A Letter to CXOs: You Have the IT Capability You Deserve

Usually I address CIOs in this column, but this time I draw on my experiences as a CIO, CFO and executive vice president to address CXOs.

I believe that every organization has the IT capability it deserves. If it’s great, that means the CXOs have IT on their radar screen. If the capability is poor, blame everybody—starting with the CEO. I have heard many executives grumble about IT. The funny thing is that many of the problems are self-inflicted. Often there is a boom-and-bust approach to “fixing” IT, characterized by a period of overinvesting followed by a period of underinvesting. That bipolar approach to IT management delays the development of disciplined IT management practices and the steady delivery of IT capability and value.

See if this sounds familiar. Some cranky general managers (perhaps you’re among them) start grumbling about the lack of IT delivery. Others jump on board and determine that the current CIO is genetically flawed and must be replaced. After a lengthy search and hefty retainer, the new CIO comes in—a talented, experienced IT executive with a mandate for change. Big expectations are backed up with big budgets, and a bunch of big development initiatives are launched. A few years later, expectations collide with the realities. Delivery is behind schedule, projects are over budget, and the cumulative support costs associated with these initiatives start mounting.

Again, the cranky general managers start grumbling, this time about the high cost of IT relative to value realized. Others jump on board, the IT budgets are cut back, the CIO leaves (to join another company facing the start of its boom cycle), and a “custodial” CIO is hired to oversee the bust cycle, characterized by cost cutting and strict controls. Again, after a few years, some cranky general managers start grumbling about poor IT delivery, and the cycle continues.

This cycle of underinvesting and overinvesting is classic, but not transparent to most because it requires a 10-year perspective—typically longer than average executive tenure. If you are starting to hear yourself and other CXOs grumbling in the hallways, you have an opportunity to redirect this energy to introduce a more disciplined approach to IT management. Disciplined IT management is characterized by a focused IT agenda, steady IT investments, value accountability and monitoring, short-cycle delivery and strong IT leadership—from within and beyond the IT department. You can help break the IT boom-and-bust cycle by doing the following.

stop the bleeding. Halt projects that are clearly in trouble, and don’t approve new projects, additional spending or more staff. You won’t have the information yet that you need to make changes, but you can make sure things don’t get worse.

Redefine accountabilities. Understand that everybody is on the hook for fixing the problem. The era of the IT valet is over?business executives can no longer drop off their IT wish, go do their “real job” and then expect the solution to be waiting at the curb when they are ready for it. CIOs are not accountable for realizing value because they don’t own the three Ps: the business P&L, people and processes. General managers are responsible for the what of IT, while IT managers are responsible for the how.

Your tasks include figuring out where IT should be invested, outlining the investment justification, managing the change program, redesigning the business processes and upgrading the skills of the frontline performers. The CIO’s responsibility includes defining and facilitating the IT governance process, delivering projects on time and on budget, provisioning basic services (such as help desk, operations and networking), and monitoring performance. CIOs must also define standards and processes around project management and methods, human resources, security, architecture and procurement.

Chart the future. Partner with the CIO and define an IT-enabled business strategy that identifies what IT initiatives are required to support the business strategy. Make sure that only initiatives with value commitments from the general managers make it through the strategy. Give your CIO some time to work up the implementation options (the how of IT) and the organization requirements (the who).

Balance supply and demand. The steady hand of IT management requires that the CFO determines how much the enterprise can afford to invest in new IT projects and on an ongoing basis. Level funding for IT initiatives makes sense because, barring dramatic structural shifts (due to startups, mergers and acquisitions, and so forth), a company’s financial and human resources capacity doesn’t change much year to year. There is only so much money and so many people to go around, and once ongoing operations are funded and staffed, there is usually very little left to allocate to business-building opportunities.

Focus the I.T. agenda. The benefits of a focused agenda are clear. Focused organizations work on fewer things at one time but get more done over time. Focused organizations realize value sooner because they understand Pareto’s Law and target 80 percent of the benefits with 20 percent of the effort. Focused organizations are able to react quicker and make fewer mistakes because they have more senior people overseeing the initiatives. Focused organizations spend time talking about projects rather than talking about project tracking. And focused organizations can hold people accountable for results.

With the level funding and a focused agenda in place, you can develop a multiyear investment and implementation plan that generates the necessary annual return.

Strengthen the organization. Sometime during the strategy-making process, you have to make a decision about whether you have the right type of technology leadership?in and out of the IT organization. If the current leadership falls short, it’s time to initiate changes.

While you’re getting the right people in place, focus your IT tactical plans on low-risk initiatives. Make sure that the leaders you bring in demonstrate an understanding of the principles outlined in this article.

Manage risks. There is one key principle here: Big projects violate organizational physics. They are too risky for three reasons. First, competitive industry conditions and basic human nature limit organizational attention spans to about six to 12 months?far less than the duration of big projects. Second, most massive initiatives are an educated guess about what will move the business, with only a foggy clue about “requirements.” Finally, mere mortal project managers cannot bring projects involving more than 50 people over the finish line without significant problems with time, scope or budget.

With help from you and other CXOs, the CIO can require that all initiatives deliver value within six months. There will be exceptions, of course, but they should be held to less than 10 percent of new investment dollars. Short-cycle time can work if you require short-term value commitments and ensure that monitoring metrics are included within the scope of projects.