Even the most seasoned IT executives won’t always be successful, but the elimination of chief information officer positions at some firms points to a credibility problem. How to turn perceptions around
Many CIOs are not rising to the level of seniority or executive contribution they feel they should be. Why not? It comes down to key areas of leadership failure, such as focusing on inputs instead of outcomes, or failing to use metrics that the rest of the business understands.
The good news is CIOs can develop skills to put “leader” back in the term “IT leader.” CIO doesn’t have to stand for “Career is Over” anymore.
Over the past few years, we’ve seen CIOs who used to be part of the executive suite reporting to the CEO or president finding themselves relegated to a lesser role and attached more to the CFO, said Craigg Ballance, president of E-finity Group Inc. and an expert with The Advisory Council, who gave a webinar on the topic last November.
“This is a disturbing trend because it says to us that the CIOs of today are not being seen by many management and executive groups as a strategic component of their organization,” he said. “This must be where a modern CIO focuses their efforts to become part of this strategic group.”
In their priorities for 2011, many CIOs have indicated they want to be more integrated into the fabric of the C-level in the organization and build credibility, said Dave Codack, head of employee technology and network services at TD Financial Services.
In many cases CIOs report one or two layers down from where the senior executive team sits, unless they’ve been able to prove themselves effective at delivering technology in a way in which it’s a differentiator for the company, which in many cases it’s not. “They fail because they’re not seen as being credible agents within the organization,” said Codack, “whether it be strategy, driving change for the organization, or introducing technology that’s going to assist them in their business objectives.”
At the end of the day, your IT operations have to run well – but that’s expected nowadays. “Where IT gets knocked, and legitimately so, is on the delivery of major projects,” said Codack. “The stats on those haven’t changed in 40 years. They’re over-budget and they’re late and there’s not any advance warning they’re not making fast enough changes to curb the demise of a project.” CIOs will never get out of the quagmire of “here we go again,” he said, unless they start focusing on business values attributes.
Value? What value?
Most IT leaders would argue that they’re delivering value to the business – whether it’s acknowledged or not – but the movement toward outsourcing and the cloud means their contribution is becoming less about the mechanics of IT and more about the strategy behind it.
The problem is there’s a tremendous credibility gap. “I’d challenge anyone to come up with much literature saying the average IT-enabled projects are highly successful,” said Ballance.
In a 2009 study by The Standish Group, business users said they felt 44 per cent of their IT projects were challenged, while 24 per cent were outright failures. They therefore claimed that 68 per cent of their IT projects were not successful. “The general mentality of success is still not there,” said Ballance. “The projects often work, but they still are not seen as successful.”
Many business owners feel they’re not getting everything they originally asked for in an IT project. Often, several priorities end up getting top billing, but none of them end up getting done well. Competing priorities often lead to confusion and incomplete projects, said Ballance. Other issues that can lead to failure include insufficient or blown budgets, as well as lack of success planning or incorrect resourcing.
One of the key failures of IT leaders is the ability to simplify the value of IT and its value proposition to the business. “It’s vitally important to create the link between what IT is doing and the overall business strategy,” said Andrew Dillane, CIO of Randstad Canada Group and president of the CIO Association of Canada. “We need to make IT relevant.”
Focusing on inputs doesn’t cut it anymore
An area where CIOs fail is thinking in terms of inputs rather than outcomes, said Ballance. Typically, an IT chef goes into the kitchen, finds flour, milk, eggs, butter and yeast, and decides to make bread. A business chef, however, will ask the customer what they want to eat – bread, muffins or pancakes – since all of those items can be made from the same components.
“We often find ourselves looking at the technology infrastructure from an input standpoint,” said Ballance. “We need to understand that the customer only cares about outcomes. This is a major gap we’ve discovered in IT programs – it’s a mind-shift to start looking at things in an outcomes-based context.”
Not only should IT leaders be familiar with the strategic goals of the project, but they should also understand the goals of the organization. “Many CIOs tell us they’re not clear on the strategic goals of the organization,” said Ballance. “If that’s the case you’re going to have to make an effort to find out, and you’re going to have to connect those dots before you start taking on projects and ultimately becoming the sacrificial lamb for being unsuccessful in your leadership role.”
Part of the problem is lack of objectivity. “Very often I see leaders that have come up through the ranks of IT and they’re too tied to technology, which is really the inputs,” said Dillane. “It has nothing to do with desired strategic outcomes. IT leaders need to have zero ties to the how – they need to be focused on the what.” And they also need to be open to many different ways of achieving the strategic direction of the business.
Traditional metrics no longer define success
IT metrics need to change from traditional “uptime” or performance-based metrics to a customer-service orientation, said Ballance. Success, ultimately, is measured in bottom-line results, not in terms of a budget being met or a project actually working. But when you’re a hammer, everything looks like a nail. And often in IT, every solution looks like a technology solution. “We fail to realize we’re our own worst enemies,” he said.
While you need to have basic IT metrics in place, they’re lousy at communicating the effectiveness of IT – and those metrics have to change in a business context, not in a technology context, said Codack. “When you talk about what you’re doing to make change in the organization, those metrics are done in a technology framework and mindset, not how the business sees it,” he said. “Unless we change that we’re not going to be able to communicate that effectively.”
IT should be using metrics that the rest of the business uses and are most important to customers. “My belief is the metrics closest to the customer win. It’s hard to argue with the value proposition then,” said Dillane. “IT should never create metrics to define its own successes – it’s dangerous.” They often get into overly creative business cases with value propositions that are “way out there,” he said, rather than keeping them close to the bottom line. While there’s a place for IT metrics within IT, but they should never be used for business cases or justifying investments.
Choosing metrics the business already uses gets executive team members on the same page. At Randstad, a company that specializes in permanent and termporary staffing for specific industry sectors, Dillane discusses metrics around increasing the speed of hire, finding the best candidate and overall customer satisfaction. “Initiatives that help us to accomplish those things will be on the top,” he said. “Today’s IT leader needs to be careful of trying to drive the agenda – they need to be collaborative in the agenda, they need to be facilitating the agenda.”
The problem with the concept of return on investment is that it’s only one element of the discussion. “Creative people can create an ROI for anything,and that’s the danger of ROI,” said Dillane. “When you create specific objectives, then you can make sure you’re attaining them.”
Understanding the language of business
The language of business is dollars, particularly when it comes to how business leaders measure success. We often use the term ROI, and every project has some sort of financial justification. But the way many technology projects are now being measured – and justified – are in other terms, such as internal rate of return (IRR).
“In IT we can almost always gather hard costs, but the benefits and value contributions under those ROIs can be pretty fuzzy at best,” said Ballance. And that means IT leaders have to rethink how they do a value calculation.
“Do you know what your hurdle rate is for your own company’s IRR? If you don’t, you should find out and look at it from the point of view of what is it I can invest in that will give me this kind of return,” said Ballance. Many IRRs are typically 15 to 20 per cent, and those are the kinds of IRRs that CEOs would be looking for (perhaps lower in certain infrastructure cases). “But the idea that an IRR has a specific corporate hurdle rate speaks enormously to the way we have to discuss our project investment language with business management.”
Then there’s net present value (NPV), which is a financial term that essentially means if a dollar spent tomorrow is cheaper than a dollar spent today, why spend today? If you know what the organization’s weighted average cost of capital is, you’re on your way to understanding the important elements of the language of business. If you don’t, then you need to do some homework.
“We need to be much more familiar with the financial language,” said Ballance. “Instead of saying they’ll work it out for me or I’ve got an ROI I can show, that is too simplistic today,” he said.
Scope creep and other project-killers
In most organizations there’s a prioritization competition between various departments. But if you have a focused, managed project portfolio, you can exercise governance in an appropriate manner where strategic projects contribute value to the bottom line.
It comes down to requirements management, said Codack, which means documenting requirements at a detailed level and getting sign-off. “That still is a flaw, it’s not done really well,” he said. Associated with that is scope creep. Often, even if you’ve got the requirements down pat, people will start asking you to add things. “Technology acquiesces too many times,” he said.
If an IT project is slated to take a couple of years, right out of the gate it’s destined to fail because players change, the industry moves, the scope changes – there are simply too many variables. A project that looked good three and a half years ago when you started the business case isn’t going to look the same today, so projects need to be broken down into smaller delivery components. This isn’t hard to do, said Codack, but in many cases it’s not being done well. “Get it out the door,” he said. “Then you’ve proven some value, you’re getting some credibility, and you don’t allow for changes to find their way in there.”
Too much time, money and resources are spent on day-to-day operations, and very little is spent moving the organization forward. “If you have a portfolio approach you can look at all major investments, operations and new projects, and you can start to have one view of the organization,” said Codack. The senior executive team can then gain an understanding of where the total IT spend is going, rather than on an individual project basis. And CIOs can start giving direction on those value-added components, as opposed to just keeping the lights on.
When a big project doesn’t have that line of sight, it can get lost. Even if the senior executive team doesn’t ask for it, you should force a status review of your IT projects at the C-level, said Codack. Sometimes the C-level is plugged in and wants that, but that’s not always the case. If you’re forced to go in front of that team, you’re going to make sure you’re on top of your game.
“Just recently, by taking a portfolio approach to our projects, even that small movement has enabled us to create more awareness with the senior executive team where they can start making some decisions around projects,” said Codack. There’s no brain surgery involved here, he added. It’s basic knitting around controlling costs and projects, and being integrated with the business to understand how to drive change and help business leaders be innovative. “There’s just so much waste going on in technology in my opinion,” he said. “We really could be innovative.”
Be a better communicator and collaborator
A CIO’s communication style can also lead to failures. Most IT leaders have a natural tendency to be problem-solvers, to quickly deduce what a solution should be, but in many cases they fail to get to the core issue, said Ballance. So they need to spend more time understanding why a project makes a difference and why it contributes to the organization’s goals and bottom line.
CIOs also need to have a stronger commitment to saying no – when they don’t have clear requirements, when project sponsorship is weak, or when there are no contingencies or insufficient funding. “We often say yes when in fact we know that’s not the right answer,” said Ballance.
Stakeholder management is a big area of failure. “CIOs are notoriously bad in marketing themselves and explaining to others, in particular senior management, the intricacies of IT and what is needed to deliver new projects and keep the lights on,” said Jories Timmers, IT director and CIO of Powerex.
One of the root causes of this, he said, is the CIO’s background. “Many of us grew up as techies and never got trained in soft skills. Also by our nature we’re bad at playing the company politics,” said Timmers. “I believe the next-generation CIOs will be better prepared – many will come from the business. Also, the educational system has incorporated more soft skills in the curriculum.”
The key challenge for CIOs is to create C-level synergy for IT-related decisions, he said. Each organization has its own culture, and executives have their own distinct personalities, and the CIO needs to understand how decisions are made – by individual executives and by the executive team.
First, acknowledge the level of disconnect, said Timmers. Then identify what problems exist, whether it’s skills at the CIO level, communication problems with executives or poor performance, and then define an action plan based on the answer. Using a coach (such as a retired CIO or executive) for a few months can help. “The better you understand the business, the better the CIO can use business language to express the IT issues and the impact it has on the business,” he said.
Another option is to go back to school or take a refresher course in IT leadership, said Timmers. The Vancouver chapter of the CIO Association of Canada, for example, organizes an annual IT leadership program with Simon Fraser University.
Get out in front of peers, build relationships (formally and informally) and collaborate on direction, said Dillane. “IT’s day-to-day job should be more focused on collaborating with everyone in the organization, as well as customers, to help accomplish the company’s strategic objectives,” he said.
“We need to spend the time to understand the business and how our people interact with customers,” said Dillane. “If we can’t understand that, how are our teams going to possibly understand the business? Conversely, if we have a strong understanding of the business we can help develop our teams.”
Being a CIO doesn’t have to mean your “Career is Over.” Instead, make it stand for “Career is Onward.”
Sponsor: IBM Canada Ltd
Pushing the frontiers – CFO Insights from the Global C-suite Study
Based on a global survey of 576 CFO interviews, this whitepaper from IBM's Institute for Business Value provides analytical insights into the traits of leading CFOs and what they are doing to become more efficient, forward-looking and proficient at creating profitable growth.