Article

Forrester: More CIOs report to CEO than CFO

Linda Tucci, Executive Editor
CIOs tend to look at reporting lines like entrails or tea leaves -- a portent of how the job will play out.

A Forrester Research Inc. survey of 503 IT executives suggests the interest in chain of command is well-founded. While a CIO's reporting relationship doesn't make a radical difference in the job, says author Bobby Cameron, it absolutely colors how IT will likely be viewed, managed and funded in your organization.

Of note, CIOs reporting to CEOs now represent by far the largest group, 34% of all respondents. At the same time, the percentage of CIOs reporting to the CFO has shrunk over the past three years, from about 25% to 18%, which is probably a good thing (read the details below and weep).

"If you look at what the drivers are in this shift, you see an increased awareness of the value of IT and its impact on other parts of the business. The various officers in the reporting relationships, CEO, president, COO and business-unit heads, indicate that they're interested in having a more direct relationship with the technology," said Cameron, principal analyst at Cambridge, Mass-based research Forrester.

So, the CIO's star is rising?

"Overall, I think this is good news," Cameron said. The survey results are supported by data from an earlier Forrester study that strongly shows the business attitude toward IT is improving, he said.

Reporting to the CEO could represent the ideal reporting relationship, in Cameron's view, because it

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puts IT close to the seat of power and business strategy, regardless of the CEO's knowledge of technology. As the appreciation of technology increases among business executives, Cameron said he would not be surprised to see more CIOs reporting to operational executives, like the COO, who are more likely to understand and execute on IT's potential as a competitive advantage in the marketplace.

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Other highlights: IT budgets as a percentage of company revenue are largest at firms where the CIO reports to the CEO and, no surprise, smallest when the CIO reports to the CFO. CIOs who report to presidents spend the greatest portion of their IT budgets on new investments, and CIOs reporting to business units, the least. The perception that IT has improved over the past year was highest at firms where the CIO reports to the COO. Improving the customer experience and improving operational excellence dominated the CIO goals for next year.

CIO to CEO: According to the report, CIOs who report to CEOs are most likely to have a centralized planning role. Interactions between IT and the business at these firms are managed "with more structure." As a result, firms where the CIO reported to the CEO were "among the strongest in centralized IT capabilities," such as vendor management and project or program management offices (PMOs). CIOs reporting to CEOs have the largest IT budgets when measured as a percentage of total revenue (6.6%), but they rate "only average" in terms of money spent on ongoing operations versus new investments (about 75%/25%).

While CIOs who report to the head honcho are highly organized, they do not particularly view IT as a game changer for the business and their opinion of IT declined over the past year. They were more likely than their peers to focus on getting large projects done on time, at the expense of infrastructure service. The focus at these shops is squarely on the customer: Improving the customer experience outranked reducing costs, increasing company differentiation, supporting regulatory requirements and supporting global expansion as the most important "business driver" for next year.

CIO to CFO: True to the hellish stereotype, CIOs who report to the CFO spend more time than their peers on cost cutting and focus the least on improving the business. They had the smallest budgets as a percentage of revenue (4.2%). They scored low on centralized vendor management and performance management but were most likely to have strong demand management.

"It reflects an increased awareness of the value of IT and the impact on other parts of the business."
Bobby Cameron
principal analystForrester Research Inc.

CIO to president: The 16% of CIOs reporting to the firm president were also unlikely to have centralized IT planning, but they were highly organized in managing internal clients, coming out second-most likely to have IT marketing and above-average on demand management. IT spending as percentage of revenue was average (4.4%) at these firms, but all about efficiency, not differentiation. These firms were least likely to view IT as giving them a competitive edge.

CIO to COO: Only 9% of Forrester respondents report to the COO, but this cohort appears to play an interesting role at their firms. Their bosses are the most likely to see IT as a differentiator -- and more than any other boss they believe that IT at their firms has improved over the past year. Paradoxically, these CIOs had the most centralized IT but were second-least likely to play a centralized planning role. These CIOs led the pack in their focus on improving infrastructure execution quality and came out near the top on improving their firms with new IT.

CIO to business-unit head: The 5% of CIOs who report to business-unit heads exhibit a mixed bag of characteristics -- least likely, for example, to have centralized IT functions like service management but they score at the top on centralized PMOs and managing IT demands. They came out just below the COO group on IT being viewed as a differentiator and No.1 on the amount of time devoted to operational excellence and improving the company with new IT.

Finally, Forrester found that reporting relationships varied quite a bit by industry but rarely by the size of the company. So, for example, if you're in business services there's a strong possibility you'll report to the CEO (46% of you do); 30% of CIOs in retail and wholesale trades report to the CFO. The exception is in small and medium-sized business, Cameron said, where the reporting relationships tends to be more personality driven.

Let us know what you think about the story; email: Linda Tucci, Senior News Writer


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