Pressure grows on CIOs as businesses put IT center stage
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Pressure grows on CIOs as businesses put IT center stage

Jessica Twentyman — April 2014

The strategic importance of IT may increasingly be recognized across the businesses, but that is putting greater focus on the performance of CIOs, new survey results from McKinsey reveal.

What would most improve the performance of your IT organization? Making business units directly accountable for IT projects, aligning budgets to demonstrable business value, raising talent levels across the IT department — or perhaps replacing the whole IT management team with new leadership?

McKinsey & Co’s annual poll on the effectiveness of IT shows a clear consensus among both IT and non-IT executives on the top three performance enhancers: greater business accountability (45% and 46%, respectively); value-aligned budgets (42% and 46%); and a talent boost (34% and 36%). But, surprisingly, CIOs appear to judge their own effectiveness much more harshly than their business counterparts do.

As the management consultancy’s survey of 800 senior managers shows, almost 30% of IT executives think replacing the IT leadership team would be an effective approach to fixing their departments’ perceived shortcomings. That compares with just 13% of their CXO colleagues.

McKinsey graph 1

Business frustration

The survey paints a mixed picture of business satisfaction with the IT department's ability to respond to fast-changing requirements. That's particularly true in newer areas of involvement for the IT department, beyond the established focus on operational productivity, knowledge sharing and helping in customer profitability.

Fewer than half (49%) the respondents say that their IT department “somewhat” or “significantly” helps the organization to meet its goals for creating new products and services, for example. And when it comes to helping it to enter new markets, the proportion is lower still, at 37%.

However, McKinsey observes that more and more executives are acknowledging the strategic value of IT to their businesses beyond merely cutting costs.

“The data indicates notable changes in organizations’ current priorities for IT. Concerns about managing costs are down [to 31% from 44% two years ago] while a larger proportion of executives now say their organizations are using IT to improve business effectiveness [61% versus 47%] and information availability [47% versus 40%].

McKinsey Survey graph 2

Talent shortfall

But do any shortcomings in meeting business objectives lie with those who lead IT, or with a dearth of available talent? Certainly, the survey highlights several major areas of talent shortage for IT. Across the survey base as a whole, two-thirds of respondents agreed that their organizations face significant challenges in finding, developing and retaining skilled IT staff.

The top three areas of recruitment need are identified as analytics and data science; joint business/IT expertise; and mobile/online development. Perhaps less predictably, a shortage of cloud/distributed computing skills was only identified by 28% of respondents — though that varied by industry, with high-tech/telecoms and professional services seeing it as the major talent gap and financial services and manufacturing as less critical.

McKinsey graph 3

Solving these talent issues will require multiple remedies, according to McKinsey’s researchers — but what these all have in common is the strong leadership required to develop a “talent-friendly culture”.

When asked what measures would most help here, the top responses are hardly surprising: “Improved culture, energy and morale of the IT organization” (52% of IT respondents), followed by “More competitive salary, benefits and/or incentives” (46%). Other answers included better-structured career paths and the availability of more cutting-edge work. (See former BP CIO, Dana Deasy, onCreating a talent pipeline.)

That’s just one of the positive ways forward for CIOs, says McKinsey. It also advises that IT leaders need to find a way to fulfill two conflicting roles: managing the IT function while leading technology-driven change. It is increasingly important for CIOs to “meet both of mandates and manage two-speed IT organizations,” the report’s authors conclude.

• See details of IT under pressure: McKinsey Global Survey results

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