Why Your CIO Should Report to the CEO

Why Your CIO Should Report to the CEO

To rehash a tired axiom, we all know that computers and technology pervade just about every part of our workday lives, and possibly a great deal of our personal lives as well. Everything from clocking in and out when we arrive and leave work, or at least keeping time sheets; entering requests for time off; receiving electronic pay stubs; accessing electronic records of our health plans and medical care; using self-service human resource portals; and of course, the ever pervasive email, instant messengers, texts, and tweets, just to mention a few.

Since technology is so important, why then does the individual in charge of this technology where we work report to anyone other than the top executive? Shouldn't the CIO report to the CEO?

If the top IT manager instead reports to the top financial person or the head of operations, the voice of IT may not be fully heard “around the table” of top management. In this case, financial, operations, or other executives can sway the organization’s priorities in directions that favor their own departments but do not serve the best interests of the whole organization for the technology it needs.

CIOs Trending Up

CIO Magazine reports in their 2015 State of the CIO survey of 558 senior IT managers that while 44% of IT heads say they do report to the CEO, 20% still report to the CFO, and 13% to the COO. In addition:

The CIOs who are viewed as "business leaders" are definitely in a minority (13 percent). In the survey, that category was defined as a "key driver of the enterprise’s competitive future." At the other end of the spectrum are the IT shops viewed as cost centers (18 percent), defined as IT functions where the "enterprise value [of IT is] unappreciated, misunderstood or unfulfilled."

Over the last few years, IT chiefs have gotten increasing access to the CEO, but they had to gain independence from their CFOs first. That stands to reason, since a lot of IT departments were born within finance, mostly to provide more efficient accounting systems.

Even now, when the role of technology in a company has become so much bigger, CFOs are hesitant to cede control over IT. Why? We cannot discard the impact that scandals over Enron, WorldCom, et al. had in this area, and the subsequent Sarbanes-Oxley (Sarbox) legislation of 2002 with heightened requirements for financial reporting. Simply put, finance executives, now under heightened scrutiny, want control of the systems that manage and report the financial data.

Time to Make A Change

If your company hasn't yet invited IT to the management table, is that the best recipe for your organization? The needs and opinions of your company’s top IT person need to be heard by the CEO. But if IT reports to the CFO or another officer, then accurate information about and critical analysis of the organization's technology needs may be watered down, re-prioritized, or even discarded before it reaches the CEO.

In addition, lack of access to the top can have adverse effects on the IT staff.

Mark Roman, CIO and Associate Vice-President of ICT for the University of Saskatchewan, related a situation where an IT department, which previously reported to the CEO, was redirected through the CFO following an acquisition:

The IT department had a weak voice. IT did not see itself as part of the business. They saw themselves as technology order-takers, not as leaders of the information systems strategy and execution.

If your top IT manager is not reporting to the CEO, even if this seems to be a good fit for your organization, making a change is definitely worth considering given the growing trend across industries for the CIO to report to the CEO.

"The CIO ought to be a part of the executive team given the incredible impact IT can and does have, and how intertwined IT and business are today," says Rudy Puryear, partner at consultancy Bain and leader of its global IT practice. “What major action can you take in this business that doesn't have IT implications in one form or fashion?”

And after you answer that, ask yourselves why the person in charge of IT is reporting to anyone other than your top executive.