Leading in a Recession Means More than Keeping Lights On

As companies struggle through the recession, a question that frequently arises is whether chief information officers are in danger of losing clout within their organizations. The theory goes, companies will be so focused on cutting costs that they will look to CIOs to simply keep the lights on rather than launching new initiatives.


In such an environment, the CIO would be pushed into the background and be in danger of losing the ear of the C-Suite.


But the reverse is also true. In order to make it through this downturn, and to be poised to thrive once the economy recovers, smart CEOs will rely on their CIOs for advice and strategy on how to drive efficiencies and create new avenues for growth.


The question is, which version will be most prevalent in the marketplace?


The last survey on the topic from the Society for Information Management (SIM) did offer some hope that CIOs are not being pushed into the background. It showed that the percentage of CIOs reporting to their chief executives had bounced back to historical levels. The results of that survey were eagerly awaited by senior IT executives after a survey conducted a year earlier showed a dramatic decrease in the percentage of CIOs reporting to CEOs.


In the 2007 survey, conducted by Stevens Institute distinguished professor Jerry Luftman on behalf of SIM, the percentage of CIOs reporting to CEOs fell almost 14% to 31.4%, from 45.2% in 2006, and 42.6% in 2005.


In the latest survey, conducted in June of 2008, that key metric bounced back in line with historical levels with 43.5% of CIOs reporting to their CEOs.


Now, the survey was conducted prior to the full onslaught of the recession, but when looked at over time it does indicate stability in reporting relationships.


I spoke to Luftman not long after the results of the survey were released, and at the time he said he wasn’t sure why there was such a pronounced drop in the 2007 figures, other than the fact that the June 2008 survey had more respondents—231 companies compared to 150 the year before.


"I said last year (when the 2007 survey was released) that the unexpected drop was likely a blip, and as it turns out the numbers are back to where they have been in the past," said Luftman. "A lot of people were watching to see if the trend would continue, so it’s obviously good news."


The 2007 figures created a considerable amount of angst within the CIO profession. If the CIO was losing a direct link to the CEO, then it could be viewed their role was being increasingly relegated to that of a business supporter—keeping the computers running and the network online – rather than that of a business driver.


There is some substance to that concern, added Luftman, as surveys have repeatedly shown that when CIOs report to their CEOs there is a stronger alignment between IT and the needs of the business.


Another recent report conducted by Forrester Research of Cambridge, Mass. raised similar concerns. In a survey of 503 senior IT executives Forrester looked at whether a CIO’s reporting relationship to the CEO, CFO, or COO, made a difference in how much time they spent on strategic thinking. When the CIO reported directly to the CEO, it was estimated that about 23% of their time was spent on ways to lower IT costs and 20% of their time was spent looking for ways to improve the company's business with new IT.


When the CIO reported directly to the CFO, it was estimated 27% of their time was spent on lowering IT costs, versus only 12% spent on looking for ways to use new IT to improve the business.


Forrester principle analyst Bobby Cameron said those reporting to the CFO fit the cliché of being more focused on counting beans than being a business driver. "They had the smallest budgets as a percentage of revenue and focused the least on improving business with new IT—with the largest chunk of their time spent on reducing costs," Cameron said in the report.


Many in the IT industry dispute the need for a CIO to report directly to the CEO. It can certainly make the job easier, but they argue a CIO can be just as effective if they have a good relationship with the CFO or whichever executive to which they report.


Bob Keefe, past president of SIM and CIO for Mueller Water Products of Atlanta, Ga., said you also have to consider the fact that CIOs have not lost clout when it comes to reporting into the C-suite. Surveys consistently show that about 85% of CIOs report to the CEO, CFO, or COO. (In 2008 it was 85.5%).


"Who you report to is not as important as having a seat at the table," said Keefe. "If the CIO is not involved in the decision making process, then it can be detrimental to the entire organization."


If the percentage of CIOs reporting to CEOs is back on track, as this last SIM survey seems to indicate, does that mean the CIO community can breathe a collective sigh of relief and carry on with business-as-usual?


Art Langer, for one, thinks that would be a mistake. In fact, Langer, who is best known for running the IT mentoring program at Columbia University, argues the 2007 figures were a wake up call and that the CIO profession is in more trouble than it cares to believe.


"There should be no celebration," says Langer. "What we're seeing is volatility—volatility in reporting relationships because CEOs still aren’t getting what they want from their CIOs."


Langer believes the thing CEOs want most from their IT leaders is strategic thinking. Yes, they need to be assured that the company’s networks and systems are reliable, but they also need someone who can envision and communicate how IT can drive new efficiencies in operations or create new revenues.


"Too many CIOs are getting up in the morning and worrying about how they’re going to keep the lights on," says Langer.


"If you are a CIO at a company going through tremendous change, you can see it as a crisis, or you can see it as an opportunity. Learn to delegate—let someone else worry about keeping the lights on—and take the opportunity to be a driver."

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Bill has been a member of the technology and publishing industries for more than 25 years and brings extensive expertise to the roles of CEO, CIO, and Executive Editor. Most recently, Bill was COO and Co-Founder of CIOZone.com and the parent company PSN Inc. Previously, Bill held the position of CTO of both Wiseads New Media and About.com.