Dotted Lines Do Little for IT Organization

By N. Dean Meyer

I’ve met so many corporate CIOs who have “dotted-line” responsibility for decentralized IT groups. Business-unit IT groups report (solid line) to their business units, and also report (dotted line) to the corporate CIO.

One CIO with such dotted-line relationships thought it meant that he was ultimately accountable for results of the corporatewide IT function, including the work of IT groups in the business units. As such, he tried to determine which things were done at the corporate versus business-unit levels. He sponsored corporatewide applications. And he established standards and practices.

Not surprisingly, business-unit IT leaders saw him as the enemy—micromanaging, controlling and dictatorial. They fought him and undermined his initiatives at every opportunity. It wasn’t long before they, with the help of their business-unit presidents, forced him out.

What do “dotted lines” really mean, and what can (and should) CIOs do with these quasi-supervisory responsibilities?

The Real Meaning of the Term

Some think that a dotted line implies some sort of supervisory responsibility. They grant that the business units can decide what is to be done, but corporate IT tries to decide how things are done (professional practices). Some even go so far as to influence career paths and contribute to performance appraisals.

Others think that a dotted line gives them some sort of power over people who don’t report to them. They feel they have the right to approve, or even command, activities done by (and funded by) business units.

Consider the “Golden Rule” of organizational design:Authority and accountability must always match.

Those with authority but without concomitant accountability are tyrants without checks and balances. Those with accountability but without concomitant authority are helpless scapegoats. A dotted line can be interpreted as either. It may mislead you to believe you can tell people how to do their jobs without accountability for their results; this naturally leads to open warfare. And it may imply accountability for the behavior of people you don’t control; this sets you up to fail.

Neither dynamic can work.

The truth is, dotted lines are meaningless. Business unit CIOs get their funding from the business unit, answer to the business unit president, and are quite willing to “defend” their business units against corporate meddling. A dotted line gives corporate staff no real authority over business-unit activities. And a corporate executive certainly must not accept accountability for others’ behaviors without any real authority.

So why are dotted lines drawn?

From a cynical perspective, it’s an attempt by corporate leaders (like the CEO) to make the corporate CIO accountable for things he or she cannot control. Said another way, it’s setting the corporate CIO up as a scapegoat to take the heat when business units misbehave. A CEO must direct staff through legitimate lines of authority—through business-unit presidents—not send the corporate CIO out to do his or her dirty work.

More positively, a dotted line is an ill-conceived attempt to give the CEO a single point of contact for the entire IT function, and to make up for the dis-integration that inevitably results from decentralization.

Five Legitimate Roles of Corporate IT

So let’s get back to basics. Corporate IT is a business within a business, a shared services provider that exists to “sell” products and services to its customers. (I use the word sell whether or not money changes hands.) It’s as simple as that. No arm-waving about “governance” or “corporate citizenship” changes that fact, or makes you exempt from the Golden Rule.

With that understood, there’s a lot that corporate IT can do to coordinate a fragmented IT function, and to generate economies of scale and synergies. Specifically, corporate IT can fulfill five roles:

1. Full-service provider to clients within corporate headquarters.
2. Sole (monopoly) provider of a short list of products and services where the synergies and economies of scale are obvious. Examples include wide-area network services, mainframe data center services, and emerging technology R&D. The products and services on the short list should be determined through a consensus of IT leaders.
3. “Outsourcing” vendor of choice whenever business-unit IT groups wish to buy from it. In this case, the decision as to what corporate IT will do for a business unit is completely at the discretion of the business unit, and corporate IT must earn the business through excellent performance and customer focus.

   By the way, the buzzword centers of excellence means that decentralized IT groups can also be shared-services organizations, selling to one another. This is generally not wise. It sets up internal competition that wastes resources and becomes contentious. There’s plenty of external competitive pressure to keep people honest. If a function is to be shared, it’s best put in corporate IT.

4. Sole provider of coordination services where decisions must be made that affect the entire corporatewide IT function. Examples include architectural standards and security policies. As a coordinator, corporate IT has no power; its job is to facilitate a consensus among stakeholders (where it is just one voice in the room).

   Corporate IT can also facilitate collaboration among all or some of the business units with common needs. Examples include shared vendor contracts (a purchasing service), and facilitation of client consortia that share the purchase of common systems such as ERP.

   Note that both of these coordination and facilitation services are just that—services—not vaguely defined lines of reporting. As such, business units may or may not choose to buy them. It’s up to the CEO and business-unit presidents to create the need for collaboration, e.g., by demanding enterprisewide standards and security policies. Only then will business-unit IT leaders choose to buy these coordination and facilitation services.

5. Spokesperson for the profession, promoting the best interests of IT staff throughout the corporation. The key here is to never speak for others or make commitments for others. Rather, the corporate CIO can further the profession by encouraging cross-boundary collaboration (professional interest groups) and representing staff’s interests in corporate policy discussions.

These five roles deliver much of the intent of dotted lines without violating the Golden Rule.

By selling through (not around) decentralized IT groups, corporate IT is not disempowering autonomous business units in any way. Yet as it earns market share, corporate IT delivers desired economies of scale and synergies. And by accepting accountability only for its five lines of business, it can contribute to corporatewide objectives without becoming a scapegoat or an ineffective patch for the problems engendered by decentralization. One more benefit: By always treating business-unit IT groups in a respectful, customer-focused manner, relationships improve and corporate IT will find itself with more, not less, actual influence. Sometime the “soft” approach is actually the strong approach.

What to Tell Your CEO

So what do you say when your CEO gives you dotted-line responsibility for IT? The right response is not a passive “OK.” Trapping yourself in an untenable situation is not good for the corporation nor for your career.

A good answer is, “Let’s talk about what that means.” No doubt every objective of the dotted line can be better achieved through one of the five legitimate roles of corporate IT.

The Bottom Line

In reality, dotted lines do little to achieve their intent, but they’re very effective at creating rules that are ignored, impeding effectiveness, straining relations, undermining a culture of customer focus and encouraging further decentralization.

Accepting them as your “reality” is not in the best interests of the corporation, and it certainly is not in your own best interests. It’s far more effective to work with corporate and business-unit leaders to clarify accountabilities and authorities, and to find effective ways to redress the problems of decentralization. Stick with the business within a business paradigm, and it will lead you to a realistic and effective approach to corporatewide coordination.

Dean Meyer helps IT leadership teams design high-performance organizations. Author of six books, numerous monographs, columns and articles, he brings innovative systematic approaches to what others consider the “soft” side of leadership. Contact him at dean@ndma.com or visit his website for information that can help you implement these ideas, or with suggestions for other buzzwords to analyze in future columns.