RSSCIOs marginally worse off under CFO
There is finally some shred of real evidence to back up my long-held suspicion that placing the CIO subordinate to the CFO has detrimental effects on overall IT service delivery to the company. A recently released report from Forrester entitled "CIOs: Reporting Relationship Defines Your Job Only At The Margin" based on results from the research firms 2007 IT governance survey finds that businesses in which the CIO reported to the CFO had IT departments which were focused primarily on cutting costs, and focused least on improving the business. They had the smallest budgets and "…were less likely to have centralized vendor management, performance management, and relationship management" than their counterparts who reported to other corporate officers.
The report takes great pains to emphasize that the overall differences are relatively small compared to the differences by industry and size. And while I typically make a negative association with the CFO>CIO reporting structure, if your corporate goals are to reduce costs and avoid IT contribution to the business at large, then hey, maybe that's your preferred solution.
Small though the differences may be, they are strong enough that Forrester was able to make generalizations about other reporting arrangements as well. They find that where the CIO reports to the CEO, the IT department is more likely to focus on customer relationships, centralized management, and meeting project completion deadlines. They also found, to my surprise, that this reporting relationship is the dominant one… an improvement over past years at 34% of the businesses surveyed. CFO>CIO relationships, in contrast, are now only in place at 18% of the respondents.
The COO>CIO structure also reflects favorable outcomes, with a focus on IT as a differentiator, and a significant role for IT in improving the business. The only relationship worse than the CFO>CIO was president>CIO, which I have never come across personally. Apparently, those poor 9% of souls have little or no centralized IT planning, with consequently fewer centralized management tools.
It may not be much, but it echoes my own observations, and reinforces the need for businesses to get the CIO out from beneath the CFO and put them somewhere they can make a difference in operations.
Finally, some statistical support for what I’ve observed anecdotally….
It’s important for a CIO to bring vision and to bring a “systems thinking” view, where actions may have effects that come after some time delay. One cannot always develop an ROI in these situations – at least not one that’s really credible – yet the vision that may make an IT department a well-oiled machine may be blocked by an ROI-mindset.
I’ve met several CFO’s who understand that you use money to improve growth and competitiveness. CIO’s working for CFO’s with that mindset may achieve more, but, in my opinion, the CIO and CFO, working as peers and as a team, can more effectively bring balance to strategic IT directions.
I couldn’t agree more. While in the past people have challenged that idea that the roles are important, instead stressing personalities, I think that it’s the exception to find people who are not formed by their roles, and the stereotypes tend to be more or less accurate.