Wednesday, March 28, 2012

Who Should IT Report To?

One of the perennial debates in IT is the question: whom should the IT department report to? The CEO? The finance department? The social media team? The head of research and development? The question is like asking how many angels can dance on a micron of silicon. At the risk of appearing to dodge the question, I suggest IT reports to everyone.

Tradition says IT should report into Finance. Historically IT departments evolved out of a corporate need to automate billing, payroll, and other fundamental and crucial financial transactions. Naturally it made sense for IT to report into the finance department. But times change. IT is an integral part of everything everyone does in an organization. IT is an essential part of the value proposition of any product or service. From pizza stores providing real-time delivery tracking to universities providing online degrees, the IT function affects every aspect of the business relationship.

I saw the issue first hand when I was the financial controller for a large IT department. I reported into a CIO whom I greatly admired and respected. One piece of career advice he gave regularly was "never let IT report to Finance." At the time I had a hard time understanding his reasons. Our CFO was a great guy and I worked closely with him because of my particular role in IT. The way our company was organized, both the CIO and CFO reported to the president and everything worked extraordinarily well.

Then the company was sold.

As the new buyer dissected our organization they made an interesting discovery. The single most expensive physical asset in the organization was the IT infrastructure. But instead of leveraging IT as an integrated value generation mechanism, the buyer viewed it a financial asset to divvy up among disparate interests in the new organization. Like a pirate looting plunder, the new owners did not recognize the real value of the treasures they had captured. The assets were squandered because they were only seen from a financial perspective and not a business perspective.

The acquiring company's IT group reported into the CFO and the results of the merger seemed to confirm my boss's advice about the IT reporting relationship with Finance. But in hindsight, that was not the real problem. They were an old style organization where 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.

As a CIO I've reported into the Finance side of organization and quite enjoyed the relationship. However, the organizational reporting relationship never biased the organizational decision-making process. IT decisions are investments with long term implications for organization success, but financial systems should never receive preferential or biased prioritization simply because of organization hierarchy. Strategic engagement of IT requires broad organization involvement that transcends arbitrary organization structures. A self-aware IT organization perceives itself as reporting to the entire organization, not just the sole linear strand of the hierarchical organization chart.

So how can IT report to everyone? It starts with an attitude - a collective state of mind defined by the IT departmental culture. It requires an open approach to all relationships across the organization and is manifested in a desire to collaborate and integrate and deliver. This open IT culture is rooted in a mutuality of respect among all departments. Whether it is finance, human resources, or manufacturing, the IT folks need to earn their respect by delivering on promises and meeting expectations.

Once the culture is established, relationships are continuously nurtured. You can't do that if you think you have one boss. Much like a consulting company has many customers, an IT organization has a multitude of clients. Specialized treatment of one client because of an organizational reporting relationship comes at the expense of servicing others. A nurturing and open IT culture flourishes in an environment where all clients become the centre of their universe.

Of course the official reporting relationship needs to be comfortable and supportive of the open IT culture. When IT reports to the CEO, this balanced perspective is assumed. In other reporting relationships, the need to be open may be less obvious. The CIO's role is to help everyone understand the need for an IT that meets the needs of the many, not the few.

As to the career advice from my old boss about never letting IT report to the CFO? I disagree. Sometimes IT should report to the CFO. But sometimes it shouldn't. It depends on the particular business model and the technical acumen of the leadership. What matters is that IT has a strong and respected voice throughout the organization. That can only be achieved by a open, service-oriented IT organization. One that identifies with the business and sees itself as part of the organization's bloodstream. One that sees itself as reporting to everyone.



  1. My favourite expression for Chief Information Officers (the real kind, not the ones that are glorified IT Directors) is that they are primus inter pares, or "first among equals".

    This absolutely resonates with your position about reporting relationships, de facto ("as a fact") regardless of how the CIO is currently placed, and, if not already de jure (under law, or "in the org model"), then certainly to be striven for.

    Indeed, the CIO who does not take the perspective of a Chief Executive Officer is missing a core part of their reason for being there!

    Well said, good sir!

  2. Thanks Bruce.

    I think it really is a mental disposition - an attitude and approach that separates IT Directors from CIOs.

    P.S. I really should have taken more Latin courses to keep up with you!