While a change in reporting relationships can be a catalyst for change, it's not a requirement. "What really matters," says Rubenstrunk, "is to recognize that both the investment value of an IT project and its execution require that the CFO, the CIO, and the business-unit head all have equal power."
Mainstay's Hartman says that often comes down to accountability. "If business-unit heads are evaluated in part on the efficacy of the IT projects they are involved with, that helps enormously," he says. He recommends making sure that an IT steering committee brings all three parties to the table regularly, and that funding for specific projects (not infrastructure or broadly used applications such as ERP, but targeted applications involving, say, HR or sales) comes from those departments' P&L.
Beyond the Org Chart
Reporting relationships can be a distraction, of course, and regardless of how a company organizes itself on paper, ultimately "it's less about relationships and more about processes," says Safeco CIO Senegor. He and CFO Mead happen to be peers who both sit on the senior leadership committee. "There are no agendas here, other than common ones," explains Senegor. Given the intensive data demands of the insurance business, Mead says that IT consumes a fairly sizable portion of Safeco's capital spend, but she won't say how much. "We've always got tons of data that needs to be transformed into information for the right people to drive the right decisions," she says. "Technology is critical in differentiating this company." That's one reason why Senegor is both the CIO and senior vice president of corporate strategy.
It's also why he produces midyear and annual reports, similar to shareholder reports, and disseminates them throughout the organization. "We want to show finance and the business units what we did with their money in terms of achieving business value, and we account for every penny," he says. "I want to change the perspective of IT from being a cost center to [being] a value-delivery center."
Given Senegor's hard-nosed focus on results, wouldn't he logically report to Mead? "Actually I'm surprised you're not asking me why CFOs don't report to CIOs," he jokes. "In a financial-services company, technology is paramount."
Mead doesn't miss a beat: "Yes, but remember: in the end, it's all about the numbers."
Russ Banham is a Seattle-based writer. He is the author of The Ford Century, a 100-year history of Ford Motor Co.
Doubling Down on Technology
For every CIO who reports a happy working relationship with a CFO, there's one with a horror story to tell. Tim Stanley, CIO of Harrah's Entertainment Inc. in Las Vegas, was once the CIO of now-defunct National Airlines. There, he says, "IT was treated as a cost center, and I reported to finance." He maintains that "when you're under a financial organization, there's less linkage with the operations side of the business, where strategy is developed. Consequently, IT becomes more of a cost-driven exercise than a strategic ROI-driven exercise."
Stanley says National failed to leverage technology to solve thorny passenger and labor issues. "Airlines are some of the worst marketers in the world, despite the availability of CRM and other technologies that can make a big difference." He says that whenever IT had such discussions with operations and finance, "it boiled down to dollars and the cost angle, as opposed to appreciating the business value." In National's "defense," it should be pointed out that in its three-year history the low-cost airline never found the sort of solid footing that might have made for looser fingers on the purse strings. But Stanley believes that greater investment in IT would have helped, not hurt.
At Harrah's, says Stanley, senior management does not view IT as a cost center, or begrudge dollars spent on IT that might have been spent elsewhere. "By reporting to the COO, I'm more directly aligned with business and operations," he says. Yet he achieves that alignment by, oddly, splitting his IT department in two: one group focuses on existing systems, while another looks at new technologies and approaches. Staffers devoted to existing IT are financially savvy and scrutinize technology assets to see how the company can become more efficient and drive more existing business value. Those on the "new IT" team focus on initiatives that can drive top-line growth or slash costs; they partner with business units, build the business case, conduct ROI analyses, and implement the technology.
"At National, whoever was the squeakiest wheel or knew the CFO personally got his or her IT project funded," says Stanley. "Here we apply rigor to ROI, not just up front but also over time, for every project. We have a 10 to 15 percent ROI threshold, and if a project doesn't meet that, it doesn't get out of committee. For example, we recently canceled a Web-based HR project because it no longer penciled out."
That's not to say that IT will overrule a business unit. "Every project we undertake is initiated by a business sponsor," Stanley points out. "My definition of world-class IT entails technology enabling, supporting, and driving the business. It's one in which finance or HR or any other unit sees IT as its customer and vice versa." Bottom line: when it comes to IT, there will be no rolling of the dice at Harrah's. —R.B.
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