Successful Chief Information Officers Speak the Language of Business: Finance

Whenever I have the occasion to speak with successful CIOs at length, I make it a point to ask them which skills they believe have served them best as they have ascended

into the biggest chair in the IT department. Some classic responses understandably crop up time and again. These leaders work in the fast-moving world of IT, and only with a deep knowledge of and curiosity about technology can they stay abreast of developments in the field. Many CIOs will also mention the importance of management skills, given that they need to harness the talents of a large, diverse team of people who run the gamut of Myers-Briggs personality types.

Over the last few months, one skill has been brought up with increasing frequency: a facility with the language of business, and, in particular, finance. A facility with this discipline ensures that IT is contributing to the same key performance indicators that the rest of the organization is, and it also proves that IT is responsible at managing the funds it is given.  More importantly it engenders trust among the rest of the executive team, giving the IT team the credibility to push strategic plans, attend board meetings, and to a greater extent earn a place among the direct reports to the CEO.

IT has long been accepted as a cost center of the company and as a cost of doing business. IT leaders have traditionally not even been asked to present the return on investment (ROI) of the projects they pursued because it was rare that there would be one. Perhaps this helps explain the subservient nomenclature of “IT and the business,” as though they are separate things.

For a long-time, IT departments measured success based on obvious IT metrics such as systems up-time and on-time/on budget/on scope of projects.  As important as these are, they are introductory or foundational metrics.  It is important for IT leaders to use the same success metrics that the rest of the organization does.  In so doing, they begin to think about their portfolio of investments’ potential to contribute to the ultimate success of the business.

I recently spoke with Bruce Hoffmeister, Global CIO of Marriott, who began his career at the hotel company in the Finance department.  Therefore, it was only natural when he moved into the IT department that he would ask the same questions about his own portfolio of projects that he had asked of others in his prior role.  Bruce told me, “IT leaders need to understand basic business language, as well as the specific business terms of their industry, such as RevPAR [revenue per available room—a key business metric at Marriott and throughout the hospitality industry] and be able to articulate the impact of their projects using business metrics.”  Hoffmeister presented a compelling case that IT leaders need to think about IT as an integral part of the business, not separate from it. As such, they need to think about IT’s role in helping the corporation achieve its goals, many of which are financial.

Also on a recent trip to California, I caught up with Rebecca Jacoby, the CIO and Senior Vice President of the IT and Cloud & Systems ManagementTechnology Group of

Cisco Systems.  She mentioned that her strategic weapon in managing IT has been an understanding of cost accounting.  Prior to her current role, Jacoby was a Supply Chain executive at Cisco, and in that role had an intimate knowledge of the cost of each aspect of the massive supply chain that allows the technology behemoth to produce all that it does. Jacoby made a pointed comparison between the supply chain of companies and all that IT manages when she mentioned to me that  “when businesses think about measuring IT, they often think about it in the same way that we’ve traditionally thought about it ourselves as IT leaders: using basic project management metrics. This does not measure real value, however.” Jacoby notes that most IT departments of a certain size manage a plethora of people who are both colleagues and external partners or vendors.  Likewise, they produce home-grown technology and purchase off-the-shelf technology.  She indicates that it is critical that the IT leadership team understand the cost of all of these facets.

When she joined IT at Cisco, Jacoby realized – thanks to her atypical background in Supply Chain – that she needed to augment the skill-set of her IT leadership team and beyond.  In partnership with her colleagues in Finance, a curriculum was developed to introduce the concepts of cost accounting to IT. She told me that “it is critical that we be able to effectively communicate the cost of all that we manage. The insights we gain allow us to provide the rationale when others want to outsource what we have traditionally provided, and frankly we can proactively let our colleagues outside of IT know when we should, in fact, do so.”

By following the lead of other business functions in elucidating the value IT is producing and the cost it takes to do so, IT’s value will become more intelligible to the rest of the organization. And once that is the case, the opinions of IT will become indispensable with regard to the company’s strategic planning and execution.