Being the First CIO Can Be Dangerous

Opinder Bawa faced a crossroads in his career last October. As the head of professional services at a successful software company, he was ensconced in a comfortable IT position. Still, Bawa was intrigued when Netro, a broadband wireless access company in San Jose, Calif., was looking for its first CIO. The challenge of being a CIO and Netro’s predictions that the $100 million company would be a $1 billion company in two years proved too compelling to resist. He accepted the job.

One year later, Bawa is another victim of the tech wreck. After routinely turning in $25 million to $30 million a quarter, Netro closed last quarter at slightly more than $2 million. Despite Bawa’s efforts to establish the CIO role and develop organized IT processes, his position was eliminated in the carnage. The lesson Bawa, who has since started his own IT consultancy, has taken away: Tread carefully.

He admits there were several red flags he should have paid more attention to when he considered the position. First was the tiny backlog of orders Netro had in hand when he joined the company, and second was the growing amount of Netro inventory stuck in its distributor channels. “It’s embarrassing to admit, but I got caught up in the standard story of how their stock would go from $100 to $700,” Bawa says. “Had I paid attention to the signs, they would have clearly shown me that this would have been one of the hardest hit markets in the downturn.”

Even under the best circumstances, the day-to-day reality of being a company-first CIO can be brutal. There is resentment from people loyal to the previous IT administration, suspicion from people skeptical of the new position, and resistance from departments and business units used to doing things their own way. Even when a company-first CIO does all the right things to solidify the role, there’s the risk that the company won’t be committed to the position in the long run.

Ray Causey is a good example of that situation. He took over as CIO of San Diego-based Mail Boxes Etc. (MBE) in 1999 and went to great lengths to establish his role among management and IT staff.

Two years later, Causey’s pet project?a $25 million satellite link between 3,500 domestic franchises and corporate systems, an Internet-enabled point-of-sale system and an Internet-based shipping system?has faced harsh public criticism and franchisee revolt (see “P.O.’d,” Darwin, www.cio.com/printlinks), but that’s not the worst of it. Since Causey spoke with CIO for this story in July, MBE eliminated his position. He was not available for comment after leaving. MBE spokespeople say his position was eliminated as part of a corporate restructuring that followed MBE’s merger with UPS this summer and that his decision to accept “early retirement” was not performance-related. Still, before leaving MBE, Causey acknowledged that being a company-first CIO “can be a huge headache.”

Nevertheless, some company-first CIOs have enjoyed success both within and as a result of their new roles. Despite the obvious perils, they say this type of challenge can be just the thing to shake someone out of midcareer inertia. There’s the rush of being a trailblazer and the freedom of starting with a clean slate, unfettered by the constraints of how the last CIO did things. Plus, the rewards can be huge. People recognize that if the company-first CIO can do this job, he can do any job. He becomes that much more marketable?and can command a higher price tag or a higher profile in his next job.

Kim Nelson is a clear example of that. She pioneered the CIO role at the Pennsylvania Department of Environmental Protection (PDEP) agency in Harrisburg, Pa. The visibility she gained while establishing the CIO position at PDEP resulted in President Bush nominating her to be the new CIO of the Environmental Protection Agency (as of press time, she hadn’t gone through her Senate confirmation hearing). “[Being the first CIO of my agency] provided me with a lot of visibility in terms of the splash of creating the role,” she says. “I’ve often been contacted by other state [DEPs] asking me to tell them how I did it. And that’s raised my profile in terms of being a leader.”

Politics as Unusual

The first and perhaps biggest challenge a company-first CIO faces is establishing credibility among users, IT staff and fellow executives. When entering an organization that’s never had a CIO, there are likely to be few organized processes around the use of technology, upgrades and support. Various departments and business units will be used to freelancing their own IT initiatives?a fact that obviously creates chaos. Worse yet, people don’t know who the CIO is or what his role is supposed to be. This can make them a little paranoid, says James W. (Wes) Smith, the first CIO of Mayer Electric Supply, a $340 million electrical equipment distributor in Birmingham, Ala.

When Smith took over as CIO in January 1999, his first order of business was to finish moving from legacy systems to the J.D. Edwards OneWorld ERP system. Unlike Causey, Smith rose to the position from within the company, having worked in finance, internal audit and quality management. He’d been leading the effort to select an ERP vendor and implement the project. Midway through vendor selection, he convinced management the company needed a CIO and that he was the guy. “With the ERP project, we were tearing out our whole infrastructure and putting in a new one,” he says. “In the process, I saw that technology would be critical to our business future and felt we needed one person to set the future direction.”

Since Smith came from a business and not an IT background, the IT staff was initially suspicious of him and his intentions. Those suspicions grew when they heard the CFO and board of directors wanted to “put a fence around the IT folks”?limiting their role to managing existing systems?and hire consultants to do the ERP implementation. Smith stood firm and insisted that IT do the job. That display of standing up for his employees went a long way toward winning their confidence. “It made the point that the company’s support was with them and that we had full faith and confidence they could do the job,” says Smith.

A company-first CIO also has to deal with fears among staff members that their jobs are about to get a lot tougher, Causey says. The appointment of a CIO is taken as a sign that the company is raising the bar when it comes to IT, he says. People realize their old ways of just punching in and doing the bare minimum won’t fly, and they fear being exposed as less valuable than everyone thought. More significantly, they fear adapting to wholesale changes in the way the company deploys technology.

When Causey joined Mail Boxes Etc., he addressed those fears directly by meeting with IT employees to share their vision, discuss their role in his initiatives and assure them that he had no plans to clean house. He also held departmental bonding sessions such as golf tournaments and trips to San Diego Padres games. “I tried to create an inclusion mentality,” Causey told CIO shortly before leaving the company. Even those efforts failed to completely overcome apprehension among the staff. Causey suffered 27 percent turnover in his first year and a half, which he attributes largely to the dotcom boom but also to the aforementioned fear and distrust. “These people didn’t give my new system a chance to get them to the necessary level,” he says.

Expectation management is another issue company-first CIOs will face. Users and executives alike frequently see the CIO as a “silver bullet” who is going to solve a company’s technology woes, says Bawa, the former first CIO of Netro. If everyone expects too much, the CIO is destined to fail.

The best way to address this, Bawa says, is to get non-IT people involved in major IT decisions. While at Netro, he did that by establishing a CIO Council that reviewed and prioritized major IT projects proposed by different business managers. He appointed several key executives to the council and served as its chairman. Through the council, he was able to evangelize certain best practices and help other executives understand project time lines and payoff. While he would still shape the company’s IT direction, the council approved projects that would cost more than $20,000, which eased some of his burden.

PDEP’s Nelson tried something similar in her agency. Nelson, who became CIO in October 1999 as part of the state’s e-government initiative to put government services online, created an IT council to set the agency’s technology priorities. The council has struggled as a policymaking body, she says, because it has been difficult to get non-IT people to participate, as they’ve been reluctant to add to their workload. Also, council members have been hesitant to make decisions regarding IT priorities, saying that they don’t feel competent. While those are issues any CIO might face, the fact that Nelson’s agency is not used to dealing with a CIO?or with IT at a strategic level?only intensifies the challenge.

The council has successfully informed people about IT projects on the horizon, but for now, Nelson makes the final decisions. This is fine in the short term, she says, but it would be better if people from higher levels of the organization were participating in the decision-making process. She uses other means to keep non-IT people involved in technology decisions. “Occasionally, I’ll go back to the executive staff and say, ’OK, here’s the issue, and here’s three recommendations for moving forward. What do you want to do?’” she says.

If PDEP was more used to dealing with a CIO?and to IT being done on a departmentwide basis?it’d probably feel more comfortable taking a more proactive role in making decisions, says Nelson. As the CIO position evolves with her successor, Karen Bassett, she expects that to happen.

As a company-first CIO, Nelson also struggled to get people from the business (or in this case, the agency) involved in developing and implementing IT projects. Since there was no prior CIO to advocate strong ties between business and IT, Nelson had to create that relationship.

That came into play during a development project called eFacts (Environment Facility Application Compliance Tracking System), an agencywide system to track agency-regulated people and places. About a year into the project, Nelson was still having trouble getting non-IT people involved. Managers would either give up their most expendable person?who wasn’t necessarily the right one for the job?or the right people would be too bogged down with their existing responsibilities; so she went back to the executive staff and demanded dedicated help. They responded by physically relocating people from other departments, such as air-quality information, water-quality information and waste information, to an area of the building where they could work full time with IT staff on application development. “We called the area the Tiger Den, and we saw a huge improvement in the project’s progress,” says Nelson. “We had people from agency program staff reviewing the deliverables, making sure the requirements documents were accurate, looking at screen designs and writing test plans.”

That set a precedent for future projects by extending a hand to program staff outside IT. “A lot of [non-IT people] felt threatened by the creation of the CIO position because it means a loss of control,” Nelson says. “[Assigning non-IT people to the IT project team] helps the first-time CIO walk that fine line between having an enterprise solution and still communicating with the internal organizations.”

Singular Technology

While a company-first cio may start with a clean slate, unfettered by the constraints of how the last CIO did things, don’t expect the job to be any easier than Causey’s, Smith’s or Nelson’s. Besides the human challenges?such as resistance, resentment, suspicion and managing user expectations?there are technical challenges?such as creating a unified technology infrastructure, centralizing IT and aligning it with the business, and implementing companywide IT standards.

Other sensitive challenges often faced by company-first CIOs are technology consolidation and creating enterprisewide standards. A company that has never had a CIO is likely to have a dispersed IT infrastructure with various business units or locations doing their own thing?and quite used to doing their own thing. All of a sudden, a CIO comes in and changes all that, so there’s a high danger of backlash.

Bawa had to change the company’s entire attitude toward technology. Before he arrived, department managers initiated and completed IT projects themselves, using the easiest and fastest technology at the time. Bawa felt major projects should be centrally approved, with an emphasis on newer, more scalable technology, instead of cheaper and more quickly integrated legacy technology.

He brought the departments around, he says, through a combination of diplomacy and caution, but also by making sound business cases with statements like “If you invest in more legacy technology at this stage, it might be faster and cheaper now, but it’ll be more expensive to change in a year.” Still, Bawa faced several difficult moments. In one instance, the company was having a tense moment with a client. Resolving the situation required making changes to legacy systems. “This required a balancing act between how strictly to apply the new corporate standards and what changes were required to satisfy the external client,” he says.

Sun Community Bancorp’s first CIO Dave Dutton also dealt with consolidation issues. Prior to his arrival, each of the company’s 20 local banks handled their own IT decisions. He had to come in and centralize and persuade a bank president that moving to a common process is cost-effective. “It’s a matter of convincing them that we can provide better support if the 20 banks agree to use the same products,” Dutton says. “Fortunately, I’ve had the absolute support of the executive management of the corporation, which creates an immediate element of trust.”

That raises another important point: Don’t consider a company-first CIO position if you’re not absolutely convinced the CEO supports what you’re doing and how you’re doing it. Without executive support, you’ll never gain credibility among users and IT personnel. “I was pretty clear with the executive staff during the interview process that I’d form an IT council who’d then determine priorities, not me personally or individual executives,” says Bawa. “Getting understanding on these points is the biggest thing.” Bawa just had the misfortune of signing up just as the economy headed south and his company began losing money.

As daunting as all this may sound, being a company-first CIO is a great opportunity. It’s more than just a challenge, Causey says. It’s a chance to be a revolutionary. “Outside of taking care of my family, making money and doing the best I can, I have a selfish desire to rule the world,” he says. Unfortunately, Causey is going to have to look elsewhere to achieve this desire. He can chalk up his MBE experience to the perils of trying to pioneer the CIO role.