Are you in tune with your CIO?
RAJAJI: Please describe how your management information systems organizations get involved in setting corporate strategy.
VERDOORN: Land O'Lakes is a $3-billion company with two separate businesses. The information systems function usually works with the finance function, and that's true across all of our divisions. I have information systems responsibility in the dairy foods organization as vice president of finance. Mark is part of the corporate organization and reports to the CFO. So across the company, information systems has historically reported to the finance organization.
I've found over the past three to five years that it's much more important for information systems to be involved strategically, partially because of what we've been going through as an organization in determining which technology we want to put in and how we can apply it. We want a consistent approach to technology and a platform to use across all of the businesses, because over the long haul, that leads to the lowest-cost information systems function.
RAJAJI: Do you have a centralized information systems strategy, in terms of both applications software and networks?
WlLBERTS: Three years ago, we consolidated into corporate all of the technology and operations functions. Each of the business units is supported by a decentralized application support team. We coordinate the technology strategies across the organization and work closely with the business units on the applications side. Between the two businesses, we have about 140 people in information systems.
RAJAJI: Here's a question for the financial executives. Do you find it's difficult to get your CIOs to think strategically, in terms of the business as a whole?
FESLER: I don't know if Ray and I have the perfect relationship, but we see eye-to-eye on most things, and we try to get our technology people right in the middle of strategic issues. In fact, in some cases, they're probably the driving force for change, because sometimes the user doesn't recognize there are better ways of doing things.
RAJAJI: What happens if user groups have conflicting priorities? Do you have a steering committee to decide on the best course of action?
FESLER: We have an executive steering committee that meets twice a year - sometimes more frequently, depending on the issues - to thoroughly discuss the priorities in information systems. The executive committee is made up of the eight major players in our company, all the way from our president to the vice presidents of all the major functional areas. That helps us determine what the priorities are and gives Ray clear marching orders, and it makes things clear to the entire organization. Last year, for instance, one of our major projects was an improved finance and human resources system. Everybody knew there were certain resources committed to that endeavor, and other projects had to fall in line behind it.
HAGEDORN: The system isn't perfect, but it works, and it takes a lot of pressure off the information systems person trying to decide what to work on.
RAJAJI: Does management information systems' reporting relationship to the CFO cause any problems from the user perspective?
FESLER: I give Ray a long rope, and he knows how far to go.
RAJAJI: Tom, give us a window into information technology at Ethicon.
FOWLER: Ethicon Endo-Surgery is a division of Johnson & Johnson, an $18-billion corporation. At J&J, the information management organization has historically reported to the vice president of finance. Over the last few years, that's begun to change slightly in certain areas of the corporation. Information management is beginning to have a higher profile, with the top information executive holding a board seat or a vice president's title. But the reporting relationship is still the same, and I believe that's because the president doesn't necessarily have the understanding or the time to have the information technology organization reporting to him or her.
Three or four years ago, J&J, which is very decentralized, decided it needed an information technology office at the corporate level. It's an office of six people from each of our consumer, professional and pharmaceutical sectors. Gregg reports to me, but there's a strong dotted line into the corporate structure.
Right now, Gregg's dealing with a lot of our standardization issues. Our company is three-and-a-half years old, and we've been fighting US Surgical for the market. Gregg's putting the infrastructure and base systems in place, although the two of us spend a great deal of time transforming the information technology organization from a technical resource to one that is truly a business partner. We're also trying to determine our potential returns from sales force automation and how much we need to invest.
LITCHFIELD: In the past few years, finance has moved beyond the accounting function to being a business partner by helping the organization with its financial issues. The information technology organization needs to make that same shift. We need to get out of the technical-support and programming-support roles; we must become an organization that delivers strategic value to the company. Our relationship with finance will help us do that, because they've been through the whole process. I look at it as more of a mentoring relationship, as opposed to a reporting relationship.
RAJAJI: Do any of you know of instances where the relationship between finance and information technology didn't work out - where you had two different cultures?
LITCHFIELD: I've been exposed to companies in which the finance function dealt with finance issues and really wasn't paying attention to technology issues. The reporting relationship was just that - a reporting relationship. And that influenced the priorities, because information technology wanted certain things done, and so did other divisions. So we had our differences. But I think those days are now behind us; financial issues are being resolved, and awareness of information technology is spreading across companies, as more people understand the value of it.
FOWLER: Information technology will someday have a separate board representative at most companies. The real issue holding many technology departments back is the company president - and on up. I've heard some presidents and directors say, "I got my first computer last year." So until you have more comfort with information technology at the president's and board of directors' level, the function needs mentoring. It needs an organization to help move it, and that's why it's important for finance to be involved.
Take a look at the two organizations that best know business processes from start to finish. It's finance and information technology. The operations, marketing, and research and development groups understand their own processes, but not necessarily the whole picture.
In the future, information technology won't need to report to finance. The company will view it as a separate organization, because it'll be a core competency that companies will require to be successful. But information technology can't have only an internal focus. It must be externally focused, and that's one of the transitions taking place now.
RAJAJI: Do you still believe information technology will have representation at the board level after all the outsourcing that's been going on? And do you think outsourcing is a good idea, especially when information technology is a strategic tool?
WILBERTS: We looked at outsourcing technical support functions, and we've outsourced some development functions on a contract basis. It's allowed us to manage some of our costs on a variable rather than fixed basis.
LITCHFIELD: We've called in a consulting firm to figure out a business-process problem and give solutions. And then we bring our programming staffs in to help implement it. I think we've got to flip that - put the strategic component inside the organization and outsource the technical capabilities - because technology is becoming more and more difficult to keep up with. It's not an easy thing to do, but that's where we have to go.
FESLER: Ultimately you're probably going to see a lot more direct reporting to the CEO or at least the COO of the units.
RAJAJI: I believe it'll happen in five or 10 years. The only reason it hasn't happened already is a lot of companies haven't yet recognized the value of information technology. But look at some of the smaller industrial companies. Small steel companies and aluminum companies have leveled the playing field against their big competitors by using technology and getting out and talking directly to their users or customers. By providing this extra service, they make their commodity look like a specialty product.
FOWLER: Whether you're in finance or information technology, you need to be recognized primarily as a business person with a background in finance or technology. Finance has been able to make that change. Information technology hasn't done that yet. Until it moves out of that technical arena - which a lot of people in the information technology organization are comfortable with - and is recognized by the organization, the process will go slowly. The goal is for the information technology person to be welcomed into those strategic discussions and show people there may be a technology solution to their business problem.
RAJAJI: I've found that having the top finance and technology people change roles and do a cross-functional transfer has worked fantastically. At my previous company, we were very successful in rotating people. Of course, you need to take the best people - those who consider themselves business people first. What do you think of that idea?
FESLER: I don't want Ray messing around with my budgets, and he probably doesn't want me messing around with his operations! On a serious note, I think there can be some cross-training between those functional areas, although we haven't done it ourselves. But from a business manager's standpoint, it's probably more difficult for the information technology person to cross over into finance than it is for the finance person to move into information technology.
HAGEDORN: I'd take the focus off finance and look at the operating units. I have business systems managers sitting on top of each of the silos, and I'd feel extremely comfortable with the idea of these people swapping jobs. Our business systems manager and revenue cycle people could run a customer service function or a warehouse. They're not technologists - they're business people, and they already play a multitude of roles in which they deal with the manufacturing arena.
FOWLER: At least one or two of our finance people have moved into other areas, because they do become strong business partners. And we've seen a couple of people in information technology do the same thing.
VERDOORN: At our company, we've had some moves from the finance side of the business into information technology. But I don't recall moves from information technology into finance. In other areas of the company, a good example is our former vice president of information systems. He's now the vice president of cheese operations.
RAJAJI: In the current environment, a strong information systems person has a unique opportunity to learn everything about the business, just like finance has always done. Like finance, the information systems staff is involved in strategic planning and budgets, so they get a very good feel for the business. Information systems will be a very viable organization to pull people out of for the operating jobs of the future.
FESLER: I don't know that the actual cross-functional move is all that important. The point is we want the information systems people to partner with the users. If the users have a problem in that particular area, they'll call a meeting of their own staff, but guess who's sitting at the user's right side? It's the information systems manager. So you can be a real asset to that user group simply by sitting down with them and solving the problem.
HAGEDORN: I'm a real proponent of the business manager being located in the functional area he or she works with, instead of in the information systems area. In our manufacturing group, the management information systems person doesn't sit with management information systems and never has. By pushing him out into that area, he becomes part of it.
By contrast, our sales and marketing group is on the first floor, and information systems is on the third floor all by itself. I believe we're too far apart for information systems to make a meaningful impact inside the sales and marketing organization on a day-in, day-out basis. If the marketing and sales people have a meeting, they wouldn't even think of having the information systems person there, but when the person is right on that floor, they actually become a member of the marketing group. It's much easier to go right next door to Mary's or Joe's office to talk about a particular issue. I really want to move aggressively in that area, but logistically it's a little difficult.
LOCATION IS EVERYTHING
RAJAJI: In my former company, we located not only the information systems staff but the finance staff next to the business units, even though they all report to the central organization. All of them sat right next to either the product manager, the business manager or the vice president, depending on the level. So the finance and technology people were in almost every strategic meeting.
HAGEDORN: So you had a good experience with them?
RAJAJI: Absolutely, because finance and technology felt they were part of the team, and the business unit people didn't feel that whatever they said would be immediately used against them. Therefore, the finance and technology functions were tapped more frequently for advice.
And just having an information systems person walking around helped escalate the knowledge level about information technology and what resources were available to the other product managers, customer service people and business managers. You could just walk across the floor and say, "Have you tried this? We can do this for you." If you have to get an appointment to see your information systems person, it'll never work.
HWU: The change in the role of the information technology area has to do with the technology of the last three to five years. It's really empowered the user. Information technology used to be in an ivory tower because many of the people did so much coding. In our company, inhouse development was heavy. There was a lot of backlog and a lot of stuff to deal with, so the technology person didn't really get exposed to the larger issues.
None of what we've talked about acknowledges that information technology now gets pushed from the users, the CFO and the CIO. They get exposed to all the different parts of the business, so they can look at the technology from a business standpoint. That's happened throughout industry.
WILBERTS: The focus of information systems is shifting from an emphasis on building capabilities to one of applying capabilities. Therefore, the role, the relationships and the location of information systems all need to be different.
REITH: As Michael said, about five years ago our management information systems function was running off on its own. They sort of made changes independently, and the management information systems function was not set up as well as the finance function. But bringing us together under one person has definitely helped us.
A BAD RAP
RAJAJI: Information systems is just like investment banking, which got a bad name with all the excesses of the 1980s. You'd hear about things like a management information systems person taking the corporation way out on a project without getting buy-in from all the users, spending $10 million and ending up with nothing to show for it.
And the other side was true, too. In many cases information systems was kept down in the organization, because finance five or 10 years back wasn't that familiar with technology. Many CFOs didn't feel they had to make that technology move or were concerned about how much it would cost, even if that's what was needed to be competitive. So they held information systems back. There were bad actors on both sides.
FOWLER: Also, the information technology organization was expected to deliver programs to end-users who were constantly changing them. It was almost a no-win situation. We had a very technical organization that enjoyed the technology and tried to satisfy 100 percent of the end-users' needs.
Now, when we go through any kind of major systems implementation, the user is the head of that project. In the case of our new MRP system, the operations group led the project, and information technology was one of the resources they drew upon most. So if you reform those attitudes and push your way back into other organizations, it allows the users to understand more of the value of information technology and the difficulties of delivering it, without constant changes as you're going through system development.
RAJAJI: The fact that more of the project managers now come from the user side helps a great deal. You have much more accountability on the user's part.
FESLER: I agree with that. If you look back 15 or 20 years, getting an information systems project done meant you threw it over the wall and let the technical people program it and bring it back. But that caused two major problems. One is we insulated the information systems people from the rest of the business because we thought they were just a bunch of techies who didn't know anything.
And the users had no idea what the technology people were doing. Therefore, they didn't accept the responsibility of defining exactly what they wanted, and they were constantly changing their minds, so the poor information systems people were trying to hit a moving target. You had projects that weren't delivered on time or within budget. So information systems got a bad rap.
But in the last five years, we've had a lot of success, because the projects have been user-driven. You can't just expect the management information systems people to lead the charge. You've got to get that user involved and to accept ownership of the system.
VERDOORN: Ten or 15 years ago you had a lot of users who were willing but uneducated buyers. They didn't want to learn about it, so they just wrote the check. And, too, you had some very good sellers on the information technology side who were selling some pretty grandiose schemes and solutions that weren't good for the business. Back then, the last place you'd look for an operating vice president was the information technology person's office. But now it's a different environment. We've had more information technology successes in the past five years than we did throughout the 1980s.
RAJAJI: As people become adept, knowledgeable users, will a CIO be necessary 10 years from now, since everybody might be CIOs themselves?
HAGEDORN: The problem with that is you end up with all these users doing things you're not aware of. Then all of a sudden, here's the project on your lap, and you might not have the capability to support it. Users must understand the implications to the technology infrastructure when they want to do something. But I don't know how you can control that when user groups today are so astute.
PLUG AND PLAY
RAJAJI: Well, when everything is truly "plug and play" and we've got people who know what they need and start using it, we'll have a very different information technology organization.
WILBERTS: There's little doubt the environment will substantially change. The breadth of solutions and opportunity out there continues to widen, yet at the same time, one of the critical success factors is the homogeneous infrastructure. A role still exists for infrastructure management of network information. The ability to apply tools on top of that becomes less of a role for information systems and more of a role for business as a whole. But you'll still have to manage it.
HWU: My major qualm is that business managers may overestimate the capabilities of a particular application. If you overload applications, you can run into trouble. Therefore, information technology will be a proponent of doing projects in phases.
LITCHFIELD: Another danger in allowing multiple applications is that one group will define data one way, while another group will define the same data another way. As business managers, we'll have to integrate those alternatives across the business.
RAJAJI: That's a good point. In the future, information technology may be responsible for the propagation, definition and integration of the data and the infrastructure. And the users will do the rest of it.
FOWLER: Are you saying that five or six years from now, information technology will revert back to a purely technologist role and the business partnering piece will move back to the business units?
HWU: No, I don't think that's the case. In our company, the CFO's vision is that department barriers will keep coming down. You need to have a corporate effort, and that requires interdisciplinary employees and resources. Instead of performing one task, the people on our project task forces work on all the different pieces of the project.
FOWLER: I agree people from different disciplines will work more fully together, but I don't believe that a marketing person, for example, will have the know-how across information technology, finance, marketing and operations to establish technology priorities on his own.
FESLER: You sometimes get power cowboys who think they know more than the information technology guy or the finance guy. You've got to be sure those people have some constraints so they'll use the full resources of the company.
RAJAJI: Any final thoughts?
HAGEDORN: I'd like to close with an anecdote. One of our plant managers called me up recently and said, "Ray, can I buy you a cup of coffee? I want to talk to you." He told me, "I've been listing all the things we need to do in the near future. There's not one thing on the list that doesn't involve information technology." Information technology has arrived in every element of our business. We have to convince the rest of the organization that it's strategic, not just a support element.
RELATED ARTICLE: VITAL STATS
Moderator: Raghavan Rajaji Senior vice president, treasurer and CFO BancTec Dallas
ETHICON ENDO-SURGERY Cincinnati
Thomas I. Fowler Vice president, finance and information technology
Gregg Litchfield Director, information technology
FOUR SEASONS HOTELS Don Mills, Ontario
Craig O. Reith Vice president, finance, and assistant treasurer
Michael Hwu Director, management information systems
HILLSHIRE FARMS AND KAHN'S Cincinnati
John F. Fesler Vice president, finance, and CFO
Raymond Hagedorn Vice president, management information systems, and CIO
LAND O'LAKES Minneapolis
Thomas Verdoorn Vice president, dairy foods administration
Mark Wilberts Vice president of information systems
RELATED ARTICLE: GETTING YOUR CIO TO GET WITH THE PROGRAM
Do any of these financial executives' complaints sound familiar?
* "I want a CIO who has leadership and technical capabilities."
* "We need a company-wide information technology strategy that will take us into the next century. We already have a business strategy to do so."
* "I wish my CIO better aligned his information technology strategy with that of the company's overall business strategy."
* "I'd like my CIO to be more visionary - more aggressive about going after the 'end game.'"
* "The MIS department should do a better job of empowering information users."
These comments come from an informal Financial Executive survey of financial and information technology executives, conducted at Financial Executives Institute's recent Information Management Issues Conference. The survey asked, among other questions, what financial executives would change about their CIOs. While financial executives admire their CIOs for their "leadership and fast results," their flexibility in adapting to users' needs and their ability to integrate rapidly changing technologies, many say they'd like their information executives to "place a greater emphasis on strategic planning," in the words of one respondent. However, several financial executives acknowledge a lack of resources as a limiting factor for their information technology departments.
The CIO respondents also got a chance to air their views, focusing on the difficulties of implementing information technology as a strategic component of business. One respondent says, "We need to provide improved mechanisms to communicate information technology, vision, design and implementation," while another points out, "The real need is to increase the business managers' understanding of IT - with a sense of realism." Yet another hints at the difficulty of eroding insular attitudes within the information technology department itself: "I want to round up the 'renegade' information technology people and consolidate things."
Traditionally, the information technology department has reported to finance, and that generally still holds true for these respondents. Thirty say their information technology department reports directly to finance. Of those that don't, two report to the CEO, three to the COO and two report to the president (some report to more than one of these executives). One respondent's information technology department reports to the senior vice president of product supply.
Whatever the kinks in the relationship between finance and information technology, both information and finance executives say their departments are working together more closely than ever. Twenty-four report an upswing during the last five years in the amount of time finance and MIS spend interacting, while nine say the level has remained the same. Only two of the respondents have noticed a decrease in the amount of interaction, in the range of 10 percent to 30 percent.
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|Title Annotation:||Information Management; includes related article on working with CIOs; relations between chief financial and chief information officers|
|Article Type:||Panel Discussion|
|Date:||Jul 1, 1996|
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