Thursday, December 4, 2014

CIO Reporting Structure: Does it Matter to IT Maturity

CIOs need to be an interpreter to mind the gap between IT and business; between silo functions and business oversight; and between industrial age & digital era.

Ever since the "early days" (the 1980s), IT has frequently reported through the business/CFO channel. This is the true state of CIOs today. However, IT is transforming from a cost center to value creator, from IT-business alignment to IT-business engagement; from IT as a back-office support function to front office innovation engine, what is the ideal CIO reporting structure, does it matter to IT maturity?

Historically many CIOs reporting to the CFO because IT is still perceived as a cost center: Some IT organizations ceaselessly suck up money with the little-perceived return. The pros about such CFO-CIO relationship is that they can complement each other for the different skill-set, the CIO can inform the CFO about the technology trend and IT capability, and the CFO can provide more detailed knowledge about budget, finance analysis; and CIOs can understand CFO’s ‘short view’ with empathy; the con is that more often than not, there’s an information gap between CFO and CIO that burdens the relationship easily. Although not all CFOs think as “bean counter”, still, due to the nature of accounting and culture of finance, many CFOs more focus on thinking quarterly, they are risk controllers, not an innovation advocate. So the communication between CFOs and CIOs may need to talk purely in terms of finance and risk, business basic and budgeting, and keep the bottom line on the track.

The percentage of CIOs reporting to CEOs is significantly increased: With emerging digital transformation, from industry study, now almost the similar percentage (43%) of CIOs reporting to their CEOs, what’s the benefit for such new reporting relationship, can it improve IT maturity.  The positive side of the structure change is that such relationship is perhaps the best way to ensure that the technology within the company is working to achieve the vision of the CEO and the goals of the company. The most important thing is to keep all senior leaders –CXOs all on the same level of understanding of business strategy, and sitting at the same table. Particularly in the digital era, when IT is involved in so much more than producing financial reports. Information Technology has become such an integral part of Operations, Finance, and Marketing, that it does not make sense to place it hierarchically below any of these other parts of the organization. Any company that fails to recognize this will end up being unnecessarily encumbered by a systemic organizational flaw.

The CIO’s reporting structure can impact IT maturity: While CIOs' leading style and overall IT maturity may also decide to whom shall they report. Technical people who become CIOs often lack the marketing sense necessary to convince executives of their proper value, but very often they are also so occupied, focused and entertained by the technical aspects of their work that they fail to put sufficient effort into understanding and making the specific business value statements that would persuade the other executives. CIOs need to get better looking at and articulating the value of technology from the perspective of CEOs, BoDs so that they don't feel as though they need a CFO to act as a translator or mediator. In fact, CIOs need to be an interpreter to mind the gap between IT and business; between silo functions and business oversight; and between industrial age & digital era, because they are in the unique position to oversee business and technology is often the game changer to catalyze innovations.

The CIO position is changing to take more of an emphasis on the "I" -Information and less on “T” -technology. CIOs also need to be more business savvy than ever. It is the trend for more CIOs reporting to CEOs for continuously improving IT maturity, still, CIOs should build a very collaborative relationship with all peer CxOs because IT is a value-added solutionary to the entire company. For any business unit to be successful they need to partner with IT, IT not only needs to optimize its own structure but also helps the organization tune the digital organizational structure & design, in order to improve cross-functional collaboration and overall business maturity.


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