IMPROVING CIO IMAGE IN THE NEW ECONOMY:
THE ROLE OF THE CIO
Group #1, IS 6800, Fall 2005
Farwah Gardezi
Debbie Jaeger
Yakun Liu
Ray Phariss
Executive Summary
1
The term CIO was first used in information technology (IT) 26 years ago by William Synott, a senior vice-president of the First National Bank of Boston, at the 1980 Information Management Exposition and Conference. He stated that the CIO was no longer equal in rank to the Chief Executive Officer (CEO) or Chief Financial Officer (CFO), but that the CIO would be responsible for obtaining and analyzing information, set corporate policy, and affect all office technological systems (Alter 65).
Many years later, the role of the CIO becomes an extremely important topic to managers. A CIO’s responsibilities have evolved from being solely in charge of data processing for all information services of an organization to a position that also completely understands a company’s strategy and business plans. The position of the CIO has become one of the most challenging and active leadership roles in business.
In many American companies and institutions today, a CIO must be a manager first, then a technician. He or she should be more interested in what works (managerial role) than how it works (technician’s role). In fact, some companies formally separate the technical role by creating a Chief Technology Officer (CTO) position to clarify the responsibilities. The CIO may know technology, but he must also know how to manage in order to add value to his company and get the most from his IT staff. Indeed, as the size of many companies’ IT departments grows in order to keep up with emerging requirements driven by new technologies and complex information systems, CIOs who become too focused on specific technologies may find that they are unable to provide the effective leadership that their highly skilled employees require. Further, they may also risk losing the respect of the company’s business leaders because of a failure to maintain the proper focus on business needs driving technology investments rather than the opposite. Brian Hawkins, president of EDUCAUSE, states, “The CIO’s role is not to focus attention on the technology, but to emphasize the opportunities that are possible through the effective use of technology” (Hawkins 102). To be most effective, CIOs must continually function with just the right balance of technical proficiency and adherence to sound business principles.
This paper will discuss the role of the Chief Information Officer (CIO) based on both research and case studies developed from personal interviews with the CIOs of three diverse organizations: Smurfit-Stone Container Corporation, FACRI (a Chinese company specializing in flight control and navigation systems), and the University of Missouri – St. Louis (UMSL). Two of these sources were suggested by our professor and the other (FACRI) was chosen based on the existence of a personal relationship that made the interview possible, and also because we believed it would add a relevant and unique perspective to our analysis.
We will explore the demographics of the typical CIO, identify similarities in the challenges they face, compare their goals and functions within their respective organizations, and examine their educational and professional backgrounds.
Finally, we will present our conclusions about the continuously evolving roles that CIOs are performing, along with some possible explanations for this trend and for the differences among the three CIOs in our case studies.
1
WHAT IS A CIO?
According to Patricia Brown, “Strategic CIOs have focused on keeping their company economically solvent by using technology to enable more efficient business operations that cut costs without compromising performance” (Brown 29). In other words, they emphasize bottom-line results and strive to maximize profit margins by helping the company to work smarter, not harder. By making business processes more efficient through the use of information technology, companies can get the same results with fewer resources or do more work with the same resources. Either way, the result is a cost reduction and this can make a company more profitable.
Both our research and case studies point out that CIOs have similar priorities. The priorities of top CIOs include improving business processes, advancing IT infrastructure, improving security, cutting costs, and aligning IT plans with company business plans (Broadbent 5). While there are elements of technical considerations in these priorities, technological knowledge alone will not necessarily generate the best solutions. Rather, the CIO must leverage his knowledge of the capabilities offered by various technologies and his insight into the goals and processes of his company in order to identify and implement the best solutions to meet his company’s needs. Under the right conditions, an effective CIO can move beyond a reactive mode of problem solving and into a more proactive mode where he becomes part of the company’s strategic planning team. Ideally, CIOs provide thought leadership to other top executives to make them aware of the possibility for IT to support and improve the strategy of the firm (Enns 156).
Through our study, we learned that CIOs face similar issues in security, budget, and attracting, retaining, and training IT staffs. All of our three interviewees mentioned them. We also learned that from 1997 to 2005, reporting structure has improved: 5% reported to the CEO in 1997, whereas 55% report to the CEO in 2005. This trend is an indication that the status of CIOs is improving.
As the cost, strategic importance and complexity of information systems and information technology in business have continued to rise, the CIO position has received more attention and, in many cases, become more powerful and influential. In fact, some companies will even rely on a CIO to reinvigorate their business by implementing the right mix of technologies and systems to get the company back on track. These CIOs are classified as “turnaround CIOs.”
Turnaround CIOs are brought into an organization when “something big” has, is, or will occur at the company, such as financial problems, consistently bad performance in IT, a merger, or a major shift in operations. Charlie Feld, former CEO of the Feld Group, states, “I think the need for these kinds of CIOs is becoming more immediate now. In every industry now, there is a Wal-Mart or a Dell that is changing the game. The older companies need to transform their legacy systems to enable, not inhibit, the speed and agility of business” (Holmes). This type of CIO must make rapid decisions to have a significant impact on the business in order to produce an effective turnaround.
While not all CIOs have what it takes to be a turnaround CIO, there is reason for all of them to be optimistic about their profession. According to Graham Waller, senior vice president with Meta’s Executive Advisory Services, “Leading CIOs are now entering an era filled with great promise, whereby there is a growing opportunity to partner closely with the business and drive transformational capabilities” (Bernard).
While some CIOs differ in the type and scope of their responsibilities, there are some functions that seem to be rather uniformly assigned to the CIO. These would include managerial oversight of the company IT organization, policy and funding authority for IT-related programs, and technical strategy formulation for the company. Aside from these core functions, many other ideas exist and they are continually evolving over time to meet new and growing demands or to accommodate new trends. For example, in 1997 it was thought that a CIO should oversee the records management, office systems, data processing, telecommunications, corporate libraries, and others (Romanczuk 14). While some of these functions remain relatively unchanged, other functions have emerged such as web-based applications, enterprise resource planning (ERP) systems, and much more complex security concerns. Indeed, the number of cyber security professionals is projected to increase at a yearly compound rate of about 14% from now until 2008 (Gross). Further, today’s CIOs are increasingly taking on more strategic roles within their organizations rather than just being asked to keep the computers and telephones working.
The following are responsibilities are commonly assigned to the CIO:
· Maintain all IT systems operating with a focus on continuous improvements
· Plan to influence business with technology
· Develop applications.
· Design IT infrastructure and architecture, including computers, networks, and the Internet.
· Outsource for special projects
· Establish strategic partnerships
· Enhance customer satisfaction, both internally and externally
· Train users and IT staff
· Attract and retain qualified IT staff
· Prepare backups and disaster recovery
· Purchase hardware and software
· Keep strong relationships with executives in organization
As CIOs continue to become more involved in business decisions, companies are becoming more aware of the need to have a CIO who is suited to the task. According to Matt Ebaugh, senior Vice-President and CIO of Commonwealth Healthcare Corporation, “CIOs are promoted within the business…(A) CIO needs to know both business and information technology…Would you appoint someone as CFO if he couldn’t read and explain a balance sheet?” (Blair 58). This hybrid requirement has evolved over the last few years as CIOs have been successfully added to strategic committees within their organizations. As early as 2001, fifty-five percent of CIOs stated that contributing to corporate strategy was one of their three top
responsibilities (Onan 90). According to Bill Johnston, president of Alinean, “A general understanding of business dynamics would be helpful. CIOs should have a holistic perspective and have an understanding of the functional needs of other departments” (Palmer).
The following are desirable CIO skills sought after by successful companies:
· Strong business direction for the industry.
· Express ability to maximize benefits of IT in solving business problems.
· Identify and evaluate new technological development
· Communicate with non-technical customers and management
· Strong organizational skills
· Balance and execute multiple IT projects on time and within budget
· Ability to get along well with existing management team
· Outstanding interpersonal skills
· Think strategically and practically
· Be flexible
· Work long hours in a stressful situation
· Leadership (Onan 91).
WHO IS A CIO?
- DEMOGRAPHICS
GENDER AND AGE
Of the 405 CIOs polled in a survey by CIO Insight, 91% were male, whereas 9% were female. In addition, the average age was 47 years old (Alter 65).
IT BACKGROUND
Of the 405 CIOs polled in the survey, 65% had a background in IT only, 9% had a background in business only, and 26% had a background in both IT and business (Franz). Most successful CIOs come from sales and marketing, plus have a technology background. It is easier to teach managers the technical side rather than teach management skills to those technically strong (Alter 65). Most IT executives elected to the position of CIO were executives with many years of experience in various fields (Kern).
CAREER
Of the 405 CIOs polled, 26% spent half of their career in IT and the other half outside of IT. Thirty-four percent of CIOs manage another corporate function while running IT. Sixteen percent of CIOs spend most of their time dealing with emergencies. In addition, 55% of CIOs report to the CEO or the president of their company (Alter 65).
SALARY
The following is a chart displaying the salaries and bonuses earned by CIOs in 2003 and 2004 from the 405 CIOs surveyed (Alter 65).
TURNOVER STATISTICS
Of the 405 CIOs polled, the average number of years a CIO stays at the current company is 5.4 years. The average number of years a CIO maintains the title at any company is 9.7 years. In addition, the number of hours worked per week by a CIO is 53 (Alter 65).
WHAT IS SUCCESS?
Of the 700 CIOs polled by Optimize, 71% of CIOs say that their success is measured by increased customer satisfaction, whereas, 64% state that performance is measured by innovation and new developments. Also, 58% say that their success is measured by increasing worker productivity (Brown 29). For a CIO to succeed, it is crucial that they actively manage business expectations because it leads to better IT governance, alignment to business technology, and more sophisticated project management (Wailgum).
IT BUDGETS
Two dilemmas CIOs encounter are: 1) often, the money CIOs save the company is from cost avoidance measures, which are a one-time savings, and 2) they are sometimes inexperienced and thus, ineffective in explaining the value of information management to those who do not give it much thought. “CIOs do not bring in capital, instead they spend it” is the thought of many CEOs. The CIO is often in the middle of many of the most unstable and costly changes in the organization. It is estimated that companies, globally, are spending $52 billion a year on reengineering, of which $40 billion goes yearly into IT (Onan 90).
To fulfill CIO priorities, the 2005 IT budgets have increased 5% since 2004, which has increased business flexibility. Executives want quick returns on their IT investments; therefore, they must be efficient as they grow, yet remain profitable. June Drewry, a SIM executive board member and former CIO of AON Corporation, states, “With lousy architecture, security is very expensive. With good architecture, you can beef up your security at a much more reasonable price” (Alter 65). CIOs spend 63% of their budget on maintenance and 37% for new technology plans. For 2006, 55% of CIOs say they need to improve security and risk management, however 48% say they need to improve internal control processes and procedures (Brown 29).
EXECUTIVE RELATIONSHIPS
A CIO’s primary guarantee of staying power is support from the CEO. CIOs cannot succeed without support from top management and their peers in other areas because they cannot thrive in the important role of keeping the customer contacts informed without their support. However, the communication gap between the IT department and the business managers can damage the company even more than the CIO’s lack of peer support. IT sometimes does not get equal management attention as the company’s finance, human resource, and operations departments if management does not understand what IT does or believes that anyone can figure out an IT problem. Two main barriers for consideration of a CIO to be on the same level as a CFO are: the fear one person controlling the information, and resistance from all departments about creating another level of management (Romanczuk 17). Of the 500 heads of IT surveyed, 72% of CIOs claimed to have a healthy relationship with the CEO, whereas only 55% of the CEOs agreed (Prewitt).