Analysts suggest that CEOs come from Mars and CIOs hail from Venus. Maybe. But they have to find a way to communicate if business is to reap the full benefits of technology. Beverley Head examines the reporting structures that prevail and those that present problems.
"The most common complaint I hear among my peers is that it is not the structure of an organisation but the politics and personalities involved." So says the CIO of a Queensland institution.
Politics and personalities rate frequent mentions when discussing reporting structures with CIOs. It appears that it is not so much the title of the person you report to but their attitude and approach to information technology which count for most. Reporting to a luddite CEO may be a far worse experience than reporting to a savvy CFO. Nevertheless, the fact remains that, if the CIO cannot win the support of the CEO either directly or circuitously, he or she is doomed to play little strategic role in the organisation and be left tinkering at the technological fringe.
The Compass and London Business School survey of CEO attitudes to CIOs, conducted in 2000, found that, although CEOs were aware of their need for competent CIOs, they struggled with the issue of how much strategic authority those CIOs should be granted (see cover story, CIO, October 2000). Most also struggled with their need to make executive decisions about IT, with only 35 per cent claiming that they were comfortable in this regard. The Compass report stated that: "This suggests that CEOs should build close relationships with their CIOs and seek to acquire more experience in making the more strategic decisions on IT."
Its hard to find a CIO to disagree with that statement.
As the CIO of a software house notes: "There is no alternative because of the influence a CIO can bring to the business." He reports to a CEO fully cognisant of the promise and perils of IT, but not all CEOs are so enlightened.
Nor is the CEO the only executive with an IT axe to grind. CIOs have many masters within an enterprise. Any line manager or business unit manager requiring an information system will make demands on a CIO's time and resources. This is compounded by often complicated corporate structures, particularly in big business.
According to the Boston Consulting Group (BCG), history has left most large enterprises with a hotchpotch of business units, which are served by a raft of line managers who are often following individual rather than corporate agendas. At one level, the CIO owes a duty of care to each of those line managers to provide the information systems that will underpin their operations and contribute to the corporate whole.
Should the CIO then report to those individual line managers, or through the operations or finance manager who has responsibility for those lines of business?
One CIO says: "I've sometimes mused whether a CIO wasn't better off reporting to the individual unit for which most of the IT is being done: that is, to whoever is paying for it. But maybe that is not a good idea as the business might change."
There's the rub. Modern enterprises are constantly in flux (at least the successful ones) and to attempt to answer to a vast and shifting network of masters for their individual projects is not the true CIO role. It might be, to a lesser extent, a job for the chief technology officer (CTO) and certainly for the IT project managers. CIOs, however, need to ensure that the operational side of the business runs smoothly but also be able to influence strategy; and most agree that the best way to achieve that is to have the ear of the CEO.
The CIO of a large Sydney-based arts body believes he has the perfect reporting structure in place, with a direct report to the CEO and regular access to the board. He says the reporting structure is fine, but then the personalities and political issues kick in as he acknowledges that a fair proportion of the board "are ambivalent about IT" - although, as he racks up successful IT projects, it is getting easier to secure the board's attention. Interestingly, he says that IT ambivalence is not linked to board members' ages. "The oldest on our board is the most turned on about IT. We have nine on the board. Five are [uninterested], three are vaguely interested and one is very interested."
Although there are occasional frustrations, he believes it is import-ant to persist with direct board communications. "I really need that direct access to the board with my peers, the other two directors, and it is important that we have a voice at the board." This, he claims, is key in order to influence strategy.
A recent success was to convince the board of the need to explore online education initiatives, with a project now under way. The CIO believes that the more runs he can get on the board the easier it will be to get a fair hearing for IT initiatives. "You have to get the runs on the board, but you don't have to convince them all, just the majority," he says. "I tend to concentrate on those [board] members I think are interested and tell them what we are doing. It is working."
The show-and-tell approach is a strategy also proposed by BCG, which notes in its report exploring how imperfect organisational structure can be overcome, that: "An explicit value-creation goal takes vision out of the realm of rhetoric and into that of measurement. It creates an objective discipline that managers can use in planning and evaluating initiatives. It also establishes a stable point of reference as capabilities evolve and as new challenges and opportunities emerge."
Says the CIO of a transport company: "I'm a great believer in delivering value in IT and you do that by showing results." And results speak loudest in CEO language.
One CIO, who does not have regular access to the CEO, is starting to be concerned that this will inhibit his ability to influence strategy plans to use the "runs on the board" strategy to combat the problem. "I'd hope that the operations role will legitimise us and then bring me through to a higher level in the corporation," he says.
The CIO of a large retailer has managed to do just this, shedding one reporting structure and taking on what he considers the more appropriate structure of reporting to the CEO after achieving the goals originally set for him. Brought into the organisation when it was going through a restructuring, the CIO was told to report to the chief financial officer. "I was hired for the change program and the CFO was the head of the change program so it was seen as the most appropriate structure," he says. "I still think that wasn't the most appropriate arrangement as the CFO did not have a corporate vision but a more parochial view."
The CIO acknowledges, though, that during the change program his challenge was not to deliver strategic change but to get buy-in from the business units in order to effect change. In any case, at the time of the reform, a direct link to the CEO might not have been particularly fruitful as the then CEO had little interest in what IT could bring to the business apart from the basic computing platform. The arrival of a new CEO and conclusion of the corporations restructure generated a new reporting structure for the CIO. "Now I report directly to the CEO," he says. "We have regular and ad hoc meetings and I am part of the executive management team that meets weekly, and on the IT steering committee that the CEO chairs."
Although more enamoured of IT, the new CEO is far from blindly seduced, and the CIO still understands that his primary function is to ensure the smooth operation of the company's underpinning information systems. But the close relationship that the two now enjoy means that the CEO directly approves the major IT project funding, "which ensures the alignment of IT with the business strategy", the CIO explains.
When he had to report via the CFO, he found that he was often having to the field pet projects of individual business managers. They perceived these "projects" as valuable in their business unit but were, in fact, not necessarily aligned with the overall business strategy.
It's hardly surprising that this CIO was underwhelmed with reporting to the CFO; and most CIOs similarly consider a report to a CFO about the worst possible situation.
A large transport organisations CIO says: "Definitely the worst reporting structure is to a CFO. There tends to be less focus on strategic systems and more on internal systems and cost cutting." Although this CIO currently reports to the CEO, he has in the past reported also to the CFO and the chief operations officer. The latter arrangement, he says, is not too dissimilar from reporting to the CEO as in most organisations a COO is effectively a deputy managing director and has a solid strategic view of the company. Nevertheless, this CIO believes that reporting to the CFO is "manageable" as long as the CFO is coached about the strategic value of IT and then passes that information higher up the corporate food chain.
Yet not all the CIOs believe this is achievable.
One says: "Under the CFO, any creativity you might use in IT is stifled. The CFO sees IT as purely a support for the business." This, he notes, is particularly short-sighted in an age when enterprises are encouraged to forge direct online links with their customers. CFOs, he believes, might stall that sort of development because there is no obvious early return for the company. "Before my position was created, there was an IT manger who reported to the CFO and we had a stagnant information technology system. There was a cost-control approach," the arts body CIO says.
That, he says, is a waste of corporate funds. If that view is entrenched, says the CIO, it would be cheaper for an organisation to hire two or three more junior technologists who could deliver the IT systems needed to run the business today, rather than having a more experienced CIO who was hired to deliver today's technology and also show how technology could be used to shape the future.
The lack of attention to IT strategy concerns the CIO of a utility. This utility has an executive board, but the CIO has not been invited onto that board, reporting instead to another member of the board, the commercial manager, and with rare access to the CEO.
Although the CIO believes that "IT is not necessary to have continued contact or extended access to the board", there are occasions when it would be useful, particularly when it comes to influencing strategy. After a relatively brief period in the role, the CIO has as yet not had much opportunity to address strategic matters, having had to grapple with the existing and required IT infrastructure. He's worried that under the current structure "I will not have enough exposure to the executive members of the board for the forward thinking stuff. This will be a problem in six to 12 months.
"I am trying to tackle it now by building relationships with the executive team by asking for meetings with them," he says. "The one person I don't have access to is the CEO - either formally or informally - and I don't know how I will overcome that."
According to the Queensland institution CIO, on occasion it may be necessary to tackle the lack of access or lack of understanding issue by moving on. She says that if the lack of awareness or interest is lower down than the executive team - that is, in the line management level - it behoves the CIO to correct that attitude through education or demonstration "But it is time to give up and go home," she warns, if that lack of interest extends to the CEO, unless that executive appears to be on shaky ground, in which case it might be worth sitting it out in the hope that a more IT-aware CEO might be on the cards.
Another CIO concurs, adding that that for the CIO to demand a change in the reporting arrangements once in a role is probably not a wise tactic. It is, however, quite reasonable to ask for a particular reporting structure when going for a new job. He did so himself. "I raised it with the head-hunters and they put it to the CEO and he said it was non-negotiable. The CEO was ultimately asked to move on."
Whether now is a good time for CIOs to be out in the market looking for work is moot. Six to 12 months ago would have been a great time to move, says the CIO of a software company. Right now, though, with the spectre of recession, he says it might be better for CIOs to grit their teeth and wait for more prosperous times.
Not that he wants to move. He enjoys a strong working relationship with his CEO. However, there have been other sources of tension as his CEO has had to act as a buffer against overseas masters who are less enthusiastic about the strategic role of IT. Dealing with overseas reporting structures is also a concern to another CIO who has had to deal with such arrangements in the past. "The offshore reporting situation is very difficult and would deter me. You don't call the shots and can't build up a proper interaction because of the time zones or the distance."
She considers the ideal reporting arrangement to be the one direct to the CEO. "But even that is only going to be effective if the CEO believes in the power of IT to contribute to and underpin the organisations goals. If you have not got a CEO who thinks that way, then you're on a hiding to nothing.
"But then you rarely find a direct report to a CEO where that mindset is not in place," she says.
She herself reports to the operations and finance directors. "It is working well in the sense that, as with any Queensland company, we are medium-sized and do not have a CIO-CTO arrangement. This [reporting structure] acknowledges that more than 50 per cent of the IT budget is spent on the operations side," she says. "It is an operation like any other operation. There is a big part of our budget where the main management issue is cost and efficiency."
When she puts her strategic hat on, however, she acknowledges that it is no longer appropriate to report to the operations director. "For us, that is got around with a steering committee which meets as often as necessary - weekly if required", and the CIO is a member of that committee. Although she has no direct link to the CEO, she says that he is technologically savvy, albeit tempered by a hard-nosed business sense that demands any IT investment be fully justified.
This, she says, is an improvement on her previous role where, although she did report to the CEO, he was not as IT aware as her current CEO.
"Structure is nothing without the goodwill, the ability to interact and to communicate," she warns. "The most common complaint is not the structure but the politics and the personalities. There are CIOs who have felt that they had the ear of the CEO to progress with a program only to hear some weeks later that it has been pulled by the same person. "I hear quite a bit of that and it can make CIOs feel destabilised."
When it comes to major projects, CIOs also feel they need access to the board, even if irregularly.
"Board access is important because, when you are in an industry where IT is pervasive and important, then there will be the need for more investment in IT and that will be lumpy and needing board approval," says one financial CIO. "The board and senior management also need to be more aware of the level of risk in some of these IT programs that we undertake so that they can make better investment decisions."
According to a transport company CIO who is expected to attend board meetings at least six times a year, his "board is very receptive. [The members] are strategically focused and aware that IT has in the past not delivered the value that they were seeking." He speaks with almost two decades of experience in the CIO role. When he started out in the role in the early 1980s, it was an electronic data processing role in which he reported to the chief accountant. Today he believes that this arrangement is only appropriate for small and medium enterprises.
Now, after "several stints reporting to CEOs", he is firmly convinced that this is the most appropriate structure for a CIO hoping to effect change. "There's just less noise associated with what you've got to get done."