The CIO profession has won a perilous victory. Chief information officers have earned the right to be regarded as enterprise leaders transforming the business and steering the company to new and vital destinations. Enterprise leadership now comes with The CIO title. But with that mantle of leadership come thick new folds of complexity and uncertainty.
Unfortunately, experience running an information systems organisation does not guarantee success in enterprise leadership. A credibly run IS group is only a ticket to a seat at the executive table. Once seated, the CIO has to change; even his thought patterns must flow in new channels. Within an IS department, there's a technical right and wrong. The program either works or doesn't work. But enterprise leadership functions within a miasma of maybes, as politics and personalities work to obscure the best course of action. How can CIOs cut through the murk to influence and inspire people who don't owe them allegiance? What are the necessary tools, skills and disciplines? How do they avoid the traps and apply their expertise?
It's not easy for any executives to ask these questions, to admit their vulnerabilities and their need for guidance. However, we know many CIOs share these concerns, so we have addressed several of them in this three-part fictional case study, which will run throughout our summer issues. The scenarios, though simplified, depict the realities of leadership. David Shepard, a newly appointed CIO at a fictional pharmaceutical company that's on the ropes, has a small window of opportunity to prove himself an enterprise leader. He's got the guts to admit he doesn't have all the answers, and he's tapped into his network for help. Guiding him and the reader is CIO's leadership faculty of IT veterans -- John Cross, Christopher Hoenig and Patricia Wallington (for their credentials, see "Meet Shepard's Coaches").
Part 1 of the case study focuses on relationship-building, an art that's fundamental to successful leadership. Can our CIO build effective relationships with his executive team while navigating a political minefield that threatens them all? Read on and find out.
A CIO to the Rescue?
In his eight years at Ausmed, David Shepard had never been in the 14th-floor executive conference room. In fact, the last time he'd been on the floor was six months ago when he gave an e-mail training session to the recently departed CEO. The crash course in getting wired hadn't paid off; the board forced the CEO to retire a few months later.
Shepard, summoned by Maureen Carleton, the new CEO, found himself seated at the boardroom table with a handful of other AusMed officers. Shepard's nemesis, Pete Lucibelli, was there. Lucibelli had made a habit of bypassing the IS department, bringing in his own technology for his sales and marketing group while paying little heed to Shepard's IT architecture standards. Also at the table was chief operating officer Robert Matson, an AusMed veteran. Even though Shepard officially had reported to the finance director, it was Matson to whom he usually turned. Now his friend was in an awkward position, apparently passed over for the top job but asked to stay on for "operational continuity".
Matson looked uncomfortable, but Shepard considered himself easily the most nervous person in the room. He had been CIO for three days, reporting directly to Carleton, and Carleton, accustomed to the bleeding-edge technology of the biotech sector where she came from, wanted Shepard to use IT as a competitive weapon in his new role as member of the leadership team. She had explained that she'd promoted him from IT director because he was adept with technology and knew the company's business processes -- advantages she couldn't get from an outsider or a CIO candidate with only a business background.
She was right about his strengths. He knew IT and its application cold. But he still felt ill-prepared to be a peer executive leading the company.
The meeting began abruptly as Carleton outlined the basics of her turnaround strategy. Actually, it was her long-time associate Richard Pepe, AusMed's new manager of business strategy, who did most of the talking. And it was an impassioned speech. AusMed was being dragged down by its low-payoff protocol-development partnership with health-care providers. To put its resources into new opportunities, AusMed needed to cut its losses and pull out of the venture, Pepe said.
Shepard winced. The knowledge network that IS had built for these facilities to share treatment data had been a breakthrough IT accomplishment. Several health-care companies had asked to study and benchmark against it. Now it was being discarded. And its creator, network manager Greg Devlin, would probably follow it out the door in frustration.
On top of that, IS was three months and several thousand dollars into development of a second generation of the network, under the co-leadership of Devlin and McEarnst & Co consultant Roberta Sedaille. This would have linked providers to their affiliated private practice physicians through a secured extranet.
Pepe outlined the second piece of the strategy: broader, faster revenue streams. AusMed's drugs were ageing; the company needed new high-margin products fast. Not surprising, given their background, Carleton and Pepe wanted to acquire boutique biotech and biogen companies to gain access to products in development. (Also not surprising, they'd got rid of AusMed's head of product development and were now trying to recruit someone from another pharmaceutical maker.) But new products in the pipeline wouldn't be enough, Pepe added. AusMed needed a more rapid rollout process to move products through their clinical trials faster than their competitors did. And the company needed to explore new markets and new delivery mechanisms. One of Pepe's ideas was to bypass pharmacies and go right to the public for non-prescription products such as AusMed's herbal line.
Shepard found himself thinking, How can we possibly fund all this?
Carleton spoke up. "We'll borrow to fund the acquisitions. The rest we'll have to accomplish on our internal budget -- which will be the same as last year's."
Great, thought Shepard. She can read minds too.
Shepard wanted to make the most of this opportunity, but he knew Carleton wouldn't have much patience with him. But how could he work with her when he barely knew her? And what would happen when she started talking to Lucibelli? He'd probably tell her to outsource, something he had proposed before.
On the other hand, Shepard's IT department was clearly doing well. The numbers were high on the last two user satisfaction surveys. His staff turnover matched the industry average (at least for now, he thought, picturing Devlin, his network manager, walking out the door).
But the efficient, effective IT organisation he'd built was just table stakes now. The credibility it provided him simply allowed Carleton to give him the benefit of the doubt.
That night, Shepard made a call to a friend, Alana Jones, a partner at an executive search firm. Until a couple of years ago, Jones was AusMed's HR director. She was very connected. Maybe, Shepard thought, she could give him the scoop on Carleton and how to handle her.
Jones didn't know anything about the CEO, but she quickly pinpointed Shepard's problems. His priority right now was relationships. To have any chance of being an effective leader, he first had to work out his relationships both with the new executives and the old. With whom should he ally himself? How should he handle the politics? What was the best way to reach his new boss? How would his promotion affect his relationships with his IT staff?
Jones suggested he tap his network for proven leaders and "go get some coaching".
Help Is on the Way
The conference call in Shepard's office went off without a hitch. On the line were three people who he felt had helped define CIO leadership: John Cross, who'd just left his post as head of IT at BP Amoco PLC; Christopher Hoenig, former director for information management and technology issues at the US General Accounting Office; and Patricia Wallington, recently retired CIO of Xerox. Shepard outlined his situation and then shut up and listened.
Patricia Wallington: Two things have happened, David, that make your relationships important. You've moved into the executive ranks, and your peers are different from who they were yesterday. Now you have to re-establish the relationships because the chemistry is different. And you have a new CEO among that set of peers.
John Cross: It's these relationships that will unlock your capacity to gather votes to sustain an idea, to create enthusiasm to support it, to marshal the investment to develop it -- in effect, to lead.
Shepard: Since I'm reporting to her, I'm most worried about my relationship with the CEO. How can I develop it quickly and well?
Christopher Hoenig: The new CEO is a double-edged sword. The big opportunity is that you've got a new CEO under a lot of competitive pressure who needs to succeed.
Wallington: And someone who sees technology as very competitive.
Hoenig: Right, but that's also one of the biggest hazards. If you have an impatient CEO who wants action and that converges with a powerful enemy or difficult circumstances, it could be hazardous to your health.
Shepard: I've been thinking that I've got to impress her quickly. What should I do? Or not do?
Cross: If you do something too smart, simple and glitzy, it may come around later to bite you. On the other hand, if she's in a hurry, it's important that you're seen as proactive with some of her agenda items. You can do that in part by testing her on the clarity of her intentions. At this stage, she will be just as impressed with the right questions as with the right answers.
Hoenig: Exactly. If you make an accurate assessment of the problem and determine what needs to be done now, you can set yourself up to intelligently overdeliver.
Wallington: I never got the art of that. I always intelligently overcommitted.
Shepard: So I should seek her out for clarification. You know, our new manager of business strategy, Rich Pepe, seems to be her right-hand man. Do I have to find a way to go around him?
Wallington: No, you can use him. Pepe has all this experience with the CEO and he can coach you on how best to meet her expectations -- what she likes and doesn't like, what she really means when she says something. He's a diamond sitting there waiting to be collected.
Cross: We had a chief of staff at BP who I reported to for a period. He proved to be a great way to get access to the CEO more quickly than anyone else because this guy was the CEO's confidant. Because he had such frequent access, if you wanted to test ideas, he could do it for you quickly. He was a sound barometer to how something was likely to play.
Hoenig: I'll throw out one caution here, though. Going into any relationship with a new confidant like that, you have to get as much intelligence as you can so you get to know what type of person he is.
Wallington: You mean Pepe could be a snake in the grass?
Hoenig: He could be protective of his access to the CEO or be out to build his own power base.
Shepard: I've never liked playing politics, and now it sounds like that's a lot of what I'll be doing. How would you proceed?
Hoenig: You have to understand the politics but not fall prey to them. You need to be the kind of person who can come in and solve problems and disagree if necessary and be an independent force. To project this, I try hard in any one-on-one conversation to have the same conversation I'd have if there were other people in the room listening to us. I try to project as much of that independence and desire to get the right solution for the company as possible. It's a very tough thing to pull off, but it's really important.
Wallington: The key to what Chris said is to get the right answer for the company, not the right answer for one person or the safest answer for you politically or careerwise. That's putting your personal courage and conviction out there.
Hoenig: If you are that kind of person, other people are going to want to have a relationship with you.
Wallington: And you will end up getting called in on lots of decisions because people will know that you can't be manipulated, that you will always be objective and above board.
Shepard: I guess it's also a political issue, but I'm not sure what will happen with my friend Rob Matson, our COO. Anything I can do here?
Cross: In too many cases I've observed that the Matsons of this world actually don't survive. They're kept on for their institutional memory, but those words usually mean they are there for a bit of transition and a year later they're gone. If that's a possibility, you have to be careful that, despite the fact that you're good friends with this guy, you aren't simply seen as an old extension of Matson's environment. Be careful about leaning too heavily on old dependencies.
Hoenig: If you haven't proved yourself yet as an independent thinker, you might want to openly disagree with Matson in an initial meeting to show that you're willing to take an independent point of view on an issue.
Shepard: I see what you're getting at, though I don't like it. I've got to figure this out.
Cross: Partly because I'm uneasy as to whether Matson is a long-term player, I'd rather spend my time figuring out Pete Lucibelli, your sales and marketing head. As a matter of practice, I always pick the three or so most difficult guys in the organisation who are at critical points and make sure they become future friends and allies.
Shepard: Lucibelli is definitely a problem. He could undermine my position before I even get these new relationships going. I don't know about making him an ally, but can I do anything to neutralise him?
Wallington: Try having an upfront conversation with him. "It's a clean slate, we have a new CEO, let's get off on the right foot." Tell him you want to understand his expectations, but he needs to understand things from your side, such as the need for standards. Then pick a person, or let him pick your very best IT person who will be his contact. Then he's got some control because he's got the person.
Shepard: I don't know if that will work. This is a guy who has broached outsourcing with the other execs in the past.
Hoenig: If there's a threat in terms of outsourcing and big consultants coming in and taking over the job, that's also something to be proactive about. Pull together the benchmarking data and take an aggressive posture on outsourcing options so that you are in control of the agenda and no one else is setting it for you.
Cross: David, if I may, one thing that's essential at this stage that goes along with working out your relationships with these people is establishing clear accountability and authority.
Shepard: For . . . ?
Cross: A new CEO comes in and fires off a lot of directives. Who will be accountable for what? If you and the others are going to make strategic decisions and investments, the CEO needs to be very clear who is going to drive that, and it needs to be known in your executive pool. If you're not careful, everybody bolts back down their various rabbit holes with huge new requirements. Then you can actually lose control. They'll say, "The CEO wants all these things done tomorrow, and I have to get on with it. I haven't got time for you."
Wallington: One thing you could do that would help your CEO (because she obviously didn't think of it) is to go forward with a proposal of how you see your role and ask her to comment and codify it as she sees it. Then suggest that this would be a good thing for everybody to do so that they could all help her do what needs to be done.
Hoenig: Define what you'll be responsible for and what you're not going to be responsible for. And negotiate for the authority you need to get the job done, things like setting and enforcing standards or allocating funds.
Shepard: I'll try that. You know, this reassessment of relationships has got to extend to my IT people as well. I'm going to have morale problems if they pull the plug on our treatment-protocols knowledge net and the extranet add-on. I may lose my ace network manager over that.
Wallington: I would do at least two things there. I'd have a communication meeting, just an open meeting, and walk everybody through what I know. I'd try to get people to understand that there will be lots of change, and change brings excitement. Nobody's talked about layoffs. Maybe you can transfer people to new projects. Without the meeting, people will speculate and worry. If you don't know everything, commit to tell them when you do know. The fact that your position has been elevated means their position in the organisation also has been elevated.
Then I'd pull key people who are particularly worried and have one-on-one conversations. Find out specifically what they're worried about and find out what they'd like to do. Maybe Devlin is sick to death of this project and would like to do something else. Give them the opportunity to talk to you.
Epilogue
David Shepard described his proposed responsibilities to the CEO, and she agreed with the suggestion that she clarify accountabilities across the executive team. Shepard also began cultivating a friendly relationship with her confidant, manager of business strategy Rich Pepe, who turned out to be as big a St Kilda fan as Shepard. After allaying fears within the IT group, Shepard identified several people eager for new challenges including, as it turned out, network guru Greg Devlin. Unfortunately, sales and marketing chief Pete Lucibelli didn't seem receptive to Shepard's proposal that they start over with a clean slate. Obviously it will take more time to build and solidify these relationships, but Shepard can't afford to wait for everything to gel; he now has to bring his strategic knowledge of technology and business process to bear on AusMed's still-fledgling turnaround strategy.
AusMed: Turnaround Plan
Company: AusMed Pty Ltd, a medium-size Victoria-based pharmaceutical company.
Competitive climate: AusMed has lost money in five of the last six quarters. Its rivals are getting bigger and stronger by acquiring other pharmaceutical companies and increasing the number of new drugs in their pipelines. AusMed's product base, on the other hand, is among the most aged in the industry.
Obstacles: AusMed's attempt to boost sales through partnerships with health-care providers has been a failure. The company teamed with hospitals and long-term care facilities to develop disease-management protocols. AusMed expected the use of these protocols to lead to more prescriptions for AusMed medications. But protocol development is proceeding slowly, and physicians are resisting the protocols (which they regard as "cookbook medicine").
Recovery strategy: The company's board of directors has decided on a strategy to stem the losses and to catch and surpass the competition. The turnaround plan is three-pronged: kill unprofitable alliances, jump-start product development through new acquisitions and create new revenue opportunities -- all the while adhering to a conservative budget.
Actions: To spearhead the changes, the board replaced AusMed's long-time CEO with a new executive from outside the company. New CEO Maureen Carleton, most recently head of a small, fast-growing biotech firm, believes that information technology must provide a competitive advantage -- a stark contrast to the outgoing CEO who saw IT as a support function. One of Carleton's first acts is to elevate AusMed IT Director David Shepard to the new position of CIO. She has made it clear that she expects Shepard to be an enterprise leader.
Meet Shepard's Coaches
In early 1999 John Cross retired from his position as head of IT at BP Amoco PLC. Beginning in 1990, Cross presided over a radical corporatewide transformation, cutting IT costs by 50 per cent while implementing a full-scale client/server migration. In the process, he changed the core mission of IS from providing transactional support services to acting as a strategic business partner. Cross was named by US CIO magazine as one of the decade's 12 most influential IT executives. He is now an executive vice president with AppNet, an Internet consulting and services start-up in Bethesda, Maryland.
As director for information management and technology issues at the US General Accounting Office, Christopher Hoenig was responsible to Congress for $US25 billion in federal IT spending. He led a historic reform that for the first time brought private sector best practice principles (and the CIO position) to the federal government. He has also been an IT management consultant with McKinsey & Co and is the author of a forthcoming book from Perseus Books based on a decade of research on world-class problem-solving and leadership techniques for the knowledge age. He is now CEO of Exolve, a Washington, DC-based consulting firm.
In 1999 Patricia Wallington retired as Xerox corporate vice president and CIO. At Xerox, Wallington forged a close relationship with CEO (now Chairman) Paul Allaire and established a corporatewide leadership training program. One of her biggest accomplishments was an outsourcing arrangement that reduced Xerox's IT costs and enabled development of a new global strategy, IM2000. In 1997 Wallington was inducted into the Women in Science and Technology Hall of Fame and the same year named by US CIO magazine as one of the 12 most influential IT executives of the decade. Now based in Sarasota, Florida, Wallington is consulting part time for Xerox and others.
Coming in Part 2
In the November, 1999 issue of CIO, join Shepard and his leadership coaches as he figures out how to enable AusMed's turnaround and lead his company in promising, yet risky, new directions.
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