CXO

The CIO's first priority is to understand the business

The CIO should become a true business partner in the enterprise.


In today's business environment, it's vitally important for the CIO to become a true business partner of the company's CEO and CFO. Together, these three executives can drive significant strategies that benefit their company.

The CEO and CFO are the two people looked to the most to see that the company performs as expected. They are ultimately responsible to the board of directors and stockholders for company performance. For the most part, company performance is measured in terms of financial performance. Their ability to achieve "the numbers" is enhanced exponentially when they have a CIO who understands the business and operates in partnership mode with them.

CEO types often come from the sales or operations side of companies in the same industry. CFOs usually have accounting experience in the industry as well; industry experience is a critical factor in operating a company. Conversely, CIOs often come from technology careers that may or may not have been in the same industry the company participates in. Our skills as an IT manager or CIO are actually very transferable across any industry.

Key contributions of an effective CIO
Good CIOs can be effective in virtually any company and in any industry because they are able to:
  • assess business issues and needs.
  • identify technology issues.
  • define IT initiatives that address these needs and issues.
  • facilitate the prioritization of IT initiatives to provide company value.
  • develop strategic IT plans for the company and anticipate need.
  • lead in building an IT organization that:
    —provides systems stability and security.
    —positions the technology resources for scalability as needed.
    —provides responsive support to technology user needs.
    —implements IT initiatives that provide value.
  • budgetand manage the IT operation to be cost-effective.
  • implement change through technology to improve profitability, productivity, and other results deemed to be important to the company.

A CIO wears many hats. Effective CIOs take care of business methodically and use proven formulas of success to generate positive results for their company. They can use these processes in any company or industry.

First, a CIO must be acutely aware of company financial challenges that the CEO and CFO have to deal with. Achieving targeted financial numbers is well over 50 percent of the executive wing's mindset and what absorbs much of their time. All you have to do is watch the anticipation every month when it's time to produce the company's monthly financial reports to realize this is the case.

Being able to relate well with the CEO and CFO in financial terms is extremely important. It's not something you can fake. To gain "full partnership" status, you have to be able to communicate in such financial terms as "earnings per share," "expense as a percent of revenue," ROI (or return on investment), and EBITDA (earnings before interest, tax, depreciation, and amortization). You also need to have a solid understanding of company P&Ls, the budgeting process, and the issues that can affect earnings, especially as it relates to technology.

Too many IT managers reach a senior management position in small and midsize companies without ever budgeting or having responsibility for a P&L. Lacking an understanding of how the financial engine of a company works makes it very difficult to become an integral partner with the senior management team.

Second, a CIO must understand the business. I stated that strong CIOs can move from company to company or from industry to industry and be very effective. They can do that only if they learn the business of the company and the industry it's in. Sharp CIOs make it a priority to get under the hood to discover what drives the company and how it's successful. In other words, they learn the business quickly.

Every industry has leverage points where technology can improve profitability and productivity, create a competitive edge, or provide other value that's important for a company's success in that industry.

For example, the healthcare industry tends to have three major drivers that contribute to operational success beyond the actual medical services provided:
  • Regulatory compliance
  • Billing for services provided as accurately and as quickly as possible
  • Collecting the cash for services rendered

If a healthcare company is heavily paper-oriented with little automation, it's a virtual gold mine for a savvy CIO. Believe it or not, healthcare is still a heavily paper-intensive industry.

Every industry has levers like these that can be capitalized on when the CEO, CFO, and CIO combine forces. Within an industry, companies have unique business issues, and one size will certainly not fit all. What I mean by this is that once you know where the industry leverage points are, assessing a company situation may identify more basic technology issues. For example, as late as 1999, I was still running into companies without e-mail services.

Astute CIOs try not to take anything for granted when learning about a new company. They assess globally and begin peeling layers of the onion away as they drill down into the real issues that the company is dealing with. CEOs and CIOs need partners who can help them solve the company's financial challenge riddle, and the only way to do that is by understanding the business. Having a CIO who can speak the financial lingo and who spends money on real issues that make a tangible difference for the company is a valued asset. Those who do this are considered partners.

CIOs are in a unique position in that they can facilitate change through technology that can improve the company in so many ways. Your ability to have business issues and financial insight into managing the technology resources operation of your company can have the most dramatic and positive effect. Gaining an executive-level perspective in the financial and business needs arena of your company and industry is the first step in gaining two new partners at the top of your company.

Mike Sisco is the founder of MDE Enterprises, an IT management training and consulting company. For more of Mike's management insight, take a look at his IT Manager Development Series.

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