Whether your title is CIO, CTO or some other variation, one of the highest-stakes business relationships you have is with your CEO. In an era in which technology has become a key strategic tool, an effective working relationship between the head of the company and the head of technology operations is vital to business success.

As CEO for the Vanguard Group, I’ve long been a believer in technology. My interest in IT dates back to the early 1980s, when I was involved in budget planning for Vanguard. Though we are an investment-management company first and foremost, it was clear then that Vanguard needed to transform itself into a technology company as well. Today, technology accounts for more than 40 percent of our operating budget. This year, we’ll spend 20 times as much on systems development as we do on advertising. Technology is a vital competitive weapon and a strategic tool for Vanguard. In fact, no single part of our company could function without IT.

I’d like to share my thoughts with you about what makes a successful CEO-CIO partnership, but first I should make a few disclaimers about my views on IT. As the head of an investment-management company, I see business issues through service-industry glasses. I also have a bias regarding organizational structures?our company takes a centralized and matrix approach to technology. We believe that there are powerful organizational advantages to structuring IS as a "center of excellence," with key personnel also reporting to business areas.

A Model Partnership

Unfortunately, as I write this column, our organization is mourning the loss of our longtime CIO, Robert A. DiStefano, who died unexpectedly in July at age 52. Bob was much loved and respected at Vanguard, and he was also admired throughout the industry?in fact, he was frequently quoted in this magazine. Bob and I worked together for 17 years in one of the longest CEO-CIO partnerships I’ve heard of. Our one-on-one sessions every other week typically lasted three hours and ranged across a spectrum of business topics, from technology to people issues to competitive developments.

In the course of choosing Bob’s successor, I gave a lot of thought to what makes a successful CEO-CIO partnership. Based on this experience, I offer this recipe.

• The CIO should report to the CEO. When technology was a back-office function, it may have made sense for the CIO to report to the CFO. But technology has become a strategic tool, and the leader of technology operations should be positioned in the organization accordingly.

• The CEO should be engaged and interested in technology. A CIO can’t succeed unless the leader of the organization is known to be in the CIO’s corner. That said, it’s the CIO’s responsibility to educate the CEO and provide reasons to become engaged. (In other words, no whining!)

• The CIO should be engaged and interested in the business. Just as the CIO must educate the CEO about technology, the CEO has a reciprocal responsibility to see that the CIO is thinking about the business. At Vanguard, we say that getting IT right is all about getting business technology right.

• The CEO-CIO relationship must be an active engagement. The partnership won’t be strong without an investment of substantial one-on-one time to discuss business strategy and technology. An active engagement is mutually beneficial because of the exchange of perspectives that it provides. The CIO has a unique vantage point as a vendor to every business unit in the organization. He is also a change agent. What’s more, the CIO’s unique perch within the organization can yield telling insights about individual talent so that he can aid the CEO in leadership development and succession planning.

• The CEO must be able to count on the CIO to demonstrate fiscal discipline. In any company, the risk of spending money unwisely is probably greater in IS than in any other business area. Who is immune to the appeal of new toys? Unfortunately, we’ve all spent money on IT projects that we have regretted later.

• The CEO must support the CIO visibly, both within the senior leadership team and across the organization as a whole. When times are tough, companies are always itching to cut technology spending. Businesspeople tend to think they could do IT more cheaply and more efficiently than the IT folks can. But cutbacks in technology spending are often shortsighted. If everyone knows that the CEO supports both the technology program and the CIO’s control of that program, budgetary hostage-taking is less likely.