Seven Habits of Highly Effective CIOs

Ask executives from companies in India what they think about their organizations in-house technologythe answer is likely to be mixed. On one hand, they may credit their CIO for improving efficiency and minimizing cost, and comment approvingly about rapid rise in scale enabled by IT. Push a little further though, and you sense that IT is not yet meeting the expectations.

So, what are those expectations? With a growing Indian economy, business leaders see an increased role for technology in enabling new products, entering new markets, and engaging new customer segments such as young and tech-savvy consumers. In the supply chain, they see technology binding together suppliers and partners, and providing greater transparency into demand.

In this context, the traditional CIOs role of improving efficiency and minimizing operational costs and risks while still considered to be of great importance, are no longer considered sufficient. Increasingly, the expectation from CIOs is to assist in the transformation of services, business processes, products, and even business models to gain competitive advantage. In the words of one CIO, who has spent the last three years focusing on rationalization and efficiency, We must now turn our attention to adding value to the business and enabling growth.

New Expectations for the CIO

To understand what skills and behaviors CIOs need in order to meet these heightened expectations, the CIO Executive Board, a program of the Corporate Executive Board, asked our network of CIOs in economically mature markets to assess their role in unearthing business enablement opportunities. Most indicated that they currently act as a participant or information resource, rather than as a leader. 51%, however, stated that their ideal contribution is to assume a leadership role in identifying business opportunities.

These CIO leadership ambitions are fully supported and encouraged by executive peers. When asked to rate the ideal role for CIOs in identifying business opportunities, 71% of CFOs said IT should be leaders. This statistic reveals that finding new ways to create business value with IT is not only an ambition of progressive CIOs, but also an imperative for CIO effectiveness as voiced by the business leadership team.

One Role, Many Questions

In my interactions with CIOs from Indian companies, ten core challenges keep coming up which can further be grouped in three broad categories. The first is setting up an IT strategy implying how does the CIO maintain the close alignment between business and IT plans; effectively manage new concepts and opportunities and to justify the IT investments, and to prove that the expected ROI is coming in.

The second is managing the technology life cycle including deciding on what practices should be used to guard against technology obsolescence; the CIO has to ensure that employees have on-time access to business data and is technology keeping up or becoming a bottleneck for the business?

When it comes to business, the CIO has to ensure that the IT setup supports the new products which the company intends to sell; supporting the organization when it enters new markets, and most importantly helping the company outperform its competitors.

The thing is that I could use exactly the same checklist in my conversations with CIOs in the USA, Europe or Australia. CIOswhether at Indian or Western organizations alikedescribe how the definition of their effectiveness has evolved beyond technology deployment and operational efficiency. Increasingly, executive leaders in organizations in India and abroad are assessing CIOs on their ability to deliver business value. In the same way that the expectations are converging, so should the response. The best practices and progressive solutions employed by one CIO should be applicable to others, regardless of location.

Seven Habits of Effective CIOs

To understand what it takes for a CIO to meet these expectations, it is useful to look at some research into CIO effectiveness. The research is based on a survey of 142 CIOs spanning revenue size, geographies, and industries. The respondents provided information on their tenure, background, time allocation, key skills, business understanding, approaches to business engagement and value measurement, and career ambitions. They also described how their IT organizations were performing. By analyzing this dataset, we identified a subset of CIOs whose performance stood out from the rest. By comparing their behaviors to the survey set as a whole, we distilled seven key findings on the management behaviors of high-performing CIOs.

CIO as an Agent of Change: The most effective CIOs are the agents of change and innovation in their organizations. The critical attributes of CIOs, who play a proactive leadership role in their organizations include catalyzing business innovation and actively participating in the generation and incubation of new business ideas, and driving organizational change since change is not just about technology. The most successful CIOs know exactly which levers to pull to drive organizational change.

CIOs and other IT leaders have much in common with sales executives. Both must understand potential business needs, describe complex products and ideas to often skeptical audiences, set expectations appropriately, and build consensus for action. Recent analysis of more than 600 sales representatives by the Sales Executive Council, a Corporate Executive Board program that works with heads of sales, found that the most effective representative have a challenger profile. This means that they have the skills and behaviors to teach customers, to tailor their messaging, and when necessary to assert control. This is in contrast to sales representative who focus on relationship building and are less effective, as a result. Our research suggests that the same challenger profile is essential for effective CIOs.

A Developer of Talent, Not Just Technology: High-performing CIOs are of the view that IT staff management and development is their current as well as ideal top priority in terms of how they spend their time. For other CIOs, IT staff management and development is only their fourth most time-intensive activity, ideally they would like this activity to take second place after strategic planning and information gathering. Perhaps not surprisingly, 61% of high-performing CIOs describe themselves as very effective at IT staff management and development, compared to only 38% of other CIOs. High-performing CIOs see effective talent development as a contribution to their companies. Far from resisting or resenting the movement of high potential staff from IT to other parts of the organization, they set themselves the goal of being an exporter of talent. High-performing CIOs are also expanding their staff development role beyond the IT function, with 69% having training or coaching role outside IT. In contrast, only 38% of other CIOs have a similar role.

To Deliver Value, You Need to Understand It First: Central to the challenge of becoming effective at delivering business value is the need for strong business understanding and credibility. In the words of one CIO, From the moment the CIO begins to say, How can I help? he loses his credibility. He should know how to help, that is his job. You need someone who understands the business and has credibility.

High-performing CIOs attach great importance to understanding the companys competitive strengths and weaknesses and its key sources of growth. 74% of high-performing CIOs rank understanding company value drivers as their first or second priority, compared to 54% of other CIOs. CFOs concur with this prioritization, identifying operational business knowledge as the most important development area for CIOs.

One measure of how CIOs build their understanding of company value drivers is to examine how they prepare for executive committee briefings. There is a clear bias towards using business focused sources of information such as company strategy documents, site visits, and a network of peers. Less than half of CIOs say they use technology oriented sources of information, such as technology conferences and the IT trade press for this purpose.

The Centered Entrepreneur: High-performing CIOs enjoy strong role definition; 93% report that they have clearly defined roles, expectations, and responsibilities compared to 80% of other CIOs. More high-performing CIOs also report clarity around their goals and objectives, 73% follow Management by Objectives (MBOs), a list of formal, quantified goals, compared to 61% of other CIOs.

With role clarity, high-performing CIOs also exhibit a higher appetite for risk-taking; 37% describe themselves as very effective at risk-taking compared to 25% of other CIOs. In addition, on an average, 50% of high-performing CIOs compensation is incentive based compared to 38% for other CIOs.

A Careful Steward of Leadership Team Time: Delivering business value from IT requires access and interaction with company leadership, but finding time with CEOs, CFOs, business unit general managers, and functional heads is not easy. Compared to other CIOs, high-performing CIOs have a lower number of formal interactionsdefined as executive committee meetings, one-on-one meetings, and project related meetingswith company leadership each year.

However, high-performing CIOs are more likely to find opportunities for informal interactionssuch as conversations in the hallway or through an open office doorwith 87% of high-performing CIOs having this type of interaction with CEOs and CFOs, and 90% with business unit general managers and functional heads. Perhaps as a result, high-performing CIOs are almost twice as likely to have executive colleagues who are very receptive to business enablement ideas, proactively identified by IT.

The Great Communicator: 89% of CIOs regularly communicate company priorities and objectives to IT staff. A much smaller group communicates this information only to their direct reports, and 1% do not communicate at all. A culture of communication is one of the most powerful drivers of IT employee effort.

A survey of 3,600 IT employees supplemented by a review of their performance reviews found that of the 300 potential drivers of performance, communication fell in the top 10% with an estimated potential 26% impact on employee effort.

Getting Ready for a Broader Role: When considering their next career step, 63% of high-performing CIOs have ambitions of moving to executive roles outside IT, interestingly 36% of other CIOs hope to find another CIO role at a larger organization and 19% hope to retire.

These divergent career aspirations are reflected in the career development priorities identified by each group. 41% of high-performing CIOs prioritize operational business knowledgeunderstanding key business processes and structurescompared to 24% of other CIOs. 51% of the latter groups prioritize internal relationship managementstrengthening their relationships with company leadershipas their single most important development area.

A review of career moves made by leading CIOs across industries suggests certain hybrid roles, and lateral moves are well supported by CIO experience and skill sets. These include leadership of a multi-functional shared services group, and roles that leverage understanding of core business processes to oversee process redesign, supply chain management, corporate procurement, or corporate strategic planning. Others have become line managers, general managers, COOs, or ultimately the CEOs.

Background is Important Too

The analysis also found that while company and industry tenure is largely consistent across all CIOs, high-performers have, significantly more management experience in other business functions. 67% of high-performing CIOs indicate that they have spent more than three years in management positions outside IT in functions such as finance, supply chain, sales, strategy, R&D, and business line management. Only 46% of other CIOs have similar levels of non-IT management experience. Interestingly, this divergence in non-IT management experience is not a result of career length; average tenure in company and industry are nearly identical across the two segments.

Prashant Mishra

The author is research director, information technology practice, Corporate Executive Board

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