3 Reasons Why IT Frustrates CEOs and What They Can Do About It
While most CEOs realize that computers have produced significant productivity, many remain frustrated with their company’s Information Technology activity due to: 1) Poor communication, 2) Persistent Unresolved Difficulties; and 3) Surprises.
March 31 2014 by Tom Pettibone
Recognition of IT’s strategic importance is growing, but so is dissatisfaction with its effectiveness, according to McKinsey’s eighth annual survey on business and technology strategy. The reason for this often falls into three categories.
Poor Communication – the CEO and CIO have difficulty communicating and time runs out.
At a major industrial minerals producer the CEO asked the CIO to develop strategies to comply with SOX, upgrade their ERP systems, and provide critical functionality to support their growth. After repeated requests, and believing the CIO was avoiding him, the CEO fired him, retained interim consulting help to develop these strategies and begin execution. In four weeks, the strategy was done, in eight weeks several new business-critical functions were implemented, SOX compliance was achieved in six months and the IT environment was prepared for an IPO. After seven months a new CIO was hired to continue the work laid out in the strategy.
Persistent Unresolved Difficulties – IT problems persist despite all efforts to correct. Fixes are promised but remain unfulfilled.
At a specialty medical testing laboratory the CEO questioned the value of IT and felt they were not working on the right things. He commissioned an IT Assessment. Based on the findings he dismissed the CIO and retained an external IT turnaround team who within four weeks installed IT Governance. That gave the CEO finger-tip control over the IT budget and what was worked on, when. The turnaround team reorganized, installed infrastructure improvements, identified the ‘high-value projects,’ reduced the project backlog by 80%, and stabilized the data center.
A specialty life & annuity insurance company was acquired and taken public. The systems were old and patchwork, performance was poor, and the staff was sub-par. Together with his CIO, the CEO commissioned an IT Assessment and Roadmap which was completed in seven weeks. They then engaged an IT turnaround team who corrected the operational performance and reorganized, hiring strong staff members. Within 30 days critical data errors were corrected and a program was initiated to correct the rest. Within four weeks a critical sales project was reengineered to deliver key benefits in 20% of the original estimate. Within three months, the team defined the platform and sourcing strategy, and within six months the team prepared the IT environment for an IPO.
The CEO at a financial services firm regularly received complaints about IT and at first he simply considered them to be ‘noise’, similar to other intra-divisional criticisms. Finally, he realized something had to be done. Together with his CIO, he commissioned an IT Assessment and subsequently engaged an IT turnaround team to develop an IT strategy and lead a turnaround to meet user needs. Within two months an IT Governance process was installed that quickly improved communications, provided focus and direction, and greatly reduced the level of complaints.
Surprises – the CEO is unpleasantly surprised.
Because of IT performance problems, the CIO at TWA was ready to sign a comprehensive outsourcing contract to straighten things out. Exercising caution, top management sought a second opinion. It turned out the deal was oversold and would result in costly overruns. The CIO was dismissed and the deal was scrubbed. To correct the problems an external IT turnaround team was engaged who, within five months, upgraded day-to-day performance to acceptable levels, reorganized, and hired skilled staff. The data and reservation centers were updated within eight months with state-of-the-art equipment and systems. Within ten months Governance, Program Management, and Business Partner functions were in full operation and the IT activity was running well, within the original budget.
At a union benefits manager the new CEO reviewed a major Corporate project to rebuild the back office and found that several IT milestones had been missed and data problems existed. Further it was rumored that the CIO was looking to leave. The CEO dismissed the CIO, and retained an external IT turnaround team who within four months got the project back on track and tackled several other key needs such as operations controls and disaster recovery.
These actual cases highlight the CEO’s frustration with IT and the actions taken as a result. In some cases it may be possible to keep the CIO by providing expert help. In other cases a change is needed and experts can assist with the challenge of transition. Regardless of the cause, the CEO is ultimately responsible and must take action to reduce risk and protect the business.
Why is IT unique in this respect? Many CEO’s are frustrated with IT because very few have hands-on experience in IT as they have in sales, marketing, finance, and operations. Most have never managed the IT function and have little or no “feel” for IT issues. Thus they cannot anticipate problems nor actively participate in solutions. Second, IT logic is written in strange code, hidden in silicon chips, and cannot be seen or touched until rollout. Unlike building a new factory, the CEO cannot physically see progress. Third, the CEO is unhappily captive since IT controls processes in nearly every part of the organization. And finally, IT is very expensive.
If one has sufficient time, an IT assessment is a good way to start. It is low cost, minimally invasive, and quickly provides actionable answers that might be handled internally. However if time is short and business results are in jeopardy, commissioning an interim CIO or an IT turnaround team may be necessary. Like a doctor, seasoned IT experts can quickly hit the ground running, fixing problems hands-on, addressing business issues, and installing best practices.
Tom Pettibone is a founding partner of Reston, VA-based Transition Partners Co.
(www.TPCO.us), an IT Management Consulting firm specializing in IT assessments, strategy, organization, governance, sourcing, and turnaround.