Should the CIO report to the CEO or the CFO

20 Nov

There is no denying the importance of a CIO to a company and the key role that they have to play within it. For such a high standing and important role is it necessary for a CIO to report to the CEO or the CFO with their findings, proposals or recommendations. There has been a debate in relation to this matter among the people in information systems. The forrester community is one such group that has debated this.

“The Forrester Community for CIOs has been debating during the past two months whether the CIO should report to the CEO . Its small group of contributing CIOs agreed 100%.. Earlier this year, The Center for CIO Leadership published a blog post by a senior, career CIO that discussed why reporting to the CEO should be mandatory. A whole host of academic papers in the past twenty years came to this conclusion giving evidence and reasons such as: IT is more likely to be successful in this case, the CIO will have a better understanding of the organisation’s strategy and will have little difficulty engaging in business planning. This has been a topic for debate almost since the CIO role emerged in the early 1980s as IT began to become critical to business activities” http://www.itsmportal.com

I will discuss a piece from research from this website  in June 2011 that came to the conclusion that no CIO reporting structure is optimal for all firms. Here the term CIO means the highest level IT executive in an organisation, although a 2008 survey by CIO magazine found that only 60% actually held the job-title CIO with 41% of the highest level IT executives reporting to the CEO and 23% to the CFO.

Here are the list of arguments that were for the CIO reporting to the CEO and CFO:

Source: (http://www.itsmportal.com)

1. “A CIO should report to the CEO in order to recognise and promote the relevance of IT to the business. Why? Because the CEO focuses on the business’ overall strategy and management.”

2.” A CIO should report to the CFO to ensure spending on IT is controlled. Why? Because the CFO focuses on financial risk planning and reporting.”

Here are the list of arguments that are in support of a CIO making decisions on his own (http://www.itsmportal.com)

1. “If a business has a strategic IT orientation, then the CIO should be a member of the top management team (TMT) and should be involved in the business’ strategic planning”

2. “If a business has an operational IT orientation, the CIO role should be to lead the IT department, offering IT support and managing projects that have a generally low level of risk.”

There was a bit of research done into the matter of whether a CIO should report to a CEO and CFO. The researchers tested three hypotheses using data from 1990-93 and 2006 that included two surveys of CIO reporting structure, together with business financial information from market intelligence sources that covered around 250 businesses.

The hypotheses tested were: (http://www.itsmportal.com)
1. “Differentiators are more likely to have their CIO report to the CEO.”
2. “Cost leaders are more likely to have their CIO report to the CFO.”
3. “Alignment between strategic positioning and CIO reporting structure is associated with higher business performance.”

The researchers found some very interesting results when they tested the 3 hypotheses “Firstly, differentiators tend to have their CIO report to the CEO whereas cost leaders tend to have their CIO report to the CFO. Secondly, alignment between a business’ strategic positioning and its CIO reporting structure has a positive contribution to business performance Thirdly, the long-held view that a specific CIO reporting structure i.e. CIO reporting to CEO is always ideal for all businesses is not true.”
(http://www.itsmportal.com)

I think that this report is a very interesting piece on the topic. I would agree with the reports finding and the results that they found.  The 3 hypotheses aspect of the research really made the report interesting in my opinion. The conclusion that I have drawn from this is that I do believe that CIO’s should report to CEO’s and CFO’s. In the case of a CIO reporting to a CEO I believe it should be in the case where a CEO is supervising CIO’s when they are leading IT initiatives for competitive advantage. Also CIO’s should only report to CFO’s when CFO’s are involved in  CIO’s implemenenting new technology and to reduce IT expenses

Sources:in
http://www.itsmportal.com

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3 Responses to “Should the CIO report to the CEO or the CFO”

  1. ncooney1 November 20, 2012 at 10:04 pm #

    I think that this debate about who the CIO should report to is a very important one with regards to the topic of the CIO. It is difficult to answer as perhaps different companies have their own ways of doing things which work best for them. However, I think you have made very relevant points. I agree with you in that I believe that the CIO should have a lot of decision making and free reign themselves and for their ideas, but that at the end of the day they should report to the CEO. I also agree with your point regarding CIOs and CFOs. I think that the CFO and the CIO should work side by side, and very closely and communication should be very clear between the two but that neither should have a higher position than the other. They are both crucial to the business and when working together they are one of the most valuable relationships in the company.

  2. pm1083 November 21, 2012 at 12:19 am #

    I think that in order for the CEO to have the information to make the best and most informed decision it would be important that the CIO reports to directly to him and work, as ncooney1 said, side by side with the CFO. If one were to be given superiority over the other then I could only see it being detrimental to the overall good of the company.
    The CEO should still be the one who decides whether a new technology is either worth the risk or the cost of being implemented.

  3. andrewfitz22 November 28, 2012 at 10:37 am #

    An article in last months Irish Times about the CIO has a comment from one CIO who reported to her CFO and said by reporting to the CFO her role was somewhat suppressed. Both the CIO and CFO need to strike a balance regarding responsibilities I think.

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