The State of the CIO 2008: The CIO’s Time to Shine

For some CIOs, there’s no separation between IT and business.

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For others, a gulf, wide and deep, undercuts their ability to do, or even define, their jobs.

In our seventh annual “State of the CIO” survey, you told us about the problems you face in this turbulent world of new technologies and tight budgets, a world in which the role of the CIO is reconsidered, reevaluated and reimagined almost on a daily basis.

Some of our 558 respondents, all heads of IT in their enterprises, are faring quite well. They’re bringing creativity and new revenues to their businesses, and they’re being rewarded with new responsibilities in operations, for example, or customer service.

Others are finding this new world difficult to navigate.

But before we can talk about challenge and change—constants, it seems, in the CIO’s universe—and about what forms they’ve taken this year and will take in the year ahead, we first have to cut through some static.

The language often used to frame the CIO experience does little to reveal the nature of the CIO’s work. Today’s IT lexicon—which bandies terms such as “innovation” and “alignment” and “ROI”—disguises the reality of being a CIO and hides the obstacles and opportunities that await the practitioners of the IT art and discipline.

“Henderson, we need to innovate right now to achieve alignment.”

“That’s right, Bartow. And after that, we’ll generate a positive ROI for our stakeholders.”

Hold on. Nobody talks like that and that’s not what you do all day.

Metaphors, which breed buzzwords, attempt to explain one idea by substituting another; for example, “innovation” replaces “make money.” But these substitutions frequently obfuscate. And CIOs don’t have time for that. CIOs excel at thinking about what’s possible. And doable.

So let’s talk about what’s real.

Stop Talking About Alignment

We can’t imagine a CIO who doesn’t know that technology must support the business’s processes and goals. If you don’t understand that, nothing in this survey will help you. In our 2008 “State of the CIO” survey, 82 percent of respondents said that aligning IT and business was their number-one activity. Of course it was. Does a therapist listen? Does a general command?

It’s clear, however, that CIOs who worry about alignment conceive of themselves, their function and their department as a thing apart. Whether that’s a problem of their own making or a dysfunction generated by their executive peers and their enterprise’s culture, these CIOs have already lost. As Roger Parks, VP of information technology and CIO at J.R. Simplot , a $4.2 billion agribusiness, puts it, “If other senior executives don’t see you as one of them, you usually can’t change their minds. You have to realize that.”

“The IT discipline still has some maturing to do,” says Rick Roy, senior vice president of customer operations at CUNA Mutual Group . Before he took over Customer operations, Roy was CIO at the financial services company from 2003 to 2005 when it had $15.2 billion in assets. “I don’t talk about aligning customer service operations with the business,” says Roy. “The CFO doesn’t talk about financial alignment with the business. So why say ‘align IT and the business?’

“Language informs approach.”

So let’s stop talking about alignment. It marks CIOs as outsiders.

Stop Talking About Innovation

Innovation, as commonly used today, really means devising new ways to keep the enterprise profitable. What CIO, what business leader, fails to understand that that’s the essence of his job? Innovation is not a task. One doesn’t do innovation. One doesn’t (or shouldn’t) have an innovation department, led by a chief innovator.

CIOs who struggle to innovate—Somehow! Some way! Maybe every Tuesday from one o’clock to two!—miss the fact that all good leaders strive for better ways of working.

Sixty-five percent of our respondents reported that generating ideas for business innovation through technology is not only a significant or dominant part of their jobs but in great part how their success is measured. That’s up from 56 percent last year. So there’s no question that innovation increasingly has become an expectation.

But one wonders if at those companies where innovation is a success metric the CIO’s performance review offers a check-box: “Did Henderson innovate this year? Yes or No?”

This use of the word “innovation,” as if it described something new and different in IT, frustrates some CIOs. It’s one with “alignment,” scoffs Randy Poppell, CIO and senior VP of strategic planning at UniGroup , a $2.3 billion transportation and relocation services company. “We all need to do it,” he says. “But not just in IT. Across the company.”

Innovation is not an IT-centric challenge; it’s not something anyone can do alone. As Michael Roberts, director of global IT strategy and planning at Citigroup, the $160 billion financial services giant, says, “No one is excluded from the responsibility for innovation.”

And Please Stop Talking About ROI

This one’s easy. If what you’re doing as a CIO takes the company, business unit, department, group, system and/or application two steps back, please stop. Now.

In this flinty economic climate, with an average tenure of 4.4 years in your current job (See The 2008 State of the CIO: Business Strategists on the Rise), there’s no more waiting for ROI. Woe to the six IT leaders in our survey who told us that they did not know who was accountable for IT ROI.

Guys, you might reexamine the color of your parachutes.

The CIO’s Time to Strut

A strong, balanced, successful CIO doesn’t heed pundits and he doesn’t pay attention to buzzwords. Strong CIOs don’t align technology and business. They work with their peers. They guide them, educate them, persuade them, debate them, hear them, help them, decide with them and execute the enterprise’s strategy with them.

Strong CIOs don’t innovate. They figure out ways to make money for the business. They cut waste and plow those savings into projects that create value. Sometimes they create whole businesses where none before existed.

Strong CIOs don’t cast about for ROI. They avoid paths that don’t promise it. Sound cocky? Maybe. But there’s no time left for IT leaders who don’t understand all this, says Jan Bertsch, CIO of $62 billion Chrysler.

“Great execution is expected. That’s the floor,” Bertsch says.

Besides, many CIOs have earned the right to strut. This year’s “State of the CIO” survey finds CIOs gaining ground. More heads of IT hold the CIO title than ever before: 60 percent this year, compared to 50 percent last year. CIOs are also making more money, too, with $237,360 the average annual compensation for respondents, jumping 28 percent from last year’s $185,240.

The average CIO in our survey rose through the IT ranks. At age 47, he (and 86 percent of the time he is a he) controls a centralized IT department with a staff of 188 and a budget of $57.8 million.

More CIOs report to the CEO (41 percent) than to any other position. That statistic has held fast three years running and is important because that relationship is a good predictor of a CIO’s success or failure. For example, Slade Gorton, a private, family-owned seafood wholesaler in Boston, recently installed Kim Gorton as president, replacing Wally Stevens, who retired after 15 years in the position. Bonnie Hardy, Slade Gorton’s CIO for the past seven years, says a CIO shouldn’t be kept at arm’s length from senior leaders in other departments. CIOs need to discuss business strategies and goals with them, not hear them “third hand.” Hardy meets with Gorton monthly and that, she says, “makes me more effective because I’m understanding needs directly.”

The shift Hardy is experiencing now is being replicated across industries, across the entire business landscape, as CIOs are beginning to work for a new generation of CEOs who grew up with technology, says Jim Noble, president of the Society for Information Management (SIM), a professional group for both CIOs and those who aspire to be. That’s a big plus, says Noble, “when the CIO is trying to sell ideas.”

Jeff Loeb agrees. Loeb became a first-time CIO last March, at Wilsons The Leather Experts, a $321 million retailer. Loeb plans to roll out a new point-of-sale system and experiment with systems to measure customer traffic and sales conversion in the stores, and he’s being supported by his CEO. In turn, Loeb aims to improve his department’s credibility and execution by making sure IT projects stick to budgets and time­tables.

“It’s important to have the CEO understand what you do,” Loeb says. “And to show him it works.”

So, What Kind of CIO Are You?

There isn’t just one way to be a CIO, or one set of CIO concerns. Based on answers to questions about how you spend your time, we’ve classified our respondents as leaders in these areas: function head, transformational or business strategy.

A function head CIO primarily concerns himself with fireproofing the IT house so that he doesn’t waste company time and money keeping the infrastructure humming. When asked to choose activities describing how they spend most of their time, 57 percent of those CIOs we identify as function heads say they focus on improving IT operations.

Raj Datt at Kennametal, for example, could be described as a function head CIO. He recently installed real-time application and network monitoring systems to strengthen his IT infrastructure. (See Six IT Leaders Who Matter.) Datt is also among the 41 percent of CIO function heads who said a critical part of their work is developing IT talent. That is, cultivating new fireproofers. Smart.

A transformational CIO is someone who, like Loeb at Wilsons, leads change efforts and redesigns business processes. According to our survey, transformational-type CIOs support the greatest number of users, 7,600 on average, and command the biggest budgets, at $70.7 million, and technology staffs, at 219. After all, it takes money and people to make change.

A business strategist CIO, such as Deirdre Woods, CIO and associate dean at The Wharton School at the University of Pennsylvania, focuses on and frequently interacts with external academic customers and has developed IT-enabled business systems to reach out to them. Woods, for example, has been building Web applications that simulate business scenarios so Wharton students can practice making decisions. (See Six IT Leaders Who Matter.) Business strategist CIOs, according to our survey, are the rarest birds and are compensated accordingly: $303,000, on average.

It’s important to note that being one sort of CIO isn’t necessarily better than being another, unless you’re not what your company needs or wants.

Put a business strategist at the IT helm of a manufacturer where the ERP system is going south or the wireless WAN in Shanghai keeps crashing and you’ll see a lot of frustration. Heads-down technology work isn’t a strength of the business strategist CIO, nor usually is it what he wants to do with his time. For that you need a function head CIO.

But don’t call on a CIO who likes to roll up his sleeves and get down and dirty with code when the enterprise needs to convince a business unit to give up the shadow IT project it’s running for the greater good. Instead, call on a transformational CIO experienced in leading change and making it stick.

No CIO is all one thing or another. All CIOs fall somewhere on a spectrum. To see where you fit in, go to The Business Strategist CIO to read about the characteristics of the top performers and Recommendations for CIOs to determine the type of IT leader you are based on the activities you spend most of your time pursuing. Both documents were developed by the CIO Executive Council, a professional group founded by readers of CIO.

Charged with instigating and executing big corporate changes, transformational CIOs work under the glare of the corporate spotlight. Knowing when to emphasize which skill requires a CIO to understand “the maturity of your business,” says Mitchell Habib, executive vice president of global business services at The Nielsen Co., a $2.5 billion information and media company based in New York and the Netherlands.

Habib is known among executive recruiters as a transformational CIO, having helped companies such as General Electric and Citigroup blaze through organizational change.

Nielsen, which provides the famous TV show ratings as well as other media metrics, hired Habib in March 2007 to reconfigure how it manages technology. He’s introducing new software platforms and, in a $1.2 billion deal with Tata Consultancy Services, is outsourcing some IT infrastructure as well as some financial and human resources processes on a global scale. In the process, he’s changing the lives of his 4,500 IT staff.

The understanding Habib talks about—knowing the potential leverage of technology—not only can elude some CIOs but it can also escape their peers in senior management, says SIM president Noble, who has been CIO at Altria and AOL Time Warner. “My worry is the board of directors, which is setting direction for the company but doesn’t know where they are in [terms of] IT sophistication,” Noble says.

CIOs can bewail their fate, forced to answer to an uninformed board. Or they can change that.

CIO Challenges and Opportunities

To educate the board as well as internal managers, sometimes CIOs must market IT’s accomplishments. Timidity gets you nowhere and our survey respondents offered specifics about where they made the biggest impact in the past year. At 70 percent, accounting and finance is the most frequently cited business process undergoing improvement by IT. That’s followed by customer service at 68 percent and human resources at 54 percent.

Forty-two percent of respondents reported that IT is improving the supply chain and logistics process. That’s a big jump over the 27 percent in last year’s study and it is the area showing the biggest rejiggering of priorities. This is not surprising. As the globalization of business picks up steam, supply chain issues have multiplied and intensified for manufacturers, retailers, transportation and warehousing companies. Not coincidentally, recalls of everything from cantaloupes to kids’ toys have forced companies to make millions in unplanned investments trying to collect bad products. (For more on the role supply chains play in recalls, go to “Beyond Peter Pan”).

Another emerging challenge (and perhaps an opportunity) for CIOs is managing “shadow IT” in the enterprise. Addressing this issue was a priority for the technology group at Southern Co., a $14 billion electricity utility. Becky Blalock, Southern’s transformational CIO for the past five years, had to convince the customer service department to relinquish a financial application it had built itself.

It was the largest application in the company not managed by IT, Blalock says. When Southern reorganized customer service, Blalock took over the software development that group had historically done. But to cement the deal, she had to demonstrate that her group could manage the application better, costing the business unit less than it had been spending. “You can’t just say, â¬ÜNo, you can’t do this,'” Blalock says. “We made a concerted effort to work with them and demonstrated we could save them money.”

You May Be in the Right Place at the Wrong Time

As often as CIOs have been told they must speak the language of business, and as much as being able to do so helped Blalock, CIOs gain or lose power based on their deeds, not their words, says Eric Sigurdson, who leads the information officers practice at recruiter Russell Reynolds. For example, CIOs can influence their place on the function head-transformational-strategist spectrum by learning different skills and shifting the way they spend their work hours to emphasize different activities. Forget alignment. Understand who wants what from you when and then do it. Forget innovation. Get out and make money or cut spending to free up money for reinvestment. Forget ROI. Make work easier or quicker for the people who use what you build.

But, Sigurdson says, more rides on whether you grew up in the same organization or moved among companies and cultures: “Outsiders coming into a company don’t have allegiances built up over years or political ties. They can do whatever they think is right without having a fallout of old relationships.”

The takeaway is this: If the rest of your C-level peers don’t view IT as integral, if they don’t demand as much from you as they do from other C-level executives, find a new company with executives who do. They’re out there.