November 29, 2007
CIOs Reporting for Duty
A controversy of sorts has popped up over the role of chief information officers and how that is reflected in organizational reporting structures.
According to an InformationWeek blog by Chris Murphy, there is a concern among technology executives that an increase in the numbers of CIOs reporting to chief financial officers (CFO) rather than chief executive officers (CEO) or presidents represents a diminution in the importance of the function within companies.
The argument, according to Mr. Murphy, is that reporting to a CEO indicates the CIO is seen as an innovation driver within a company while a line to the CFO puts the emphasis on information technology as a cost center.
A study by the Society for Information Management (SIM), reported on by InformationWeek’s John Soat, found that there has been a dramatic decrease in the percentage of top IT execs reporting to the heads of companies.
According to the SIM research, 31 percent of tech execs currently report to the CEO compared to 45 percent last year. The numbers reporting to CFOs increased to 29 percent versus 25 percent in the previous survey.
“If the CEO number is going down, clearly [CIOs are] losing traction,” Jerry Luftman, associate dean of the Graduate Information Systems Programs at the Stevens Institute of Technology in Hoboken, NJ, told Mr. Soat. “I’m hoping it’s a blip.”
Separately, InformationWeek’s own research paints a different picture. According to its CIO Effectiveness study, 41 percent said the role of CIO is gaining in influence within companies while only 19 percent saw it in decline.
InformationWeek’s numbers show 46 percent of CIOs report directly to a CEO or president, 24 percent to the CFO and 13 percent to the chief operating officer.
Kevin Rosenberg, managing partner with executive search firm BridgeGate, said he sees “fewer CIOs reporting to CFOs than ever before.”
Individual CIOs say the question of their role and effectiveness within an organization has more to do with to whom they report than the title of the person.
One CIO, according to Mr. Sloat, was quite pleased reporting to the CFO because his company’s CEO “doesn’t have a clue.”
Of course, another CIO described reporting to the CFO as “a nightmare.”
Discussion Question: To whom do you think the CIO should report? Does the reporting line of a CIO have an effect on the role of information technology as an innovation driver?
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I suspect that the drop is primarily due to the lack of understanding most CEOs have of the importance of the Information Age. They have changed reporting because they cannot grasp the importance of the function and frankly can’t use a computer. I can’t tell you how many CEOs have their “assistants” handle everything, including email. For them to have a conversation with a CIO would be akin to trying to converse in Swahili.
We are on the tail end of the “old line” CEOs. These “big picture” men, are usually better at putting out fires than lighting beacons. Word to the wise – look at those companies that don’t use computers and systems to the max and buy some long term puts. Living in a global environment will not allow any successful organization to move back to a 1950’s style structure. At a time when it is imperative that CIOs bring every system to the party that can improve quality and increase profits, I’m surprised that enlightened members of BODs are allowing this to happen. What a shame and what an indictment of America’s business community.
This would seem to be the same kind of thinking that gave us General Motors, Ford and two dozen chain grocers I could name.
At Gamestop, the Vice Chairman and COO, Dan DeMatteo, is the former CIO. Titles don’t matter as much as corporate culture and the personalities of the top executives. Today’s CFOs are often a lot more technosavvy than 30 years ago. And if the CIO reports to the CEO, and the CFO doesn’t approve the CIOs spending, what will be accomplished? Sounds trite, but people have to work together as a team.
I agree with the notion that personalities are more important than titles. If the CEO is a technophobe, having the CIO report to him or her will not benefit the organization and may even do substantial harm. On the other hand, having a CIO report to a CFO who has a positive vision for technology’s role in the company can result in a two-pronged attack for resources, Also, even when there is a level between the CEO and the CIO, the good CEO will still ask for and get information directly from the CIO. More and more CEOs are geeks who love talking systems with their CIOs.
The issue of whom the CIO reports to is complicated and has no clear answer for one-size fits all because the CFO functions, the CIO objectives, and personal business agendas for the CEO, often are in conflict with one another. Not the answer you were looking for, and perhaps not politically correct, but it’s often the truth in a practical sense. In a publicly traded company the CIO should be given certain freedoms to do his or her job honestly, earnestly, and objectively, and he or she should report to the Board, but have balanced input from the CFO and CEO.
First, I’d question that dramatic drop, of 45% reporting to the CEO last year, declining to only 31% this year. Sample size and variation instantly spring to mind. And, well, of course it makes sense to have this function report to the CEO and not the CFO! And for all the good reasons mentioned. Any company today has to see the IT function as strategically vital. And, it has always been the mindset of most CFOs to try to cut costs. Duh!
CFOs tend to have a very narrow view of how technology can help achieve measurable benefits. For them, benefits can be either reduced expenses or improved productivity. Occasionally, they’ll pass on increased return on inventory or extending the life of an asset. They are pragmatists.
CEOs, on the other hand, tend to have a much more expansive attitude about benefits. Will the IT investment increase sales? The company’s knowledge? Will it improve the company’s key relationships with vendors, customers, or the associates? CEOs are more visionary.
IT should report to the exec going for the full measure of return.
It appears that these samples may not be representative of the population as a whole.
In my mind, the CIO should report to the individual (COO, CFO, CEO) that supports technology as a basis to facilitate competitive strategy, rather than simple plumbing and infrastructure.
Guess it depends on who the CFO is. Frankly, its gross stereotyping to ‘pigeon hole’ CFOs as only being concerned with costs. One CFO that comes to mind as a very strategic thinker is Dick Galanti at COSTCO. You could sit next to him on a cross country flight, have an exceptionally provocative and insightful discussion about retailing throughout the flight, get off the airplane at the other end and never know he was the CFO.
The placement of the CIO is particularly important in retail. Retail companies have spent so little on technology in past years that they have a mighty job ahead of them to catch up. Retail CIOs uniformly report that new investments in technology bring outstanding results to the top line. They would deploy more if they had sufficient funding and staff resources. So parking the CIO under the financial guy can absolutely result in a “why are we spending again?” mindset. If you need ammunition at your own company, get in touch!
It seems to me it would depend on if the CEO is a hands on day to day manager or if he is just a figurehead who just goes to Wall Street analysts conferences or plays golf all day. Naturally, a CIO is not going to report to someone who isn’t there. The CFO is usually the one who is on call all the time. The CFO is the one who gets blamed for everything, so it seems natural that the CIO would report to him.
The answer is simple–the CEO. As more and more IT initiatives are beamed at the customer out front and the supplier out back, the more “business-wide” are the applications and need for input and support from the top for IT prioritizing. The CFO deals with control (internal) and financing (external)–this is quite enough in today’s complex world.
This “CIO reporting to the CFO” trend has been going on for years, so this is nothing new. We did a package of stories on this four years ago and it was dismissed as old news back then.
As to the substance of this, namely that reporting into the CFO as somehow a demotion for the CIO, I don’t buy into that. Clearly, it’s going to depend on the culture of that particular company, but CFOs have become extremely powerful executives, especially in retail.
Having the CIO report to a financial executive forces the CIO to view technology as a tool to help the company become more profitable and more strategic. There have been cases where reporting in to the CEO is less effective because the CEO may have such a diluted perspective.
If it forces the IT department to deal with more strategic concerns, their influence and clout will actually sharply increase, not the other way around.
Is there any true downside to this for CIOs? There shouldn’t be. If they succeed and their efforts contribute meaningfully to better profits, the CEO (and the board) will quickly see that. The only way the CIO would remain invisible to the CEO/board if the IT department is operating only tactically. If so, then they deserve to not get the attention.
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I suspect that the drop is primarily due to the lack of understanding most CEOs have of the importance of the Information Age. They have changed reporting because they cannot grasp the importance of the function and frankly can’t use a computer. I can’t tell you how many CEOs have their “assistants” handle everything, including email. For them to have a conversation with a CIO would be akin to trying to converse in Swahili.
We are on the tail end of the “old line” CEOs. These “big picture” men, are usually better at putting out fires than lighting beacons. Word to the wise – look at those companies that don’t use computers and systems to the max and buy some long term puts. Living in a global environment will not allow any successful organization to move back to a 1950’s style structure. At a time when it is imperative that CIOs bring every system to the party that can improve quality and increase profits, I’m surprised that enlightened members of BODs are allowing this to happen. What a shame and what an indictment of America’s business community.
This would seem to be the same kind of thinking that gave us General Motors, Ford and two dozen chain grocers I could name.
At Gamestop, the Vice Chairman and COO, Dan DeMatteo, is the former CIO. Titles don’t matter as much as corporate culture and the personalities of the top executives. Today’s CFOs are often a lot more technosavvy than 30 years ago. And if the CIO reports to the CEO, and the CFO doesn’t approve the CIOs spending, what will be accomplished? Sounds trite, but people have to work together as a team.
I agree with the notion that personalities are more important than titles. If the CEO is a technophobe, having the CIO report to him or her will not benefit the organization and may even do substantial harm. On the other hand, having a CIO report to a CFO who has a positive vision for technology’s role in the company can result in a two-pronged attack for resources, Also, even when there is a level between the CEO and the CIO, the good CEO will still ask for and get information directly from the CIO. More and more CEOs are geeks who love talking systems with their CIOs.
The issue of whom the CIO reports to is complicated and has no clear answer for one-size fits all because the CFO functions, the CIO objectives, and personal business agendas for the CEO, often are in conflict with one another. Not the answer you were looking for, and perhaps not politically correct, but it’s often the truth in a practical sense. In a publicly traded company the CIO should be given certain freedoms to do his or her job honestly, earnestly, and objectively, and he or she should report to the Board, but have balanced input from the CFO and CEO.
First, I’d question that dramatic drop, of 45% reporting to the CEO last year, declining to only 31% this year. Sample size and variation instantly spring to mind. And, well, of course it makes sense to have this function report to the CEO and not the CFO! And for all the good reasons mentioned. Any company today has to see the IT function as strategically vital. And, it has always been the mindset of most CFOs to try to cut costs. Duh!
CFOs tend to have a very narrow view of how technology can help achieve measurable benefits. For them, benefits can be either reduced expenses or improved productivity. Occasionally, they’ll pass on increased return on inventory or extending the life of an asset. They are pragmatists.
CEOs, on the other hand, tend to have a much more expansive attitude about benefits. Will the IT investment increase sales? The company’s knowledge? Will it improve the company’s key relationships with vendors, customers, or the associates? CEOs are more visionary.
IT should report to the exec going for the full measure of return.
It appears that these samples may not be representative of the population as a whole.
In my mind, the CIO should report to the individual (COO, CFO, CEO) that supports technology as a basis to facilitate competitive strategy, rather than simple plumbing and infrastructure.
Guess it depends on who the CFO is. Frankly, its gross stereotyping to ‘pigeon hole’ CFOs as only being concerned with costs. One CFO that comes to mind as a very strategic thinker is Dick Galanti at COSTCO. You could sit next to him on a cross country flight, have an exceptionally provocative and insightful discussion about retailing throughout the flight, get off the airplane at the other end and never know he was the CFO.
The placement of the CIO is particularly important in retail. Retail companies have spent so little on technology in past years that they have a mighty job ahead of them to catch up. Retail CIOs uniformly report that new investments in technology bring outstanding results to the top line. They would deploy more if they had sufficient funding and staff resources. So parking the CIO under the financial guy can absolutely result in a “why are we spending again?” mindset. If you need ammunition at your own company, get in touch!
It seems to me it would depend on if the CEO is a hands on day to day manager or if he is just a figurehead who just goes to Wall Street analysts conferences or plays golf all day. Naturally, a CIO is not going to report to someone who isn’t there. The CFO is usually the one who is on call all the time. The CFO is the one who gets blamed for everything, so it seems natural that the CIO would report to him.
The answer is simple–the CEO. As more and more IT initiatives are beamed at the customer out front and the supplier out back, the more “business-wide” are the applications and need for input and support from the top for IT prioritizing. The CFO deals with control (internal) and financing (external)–this is quite enough in today’s complex world.
This “CIO reporting to the CFO” trend has been going on for years, so this is nothing new. We did a package of stories on this four years ago and it was dismissed as old news back then.
As to the substance of this, namely that reporting into the CFO as somehow a demotion for the CIO, I don’t buy into that. Clearly, it’s going to depend on the culture of that particular company, but CFOs have become extremely powerful executives, especially in retail.
Having the CIO report to a financial executive forces the CIO to view technology as a tool to help the company become more profitable and more strategic. There have been cases where reporting in to the CEO is less effective because the CEO may have such a diluted perspective.
If it forces the IT department to deal with more strategic concerns, their influence and clout will actually sharply increase, not the other way around.
Is there any true downside to this for CIOs? There shouldn’t be. If they succeed and their efforts contribute meaningfully to better profits, the CEO (and the board) will quickly see that. The only way the CIO would remain invisible to the CEO/board if the IT department is operating only tactically. If so, then they deserve to not get the attention.