CIOs Disconnected From Business Execs

At Maple Leaf Foods, a $5 billion consumer packaged-goods company, IT doesn’t just respond to business decisions, it participates in the planning that leads to those decisions. For starters, CIO Jeff Hutchinson sits on the executive committee, and some of his IT leaders sit on business unit committees. In addition, non-IT managers report to the CIO, and several IT staffers report to those managers. The IT group influences what the company does and doesn’t do—which plants to close or expand, which acquisitions to make, which customers to cultivate—and a major part of Hutchinson’s bonus depends on meeting corporate profit goals.

Being the strategic partner that many CIOs say they want to be means so much more than just having an academic understanding of your company or industry, Hutchinson says. “Be part of the business. Be part of the decisions,” he says. “That’s different.”

This cross-pollinated, matrixed and hybrid business-IT world, however, is fantasy for most CIOs, according to our annual State of the CIO survey.

In its 11th year, the survey uncovers how the role of the CIO continues to evolve as business and technology change. Our

latest data

shows that while CIOs have gained strategic influence generally in the past few years, most—57 percent of the 596 IT leaders polled—say they are perceived as a service provider or technology-only collaborator. Another 21 percent say IT is unappreciated and misunderstood as a cost center.

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For more survey highlights, see our special section graphing some interesting discoveries. Or read more about

a few of our key findings

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Just 22 percent of respondents say they are viewed as a true peer or game-changer, as in the Maple Leaf model. Those CIOs who identify themselves among the elite see things differently from other CIOs, and not just because they are paid more than other CIOs and enjoy bigger budgets and a smaller staff-to-user ratio. (See “Who’s Above Average?”) The elite are more likely to predict a good year ahead, confident they are improving risk management and expecting to invent new IT-infused products and services for competitive advantage.

Among the broader pool of respondents, though, we find a worrisome disconnect between CIOs and non-IT leaders on the importance of key issues: cost cutting and the assault from competitors. CIOs generally consider both lower priorities than their business counterparts do. If you don’t think the same way about money and competition, how can you align with—never mind accelerate or help set—business goals?

Well, you can’t.

“We need to be in lockstep,” says Karla Viglasky, CIO of ITT, a $2 billion manufacturer. Viglasky, whose career includes stints in engineering and e-commerce, was named ITT’s CIO in November. “I’ve been the victim and the torturer when it comes to IT,” she says. “You can’t gain credibility with the business by saying, ‘I need to help you understand what I do.’ They don’t care. Instead, you prove yourself every single day.”

Part of the proof for the CIOs we surveyed may come from major investments planned for 2012 in analytics, collaboration, mobility and other technologies that reduce the time and space between employees. That’s if they can overcome abiding concerns about enterprise security, as well as about the macroeconomic issues of stagnant job growth and the global recession. It’s a tense time, certainly. But CIOs leading through it have devised creative ways to handle these challenges.

Live or Die by Corporate Goals

In addition to our usual State of the CIO research, this year we worked with Forrester Research to survey non-IT executives to get a handle on how their thinking compares with that of CIOs. We found that IT leaders disagree with their colleagues in some crucial areas. About cost cutting, for example, 37 percent of 386 CIOs in North America say rising pressure to reduce costs is a low priority or is not on their agenda. But 84 percent of 377 business decision makers in North America called it a high or critical priority.

Worrying about the competition, meanwhile, is low or no priority for 52 percent of CIOs, while 78 percent of business colleagues view it as a high or critical priority.

This misalignment can result in projects that don’t quite produce the results business units want and a lot of meetings trying to figure out why, says Nancy Wolk, CIO of Alcoa, a $24.6 billion aluminum manufacturer.

Strategic CIOs advise fellow IT leaders to think of themselves as company citizens first, then members of their department. Live the larger goals of the company, they say. No one’s advocating any Manchurian candidate brainwashing, but a little rhythmic meditation on the corporate objectives while lining up at Starbucks every morning couldn’t hurt.

Wolk suggests coming up with a simple test to sort ideas. “We think of everything we do in terms of, Does it help us grow or help us generate cash?”

An upcoming project to provide the sales staff with mobile dashboards about customers will help Alcoa grow, she says. Green light.

A proposal to pilot collaboration tools for problem solving and innovation might boost productivity but is a step or two removed from company growth. It goes into the queue, but further down.

At ITT—one of three companies created by a spinoff plan executed by a company of the same name on October 31, 2011—senior leaders have set an objective to provide a premier experience to customers, Viglasky says. IT can then find the points at which the customer connects with the company to see how technology can make those interactions faster or more enjoyable, or both, she says. Upgrading customer-facing systems makes the agenda, as does a pilot of iPads for staff that serves customers.

One way to internalize the corporate goals quickly, says Hutchinson at Maple Leaf Foods, is for the IT group to keep close to sales and marketing. Those departments are at the forefront, with much of their compensation riding on how cheery they can make the CEO and CFO.

Going Through Labor Pains

Whether a company can achieve its strategic goals depends on whether it can get the right people into the right positions. Staffing, however, is difficult both inside and outside IT during this skimpy and jobless economic recovery. Many companies don’t have money to hire. Some that do are finding a mismatch between what they want and who’s available.

Fifty-seven percent of CIOs are concerned that stagnant job growth will hurt their organizations, and that figure climbs to 69 percent when looking at just the respondents in North America.

One problem is that people are stuck, explains Katrina Lane, CTO at Caesar’s Entertainment, an $8.8 billion casino company.

As the rough economy curbs home sales, the workforce becomes less mobile, Lane says. She’d like to hire senior IT staff in various disciplines but has had challenges in finding talent.

“They can’t get rid of their houses, and you end up having a smaller pool of people to draw from,” she says. Caesar’s has major offices in Las Vegas, with additional staff in Reno, Nev., and Atlantic City, N.J., and teams at each casino, which has helped. Still, she’s learned to screen candidates early to find out whether it’s realistic for them to relocate.

Tim Campos, director of IT for Facebook, worries more about the hiring plans of the customers of the $6.3 billion social network. Companies that can’t hire the right people won’t grow and so won’t advertise as much on Facebook, he says.

But like Lane, Campos also has trouble filling some jobs. The company, which has 800 million active users, has grown from just a few co-founders in 2004 to more than 3,000 employees today. “We can’t hire fast enough,” he says. (See “Facebook Sets Up New York Engineering Shop.”)

Software engineers, data analysts and strong all-around IT managers are high on his list of wanna-gets. Although company headquarters is in Silicon Valley, “It’s still very difficult for us to find the best talent. There’s a mismatch in what’s available and what we need to grow,” he says, adding that Facebook also competes with other technology companies for “people who can make a big impact.”

Facebook leaders decided that a prime differentiator for the company is its talented employees, which crystallizes IT’s mandate: Make hiring easier, make hiring more efficient, make new employees productive sooner.

The IT group is the first department new employees meet on their first day, during an on-boarding process that takes no more than 45 minutes. Their workstations, computers and other devices are already set up; IT teaches them how to access the data and applications they need.

If employees need new accessories, such as a keyboard, mouse or power supply, they can swipe an ID card at a vending machine that dispenses equipment. Campos doesn’t want to make people submit to a long procurement process for simple requests. The vending machine cuts overhead while still tracking technology costs, he says.

The Tech Agenda

As 2012 unfolds, companies plan to complete major initiatives using technologies that they expect will change the role of CIO, according to our survey. These include analytics, cloud, mobility and social media. But the effect of these technologies will vary by company. As part of the mission to provide top customer service at Alcoa, for example, Wolk is experimenting with visual analytics. That is, she’s providing sales, marketing and other employees with desktop and mobile applications that graphically depict trends and information about customers.

Charts, graphs and perhaps animation will eventually show items such as contract details, orders in process, and sales volume compared to forecasts. Visual analytics will make employees more productive, Wolk says, because people can get meaning more quickly from pictures than from lists and numbers, especially on the small screens of mobile devices.

At Restaurant Technologies, a privately held restaurant supply company, IT is branching into revenue generation with services that use data collected from sensors and other technology built into kitchen equipment. For example, the company can monitor how often the 17,000 restaurant locations it services, including 8,000 McDonald’s locations, filter the cooking oil in their fryers and use that information to recommend the most ­efficient practices, says Randy Witt, director of IT.

Restaurant Technologies was bought in 2011 by a European private equity firm, which is pushing it to expand both geographically and in the number of data-focused services it offers, Witt says. Two new project managers are leading development, and Witt has hired two business analysts and is seeking a third.

Insecure About Security

Beneath these project plans lies a pervasive anxiety about security. In our survey, 69 percent of CIOs say they expect a security problem to hit their organizations within the next three years. As society grows ever more connected, threats can propagate fast. As companies use more mobile and cloud technology, data constantly moves and becomes harder to protect.

“How you architect, how you choose to leverage the cloud, how you implement applications [all illustrate how much] enterprise security is becoming a significant issue for CIOs,” says Facebook’s Campos.

The primary reason Allergan has moved cautiously towards cloud computing, says CIO Sue-Jean Lin, is risk. The $4.9 billion pharmaceutical company must comply with hundreds of government rules and regulations, and Lin wants a cloud vendor to be fully compliant with security standards and applicable regulations governing the pharmaceutical industry. She isn’t satisfied with what she’s seen so far. “The basic principles behind cloud computing make sense,” she says. “But we can’t ignore compliance.”

Computer criminals are more professional and organized than ever, so the risk is bigger but maddeningly difficult to quantify, says Lane at Caesar’s Entertainment. As a result, deciding how to handle security involves more assumptions than some CIOs feel comfortable with. Analyzing the risk isn’t as straightforward as planning for server downtime, for example, because reliable data on scary scenarios doesn’t exist, she says.

“We care immensely about protecting company secrets and customer data. With a server outage, I have years of data to draw on when I judge which technologies to use,” she says. “But this is: We think the current status of the hacker world is X and therefore, we think Y. It’s very hard to know.”

Restaurant Technologies outsources most of its security, at least for now. The company is small, with a staff experienced in many technology realms, but not security, Witt says. A consultancy monitors for intruders and performs penetration tests, among other services. The company is also helping Witt’s staff develop security policies and practices, with an eye toward the day, perhaps within two years, when Restaurant Technologies will bring security in-house. “This is instead of trying to figure it out on our own through trial and error. Those would be pretty unpleasant errors.”

Cut Costs, Gain Efficiencies

Seventy-seven percent of the CIOs we surveyed hope that helping their colleagues understand IT will produce positive results for the IT group in the next three years. Yet our data suggests that a fair number of CIOs aren’t making the effort to build relationships with business peers: 43 percent say marketing the IT department so that the business has a better understanding of IT’s capabilities and processes is a low priority or not a priority at all.

There’s no doubt that IT contributes to corporate growth by, for example, finding new streams of revenue with technology-enhanced products, like at Restaurant Technologies. But colleagues generally expect IT to reduce costs, says Khalid Kark, a Forrester analyst. “You should not lose sight of that. Business considers it hugely important,” he says.

But the mandate isn’t necessarily to slash spending and, thereby, IT services, says Yuri Aguiar, CIO of Ogilvy and Mather, a privately held global advertising firm. One CIO’s cost is another’s efficiency.

It’s not semantics. There’s real math involved. Expenses may hold steady, but if IT can provide more server power, say, or a better way to collaborate with coworkers for the same amount of money, that’s a gain in efficiency, Aguiar says. IT is not spending money it might otherwise have had to spend.

The next step is to quantify the efficiency gains and share them, Aguiar says. The LifeRay open-source software at the heart of Ogilvy’s new collaboration system saves the company money compared to buying Microsoft’s SharePoint or some other commercial product. The virtualized servers on which it runs reduce up-front hardware costs while providing more power and quicker time to market, he says. But virtualization also decreases depreciation costs over time, a factor that should be figured into any calculation of IT expenses for the project, he adds. “Maybe now I invest that in [hiring or training] a business analyst,” he says.

Many CIOs don’t want to be seen as the “no” guy who turns down lots of requests for reasons that are mysterious to the asker, such as cost, Kark says. That’s why at Facebook, for example, Campos likes to show employees some IT costs, such as telecommunications bills. Cell phone service is one of Facebook’s biggest technology expenses, and he provides reports that chart how much each person racks up compared to the rest of their department. In those IT vending machines, each piece of equipment carries a visible price tag.

“That awareness drives costs down in a way that doesn’t impact IT’s service,” he says. He’s glad not to have to police every penny. “Instead, I empower employees to make the right decisions.”

CIOs continue to progress toward an ever-more-strategic role in many ways, including, as this year’s survey finds, by delegating more of their operations to trusted lieutenants; 46 percent of CIOs say they are doing that, up from 35 percent last year. Also, CIOs are aligned with non-IT business managers in their view that rising regulatory requirements and government involvement in the economy are high, even critical, priorities. Similarly, they agree that so is sorting out what the accelerating rate of technology change will do to their own company’s products and services.

But overall, progress is uneven. For example, according to our survey, fewer CIOs now report to the CEO, a metric typically used to estimate CIO influence. Thirty-eight percent of CIOs this year report to the CEO, down from 44 percent last year and 43 percent the year before. Few CIOs call on customers as they try to improve relationships with business stakeholders—just 23 percent, up only slightly from last year’s 18 percent.

That, of course, makes Maple Leaf Foods all the more notable. Hutchinson says he and his IT staff spend as much time figuring out what customers are doing as they do learning about the competition. The CIO of one of Maple Leaf’s biggest customers happens to have an office near Hutchinson’s, and the two get together regularly to talk technology and business, he says.

And so successful are Hutchinson’s efforts to cross-pollinate IT and business units that when one of his technology managers didn’t attend a business-side meeting recently because of a scheduling conflict, Hutchinson got a call.

“The president of the business unit says, ‘I’m mad at you because your person is in your meeting, not mine,’” Hutchinson says. “It’s happened in a couple cases. That’s how I know this is right. This is working.”

Follow Senior Editor Kim S. Nash on Twitter: @knash99.