Thursday, May 23, 2024

You Report To … Who?

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Beyond the endless discussions about death march CIOs who report to CFOs, and Cheshire CIOs who’ve landed seats at the big table courtesy of their CEO-reporting relationship, are huge issues around how to make IT “work” in your company. Here are a few of them:

  • The re-engineering of IT organizations will surface as one of the major corporate imperatives of the new millennium: Companies will look to IT to (really) integrate with the business and provide competitive advantage; organizations that fail to assume this new role will be ousted in favor of new regimes that “get it.”
  • Speed and flexibility will become as important as consistency; “good ‘ol boy” relationships will be (partially, not completely!) replaced by strategic partnerships that will be judged by performance – not historical inertia.
  • As skill sets become obsolete faster and faster, there will be pressure to change IT organizations at a moment’s notice. This will dictate against large permanent in-house staffs organized to protect their existence. New applications pressures will kill entrenched bureaucracies and give rise to a new class of results-oriented hired guns.
  • The emphasis on business/IT alignment will increasingly focus on business requirements which in turn will lead to business applications and computing and communications infrastructure specifications.
  • Given the pace of technology change, it’s essential that your organizational infers requirements and produce specifications quickly and efficiently. This will require companies to tilt toward staff with these kinds of capabilities as they proportionately tilt away from implementation skills. IT organizations will be driven by “architects” and “specifiers” – not programmers.

  • Companies will find it increasingly difficult – if not impossible – to keep their staffs current in the newest business technologies. This means that IT organizations by default will have to outsource certain skills. The approach that may make the most sense is one which recognizes that future core competencies will not consist of in-house implementation expertise but expertise that can abstract, synthesize, integrate, design, plan and manage IT.
  • How many of the above drivers hit home?

    The components of your organization strategy appear in Figure 1.

    Business Strategy Linkages

    If you live in a decentralized organization – where the central IT organization owns the enterprise computing and communications infrastructure and the lines of business own their applications – pay very special attention to IT organization. Unless you’re prepared to fight lots of religious wars between central IT and the lines of business, organize your internal IT professionals in ways that support the lines of business.

    If your current organizational structure in any way, shape or form encourages an adversarial relationship between central IT and the lines of business then your organizational structure is flawed.

    Assessment of Core Competencies

    Let’s make some assumptions about where you are today and where you’re likely to be tomorrow. These assumptions will help you think about IT products and services acquisition as well as organizational structures:

  • Business processes necessary to sustain profitability and growth must be flexible and adaptive; “entrenched” or “traditional” processes will not sustain profitability or market share … organizations pay “lip service” to the value of thinking “outside the box,” but seldom actively encourage or reward it.
  • Initiatives like “business process engineering,” “total quality management,” “process improvement” and similar attempts to change organizational processes for higher profits and greater market share, play out as expense reduction efforts – not as strategic initiatives that provide long-term vision … there is very little evidence that these efforts have long-term payoff, except as “political” processes that create the impression – both inside and outside of the organization – that there is a logical process at work.
  • Because of the evolution of the technology field itself, many organizations are now staffed with professionals who have a “bottom-up” view of the nature and purpose of information and software systems.
  • Efforts to re-tool and re-train IT professionals have not proven cost-effective: in fact, the amount of time, effort and money spent on retooling and retraining has seldom – if ever – resulted in measurable returns on the investments … the effort necessary to reach these professionals is disproportionate to the return.
  • The basic discipline necessary to convert business requirements into applications can only be practiced in organizations with repetitive missions, with professionals trained in the discipline, and in organizations deeply committed to rewarding disciplinarians and punishing violators.
  • Process improvement that lasts and has a measurable impact is fundamental and can be found in generic disciplines like design and engineering … not in fads like “BPR,” “TQM,” or other evangelical movements that ultimately trace their discipline to design and engineering.
  • Those who create and market information technology exploit this chaos to their own competitive advantage by selling “silver bullets” to IT managers vulnerable to promises that are seldom – if ever – kept.
  • IT costs will continue to grow disproportionately to profitability … the market forces that will drive this ratio include increased employee acquisition, support and retention costs, increased costs of doing business due to increasing regulation, and the costs connected with maintaining huge corporate technology infrastructures.
  • In light of these realities, you have a number of organizational options available to you. You can continue to support (read: care and feed) a large in-house IT staff – and organize accordingly – or you can begin the transition to a more creative IT products and services acquisition strategy that will require you to make some significant organizational changes.

    As your business evolves it’s essential that you undertake a brutally candid assessment of your core competencies today and – especially – what they should be tomorrow, and then begin to define the organizational structures that will exploit the “right” competencies.

    Acquisition & Support Requirements

    So what do you need?

    The bottom line is simple: if you haven’t conducted any alignment assessments then you cannot organize effectively. If you’ve organized before you’ve made these assessments then you’re already non-aligned, since it’s impossible to cost-effectively map your IT requirements around a pre-defined organizational structure before you know the requirements!

    The core competency process discussed above will help a lot here. Asking tough questions about what you need to do – and should do – will help you determine your IT requirements and help you, in turn, map your acquisition and organizational options. This is no time for the faint of heart. You must candidly assess what you should do and then define your organizational structure.

    Optimal Organizational Structures

    One of the steps you can take that will help you transition from perhaps where you are today to where you might very well need to go tomorrow will be explored in Part 2 on Friday. It describes an approach to organizational alignment that builds from the above assumptions about your situation and current and future core competencies.

    Steve Andriole is the Thomas G. Labrecque Professor of Business at Villanova University where he conducts applied research in business and technology alignment. He is also the founder & CTO of TechVestCo, a new-economy consortium that focuses on optimizing investments in information technology. He can be reached at

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