The CIO – a CEO’s Untapped Strategic Arsenal

By Beverly Lieberman

There seems to be a surprising paradox affecting Chief Information Officers in corporate America today, and it centers on the CIO’s evolving role. Both CEOs and CIOs describe the CIO’s role as strategic, but when interviewed at length, both their expectations and reality argue otherwise.

This contradictory picture is clearly painted in a 2004 survey conducted by Beverly Lieberman, President of the executive search firm Halbrecht Lieberman Associates. She personally interviewed over 30 CEOs and CIOs from Fortune 500 corporations, including Aetna, Best Buy, Pfizer, Harrah’s Entertainment, GE, and other household names. Even though the surveys were taken across different geographies and industries, the common findings stem from two questions: “What do you expect from your CIO?” and “Do you view the CIO as a strategic role?”

“When recruiting a CIO, company executives emphasize they are looking to fill a highly visible, strategic role. Typically, a CEO will describe an ideal candidate as a visionary, a driver of change, and an initiator of business possibilities through IT,” explained Ms. Lieberman, whose Westport, Connecticut firm has placed thousands of prominent IT executives nationwide. “Yet, during my interviews, I have uncovered a dramatic disconnect. Most CIOs report that they actually focus their attention on overseeing tactical operations—rather than strategic initiatives. This fascinated me, and I decided to conduct a national survey to learn the underlying factors and verify that this trend was indeed national in scope.”

CIOs are increasingly reporting directly to CEOs and are being included at the executive management table. But positioning alone does not translate into their being tapped for a full arsenal of strategic ideas. Ms. Lieberman’s coast-to-coast study suggests that today’s CIO duality is the result of a combination of factors including business climate, the quality of the CEO-CIO relationship, and the perception of the CIO within the company. The following are excerpts of her research findings and industry observations, which Ms. Lieberman presented at the November 2004 CIO Perspectives Conference in Scottsdale, Arizona.

A Changing Business Climate

Over the last four years, the soft economy has placed many CEOs into survival mode. With an intense focus on mergers and acquisitions, operational efficiencies, and risk avoidance, most CEOs are prioritizing cost management rather than blue sky planning and new product innovation. Consequently, there has been less investment in strategic information technology initiatives. The CIO’s attention is being monopolized by merging IT systems, operational improvements, implementing new architectural road maps, downsizing concerns, outsourcing issues, and overall “doing more with less”. This full plate of “to dos” leaves little time for thoughtful strategic reflection.

“While the CIO’s contribution during these tough times is undoubtedly critical to the company, in most cases, CIOs find themselves playing defense and hoping that the time will come when they can get back on the offense team,” explained Ms. Lieberman, who is a contributing writer to CIO Magazine and one of CIO.com’s online career counselors. “Many CIOs work on strategic projects, but that’s not the same as being a strategic contributor.”

So, while in theory, CIOs are considered strategic, there hasn’t been as much scope for strategy-making due to the recent business climate.

Perception of the CIO

The quality of the CEO-CIO relationship also plays a vital role in the CIO’s effectiveness and ultimate success as a strategic contributor.

CIOs have not traditionally reported to the CEOs, who are often more experienced at managing other senior executives like the CFO or COO. Since CIOs generally come up from the technical ranks, they tend to live and speak in a complex, jargon-filled world that can be indecipherable to many CEOs and other senior executives. This contributes to the CIO’s difficulty in being heard and brought into the corporate fold. Although the CEO-CIO relationship is based on mutual respect and collaboration, the fact is, CEOs are simply more comfortable talking with their CMOs and CFOs about strategy, and less inclined to turn to their CIOs.

The research study also revealed a strong internal perception that IT mostly operates in a service delivery capacity or acts as a support function. For years, CIOs have been working vigorously on implementing systems, tools, dashboards, and process improvements in support of the CEOs’ imperatives. Ms. Lieberman believes there is a tremendous opportunity for CEOs to form stronger relationships with their CIOs and tap into a highly motivated yet undervalued strategic resource.

One Fortune 500 CEO, who participated in Ms. Lieberman’s national survey, created an innovative way to elevate his CIO’s perception within his own company. He encouraged his CIO to sit on a Board of Directors of another company. This not only offered additional opportunities for intellectual challenge, but simultaneously enabled the CIO to be viewed as a high level business partner.

As companies become more information driven, CEOs are recognizing CIOs as boardroom peers and key members of their executive team. This trend is currently reflected in many leading software and internet companies, who have Chief Technology Officers (CTOs) reporting directly to the CEO. These executives are viewed as strategic business leaders who take on partnership roles with sales and marketing. Operating under a higher level of strategic expectation, CTOs are more often able to delegate day-to-day operational functions, and devote more of their attention towards revenue-generating product innovation, visionary services, and competitive analysis.

Nurturing Your Competitive Edge

Expanding a CIO’s input into company strategy has proved successful for a number of companies in Ms. Lieberman’s survey. One Fortune 500 CEO said, “I expect my CIO to demonstrate the capacity to understand the broader context of the business and to apply IT thinking to help the company compete in our marketplace. The CIO is a driver of change along with me.” Successful CEOs who take their relationship with their CIO to the next level are discovering an arsenal of strategic ideas from IT.

“CEOs have a golden opportunity to nurture a valuable competitive resource by setting the tone of their CIO relationship,” advised Ms. Lieberman, whose nearly 20 year industry expertise makes her a frequent conference panelist, lecturer, and seminar host. “The best motivational and retention tool is to have your CIO play an active, strategic role and do more than execute an endless series of implementations. A CIO who is fully challenged and able to live up to his intellectual potential will not only remain a loyal employee, but will add important value to the company’s mission.”

Ms. Lieberman offers some professional recommendations on how CEOs can help coach and mentor their CIOs. Some of these suggestions are derived from the practices of CEOs in her research.

Make time for relationship building. The CEO should discuss openly and frequently what’s needed in the company, and brainstorm with the CIO to gain assurance that the CIO is in tune with the company’s overall strategy. A performance review is a perfect opportunity to ask, “What areas would you like to focus on if you weren’t busy implementing SAP software?” Many CIOs are yearning to contribute their intellectual horsepower to the top line.

Encourage the CIO to hire strong lieutenants in order to be freed-up to take on a more active, strategic role.

Encourage the CIO to adjust from an IT focus to a business strategy focus. Offer rotational opportunities in marketing, operations, and customer service to gain general management and P&L responsibilities. Working with business counterparts will help CIOs achieve a better understanding of different department needs and goals. This will result in a more broad-based CIO who will be better equipped to run IT as a business.

Help elevate the CIO’s stature and perception within the company. Be sure to include the CIO in cross functional meetings with key department heads, and encourage the CIO to demonstrate expertise to senior executives. Also, suggest that the CIO sit on a Board of Directors of another company. The CIO will gain prestige and another opportunity to act as a business partner rather than a service provider.

Encourage the use of an executive coach for on-going professional development. Outside coaching gives objective feedback and ample opportunities to enhance relationship building, presentation techniques, and other critical executive management skills.

A Look Ahead

For a company to effectively use IT to drive innovation and growth, a collaborative working relationship between the CEO and CIO is crucial. When engaged and mentored, an ideal CIO can successfully relate the technological impact on company goals to senior management, and at the same time, help the IT staff connect the business imperative to the technological applications.

“With CIOs increasingly reporting to CEOs and sitting at the executive table, they have been able to bring some previously untapped, competitive resources to their companies,” noted Ms. Lieberman. “CIOs have an unmatched knowledge about the company’s internal operations, business processes, and technological capabilities. All this intellectual capital creates an invaluable sounding board and a consummate “ear-to-the-ground” consultant to the CEO.”

Ms. Lieberman’s survey supports the belief that a CEO who realizes the value of having a CIO in tune with company strategy will see bottom line tangible results – new ways of doing business, opportunities to increase efficiency and cut expenses, less dependency on costly outside consultants, and ingenious insights on innovative products and services.

Beverly Lieberman is President of Halbrecht Lieberman Associates, Inc., an internationally recognized executive search firm that provides retained executive search services across multiple industries while specializing in information technology.
She has successfully managed searches for senior executives in communications, healthcare, high technology, management consulting, manufacturing, financial services and retail companies. A frequent IT industry panelist and speaker, Ms. Lieberman is a contributing writer for CIO Magazine and one of CIO.com’s online career counselors. To request a complete research report, call 203-222-4890 or visit www.hlassoc.com