have interviewed representatives of Y2K projects within the organisations and gathered material in order to describe how the Y2K tasks were implemented. On a bimonthly basis one to two hours long half-open deep interviews were held on the premises of the organisations. Notes were taken during the interviews. No tape recorder was used. All in all 23 interviews were carried out. On almost all occasions two members of the FOA research team interviewed one person. For practical reasons some interviews were carried out by telephone. This was normally done in the same way – two persons interviewed one. The interviewed representatives from the three organisations were three Y2K project leaders at the corporate level and four members of the project groups. It has not been possible to complement this top down approach with a bottom up view of the millennium work at the three organisations. The millennium compliance work was also studied through published material as well as internal documents from the three organisations. The material gathered was structured through the use of the parameters co-ordination and motivation. The choice of parameters was inspired by Milgrom and Roberts.5 These two main parameters were then divided into four specific parameters6: • Co-ordination - responsibility, review & control • Motivation - incentive and competence. The interview material was related to the co-ordination parameters through the following questions: • How has the Y2K preparedness process been co-ordinated in the line organisation? • What mandates and responsibilities are given to the Y2K projects and their managers in relation to the mandates and responsibilities of the ordinary line organisation? • How has the Y2K implementation process been reviewed in the organisation? The material was related to the motivation parameters through the following questions: • What motivates project members and others in the organisation to work with the Y2K issue? • Which incentives were created for the project members? 5
Milgrom, P. and Roberts, J. Economics Organisation and Management. 1992. These specific parameters have been used in earlier FOA work. Andersson, C.; Broberg Wulff, M. Power Supply and Telecommunications – Preparedness for the transition to the year 2000. FOA-R—98-00909-240— SE, 1998 (in Swedish). Broberg Wulff, M.; Hedberg L. Water supply during war – threat, preparedness and organisation. FOA-R—94-00004-1.2-SE. Report, 1994 6
9
•
What were the requirements for theY2K project managers, project members and steering group members respectively?
Since we found interesting dissimilarities in the way the Y2K problem was handled in the organisations, we looked for a complementary model to explain our findings. Eventually we chose Mintzberg’s basic organisational model (described in subchapter 5.6 below), which sheds light on the dissimilarities mentioned.7 Having explained the background of this study, its objectives and method in the first three chapters of this report, we shall use chapter five and six to describe and analyse the different perspectives on the Y2K problem the three organisations studied have taken. These organisations are the Swedish National Grid (Svenska Kraftnät, abbreviated SvK) and Vattenfall within the power supply sector and Telia within the telecommunication sector. For the reader not already aquatinted with the Swedish Y2K model and these three organisations, an overview is given in chapter four. Before that our use of the concepts of risk management and crisis management will be clarified.
3.1 Risk management Risk management is a central concept of this study, where it has been used in a somewhat limited sense. To define how the concept of risk management is used in this study, we have to start by defining what we mean by crisis management. The concept of crisis management signifies all attempts to handle a risk situation or crisis once it has occurred. The main Y2K potential crisis moment occurs at midnight of New Years Eve 1999/2000. If there is technical malfunctioning in essential systems at that moment it calls for crisis management. Before that critical moment there can, strictly speaking, be no crisis management – only preparatory work. But the preparatory work done may have crisis management as its focus. Organisations may prepare lists of who is to be at the work place during New Years Night and who is to be available to be called in with short notice. This concerns technical as well as customer oriented personnel. The preparatory work mentioned above is excluded from what we here mean by risk management.8 That is, risk management here means solely the preparatory work aiming at discovering technical deficiencies and handling them before the turn of the millennium. Having now made clear an important terminological point, we next turn to a broad description of what can be called “the Swedish Y2K model”. The following chapter is devoted to the setting of our study in a national context.
7
Mintzberg, Henry. Structure in Fives. New Jersey 1983. We intend to analyse the crisis management concept in a forthcoming report, which will include that sort of preparatory work. 8
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4. The Swedish Y2K Model The Swedish general approach to the Y2K problem is decentralised: • On the national level there are two organisations to guide, assist and review the work related to adaptations for the year 2000, the Millennium Commission9 and the Swedish Agency for Administrative Development (Statskontoret)10. The former is responsible for guiding and reviewing the management of the Y2K tasks for companies and agencies in vital sectors, while the latter guides and reviews public authorities and updates the government on their progress in managing the millennium bug. (The national level’s millennium work is not studied here.) • Below the national level there is an established sector functional structure for management of the Y2K tasks. On this level we have studied the Y2K sector co-ordinating authority for power supply, the Swedish National Grid (SvK) (figure 1). The corresponding authority for telecommunications is the National Post and Telecom Agency (abbreviated PTS). • Below the sector level there are a number of state or privately owned companies, among them Vattenfall and Telia.
The Swedish Agency for Administrative Development
National Level
The Millennium Commission
Public Authorities
Sector Level
Trade Associations
10 vital sectors Power supply sector
Telecom sector
SvK
PTS
Power producers
Company Level
Telia
Vattenfall
Figure 1. The organisations studied placed in a national web of Y2K preparedness.
9
A government commission founded 1998. Dir. 1998:10 Decision of the governmental meeting 29 January 1998. 10 A public authority, which was given this task by a governmental decree (SFS 1997:30).
11
4. 1 The national level Since December 1996, when the Swedish government for the first time highlighted the Year 2000 problem - through a hearing arranged by the IT Commission11 - several activities have taken place, some of which are illustrated in figure 2.
Assignment to Vital Sectors
Ordinance to Report
Millennium Commission Founded
IT Commission's 1st Hearing 1996
1997
In-housequestionings Telia and Vattenfall
1998
18/12
June 1 st Final Adaptation Public Authorities
Hearings Telia and Vattenfall
Reviews Power Supply and Telecom
1999
29/1 1st
sector report
sector report
sector report
Is the symbol for The Swedish Agency for Administrative Development g
Figure 2. Governmental Y2K measures.
In February 1997 an ordinance for public authorities to report Y2K management status to the Swedish Agency for Administrative Development was given by the government. This agency’s first status report was presented in September 1997. In June 1998, vital sector agencies such as the Swedish National Grid and the National Post and Telecom Agency were prescribed to report their sector status to the Swedish Agency for Administrative Development. Three such reports have been presented, one in 1998 and two in 1999. Public authorities were to finalise their Y2K adaptations no later than 1st of June 1999.12 Telia and Vattenfall have testified in the Millennium Commission power supply and telecommunications hearings13, “reviews”14 and special “in house questionings”15.
11
Later, the Millennium Commission took over the Y2K tasks from the IT Commission and published some twenty reports. 12 Governmental decree SFS 1998:1578 § 6. 13 During the spring of 1999 14 Persson, Gert; Utlåtande om El-sektorn 1999-05-05 and Persson, Gert; Utlåtande om Tele-sektorn 1999-07-01. 15 During the fall of 1998
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The Swedish Agency for Administrative Development stated that16: • power supply and telecommunications are expected to function normally during and after the transition to the year 2000; • the operators in power supply and telecommunications are working satisfactory; • The Swedish National Grid is also grasping the situation satisfactory and that • there is a fair degree of co-ordination of the preparedness measures among the actors in power supply. Relating these great expectations on the two systems’ reliance during the turn of the millennium we now leave the national level to say some words about how the sector level for power supply and telecommunications is structured.
4. 2 The sector level - Power supply and telecommunications The authorities responsible for power supply and telecommunications – the Swedish National Grid and the National Post and Telecom Agency – have been given the task of co-ordinating measures within their respective sectors to avoid disturbances due to the transition to the year 2000. The appointed authorities were to analyse and judge the risks for disturbances and ensure that the organisations operating within these two critical sectors took the measures needed to safeguard their functioning. They approached this task in different ways. The Swedish National Grid chose to work proactively. An inter-organisational working group, Power in the Year 2000, has been set up in the power supply sector. Today there are nearly 400 organisations (agents) in the system (some 20 producers, about 220 grid enterprises and some 160 power supply sellers), which make co-ordination a challenge. Their size varies and so does the type of organisation (government or privately owned). On the other hand the interdependence among the organisations is an incentive for co-ordination. There are only about ten operators within the telecommunication system. The National Post and Telecom Agency seems to have a different strategy towards its agents. The agency saw competition and economical incentive as the major force to assure that adequate measures were taken regarding the millennium bug. In other words the Swedish National Grid and the National Post and Telecom Agency were using different models to cope with the millennium bug. We can describe them as a co-ordination model and a market oriented (competition) model. By this we partly leave the sector level and turn our attention to the three organisations investigated. Two of them are located on the company level.
16
The first sector report of the Swedish Agency for Administrative Development March 1999; Läget i viktiga samhällsfunktioner. Skiftet till år 2000. Lägesrapport 9 – mars 99.
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4.3 The organisations studied The Swedish National Grid (SvK), Vattenfall and Telia are in their present form products of the nineties, but have their roots in earlier decades. Vattenfall was a governmental agency with a regional monopoly until 1992, when it was split into the Swedish National Grid, a governmental authority, and the new Vattenfall, a state owned company. Telia’s predecessor Televerket was the telecommunications authority until 1993, when it was transformed into the National Post and Telecom Agency and Telia, a state-owned company. The Swedish National Grid is the official national system operator responsible for system security in the national power grid. This includes not only the responsibility for the national transmissions network - the grid - but also for the national balance of electricity (frequency regulation). The Swedish National Grid represents a monopoly. It is a homogenous and fairly small organisation. Vattenfall and Telia are the largest companies in their field, supplying Sweden with half of its electrical power and nearly 80% of all cable-delivered telecommunications services respectively. However, they are exposed to rapidly growing competition as power supply and telecommunications were deregulated in the 1990s. This also added some turbulence to the organisational structure of the power supply and telecommunications systems. Today the Vattenfall Group is somewhat larger (some 90 and 50 companies respectively). Some features of these organisations are presented in table 1. Table 1. Characteristics of the three organisations Organisation
Market sphere
The Swedish National Grid
Nordic and Baltic Region
Vattenfall
Mainly Northern European17 International
Telia
17
Number of employees 250
8 000 34 000
Vattenfall also operates in Southeast Asia and South America.
14
Services/products
Type of organisation
Power balance and reliability of national grid; Training Power supply and consultant services Telecom services and products
Public utility
Company (stateowned) Company (stateowned)
5. Different perspectives on the Y2K Problem All three organisations have chosen to establish a special Y2K project. Each project has a steering group with representatives from the top management level and three to five subprojects. In addition Telia established a replication of the project structure in each of its business areas18. Vattenfall and Telia launched their projects in October 1996. The Swedish National Grid launched its project a year later,19 "inspired by the second Y2K governmental hearing regarding embedded systems and pressured by media"20. The millennium bug was an unforeseen and alien problem for the three organisations studied21. Managing it is seen as a challenge for the top managers in each of the three organisations. This attitude is reflected in their choice of Y2K project managers. They should, apart from having a background in IT, be experienced senior project managers. In general we have found that two corresponding kinds of competence have been used in the project groups’ management of the Y2K problem - IT knowledge and knowledge of the organisation’s business processes. The last competence is referred to as “helicopter view knowledge” by one of the project managers. But there is also other competence used in the organisations to manage the Y2K tasks. In-house lawyers and information officers represent two kinds of competence necessary to either incorporate to a project or to associate closely to it. The latter competence highlights the fact that the Y2K problem also is an information problem, both internally and externally. Vattenfall and Telia have other kinds of competence in common: risk managers and computer security managers (table 2). Table 2. A snapshot of project members in the studied Year 2000 projects – the composition of the projects varies over time depending on the state of work. Organisation Project Group
Swedish National Grid 4 members:, e.g. • Project manager • Assistant project leader – Consultant • Information officer • Administrator
Sub Projects
• •
3 projects Sub project managers – line managers
Vattenfall Approximately: 20 members, e.g.: • Project manager • Sub project managers “up and comings” • In-house lawyer • Risk manager • Information officer • Administrator • Other • 4 projects (members included in the project group)
18
Year 2000 line project groups. September 1997 20 Comment by one of the persons interviewed. 21 Comment made by all the persons interviewed. 19
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Telia Approximately: 30 members, e.g.: • Project manager • Sub project managers – experienced people • In-house lawyer • Risk manager • Information officer • Administrator • Other • 5 projects (members included in the project group)
5.1 From risk management to business opportunity After a period when some technical specialists tried to evoke their surroundings of the Y2K problem, the corporate level realised that there was a problem, which had to be dealt with. From that moment until the preventive work is carried out, the Y2K problem remains a question of risk management for the organisations studied. During the preventive work, the organisations realised that there was no guarantee that they would manage to eliminate all potential problems.22 Hence, they started to prepare how to handle disturbances. During the preventive work they also got a precise overview over their processes and products, enabling them to make economic gains by eliminating a great number of old systems and making strategic choices of what products to keep for the future. That is, there was a tendency towards a shift in the preparatory work from pure risk management to a mixed approach including crisis management and business opportunity. In the organisations studied we have identified three different approaches to manage the millennium bug, namely: • risk management, • crisis management and • business opportunity. Business opportunity Crisis management Swedish National Grid
Risk management
Vattenfall
Telia
Figure 3. Three ways of looking at the millennium problem
A similar variation of approaches was found by Jane Burns in her study on British organisations facing the Y2K challenge.23 The risk management approach comprises a technical compliance approach aiming at ”a normal day” at the turn of the millennium. It has the following phases: awareness of the problem, survey of systems and objects, identification of potential critical objects and systems24, compliance (repair or exchange), test of objects and systems and Year 2000 validation. All three organisations started their Y2K management with this approach.
22
For different reasons full-scale tests are impossible to carry out for huge systems. Customers may not tolerate disturbances for testing reasons. Systems may be too complex to test on full scale. Further, the organisations may have microchips in their systems that are not Y2K compliant, as they have been sold under the same name as Y2K compliant chips. 23 Burns, Jane. Organisational Culture and Responsiveness to the Y2K Problem., in The Millennium Bug: The year 2000 computer problem. Structure, Denial and Actions. pp. 117-128, Leuven 1990. 24 In fact, this is a rather extensive phase, inter alia comprising the definition of which processes are to be regarded as critical, which interdependencies are of vital importance and similar rather complex questions.
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The crisis management (or contingency planning) approach developed successively in the three organisations during 1999 when the need for having key personnel at hand with routines and checklists at their disposal on New Year’s Eve was actualised, thus creating a ”back up” in case the risk management approach fails. This approach comprises technical and customer oriented measures. The technical measures are concerned with providing a capacity to handle disturbances within the systems, to solve technical problems and to repair systems during the first hours of year 2000. The customer-oriented measures focus on handling customers’ questions, i.e. to be able to inform the customers of problems, should such arise. In fact, major customers or partners were informed of possible Y2K problems related to their business relations with the three organisations surveyed. Even though the Swedish National Grid and Vattenfall managed the Y2K problem using the two approaches, they focussed their work differently. The Swedish National Grid mainly saw it as a technical problem while Vattenfall mainly saw it as a support problem. We will describe these differences by describing the way their Y2K projects used to handle their task. The last approach, business opportunity, comes from seeing Y2K as a strategic problem. It aims at assuring revenues using Y2K as an opportunity for considering product portfolios, product development and means of production. This approach was singled out by Telia; “The Y2K project enables us to proceed to new platforms, for example we then have the guts to tell our customers that we do no longer service the old switch-boards. It gives us the possibility to concentrate on new products and markets.”25 The somewhat different perspectives on the Y2K problem had implications for the coordinating and motivating efforts made. A short description follows of the implications for the special co-ordinating patterns and motivating mechanisms that each project made use of.
5.2 A technical problem - co-ordinating patterns and motivating mechanisms The Swedish National Grid’s handling of a problem of technical nature does not require any activities outside the production line, such as information campaigns, pressure and support from other parts of the organisation. It is enough to approach the risk preventive work as an ordinary production issue. The Swedish National Grid launched a project focussing on technical compliance. For a relatively small organisation, some 250 employees, this makes sense. Hence, there was no need of co-ordinating the so-called project with the line, as the project actually was part of the line. Y2K project and subproject members were line managers in direct control of the Y2K measures to be undertaken at each level. A model for the survey of systems was developed by a consultant (deputy project manager). He also developed the questionnaires used to follow up the Y2K compliance, a standardised package of forms, Signature 2000, going into every detail26 and requiring the signature of the responsible person of each level of the systems checked. Line responsibility in a highly centralised process controlled by a centralised follow up system, makes a complex co-ordination pattern superfluous.
25
Quotation from Telia’s project manager during an interview. Signature 2000 comprises responsibility/system, type of system, type of component and component within the three subprojects. Progress status is also reported with one of the parameters survey, preliminary analysis, detail analysis, repair/exchange, verify and 2000-compliant. 26
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The large amount of systems that needed to be reviewed in these complex organisations has been one of the problems in handling the turn of the millennium. Changes regarding e.g. organisation, systems and products would effect the control of the Y2K status. The Swedish National Grid and Telia used the term freezing to control such changes. The idea was that no investment should be made without approval from the Y2K projects. The Swedish National Grid’s subproject managers were line managers with a well-known competence of the working areas except for a consultant who also had insider knowledge. He was the only person working close to full time in solving the Y2K problem. All of them were motivated by the fact that the top managers had declared the management of the Y2K problem a top priority issue. No special incentives were created. The Swedish National Grid seems to have used more “sticks” than “carrots” to involve the employees in Y2K preparedness. One of the persons interviewed commented: “It is simply something you have to do before e.g. investments in new systems can be made”.
5.3 A support problem - co-ordinating patterns and motivating mechanisms Here, support means helping a part of an organisation to carry out the Y2K compliance work without taking over or interfering with ordinary production. Vattenfall’s Y2K project is best characterised as a support project, the goal of which was to avoid or eliminate risks for disturbances with a minimum of intervention to ordinary production. Within the Vattenfall company group the chief executive officers (the CEOs) were made aware of their responsibility for the implementation of the Y2K measures. The Y2K project was divided into sub projects covering the organisation’s operating areas in a different way than the line divisions. This also applies to Telia. Co-ordination is therefore an important management task. As a mean of co-ordination Vattenfall at an early stage carried out two information campaigns. The first campaign, addressed to all employees, clarified the problem and had, according to the interviewees, a notable effect. The second one was sent as a letter to the executive officers, but had a more questionable effect as “some letters remained unread and some didn't reach the appropriate level”. Another mean of co-ordination was to establish a group of some 50 “Y2K co-ordinators” to co-ordinate preparedness measures at different levels in the organisation. They became important channels for information sharing and for identifying important issues at lower levels, to be managed higher up in the organisation. However, the multiple levels of co-ordination became an initial hinder for an efficient flow of information according to a project member. The Y2K status reports, required by the project group, were frequently delivered in nonstandard forms from different parts of the Vattenfall group, with the consequence of extra work for the project members. For two reasons, the Vattenfall Y2K project could not expect the various parts of the organisation to co-operate fully. One reason to this is the recent structural changes within the Vattenfall group, which now comprises many formerly independent companies. Another reason is the superiority of security awareness at some organisations within the group, namely at the two nuclear power plants owned by Vattenfall. Using the support focus, it has been possible for the project group to co-operate with all these units without hindering clashes.
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In contrast to the Swedish National Grid and Telia “freezing” the acquisition of new systems, Vattenfall found it important for the Y2K project to ”follow the changes and handle the fact that everything changes”27. The Vattenfall subproject managers were mainly of the category "up and coming" and were recruited mostly because of their IT knowledge. For them the individual motivating mechanism was “the opportunity to develop into future project managers”. 28
5.4 A strategic problem - co-ordinating patterns and motivating mechanisms Telia launched a strategic project, the goal of which was to ensure corporate revenues after the turn of the millennium and to look for business opportunities. Measures should not be seen as specific Y2K measures.29 Therefore costs should not be seen as Y2K costs. Telia’s Y2K project group is responsible for enforcing implementation of preparedness measures if necessary30. Its managers’ legal responsibility for Y2K compliance was emphasised.31 Coordination between project and line is achieved through a matrix structure where top managers, responsible for the implementation of Y2K measures and the project members, responsible for the strategies for Y2K management, work close together. It has been crucial to identify a responsible person for each system or object. A special reviewing technique was used. No standard questions were used to follow up Y2K implementation. In order to achieve a continuous dialogue on the topic, those reviewed had to answer unexpected questions highlighting different perspectives of the problem. The project group played a decisive role in decisions concerning future investments (which might cause disturbances for the Y2K validation process) in concordance with the project’s strategic role. In Telia’s project the subproject managers were mainly experienced managers with an overall and cunning competence, their project group members also being in the fifties.32 Individual motivating mechanisms to maintain the competence of the project members comprise a bonus system related to the project members’ “participation guarantee”. Project members would get a bonus if they worked with the millennium problem until countermeasures had been implemented. The difficulty of motivating the employees to take part in the Y2K work was seen as an “educational problem” by Telia’s project manager and the “challenge” to manage it was her main motivation. Education consists of finding a way to explain how disturbances caused by poorly implemented preparedness measures can affect the company’s future. While the technical and the support perspectives focus on the problem itself, in the strategic perspective the necessity of Y2K measures was used to include opportunities in the project.
27
According to the project manager at Vattenfall. According to the project manager at Vattenfall. 29 The Year 2000 problem is a business problem according to the project manager at Telia. 30 Enforcing implementation in the line organisation has been used a few times, according to the project manager. 31 Responsibility according to Swedish law on shareholding companies, Aktiebolagslagen 15:1. 32 The project manager has chosen project members. 28
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5. 5 Similarities Having examined the main differences in the three organisations’ perspectives to the Y2K problem, one must also pay attention to common traits in their efforts to co-ordinate action and to motivate their personnel for the millennium work. In all three organisations the chief executive officers (the CEOs) accepted responsibility after having been made aware of the Y2K risks. The Y2K projects received a budget without restrictions and a written assignment from the top management to initiate, co-ordinate, control, and formulate the strategies for the millennium work. Assignments were delegated to each part of the line organisation. Divisions and sections were to find solutions within the ordinary budget. The steering group would resolve differences of opinion between the project and the line and serve as a protector for the project groups against the criticism the latter might be subject to.33 The Y2K review and control process was a tool to clarify “system functionality and stress implementation through responsibility at the individual level”. Although the free hands of the project managers at first glance looked like an easy management task, one must remember that there were no experiences of similar projects to build on. Hence, the work was performed on a trial and error basis in an iterative process. Co-ordination of preparedness measures was the responsibility of the project groups. It was achieved by introducing these measures through the ordinary channels of the organisations. Project managers expressed their view that it would “not work if new ones were created”. Thus the Y2K progress became an issue at management meetings at all levels and was presented in the organisations’ ordinary information systems (Intranet). To integrate the line organisation into the millennium work more closely, in many cases project members were picked from key line positions. This is true especially for project steering group members. We have found a sincere effort in all three projects to engage the respective line organisations in the preparedness work. To establish review and control, databases were created for large amounts of technical systems and components. This measure created an overview which didn’t exist before and which was used to rid the organisation of outmoded systems. In Telia seven out of nine budget systems were discarded, in Vattenfall fourteen out of fifteen. Indeed, a successful organisational rationalisation! Although being a side effect of the Y2K review and control efforts, this overview proved to be one of the greatest achievements of each of the projects. Hunting the millennium bug by going through all systems, processes and products to make them Y2K compliant, has simultaneously paved the way for making them more efficient. All three projects reviewed the Y2K work through periodical status reports to their steering groups.34 The three project groups also developed graphical presentations for the description of work progress.35 These review reports had an official status in the organisations and were made available to the employees on e.g. Intranet.
33
The importance of this type of high level buy-in and top level support is stressed in the risk management literature, c.f. Davis, Steve Risk Management http://users.erols.com/steve451/risk.htm 1999-11-15 15:12 and Bakka, Jörgen; Fivelsdal, Egil. Organisationsteori. Struktur och processer. Stockholm 1988. S. 57 34 Mostly through monthly reports. 35 The Swedish National Grid and Telia have used the traffic light symbols with red, yellow and green lights, to report work progress.
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From a technical point of view the millennium problem can be seen as “boring” and nonchallenging. Some employees in the three organisations stated they “don’t believe it’s a problem”. All three organisations have had problems in engaging their personnel in the Y2K work. It has been said to be of critical importance to engage the middle management level.36 Thus, the lines in these three organisations have had substantial difficulties to associate Y2K measures with profit. For the project managers, their top managers’ interest and support for the implementation process in the line organisation have been incentives of utmost importance. Project members gained a strategic view of the organisation’s structure and business processes, an overview, which gave them management competence for future tasks. Some persons in the Y2K project groups were strongly motivated by the fear of failure, knowing that the consequences of an infrastructural collapse would not pass unattended by the public they should have to face. As mentioned under chapter 5 above, the competence the three Y2K project managers have in common are IT knowledge and knowledge of the organisation’s business processes, specified as an experienced senior project manager with a background in IT.
36
Comments by interviewed representatives from all three organisations.
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Dissimilarities and similarities in handling the millennium problem are summarised in table 3. Table 3. Parameters describing the Y2K management in the three organisations Parameter level I
Parameter level II
Dissimilarities
Similarities
Co-ordination
Responsibility
•
Vattenfall: CEOs were made aware of their responsibility Vattenfall: Additional co-ordinating levels Telia: Top managers’ legal responsibility was stressed Telia: Project may force implementation
•
The Swedish National Grid and Telia: ”Freezing” of free system acquisition
•
• • •
Review & control
•
• • • •
• • •
Motivation
Incentive
• • •
Competence
• • •
The Swedish National Grid: No incentives used Vattenfall: Career development Τelia: bonus system – participation guarantee The Swedish National Grid: Consultant in key position Vattenfall: “Up and comings” Telia: Experienced personnel
• •
• •
Project initiates, coordinates and controls Line organisation implements Project reports to steering group Top managers are members of the steering group Project groups have no budgetary limitations Comprehensive databases with system overview Clarify system responsibility Monthly reports to steering group Y2K standing issue at top and lower management meetings Awareness of Year 2000 failure consequences Top managers' interest and support for the implementation process Project managers: Long experience, IT, age of 45+ Project members: IT, helicopter view
5.6 The projects’ location within the organisation The differences in the three organisations’ foci can also be illustrated by an organisational model, which indicates the differences between the project groups. Despite the fact that all three organisations have used corporate level projects for their Y2K management work, they use the term ”project” in rather different senses. This model was developed by Mintzberg.37 In figure 4 we have placed the three projects in a standard version of Mintzberg’s diagram. Mintzberg’s model can be further described as follows. He sees an organisation as consisting of five main parts divided into three basic groups:
37
Mintzberg, Henry. Structure in Fives: Designing Effective Organisations. New Jersey, 1983.
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1. At the bottom of the central group we find the operating core, where operators produce the products of the organisation. Examples of operators are assemblers and salespersons. Above the operating core is the middle line consisting of managers in charge of production, from the foremen just above the operating core to the vice presidents, just below the strategic apex where the board of directors, the president, his staff and the executive committee is located. 2. Left of that group reaching from the top of the operating core to the strategic apex lies a group called the technostructure, consisting of analysts who serve the organisation by affecting the work of others. Here we find the controller and technocratic clerical staff as well as those engaged in strategic planning, operations research and work-study. 3. Similarly placed on the right side we find the support staff, which provides support to the organisation. Here we find persons engaged in public relations, research and development, handling the payroll, or working in reception or the cafeteria. In the Swedish National Grid (SvK) three out of four sub project managers belong to the middle line, in Vattenfall all four belong to the support staff while four out five in Telia belong to the technostructure (Fig 4).
Strategic Apex
The Telia Y2K project
Technostructure
Middle Line
The SvK Y2K project
The Vattenfall Y2K project
Support Staff
Operating Core
Figure 4: The relation between the five basic parts of the organisations and their Y2K projects.
The different perspectives of the projects seem to coincide with the organisational locations of their main members. Our classification of the Swedish National Grid’s project as a technical compliance project, the Vattenfall project as a support project and the Telia project as a strategic project, complies with Mintzberg’s diagram.
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6. Conclusions By studying the preparedness work performed by three main actors within the power supply and telecommunications sectors, we have analysed a vital part of the Swedish Y2K risk management activities. We found that these actors, the Swedish National Grid, Vattenfall and Telia, had different perspectives for their Y2K projects: the power supply authority focussed on the technical problem, the power supply company on the support problem and the telecommunications operator on the strategic problem. We think that the three mentioned perspectives worked well in the organisations where they were deployed as project members were satisfied with their work and stated that Y2K compliance for critical systems was achieved well before New Year’s Eve. Analysing how the preparedness work was organised, we noticed a sincere effort in all three projects to integrate the respective line organisation in the preparedness work. We observed co-ordination patterns, which clarified responsibilities between the project and the line. The project initiated, coordinated, controlled and formulated the strategies for the millennium work while the line implemented preventive measures. Further, we observed review tools, which had been specially developed for presenting work progress in a simple diagram form to be made available for all employees through the Intranet. This review system worked well to inform and spur employees. We also observed that the motivating strategies worked well, that project managers were satisfied with their choice of project members, that the projects had access to the competence needed. Governmental expectations were that these sectors would function normally. International reviews of the Swedish Y2K risk management process were very positive about the way it was handled. This report was written during the countdown for the Y2K event. In a follow-up report after the turn of the millennium we will analyse the outcome of the Y2K risk preventive work in the three organisations and if possible compare it with the outcome from their counterparts in some other industrialised countries.
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