The question has been batted back and forth for nearly as long as there have been CIOs: To whom should they report? I won't keep you in suspense as to where I stand: CIOs hold a C-level position, and as such they should report to the strategic leader, meaning either the CEO or the COO.
Why do I believe this? I have several reasons, and none of them has anything to do with status. The simplest is this: Because information technology is the most powerful competitive enabler available to most businesses, its leader should not be relegated to reporting to someone who may have other priorities than the organization's strategic performance.
There are some exceptions to this, and I'll get to them. But first, let me articulate the primary reasons why having the CIO report directly to the CEO is the best arrangement.
1. CFOs have totally different priorities.
CFOs are, by nature, risk-averse. They are charged with protecting the financial well-being of the organization. Their charter is to question expenditures, ensure that proper controls are in place and ascertain that investments realize the expected returns. Their focus is on the short term, and their priority is process. CIOs, on the other hand, must be risk takers. After all, every strategic system development project is risky -- it has never been done before in the company and will have long-term impact. CIOs have to focus on the long term, since most significant IT developments span many years. Their priority is introducing beneficial change, not maintaining a consistent process. When a CIO reports to the CFO, the IT function ends up operating much more conservatively than it should. That might be OK for certain companies, on a temporary basis, and in the course of my career as a CIO, I had some productive working relationships with CFOs that I reported to. Nonetheless, I think that the days when this sort of relationship could really work are gone. Quite frankly, a conservative IT function is not going to help most companies to confront the increasingly intense competitive environment out there.
2. The CEO needs to know what IT can do for the company.
Strategic IT projects can have an enormous impact on the future of a company. That makes the IT function so central to the company's competitiveness that it's essential for the CEO to have a working knowledge of the process of IT project creation. This is too important to be blunted by intermediaries. A CEO needs a CIO who can function as a partner, giving the CEO enough familiarity with the process of IT project creation so that the CEO can make sure that the company's strategy is being properly addressed by the IT function.
3. CIOs need to be deeply involved in business operations.
The officers who are closest to the operations side of the business are the CEO and COO. Most CEOs today want their CIO to help the business compete profitably through technology, and they recognize that the CIO can better do this when enmeshed in the inner operations of the lines of business. A CIO reporting to the CFO or CAO misses out on working closely with people who are savvy about those things.
4. CIOs need credence in the eyes of users.
Most internal IT customers are part of the operational staff. A CIO who is positioned on the same side of the org chart as them has more credence.
5. Reporting to the CEO provides enterprisewide purview.
Because IT is the strategic engine of the business, its priorities must be set with the participation of all parts of the organization. When the CIO reports to the CEO, the other C-level executives understand that relationship.
6. Reporting to the CEO gives the CIO more influence.
Influence should not be confused with status. Status resides inside people's heads, but influence has real practical value. A CIO might need to make significant organizational changes, possibly even cultural changes. Anything that affects the status quo is likely to meet major resistance, and a CIO who is working hand in hand with the CEO is better able to carry out initiatives effectively. When everyone knows that the CIO reports to the CEO, they perceive that the CEO accords the IT function and the CIO position a great deal of importance. And when any part of the business has a problem with what IT is doing, the CIO can set up a meeting with the CEO quickly.
7. No one but the CEO is going to adequately support the research the CEO wants the CIO to deliver.
Increasingly, CEOs want their CIOs to help lead the business to better ways of doing things through new ideas and technologies. But it's unlikely that any other C-level officer is going to fully recognize how vitally important researching emerging technologies is, and they certainly would be slow to come up with the necessary funding.
When Is a CIO Not a CIO?
Case closed? Actually, no. There are instances when a CIO shouldn't be in a close relationship with the CEO and should instead report to someone else. What this comes down to is the qualifications of the CIO, plus the CEO's definition of a C-level position. In other words, there are CIOs who hold the title but aren't really considered to function at the C level.
A C-level CIO is not just technically competent. Such CIOs are also proactive in their technical competence, display business leadership abilities and are skilled in collaboration, communication and persuasion. They know how to create relationships out of a community of interest in profitably growing the business, and they are able to jump-start initiatives to move the business to higher competitive levels. In other words, they have considerable business acumen and are able to talk about their specialty in the business and stockholder terms that their peers understand.
CIOs who lack these skills -- who cannot clearly articulate how the IT function benefits business results by avoiding cost, improving service and increasing revenue -- should report to an executive other the CEO. CIOs just don't belong on that level of management if they are unable to convert strategic and business direction into IT actions. These CIOs are really technology-focused IT managers who do not understand all aspects of the business value proposition. They cannot be expected to fully develop the initiatives the organization needs to derive from its IT function, and frankly, I've found that such technology-focused IT managers will not take such initiatives in any case.
The trend today seems to be toward more and more CIOs who truly belong on the C level, with some of them holding broad general business management positions. Some examples: The CIO of one of the largest IT equipment suppliers also directs his firm's supply chain; the CIO for a major airline is responsible for all marketing activities; the CIO for a major parcel-delivery company is also responsible for route acquisition and optimization.
What they all have in common, besides a deep understanding of the business and how to communicate in business terms, is that they all report to their CEO.
Al Kuebler was CIO for AT&T Universal Card, Los Angeles County, Alcatel and McGraw-Hill and director of process engineering at Citicorp. He also directed the consulting activity for CSC Europe. He is now a consultant on general management and IT issues. He is the author of the book Technical Impact: Making Your Information Technology Effective, and Keeping It That Way, from which this article was adapted. He can be reached at ak@technicalimpact.com.
