SBA

Why companies should have a Chief Information Officer.

In business there are three currencies; talent, finance and information. How do I come to that? It’s pretty simple, consider the way we work and what we value. The Finance element is obvious, most businesses have a Finance Director or CFO (Chief Finance Officer) whose responsibility encompasses not only accounting, but the management and exploitation of financial resources, whether they are cash, creditors, debtors, leveragable assets, contracts, negotiable documents etc.

The Talent element is the domain of the Human Resources Director or CPO (Chief Personnel Officer). Is it a currency? The measurement of “human capital” is well established as a method of understanding the value of personnel development. We can put a value on it, we pay good money to acquire and retain it; talent fits the bill of an exchangeable currency, and in the world of football and other professional team sports we sell talent in addition to buying it.

But Information? Some businesses explicitly sell information, many buy it. IP, technology, commercial data, mailing lists... Information appears to be a regular currency of business, and it’s very difficult to find a business that doesn’t use and depend upon information, it is clearly of great value, so who is responsible? Who looks after the stewardship of information in business? The Information Director? Look around at the businesses you know and you will be hard pressed to find an executive with this title or role.

Many businesses have an Information Technology or Information Systems Director - but this is a different role, responsible for the tools we use to process information in business; in most instances the IT / IS Director is not responsible for the stewardship of information. The Chief Information Officer (CIO) role exists in a few businesses, but in most this is an alias for the IT Director. When business originally conceived the CIO role it was intended to steward information, but for most the pressing need and complexities of managing information systems meant that CIO was effectively corrupted into CITO, and the role of CTO (Chief Technology Officer) emerged.

So, should businesses have a CIO? Is the role merited?

When we buy or sell businesses we attach a value to the enterprise - “shareholder value”, which encompasses the value of all the negotiable currencies in the business. We consider the employees we are buying, their strengths and talents, and the financial assets. We also take into account the information of the business; who are the customers? what have they bought? what might they buy? what ongoing commitment do they have (contracts, service agreements etc.)? what IP does the business own? what special business processes does it execute (know-how) etc. etc. Without its operating information and institutional knowledge the value of a business is reduced to its physical assets; the information in the business is the primary component of what we call “goodwill” when we acquire it. Therefore information is a valuable and quantifiable asset base which we should steward, manage and develop in order to grow shareholder value.

From the perspective of creating shareholder value it is immediately apparent that we should steward business information, and recognise it as one of the major currencies of business. So who should steward it? We accept that Finance and Talent are stewarded by professionals. In some large, sophisticated businesses there is a real CIO whose responsibility is the operating information of the business. Perhaps that’s a contributor to why those businesses are so successful. The CIO may “own” the information technology platform, in the same way that the HR Director probably owns the training function, but the management of the technology platform will be delegated to a CTO or IT Director.

Many businesses are probably missing a trick in not having a real CIO whose domain is the information of the business rather than the Information Technology. Information is a currency of business and a strategic asset, as business leaders we should give more consideration to stewarding and developing our information assets, and where appropriate we should consider appointing some specialist executive explicitly for that purpose. As a by-product, with effective and clear vision of information strategy, purpose and management, businesses that appoint a real CIO commonly find that their IT does a better job; it’s much easier for the IT department to create effective systems to process information if they know what the systems are supposed to achieve instead of merely being told how they should operate.