The Dimensions of the Challenge

CIOs need to figure out the future of IT leadership in an industry where the future seems to change every day. "IT's relationship with the business is changing, and in ten years the job you do today won't be the same as you do then," says Phil Murphy, a principal analyst at Forrester Research.

Business is now digital — no company can run without effective technology strategies. Those that truly manage their information well really do gain advantages over the competition. That means effective CIOs have a seat at the head table.

The shift in business expectations means that CIOs have better job security than in the past. But it also takes longer to find good ones with the right mix of business and technical know-how. For example, Pete Walton is in his second stint as CIO at Hess Corp. The petroleum products company coaxed him out of retirement in 2005 when its CIO at that time left. Hess was wanted someone who could take its Information Services "to the next level," says Walton. Among other things, that meant finding a new IT leader who could "fuse with the business" and create a culture of innovation.

"CEOs want someone who's business savvy and can figure out how you can use technology for the business. Trying to find that hybrid person is hard," says Diane S. Wallace, CIO for the state of Connecticut and a judge for the 2008 Ones to Watch awards.

It will only get harder to find them, just for demographic reasons.

"We have this triple threat of labour shortage: The Boomers are retiring, young people are not going into IT and fewer people are getting degrees," says Robert D. Scott, who in February retired as Procter & Gamble's vice president of Global Business Services. Scott says he noticed a drop in IT interest during the technology bubble of the late 1990s. Then the rush to outsourcing created a cloud around U.S. IT jobs. That pall persists despite strong job growth in IT, which is expected to add more than 200,000 jobs by 2016, according to the Bureau of Labor Statistics.

P&G is a case in point. It outsourced about half its IT staff in 2003, but IT employment is now back to the level it was five years ago. Scott says that this is because the company outsourced its commodity IT, and "internal IT moved up the food chain, and is creating more and more business value."

Scott says P&G continues to attract strong candidates for IT jobs. But the hiring pool is not as deep as in years past. Plus, P&G believes strongly in promoting people steeped in its culture. It worries about keeping its Generation Y employees.

The triple threat is already creating an IT brain drain. Wallace says 40 percent of her staff of 518 will be eligible for retirement in the next two to three years. Barbara A. White, CIO and associate provost at the University of Georgia, says she's lost 90 years of experience in April when three staff members retired, and has a bulge of staff likely to retire in the next 10 years.

The situation facing IT reminds Jonathan Kass of his days in the aerospace industry. Kass, vice president of operations and CIO at Veterinary Pet Insurance, started his career as an aerospace engineer in the 1980s. As a new hire, he found that he was mostly reporting to people in their 40s and 50s. An entire generation of leaders was MIA, their ranks thinned by the layoffs that swept the industry in the 1970s to mid 1980s. Kass sees the same phenomenon emerging in IT in the wake of the job insecurity sparked by outsourcing. And he worries about what it means for fast-growing companies like his own that need strong leaders at all levels to innovate and compete. "You're talking about hiring very junior people who won't be ready for leadership," he says.

How can today's CIOs help their companies bridge this leadership gap? There are ways to cultivate the next generation of leaders. But it takes dedication to managing people, not just information.