The Six Best Practices - What Leading CIOs Do

To be an effective CIO, you need to do six things:

1. You must be on the executive team.

2. You have to engage senior business managers in IT projects.

3. You must also include users in the same projects.

4. You need a high-level group to make IT decisions.

5. You must communicate regularly with end users.

6. You have to assign IT staff as liaisons to business units.

That's the conclusion of leading CIOs who participated in our "State of the CIO 2004" survey. From among the respondents, CIO editors and staff culled a subgroup that we judged to exemplify best practices for IT executives based on their responses to particular questions. Those best practices CIOs then ranked the actions they deemed most critical to successfully leading IT in their organizations. According to these top-flight CIOs, there are six - and only six - essential practices that CIOs must undertake to be effective in their jobs and ensure that IT is adding maximum value to their organizations.

But it's one thing to know what you need to do to be successful; it's another to do it.

In interviews, more than a dozen of the best practices CIOs share the techniques that make them successful. Some of them you may already be doing. Some of them you may want to enhance with the suggestions that follow - while others may be impractical or too costly, but they are all worthy of consideration.

BEST PRACTICE 1

78 percent of CIOs say: Get on the executive team

The Buck Starts There How to get the executive committee on your side

The single most important management practice, according to best practices CIOs in "The "State of the CIO 2004" survey, is participation in the executive team.

But simply having a keycard to the corner suite won't necessarily make a CIO more effective. Leading CIOs said it's how they use their access that provides the advantage. Here's what they said to do.

Join the Team Just over 50 percent of CIOs are already members of their companies' executive teams, according to our survey. These CIOs already have a CEO who views technology as strategic and understands that technology can help the company grow. The other 49 percent needs to find a way to get in the club. So what's the key that opens the door? You need to convince your CEO that technology is central to building and maintaining the company's competitive advantage. It's logical to include the CIO on an executive committee, which typically encompasses marketing, sales, finance, human resources and other business enablers, so that every aspect of running the company is represented.

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Get on the Agenda Once you have your own chair in the executive conference room, you have to make good use of the meeting time. Key is making IT a permanent item on the executive committee's monthly agenda. Use the time to educate colleagues about the benefits and risks of new technologies and get feedback about how your organization is performing. It's also an opportunity to set the expectations of other CXOs about upcoming projects. Educate other executives about what technology can, and can't, do.

One of our best practices CIOs cited an example. He explained that at his organization it's a corporate priority to do more business with customers online this year. But he noted that there are many misconceptions about how much connectivity is possible. "Connections are a broad, utopian concept," he said. "Each [business] executive was operating with his own understanding of what it really meant." This CIO took advantage of his monthly platform to establish a common understanding about the type of online interactions that were technically and operationally feasible. Without that consensus, "there's a strong risk marketing teams would sell something we couldn't deliver or that was inappropriate technologically", he said.

Another suggestion - especially if your organization is about to undertake a large IT initiative or is undergoing a major IT transformation - was to try and establish a standing, hour-long meeting once a week - or at a frequency that works for you - with the CEO to talk about anything that either of you have on your minds.

Speak Their Language Our best practices CIOs agree that when talking with other executives it's important to speak in terms of business strategy. One CIO we spoke to got approval for an unbudgeted expenditure on software licences for demand planning, inventory planning and some CRM tools among other applications. "Some of those needs we'd identified for years and hadn't moved on because other projects took priority," the CIO said. He decided it was time to move forward when a vendor with whom he already had a relationship offered him a good deal on a bundle of licences. He explained to his executive colleagues the advantages of locking in a good price on software licences that the company would need in the future. He described how the expenditure would affect the IT budget and emphasized that the purchase would not commit the company to a major new system deployment that would disrupt existing projects. It was a compelling case.

When the executive team comes to understand the business value of a project, they'll be allies when it's time to execute it. That's one reason why access to senior executives is critical, even if a CIO isn't on the top management team.

Our CIOs said if you're not an executive committee member then try for "an open invitation" to bring any high-level IT concerns to the group. For example, one CIO used her "open invitation" to get help from top management when it was time to roll out the company's supplier extranet. "Top management worked with a lot of our regional execs and brought them into the process much more quickly than I could," she said. Senior executives made the deployment a topic on the agenda for an offsite meeting, where they presented the concept, reviewed the results of a pilot project and described the next steps of the rollout.

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BEST PRACTICE 2

69 percent of CIOs say: Involve business unit managers in all stages of projects

Hook Your Business Leaders How to keep the business engaged in IT initiatives from start to finish

One of our best practices CIOs - who had spent more than 10 years on the business side of the company - said he actually took on the CIO role because as a businessperson he was "sick and tired of having IT done to me". So when he took the CIO job, he wanted to involve business managers in the IT process.

Then as the CIO he saw the flip side during a multi-country ERP implementation. The initial implementations went less than smoothly. "The first projects we did were your typical IT projects: The business gave us their requirements, we gave them the system, and they struggled," he said. As the SAP work continued, he noticed another disturbing trend: Only 60 percent of project milestones were being met on time. The CIO knew he needed to involve the business managers more intimately in IT projects. Like many of his peer CIOs, he found the only way to do that was to make the business leaders feel like ultimate owners of IT projects.

Nearly 70 percent of CIOs in "The State of the CIO 2004" survey said it's extremely important to involve senior business leaders or managers in all stages of an IT initiative. Here are three methods that leading CIOs use to bring the business side into the IT process.

Establish a Clear System Set up a project management process for all IT projects to clarify the requirements of business involvement, our leading CIOs said. And at the start of each initiative, involve business leaders by insisting on both a business champion and a business-side project manager for every IT project.

The champion is the general manager of a plant or a business unit head who will reap the project's benefits. "The business champion is the person ultimately responsible for the recognition of the business value of a project. If we're claiming $1 million in savings, his annual operating plan must reflect that," one CIO said.

The project manager is someone selected by the champion from his staff. The business project manager can make sure the business roadblocks are taken out of the way. As an example, another best practices CIO cited an instance where a business project manager shepherding a project involving ERP software determined that the project staffers didn't have the right skills to run the application. The business project manager arranged to have them trained and in the meantime brought in temporary help until the staffers were up to speed.

If managers are reluctant to designate champions or devote their own time, then take that as an admission that the project is a low priority.

Another must, our CIOs said, is that an IT project manager familiar with project management methodology should be part of the project team. One CIO said his team begins by reviewing its project management process: What they will have to report on and when, as well as instructions on how to identify and resolve problems and changes in scope. The team figures out the resources required (such as a materials manager to describe business processes or a financial analyst to help with the figures) and each individual's level of involvement. Then throughout the life of the project, the business leaders, with the help of IT, follow the very detailed steps written down in the project management process.

Encourage Business Leaders to Think in IT Terms The bulk of our best practices CIOs see most of their IT projects initiated by managers in the lines of business, so it's important that business managers understand IT's capabilities and limitations.

One CIO asks the business managers to make a pitch first to their functional heads - including a presentation of costs and benefits - for any IT project. If approved by that manager, the project then goes before the information technology steering committee. "IT has to manage from the back," this CIO said. "We in IT do a lot of things behind the scenes, but for projects to be successful you have to have senior managers say: 'This is mine. It's integral to my success.'"

Make Managers Set IT Priorities Our best practices CIOs agree that the only workable method of prioritizing IT projects is to get business leaders and users to do it.

To whittle down the hundreds of competing requests for IT services that come from each of his organization's four autonomous divisions, one CIO formed user groups around a specific area of technology that affects all divisions, such as e-business. Each group is chaired and populated by eight managerial representatives of the business and includes one of the CIO's IT directors. It's a kind of mini-steering committee working below the CIO's executive IT steering committee, which he said "doesn't have time to participate in the day-to-day drudgery of IT decisions".

Now, when any department leader has an e-business request, he must explain to his peers how it fits into the strategy of the company as a whole. The portfolio of e-business projects has gone from 150 to 50, with 10 having priority at any one time. IT-business relations have improved because division leaders "know why their project is off the list, and they know that it was the business itself that put it off the list".

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BEST PRACTICE 3

73 percent of CIOs say: Involve user representatives in all stages of IT projects

People Use Your Systems, Remember? How to work user preferences into IT initiatives

Users are "who you're building the systems for, so they have to be involved", was the consensus of our best practices CIOs. They pointed out that most systems failures can be attributed to inadequate user involvement.

In answering "The State of the CIO 2004" survey, 73 percent of CIOs said user representatives from affected departments or functions should be involved in all stages of IT initiatives. Many CIOs know that getting line users involved early can increase a project's chances of success. But figuring out who to invite to the party and how to get them involved can be the real challenge, particularly in large or far-flung enterprises. Here's how leading CIOs do it.

Find the Expert Users In most instances - and certainly in larger organizations - getting all users involved in IT initiatives would be a logistical impossibility. Our best practices CIOs suggested that it's better to focus on getting the right end users engaged.

For major IT initiatives, one CIO said his project leaders work with a core team of experts from the corporate and business levels, as well as a group of field representatives who are nominated by their local managers to join a geographically dispersed team for each major initiative.

For example, when IT was building a new billing system, the project manager needed to talk to local office users in areas such as receivables, billing, and credit and collections. So he contacted senior managers in each functional area, asking them to nominate their best and brightest to help out. Once the hard work of locating the right users is done, convincing them to take part is relatively easy, the CIO said. "[These users] like to be actively engaged in what we're doing, and they take pride in being aware of all the new things coming down the road," he explained.

Typically, a project team will handle all of the planning for a new system and provide all the technical expertise. If necessary, team members conduct site visits to ensure that they understand the system requirements.

Seek Out the Doubters For any major IT initiative, one best practices CIO always involves one set of end users: the informed sceptics. "They're public enemy number one because they can bring IT projects to a screeching halt," the CIO said. "But if you involve them up front, they can be a good barometer for how the project is proceeding."

Locating the Doubting Thomases wasn't hard. "They tend to be subject matter experts, and they're pretty well-known because they're vocal and they're often the creators of the systems IT is trying to replace," the CIO explained. Depending on the amount of time each user could offer, the CIO either assigned them to the project's steering committee or the project management team.

Nay-saying users have a strong set of views, but if you can win them over, the sceptics end up being the early adopters and thought-leaders who influence others

Keep a Check on User Involvement While involving users is important, there is a caveat: Don't let them hijack a project. It's a lesson one CIO learned the hard way: "[The users] ended up turning the new system into something that looked just like the old system. You want users involved; just don't let them drive," the CIO said. Having a forceful IT project leader to keep things on track and set parameters for user involvement can help prevent change-averse users from seizing too much control of a technology initiative.

So that change-wary users don't drag their feet when new systems are announced, our best practices CIOs said it's key bring to bring users into the project process early. And, according to the CIOs, part of how you avoid feet dragging is through education.

"A lot of our [project development] strategy is focused on bringing users up to speed as quickly as we can on the new capabilities these systems have to offer," one CIO said. "We look at education and appointing people to become part of the team as a way to get those old ideas out of their head and show them how things can be done differently."

Leverage Power Users At the start of each IT initiative, one best practices CIO said he identifies super users at facilities that will be affected by new projects. These knowledgeable, interested users help with all stages of projects, from requirements definition to post implementation support. But they are most critical during the implementation and training phase. The CIO's suggestion was to start the rollout of new technology at the division or unit that your team has identified as most receptive to change, based on a willingness to commit resources to the proposed project.

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BEST PRACTICE 4

57 percent of CIOs say: Use a steering committee to guide IT investment

Call for Backup How a cross-functional steering committee can make better spending decisions

IT steering committees have become more widespread as the importance of IT has grown. Steering committees let CIOs share the responsibilities - and the risks - of aligning IT with the business. If you hate being the person who always says: No - the IS steering group can do it for you.

As one CIO we spoke with observed: "If I had to interact with each proponent [of a project] and say, IT doesn't think your idea is worth what someone else's is, I would be miserable and so would my staff." Instead, four board member meet biweekly with the heads of major departments within this CIO's organization to set IT investment priorities. Every proposal - whether it's for a brand-new system, an upgrade or maintenance - needs the steering committee's stamp of approval before it gets funding. And no project gets on the steering committee's agenda unless it's presented with a well-developed business case.

When a committee of top executives makes technology investment decisions, "there's a lot more clarity" about the contribution IT makes to the organization, said another CIO. "I think it allows our IT organization to focus on more effective execution and less on having to sell things to the business."

75 percent CIOs in "The State of the CIO 2004" survey said they have a high-level group that governs IT investment decisions and 57 percent indicated that this practice makes CIOs highly effective in their jobs. Those who get the most out of their steering committees follow a few basic rules.

Get Strategic CIOs who want to form steering committees or improve their existing committees' decision-making processes should start by making sure their CEOs agree that IT has strategic importance to their companies. Our best practices CIOs said you need to explain to CEOs that if they are going to be spending significant dollars on technology, you need some type of structure that can help them sort through the priorities. Once that principle is accepted, the next step is to give the company's top managers a say in how the technology budget is spent.

Tap Top Decision-Makers Some organizations involve only members of the executive committee in IT decision-making, others include business unit heads. However our best practices CIOs agreed that a general rule of thumb was to: Keep the group small enough to be able to make decisions, but make sure important business interests are accounted for. When key managers participate in an IT investment decision, the CIOs said, the outcome is a prioritized project list, along with resources to back it up.

"I would have the head of our services group saying he needs project accounting today, and sales saying we need a CRM system," the CIO said. "They're both valid requests. How do I prioritize those?" His high-level group, which also includes the company president, CFO, CIO, chief accounting officer and the heads of two business units, decides which projects should move quickest. For example, the purchasing department might have a system that's working well enough to put off an upgrade, but the project accounting system has to be fixed right away to accommodate plans to take on more clients.

Meet Frequently At one top CIO's organization, a subgroup of the technology steering committee called the IT Application Prioritization Review meets twice a month to go over new proposals, passing on to the full committee those ideas that members think should go forward. Frequent meetings ensure that IT spending stays aligned with business strategy by providing a means for project proponents to get feedback.

Another CIO pointed out that any time his steering committee rejects a proposal he thinks has merit, he can refine his argument and pitch it again in a month. To win approval for a recent upgrade to his company's human resources management system, the CIO used the time between meetings to talk up the project in one-on-one conversations with steering committee members, then brought the HR director to the full group to help make the case. The two of them presented the argument that the existing system couldn't support the additional users that would be accessing it as the company hired new people to advance its growth strategy. The CIO's case carried the day.

Establish Clear Standards and Steps for Project Approval Build senior management approval into your development methodology for major projects, our best practices CIOs said. Start with ideas generated within the company's business units and use teams of IT and business process experts to analyze corporatewide system requirements and design a prototype. In the design phase, spell out the business value for the project and investigate whether it can be scaled up for use by the entire enterprise. Executives take special interest in projects business units can share.

If you establish clear standards and steps for project approval, ideas can have free reign, but cowboy projects won't sabotage IT's charter. At one CIO's company, anyone can generate an idea for an IT investment. He has developed a form to describe the business case for each project, which must be completed before a proposal can be submitted to the steering committee. Project proponents have to review the ROI and explain whether it fulfils a goal of the organization's strategic plan. The process ensures that every idea can be considered and that everyone knows what he has to do for his proposal to pass muster with the IT steering committee.

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BEST PRACTICE 5

71 percent of our CIOs say: Communicate regularly with users at large

Keep Talking How to keep in contact with everyone

According to "The State of the CIO 2004" survey, CIOs spend 26 percent of their time communicating with users - from business leaders on down. If you add in the time CIOs spend managing staff, interacting with outside partners and dealing with vendors, they spend well over 75 percent of their time communicating in some form. Moreover as noted previously, regular communication with users ranks at the number three practice that CIOs rate as highly effective in adding value to the business at large. Our top CIOs couldn't agree more - they said communication with the user population at large is indispensable.

There are about as many ways to communicate with users as there are CIOs who do so, but some clear trends show up in the kinds of efforts that work best.

Show and Tell While all our best practices CIO were keen communicators - one CIO said she believed there is no such thing as too much communication. At the highest level, she issues a "State of IT" report each quarter via the organization's intranet, detailing what the technology team did in the previous quarter and what's coming next. The report shows users who are vying for her services what's going on outside their own departments and why IT has said no to certain requests. The report also reveals work done by IT that's easily overlooked by users, such as antivirus projects.

Although the online report was far from a hit initially, she told us she knew she had to keep publishing. "The first time you put something out there, you might not get the response that you expect, but you can't just drop it. You have to keep at it," she said.

This CIO also periodically holds an IT open house, where her team displays technology at work in various areas of the company. Often, an employee from one business department will see an application being used by another group and will think of how to make it work for himself.

These gatherings give users a clearer understanding of how IT works than they can get from just reading a newsletter. "They'll see something and say: 'Hey, I could use that' - You have a new project that is the users' idea, and they have a stake in it," she explained.

Reach Out Remember there is another side to communication: Listening. Make yourself visible and accessible for questions and be prepared to listen to feedback. As one CIO told us: "Just ask the question and shut up." (For more on communication skills, see "What to Communicate? Shut Up and Listen", page 110.)

Keep your ears open for new initiatives going on in other departments - and have your staff do the same, the best practices CIOs said.

One CIO said IT staffers at his company invite themselves to business meetings to find out early what IT can contribute and to send the message that IT wants to be involved in business initiatives. He said if your staff hear of some idea like, say, a new marketing program, they should simply say: "Hey, we might be able to help with that. Can we come?" Sometimes IT can offer assistance, sometimes it can't, he said, but it's likely the time in those meetings will be well spent because it sets the tone that IT should be involved in business initiatives.

Show Them the Money One CIO published articles about IT in the CEO's biweekly newsletter, created a monthly IT newsletter for her company's offices and hosted casual meet-the-technology-team get-togethers; but she still had trouble convincing her business partners and users that her department added value to the organization.

A couple of years ago, she started publishing a quarterly communique called "Dollars and Sense", which she distributes to executives at the company's headquarters. With hard numbers, it details each department's portion of total technology expenditures - from the telephone system on up to large IT projects.

Getting that information together has been a big challenge, but communicating the cost and ultimate worth of what her department does will be invaluable, the CIO said. "It's a way of charging back [costs] without charging back, and of giving users a real understanding of the cost of technology. In the past, their perception was that the technology budget was just for the technology department. But now they see it supports the entire organization. And as they receive this information on a regular basis, we hope they can use it to help make better technology decisions in the future."

Keep an Open Line To foster communication between employees and IT staff, one leading CIO took a page from customer-facing groups, and created a customer advocate position within IT. The advocate spends time with the line users at the plants. The customer advocate is basically an ombudsman," the CIO said. "She's not there to replace the help desk; she's not there just to be yelled at; she's there to talk to our customers and find out what they need."

The new position has helped the IT group build real relationships with the business side, the CIO said. But the customer advocate's ongoing exchange with users has had practical benefits as well. Recently, one plant was trying to upgrade its business planning and control system software, but the customer advocate knew from talking with employees that the plant had done an incredible amount of customization in its initial implementation.

She warned them to wait on the upgrade and spread the word to IT colleagues. "If the plant had just done that upgrade on its own, it probably would have brought the whole place down," the CIO told us.

But simply hiring people to talk to users on a regular basis would be insufficient if the CIO himself wasn't following up with the same kind of relationship-building with the business. He meets at least quarterly with each division's executive to discuss what IT has done for the unit thus far and what it can do in the future.

"You can't put any of these types of communication efforts in place unless you're taking an out-in-front posture," the CIO said. "The CIO can't sit in his office. He can't do it over the telephone. He has to get out and meet with people and say: 'What can I do to help you?'"

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BEST PRACTICE 6

39 percent of CIOs say: Designate IT staff liaisons to each major business unit

Ambassadors of IT How to best use business liaisons

Many large IT organizations use a federal-and-state type of system with a corporate CIO and several divisional information officers in the business units. Over 50 percent of our "State of the CIO 2004" respondents indicated that that they have IT staff serving as liaisons to the business units to help CIOs identify common needs across the company, investigate user complaints and help users identify functional requirements for new projects.

One best practices CIO said that when he wants to know what's happening in the company trenches, he turns to his application managers. But he has charged these five key staff members to do more than provide technical assistance for the manufacturing, sales and distribution functions. They're also experts on user needs, providing the CIO with early warning of problems and emerging needs.

Last summer, for example, the CIO's company decided to shift some of its manufacturing operations from one country to another. The information technology manager in charge of sales, distribution and manufacturing applications for the division affected - who reports to the CIO - alerted him that some other project should be put on the back burner to accommodate the new work.

At many companies, IT staff serving as liaisons to business units help CIOs identify common needs across the company, investigate user complaints and help users identify functional requirements for new projects. In "The State of the CIO 2004" survey, 39 percent of best practices CIOs rated this method as highly effective. Top CIOs say there are three keys to using liaisons.

Use Business Experts First and foremost, our best practices CIOs said, is that business liaisons should all have work experience in the functional areas they support.

For example, one health-care CIO taps only analysts or IT project managers who are former nurses and lab technicians as his customer relationship managers. The CIO described how a critical care nurse he recruited to be his liaison to the clinic's intensive care unit made a crucial contribution to managing user expectations for a new patient-monitoring system.

Nurses and physicians had asked for a system that recorded patients' vital signs every second - a requirement that would have generated massive amounts of data and slowed its delivery. The former nurse knew no one would ever be able to use that much information. "She had the ability to say: 'If I was here on my own, I wouldn't be here handwriting measurements every second'," the CIO said. Users wanted more frequent monitoring than they could accomplish manually, but recording data once a minute - or every five minutes - could satisfy that requirement in a way that made more sense technically.

And to ensure these business liaisons keep up with what's happening in the field, one CIO said suggested having them spend one week of the year on the front lines, working in the factories or offices where their systems are being used.

Provide a Single Point of Contact If there are business units or agencies whose budgets have some autonomy when it comes to IT spending, it's a good idea to appoint a contact person from your department to maintain a dialogue with the IT staff and business managers," said a best practices CIO who's in that situation.

Another CIO created the customer relationship manager position as a single point of contact between his shop and his organization's departments. Prior to this arrangement, many IT staffers interacted with users, but no single person was responsible for collating all the concerns from a department and coordinating a response. Now, with one point person for each department, the CIO is seeing service levels improve. In addition, the customer relationship managers holds regular meetings with senior IT staff to share information. These exchanges help IT staff identify projects that can serve more than one department and helps the CIO with planning.

Anticipate Issues One of our best practices CIOs decided to designate liaisons from his staff to the company's business units after an executive complained during an IT steering committee meeting about a problem with the company's home-grown order management and configuration system. "Our impression was that it worked fine," the CIO said, so he sent some staff to investigate the complaint. "My impression was that there were one or two people who had a misperception about what the application did, and that turned into a sense that the system didn't work," he said.

Our top CIOs agreed that you can stave off trouble, if you learn about any potential problems that might be brewing before your executive colleagues get wind of them. Charge your business liaisons to sniff out trouble, they said.

And even if you have regularly scheduled meetings with business unit liaisons to discuss projects, keep in touch between meetings. One of our best practices CIOs has his IT liaisons meet with their business constituents every week or two, and to gather information from department heads and lower-level managers alike. He pulls the liaisons together quarterly to translate their feedback into deliverables for the next quarter. Then he takes this agenda to the IT steering committee for approval. The dual-direction communication - top to bottom and across functions - is helping him overcome one of his biggest hurdles: Dispelling a common perception that IT is made of techies with no business savvy.

That battle, like the some of the other hurdles CIOs face such as alignment issues: disconnects with executive peers and difficulty proving the value of IT, which are detailed in this Special Report, may sound all too familiar to many CIOs. But CIOs who follow the six best practices described in "The State of the CIO 2004" survey will find those challenges surmountable.