The Chief Information Officer

The number of corporate CIOs has increased dramatically over the past two decades as information management moves from the wings of company operations to centre stage. The CIO's role is shifting from the technical business of data processing to the more broadly conceived job of knowledge management. So important has managing knowledge become to the success of a company that harnessing knowledge may be a corporation's most pressing challenge-and at the very heart of the CIO's evolving role.

Though a relative newcomer to the executive wing, the CIO has become in many ways the most challenging and dynamic leadership role in the business world.

Throughout the '80s and '90s, corporations have faced dramatic challenges brought about by changes in markets and corporate organisations. In many industries, both production and markets have globalised. Companies have experienced major shifts both upward and downward in their scale of operations through significant downsizing and major mergers and acquisitions. In responding to these dramatic changes, companies have invested vast resources to reengineer their operations. It has been estimated that companies worldwide are spending $52 billion a year on reengineering, of which $40 billion goes annually into information technology. In other words, the CIO is at the centre of many of the most volatile and costly changes in the life of a corporation.

Companies trying to keep ahead of the curve of these rapidly moving business trends clearly need to understand the new challenges facing the CIO. In the face of the increasing importance and cost of the IT function and its changing profile, research was carried out by Korn/Ferry International, who teamed up with the Financial Times to conduct a survey of CIOs in three major European markets and the United States. The goal was to bring into sharp focus the CIO's role as it is evolving today on both sides of the Atlantic.

Key Trends

Here are some of the key trends that were uncovered in the evolution of the CIO role:

• The role of the CIO is moving from technical planning and implementation to strategic planning
  
  
• The current role of the CIO appears to be more tactical than broadly strategic. CIOs tend to focus on the planning and implementation of specific information technologies, rather than on long-term company strategy. In fact, over half of the respondents reported being diverted from a focus on long-range planning by persistent local 'fire-fighting' activities that dominated their time and attention. The relatively limited vision of the IT function would need to be expanded, as knowledge management is recognised by the CEO and board as a central component of strategic planning. This change in orientation will have an important impact on the future training and recruitment of CIOs
  
  
• The CIO would increasingly become an important voice in strategic planning. Currently, the CIO is not active in top levels of corporate planning and decision-making. Despite the fact that IT has been heralded as a key to future business success and growing market share, it is striking that the CIO is often isolated from the company's top decision makers. Given this limited access, how can the CIO's skills be adequately leveraged by a company to help manage business growth and development?

• Leading the transformation of the CIO role is an important human resource challenge for companies. This would mean rethinking the skill set associated with the CIO function, including the way companies use the CIO, the CIO's relation to the senior officers, the performance expectations and evaluation process, and performance incentives and remuneration

• The ideal qualifications for the CIO are changing as the IT function becomes more central to business planning. The ideal resume of the CIO will come to include technical qualifications, plus a background in understanding finance, marketing and strategic project, and business planning

• There is currently some uncertainty about the best mix of qualifications for the CIO — and variations in background and experience emerge among the countries surveyed. For example, CIOs with a background in finance, engineering and IT — found especially in Europe — tend to stress the need for more general business experience

• The CIO would become increasingly involved with external as well as internal customer support. The perceived success of the IT role is currently associated more with internal communications and networking than with external customer-based technology support. This role is likely to change as knowledge management expands to include external as well as in-house support functions

• CIOs tend to be more strongly motivated by new and stimulating job and project challenges. This trend is especially strong in the United States, where CIOs already have the highest remuneration

The Ambivalence About the Changing CIO Role

If there is a single theme emerging from the research carried out, it is that — behind all the numbers — there is ambivalence among today's CIOs about the changing nature of their jobs. Many were trained in computer science — and identify themselves as high-level technical experts rather than as integral to the business itself. Yet many clearly see that the increasing significance of the IT function to a company's success calls for a new skill set in the next generation of CIOs.

In the role of business strategist, the CIOs of the future would have to forge new kinds of relations with top corporate decision makers. They would effectively move into the circle of corporate planners at the highest level. Although there are significant national differences in how current CIOs view these coming changes, the study overall suggests a tension between current CIOs' appreciation of the role they now play in the company and the wider influence they may have in the future.

This tension shows up in some of the more puzzling contradictions in the survey data. American CIOs overwhelmingly see their successors as needing a new skill set, while their European counterparts do not. Or consider the implications of the following three trends we uncovered:

• CIOs across the board recognise the importance of getting their message through to their company's senior decision makers

• But even though many CIOs do not have frequent contact with their CEOs or a seat on their executive boards
  

• CIOs are by and large satisfied with their current relationships with senior decision makers
  
  

Given the increasing importance of IT to corporate success, it is hard to understand why current CIOs should be as satisfied as they seem to be with the current decision-making arrangements in their companies. This apparent disconnect between future needs and current realities of the CIO role is evident in several places in our study. It suggests that the evolutionary path of the CIO role is not necessarily a smooth one and that moving the IT function front and centre in the corporate planning process would require some fundamental changes in the background, the skill set and the self-perception of the next generation of CIOs.

Top recommendations for harnessing the role of the CIO

• Initiate closer involvement of the CIO with other senior officers and include the CIO's perspective before strategic objectives are finalised by the board

• Address impediments to success, such as lack of planning, skills shortages and cultural resistance, and review progress regularly

• Look beyond return on investment and focus on three separate areas: running costs, extraordinary costs (for example, Y2K and the Euro) and technology's contribution to business growth

• Re-examine remuneration incentives, particularly with reference to the need for a broader skill set, including business and financial experience

• Make sure the CIO's role is challenging and stimulating and senior executives acknowledge the CIO’s contribution. An understanding of the issues the CIO faces and the achievements accomplished over the year will ensure top performance

My Conclusion

No dimension of business practice is more dynamic than information technology.

New innovations in information technology tend to create the basis for further innovations. For example, rapid expansion in computer memory capacity and increased computational power produce a demand for new applications, which in turn create a demand for still more powerful hardware. Computers are used to design a new generation of computers. Software applications are used to create and compile yet more complex software programs. The proliferation of desktop PCs encourages ever more sophisticated networking technologies that, in turn, change the way people and markets work and the way information is created and distributed.

Information technology is inherently dynamic. In light of this, it is not surprising that the role of the chief information officer has grown significantly in importance and has assumed new responsibilities that go far beyond the technical service role that once defined the position. The CIO illuminates a complex figure in flux, an individual trying not only to keep up with the rapid changes in hardware and software, but also to adjust to a world in which knowledge management has become, in many ways, the main business of business.

These changes in the scale and scope of the CIO role are only now beginning to be felt in the world's major corporations. Many CIOs find themselves in a kind of professional limbo, caught between a past where they were seen as technically oriented computer specialists, focused mainly on tooling up their shops with the latest hardware and applications, and a rapidly approaching future where they will become increasingly involved in strategic business planning at the highest levels of their corporations. Companies that can successfully manage the transition of the CIO from an information processing function to a knowledge management role will have an enormous competitive advantage over those that do not understand and adapt to the demands of this changing business world.

The revealed many significant national differences in how the CIO role is evolving and, despite the globalisation of the world economy and the rapid unification of European economies, these differences are not expected to go away. Still, no matter where they are located, modern businesses will have to address a common set of issues involving the role of the CIO. Major challenges include:

• Transforming the IT function from tactical operations to more global strategic planning,
• Redefining the appropriate training and background of the CIO to include more business and financial experience in addition to a technical background,
• Redefining the ideal skill set for the CIO,
• Improving the communication between the CIO and senior policy makers in the organisation,
• Making sure that the value of the IT function is more fully understood by senior management,
• Understanding why the current CIO role remains largely out of synch with the increasing importance of IT to a company's success,
• Successfully managing the evolution of the CIO role 'on the fly,'
• Finding ways to deal with some of the most significant national differences in the IT function in Europe as Europe's economies become increasingly coordinated
• Learning how to harness the changing IT function to maximise corporate competitiveness and growth

To meet these challenges, companies will have to identify and overcome the key barriers to this critical transformation of the IT function:

• The CIO's lack of access to decision makers,
• Persistent corporate instability due to takeovers, mergers and acquisitions,
• The outdated view of the CIO as only a high-class technician,
• Poorly articulated or non-existent evaluation system for CIOs (in Europe),
• Poor incentives in the CIO's remuneration package (particularly in Europe) including the lack of deferred remuneration and inadequate salaries and
• The CIOs' own ambivalence about their new role and their reluctance to change the status quo

This last point is especially important, for it is the human factors that are sometimes overlooked in the rush to examine the structural impediments to corporate change. It is not just organisations that will have to change to adapt to the brave new world of knowledge management. To negotiate successfully the sea change corporate IT functions are experiencing, CIOs will have to take a hard look at their own beliefs and attitudes, convictions often formed at a time when their jobs called for skills very different from those demanded today. The coming of age of corporate IT will mean that CIOs must radically rethink their jobs, incorporating into the old technology-guru role new business skills, new relationships with corporate leadership and new responsibilities for strategic thinking. While many CIOs acknowledge these changes, there is also considerable reluctance to move beyond the older, more limited vision of the CIO role.

Clearly, managing the evolution of the CIO role will not be easy. But successfully implementing this complex transition in the CIO role is surely one of the most important challenges that corporate leaders face today. The function they had once understood as an exchange network of goods and services has become something more like a vast and rapidly evolving marketplace of knowledge.