"E-commerce will be driven by young executives more likely to be computer literate. Therefore, business training of these heirs-apparent is vital to inherit the future" - Australian CEO, Compass 2000 ReportIt was a large, profitable company with 300 employees. Senior management and the CIO had established a regular dialogue. It went something like this: "Can you fix this PC? I need this keyboard rejigged. What do you think of the new Palm Pilots, should I get one?" So senior management did have a working relationship with the CIO, and they did communicate regularly with him.
The trouble was the relationship was the wrong relationship and the communications were doomed.
The CIO was treated as a technician rather than a strategic asset. Day to day, senior management wanted their technical problems fixed or a chat with the CIO about flash new gizmos - but when it came to review time, they hammered him for having failed to contribute to the strategic plan.
Frustrated, he left - and senior management's poor opinion of IS staff was confirmed.
That problem was that senior management did not let the CIO do a CIO's job. It is difficult to imagine asking the CFO of an organisation to come and fix up a spreadsheet, or pester him for an opinion about the best personal investment products on the market.
The CFO is left to do his job. The CIO barely has time to do his.
The sometimes inharmonious relationship between the CEO and the CIO is clearly revealed in a worldwide survey done by London Business School and Compass Management Consulting. According to the World IT Strategy Compass Census 2000 report, although they are now recognising the strategic value of IT to their businesses, CEOs struggle with the notion that the CIO must be allowed to do his or her job in order to deliver this value. Fewer than one-third of CEOs questioned in the survey believe that it is the role of a CIO to transform the business through IT and only a handful more expect a CIO to "contribute to the business".
Yet if the CIO isn't going to release the value in technology, then who is? It's a little like Victorian society's notion of bathing. They liked the idea of being refreshed in the ocean and its health-promoting possibilities but were reluctant to shed their clothes.Consequently, they had themselves wheeled to the water's edge in bathing carriages, spent considerable sums paying for attendant servants and took to the waters fully clothed. This meant they in fact drew few benefits from their "exercise".
CEOs who expect strategic benefit from a division restricted to a support role are similarly encumbered. Senior management needs to shed its layers of prejudice about information systems and plunge into a much closer relationship with the CIO.
The Compass research brings together the opinions of 412 chief executive officers worldwide, 28 of whom are based in Australia. Rawdon Simon, managing director of Compass Analysis in Australia, says that despite their location, there was little difference in the CEOs' responses. The only distinguishing factor about the Australian responses was that proportionately more CEOs took the time to complete the survey here than did their peers overseas.
What the survey reveals is that information systems has reached the radar screens of senior management. In rank order, the main issues exercising the attention of CEOs in 2000 are increased profitability, business growth, e-commerce and improving IT performance. "IT-related matters are firmly on board agendas and can no longer be treated as somehow separate from the business," report says. It notes also that "the new economy is firmly influencing board agendas and occupying CEO mindshare. Abdication or delegation of IT-related issues is no longer an option for today's CEOs. They have to be fit for the information age."
Simon says that the survey reveals that CEOs recognise that information technology can contribute real value to the organisation. "In the past, IT was more a means to an end," he says. One of the key ways in which information systems could deliver that value was to forge a closer relationship with the customer, the respondents said.
Implementing customer relationship management systems was the primary way for IT to yield a competitive advantage, 38 per cent of survey participants said. This need for well-developed CRM systems was enhanced in the e-commerce age, given the potential to grow much closer relationships between supplier and customer.
Show me the Customer
The Compass report clearly demonstrates that CEOs were well versed with the business potential of e-commerce. They said the top business impacts of e-commerce were access to new cust-omers, improved supply chain efficiency, more business from existing customers, retention of existing customers and better management of information and knowledge. These, they said, far outweighed the importance of any cost saving which might be possible thanks to e-commerce. Compass took this as a signal that "CEOs seem to understand the impacts and capabilities of e-commerce that really matter".
CEOs also seem to be feeling more comfortable actually using the information technology in their organisation rather than preserving their observer status. Nineteen out of 20 CEOs said they were comfortable using IT and understanding the business potential of IT. Fewer were comfortable making executive decisions on IT, which, says the report, "suggests that CEOs should build close relationships with their chief information officers and seek to acquire more experience in making the more strategic decisions on IT".
Simon describes as "quite strange" then that the CEO struggles with the question of how much authority the CIO should get. Although only 35 per cent of CEOs claim to be very comfortable making executive decisions about IT, the remainder do not seem to be actively seeking help from the CIO.
In Compass' previous report, released in 1999, about half of the CIOs in the companies surveyed had been granted a significant role in strategy formulation. This year it is about the same. "It certainly does seem to be an attitudinal thing," Simon says. However, he also says that the CEOs who have a more mature attitude to their CIOs, and admit them into the inner circle of decision makers, seem to be the CEOs who claim to have secured more benefit from information technology. These, though, remain the exception and "there still seems to be some fear of IT", Simon says, adding that "it could be a generational thing".
So if the CEO doesn't want a close relationship with the CIO, and doesn't want him or her in the boardroom, what does the CEO want from the relationship?
The 2000 report asked CEOs to rank their expectations of the tasks and performance of their CIOs. In 75 per cent of cases the key tasks of a CIO were identified as: providing systems to support business strategy keeping users and managers satisfied running an economical IT operation building a sound IT infrastructure introducing relevant new technologies educating the CEO on IT trends.
Less important, but still notable, were the requirements that CIOs contribute to business strategy-making, be an agent of change and re-engineer the IT functions.
As Simon notes, it is clear that CEOs are aware that there is a real value which the CIOs can deliver; never- theless, the CEOs still need to overhaul the relationship between themselves and the CIO before that value can be realised.
John Smyrk, an independent information system consultant and lecturer with the Australian National University, says that the apparently uncomfortable relationship between the CEO and the CIO that the survey exposes is borne out in the field. However, he is reluctant to lay all the blame at the feet of the CEO. "The CIO is the residual element of the old order and the way IT was integrated in organisations. Even the term CIO', rather than being the vanguard of the new model, is more the rearguard of the old model," he claims.
He favours the emerging term chief technology officer (CTO), which CIO magazine has already identified as a trend. Although it is gaining currency in Australia , it will take more than a change of acronym to secure the level of attitudinal change necessary to ensure that the full potential value of information technology can be transferred to corporate Australia. Smyrk nonetheless believes that CTO will become a favoured term as business recognises that it is the role of the CIO to deploy not information but technology. CTO, he believes, is far less ambiguous a descriptor. "This per-son has a clear technology focus as an enabler of the business," Smyrk says.
Just as the CFO has responsibility for the financial conduct of the organisation, the CTO will have ownership of the IT strategic plan and absolute resp-onsibility for the information technology and communications infrastructure, Smyrk says. Although part of that might be delivered through an outsourcing arrangement, the buck would always stop with the CTO, just as the accounting buck ultimately stops with the CFO.
Brand New Model
One of the biggest hurdles to be cleared before the relationship problems between the CEO and the CIO can be resolved, Smyrk says, is that the CIO model is wrong and consequently the CIO term is wrong.
Nomenclature aside, Smyrk believes that the greatest ally a CIO has in forging a stronger relationship with the CEO is the continued unfolding of the e-commerce and Internet ages. Rather than management discussing technology systems and data processing centres every time they converse with the CIO, they are now introducing e-commerce into their organisations and have a new common ground. "That subtle change of label has delivered a change in the way IT is unfolding," Smyrk says. "Most e-commerce projects are commerce projects underpinned by technology" rather than being technology projects which management hopes will deliver some form of additional business.
Just as the CFO is charged with establishing the systems and routines the company uses in all its financial activities, the CIO or CTO should take charge of the technology that the company uses as the foundation for e-commerce and all its other activities. Just as the CFO reports to the board about a better leasing vehicle or improved debt restructuring, the CTO or CIO should report to the board on the best technology platforms for the business.
Smyrk says that one of the problems which presently plagues CIOs is that "everyone who can pick up and read a technology magazine is immediately an expert on technology. The CIO must have the power and authority to say: No, you may not make decisions - but you may make suggestions.' They cannot be dictated to, any more than someone could tell a CFO that they have had a great idea for leveraged leas-ing, so the firm is moving into it'."
In order for the CIO to claim that level of power and authority, the CEO has also to create an environment which will permit that. The CEO has to move beyond the present state of recognising the potential value of information systems - identified in the Compass 2000 report - and towards a much closer relationship with the CTO or CIO, which will allow the business to seize that value.
"It is a bit strange this reluctance to let the CIO in on the board agenda, yet to hold the CIO accountable for the implementation," Simon says of the uneasy relationship between the CEO and the CIO. CIOs must, however, not become disillusioned at the CEOs' sluggishness in admitting them to the boardroom, he says; rather the CIOs must continue to play a leading role, educating the board and CEOs about what technology could achieve for the business.
"They have a tough job ahead as they are caught between a rock and a hard place," Simon says. "The expectations of the CEO are conflicting. They expect the CIO to support the strategy but not to contribute to the business. CEOs want CIOs to satisfy the users and yet to be economical. They want them to implement a sound structure, but also to implement change." A rock and a hard place indeed - BYO padding.
Corrs Chambers Westgarth
Friends, partners, board members: lend me your ears Last year, an information systems consultancy team breezed into the offices of legal firm Corrs Chambers Westgarth. It was to conduct a strengths and weaknesses analysis which would be important for the firm's CIO Barbara Teasdale who was about to prepare her business plan for the current financial year.
"One of the [consultancy's] recommendations was that technology needed a higher level of profile in the firm so that at the board level there was a greater level of understanding [about IT]," Teasdale says. Months after the findings of that investigation were circulated, she still reports to the corporate services director.
Corrs is one of the largest legal firms in Australia. It employs more than 1000 people, 150 of whom are partners, consultants and special counsel - effectively the management board of the legal partnership. Although the firm does employ a full-time CEO, Meredith Hellicar, many of the management decisions remain founded in the partnership. "A significant part of my job is to communicate to the partners so that they can understand what is happening with technology - and also at budget time, understand the nature of the spend," Teasdale says.
She believes that there is a significant change occurring presently in information systems: the dawning of the age of "IT value". This, she believes, will gradually force closer and closer links between the CIO and senior management. "Previously, technology was necessary to keep the business running," Teasdale says. "Now it is a value-added area." As that is recognised, she expects the strategic value of information systems also to be revealed and more actively sought.
For the present, at least, in communicating her message Teasdale has to use a go-between. "I believe absolutely that I could offer more if I had the ear of the board directly," she says. Still, she does not permit herself to be frustrated by her lack of access, accepting it as the currently pervasive situation as in most large organisations.
"I would prefer to be closer and to have more communication with the CEO and at board level," Teasdale says. She remains, however, optimistic that this will happen as the value of information systems is recognised. "It is a transition," she says.
- B Head
When going the distance means keeping some distance Ted Johnson is the CEO of Victoria's RACV and is fully aware of the importance of the Internet. He is well versed in the benefits of e-commerce. He recognises that "information systems is the platform on which we will build our future direction".
Johnson keeps some distance between himself and RACV CTO Charles Burgess. Ex-Hewlett-Packard and ex-McKinsey, Burgess reports to Johnson through the executive general manager of corporate services. This, Johnson says, is largely because of the RACV's tendency to outsource much of its information systems work.
Johnson says that the CTO and the general manager are responsible for the smooth operation of the outsourcing contracts, including a large deal let to IBM GSA last year. Both of them work in concert to ensure that the outsourcing arrangement meets its objectives in terms of performance and to administer the financial penalty scheme associated with that. Therefore, Johnson says, it makes more sense that Burgess reports to him and the board via the general manager. This includes communicating the information systems strategy, which the organisation has retained in-house and which is part of Burgess' bailiwick.
At present, one of the main items on the RACV information systems agenda is developing a new Internet distribution system called Membernet. The system is based on the partnership between the CTO and another member of the executive team rather than between the CEO and the CTO, even though this will fundamentally alter the relationship between the organisation and many of its clients.
Johnson says that at present it makes sense for the CTO to work with other members of the executive team and be seen to be working in concert. However, he acknowledges that the relationship between managers is constantly evolving; although he believes the current reporting structure is the best for the RACV, he acknowledges it may require a change in 12 months. - B Head