3 ways for CIOs to understand their company’s bottom line

Tech execs who aspire to be CEOs or COOs someday must commit to understanding the financial aspects of their field and their company.

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For many IT execs, the drumbeat of "know the business, know the business" has become just so much white background noise.

That's why the insight of Hewlett-Packard CIO Ramon Baez is so refreshing. Speaking earlier this year in an online event examining the changing role of the CIO, Baez couched the issue of understanding the business purely in financial terms: "The language of the business is finance. When the CIO understands how the company makes money and loses money, that's when you understand what to focus on and what not to focus on," he said.

Baez's sentiments resonate strongly with many CIOs. "If the person leading IT is open and willing to learn more about the language of business, and can grow and develop in that knowledge, that's a key factor in aligning the gap between business and IT," says Henry Jenkins, director of information systems at Huntington Hospital in Pasadena, Calif.

John Reed, senior executive director at IT staffing firm Robert Half Technology (RHT), concurs. "Companies aren't necessarily looking for CIOs who know how to read an accounting ledger. But can they understand what contributes to financial performance?" IT executives need to be able to look at a financial report, identify the top and bottom lines, recognize where the profit comes from, and then put on their CIO hats and identify where technology can do things to reduce cost, increase profitability, and identify new business opportunities. "If you can read those reports, you understand where your highest impact is," says Reed.

That understanding will not only make you a more effective CIO, it might just lead you into the corner office. "That's how CEOs are formed -- they're people who understand how the company makes money," says Mark Tonnesen, former CIO of games developer Electronic Arts, currently CEO of the Santa Clara, Calif.-based startup MapMyID. "CIOs have to walk in the shoes of their business counterparts. They have to understand sales, marketing, service and operations."

To be sure, any C-level executive worth his or her salt has a basic understanding of what brings in the revenue. What Baez and his counterparts are advising is that IT executives dig deeper -- first gaining a precise understanding of how the company earns money, then analyzing how technology might add leverage to that process.

Based on interviews with CIOs and former CIOs, Computerworld has developed three key tips that help CIOs up their financial game (and one bold suggestion for up-and-comers).

Tip 1: Shadow co-workers

The best way to learn about departments beyond IT is to have a guide to familiarize you. Or, as Tonneson puts it, "Get out of your seat." By shadowing co-workers on an ongoing basis, you'll develop strong insight into not just what they do, but how that contributes to the bottom line.

When he was vice president of sales operations & IT at Cisco Systems, Tonneson went on sales calls. He pumped the salespeople for information on how the company retained customers and lost deals. He spent time with the finance people because "they know exactly where the money is. There's nothing better than having a factual, real-life data point, rather than just numbers. That's the intelligence you need to have to sit at the table and provide advice."

Jenny Chang, senior project manager for IT strategic services at Oakland, Calif.-based Kaiser Permanente, recommends taking as many opportunities to network as possible. "Initiate dialogue with people who work in areas different from yours, whether in networking groups or one-on-one conversations," she says. Folks in sales and finance are a natural place to start, but keep your vision broad: Employees down at the loading dock can give you logistics insight too.

RHT's Reed recommends sitting down with subject matter experts in your organization and asking them to walk you through issues within their group -- whether discussing obstacles to generating revenue or identifying new opportunities to improve revenue through technology. "Formal training can be generic in nature. Understanding your specific company has a bigger impact," he says.

Don't limit your interaction to high-level executives, Reed notes; ask to sit in on staff meetings or visit multiple facilities. Meeting with lower-level employees gives you real insight into day-to-day operations. "Ask them how they could be more efficient if IT put better technology in their hands," he suggests.

Tip 2: Talk to customers

In addition to talking to salespeople in the company, IT executives should also accompany sales reps when they visit customers, or even make arrangements to visit the customers themselves. "I like to walk in [customers'] shoes, to understand how they use our products and services," says Tonnesen. "It helps me understand the lifetime value of a customer and how we can support and enhance it."

nigel fenwick forrester courtesy photo

As CIO at Reebok, Nigel Fenwick spent time talking to retailers to better understand how technology could help sales.

When Nigel Fenwick was CIO of Reebok, he spent a lot of time talking to retailers about their struggles. Now a senior analyst at Forrester Research, he's adamant that CIOs who want to learn about the business go out to the people who sign the checks. "I learned a lot about retailing," he says, recalling that while retailers hate to have too much overstock, it's also difficult for them to figure out exactly what to buy.

Fenwick realized that Reebok was already doing extensive forecasting of what colors and sizes were most likely to sell, and he offered that information to the retailers.

"When they're faced with buying from three different shoe manufacturers, and they can have more confidence that they'll actually sell what Reebok offers, based on our forecasting, they had more confidence in us," says Fenwick. "It just required some thinking from the customers' perspective, looking at the company from the outside in."

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