Who Will Be Your Next CIO: An Insider Or An Outsider?

Do you know where your next CIO is going to come from? If you don't, you're not alone. A surprising number of organizations don't have an official blueprint for filling a CIO void, according to trend data, recruiters, consultants, and CIOs themselves. Surprising because one of the most important decisions a company makes about its business technology strategy is who will lead it. This pivotal decision boils down to promoting from within or hiring an outsider, and that decision has everything to do with finding the most qualified person for the job. An increasing number of companies are going outside for their CIOs, and one reason may be because they don't have qualified internal candidates lined up. According to a recent survey by CDW, a computer equipment reseller, only 38% of 1,000 or so respondents--both CIOs and corporate managers--say their organizations have formal CIO succession plans. Whether you go outside or promote a qualified candidate, you need a deliberate CIO succession strategy that aligns with the business and technology needs of the organization. Both choices have pitfalls, but one thing is clear: Being without an able and experienced CIO is a competitive disadvantage in today's technology-run global business environment. That's the predicament Juniper Networks found itself in when CIO Alan Boehme left last summer. Boehme, who came to Juniper in 2005 from the CIO spot at Best Software, was involved in a car accident early last year and left Juniper several months later, for "personal reasons," the company says. VP of IT operations and infrastructure Danny Moquin was appointed acting CIO. But shortly after a new CFO, Robyn Denholm, came on board last August, the company decided to initiate a search for a new CIO. It installed Kevin Smith, executive VP and head of the company's business process reengineering project, as interim CIO until a suitable candidate could be found. "Danny's a great guy," says Denholm. "If the company was at a different phase, not growing as rapidly, he would have been the logical choice." Juniper recruited Michele Goins, who was hired in February. Goins had spent 25 years at Hewlett-Packard, the last seven as the CIO of its $30 billion-a-year printer division, and had retired in May 2007. She wasn't actively soliciting another CIO spot but "people in the Bay Area knew I was available," and her reputation evidently preceded her, she says. The position is a perfect fit for her, Goins says. The company has something of the feel of the early HP--a focus on core values and exciting momentum. Also, IT lacked strategic direction, and the applications group was "looking for a leader," she says. Goins says she tried "to sniff out" any resentment of her as an outsider; she didn't find it, but she did sense some apprehension that she wouldn't be able to "scale down" the skills and experience she gained at HP to match the needs of the smaller Juniper. As for Moquin, he has the potential to be a CIO someday, but he needs more experience, Goins says. In particular, he's well versed in infrastructure but light on the applications side. He now reports to Goins. "We're working with him now to broaden his experience," she says. "It was just too soon in his career." THE RIGHT STUFF Finding the perfect CIO--be it an insider or an outsider--is particularly challenging because the qualifications for the job are somewhat subjective. The proper mix of leadership skills, technical depth, and business acumen isn't necessarily formulaic. A lot depends on the situation: the size of the company, the industry, and especially the expectations for the IT organization. Many CIOs come from someplace else. According to our recent Tomorrow's CIO Analytics Report (available for purchase at informationweekanalytics.com), 58% of the more than 500 CIOs we surveyed say they were hired from another company. That trend is likely to continue: Nearly two-thirds of the CIOs say they expect their successors to come from outside their companies; in a similar survey last year it was 56%. Some of this has to do with the short time CIOs spend in any specific corner office. In our Tomorrow's CIO report, more than half of the tech chiefs (53%) say they've been in their jobs five years or more. That's unusual, according to the recruiters and consultants contacted for this story, who peg the average CIO tenure at three to five years. And some of that seems to be a technology version of wanderlust. Eddie Chu, for example, considers himself something of a serial CIO. Chu has made a career of reorienting IT strategies and leading tech-based change on a contract basis. At his last three positions, he was the first executive-level manager of IT. "When a company wants to take its [technology operation] to the next level, that's where I fly," he says. Chu recently changed his M.O. when he was hired last February at Minto Group, a real estate developer in Ottawa. The IT challenges at Minto are typical of a midsize, privately owned company, Chu says: The e-mail runs but there's no IT architecture, and "any enterprise software is grossly underutilized." His IT staff of 25 is "mostly keep-the-wheels-on people," he says. Minto is holding its own, despite the real estate downturn, Chu says. The three brothers who own the "highly profitable" company have ambitious plans, and they realize "just keeping IT running is not going to get them there," he says. Chu brings both business skills and technology chops to the job. His main thrust right now is to rationalize the company's business process engineering efforts across all five of its operating groups. OUTSIDER MENTALITY Bob Keefe isn't quite the serial CIO Chu is, but he's on his "third CIO spot in the last 14 years," he says. Keefe is CIO of Mueller Water Products, a $1.8 billion-a-year manufacturer and distributor of products for water distribution and treatment systems. It's a new CIO spot in a new company that was formed from the merger and spin-off in 2006 of three companies, all of them familiar names in the water systems industry. Like Chu, Keefe has made a specialty of being a hired gun. "I've kind of found a niche of coming in when companies need to get to the next level of IT," he says. Before Mueller, Keefe was CIO at Russell, the maker of athletic clothes, and before that CIO at ConAgra Refrigerated Foods. Keefe also is the international president of the Society for Information Management, a grassroots support group for IT management. Despite his career trajectory, Keefe advocates that companies cultivate internal candidates for the CIO spot. That advice is based largely on input from his colleagues at SIM and from his own experience. If there isn't a qualified internal candidate in the IT organization, Keefe advises a hybrid strategy, what he calls a "methodical" approach to developing CIO talent: Bring in a VP of IT-level candidate, either from the outside or from another part of the company, and have that person work in the organization for a year or two before promoting the exec to CIO. In some cases, hiring a CIO from the outside may be a matter of necessity. Robert Rosen was afraid that members of the IT team who aspired to the CIO position would resent his coming in from the outside when, in 2001, he took the top tech spot at the National Institute of Arthritis and Musculoskeletal and Skin Diseases at the National Institutes of Health. Turns out, nobody in IT applied for the job. "They didn't really want it," Rosen says. These were fairly senior people in the organization, he says, and apparently they weren't interested in "twice as much pain for 5% more money." Rosen says he has tried to develop a CIO candidate internally, but still, no one on his staff seems interested. "One or two of them might be," he says, but they're not "overtly" lobbying for the position. The irony is that the National Institutes of Health has had a culture of promoting from within--Rosen says he was one of the first CIOs hired from outside. That culture has eroded over the last several years as the federal government has embraced a contract-oriented model for services. When the time comes to replace Rosen, it will probably involve a combination of recruiting from both inside and outside, he says, and that way, if any of his IT staff are motivated, they can apply for the job. "Let them sell themselves," he says. CULTURAL IMPERATIVE Succession planning is very often a cultural thing: If there's a formal succession plan for the CIO, that's likely because there are succession plans for the other executive positions in the company. That's especially true in large companies, where federal regulations like Sarbanes-Oxley come into play. When the CDW survey data is broken down by company size, the percentages flip for companies with 1,000 or more employees: 62% report having formal CIO succession plans. E.&J. Gallo, the California winemaker and family-run business, has made executive succession planning a corporate imperative. Kent Kushar was hired as CIO in 1997 after consulting in the position for a year and a half, and now, at age 64, he's working with HR on his succession plan. One thing Gallo is doing, he says, is looking to other parts of the organization for high-profile candidates who can fill senior roles in IT. One of those is VP Kevin Barnes, who came from the sales and marketing side, which demonstrates the importance of a customer-oriented technology strategy to Gallo's business model, says Kushar. The retail discipline known as category management, Barnes' specialty, "is an IT science," he says. Gallo sent Barnes to an IT leadership training class sponsored by nGenera, a software and services company that specializes in business process reengineering. The six-month course, developed and run by Harvard professor Jim Cash and Keri Pearlson, author of Managing And Using Information Systems (Wiley; 2005), is tailored to CIO succession, says Steve Guengerich, chief learning officer at nGenera. The class involves workshops, teleconferences, personal advisers, and the use of nGenera's collaboration software, and usually has about 40 experienced, "high potential" students, he says. The once-a-year seminar, known as the IT Leadership Development Program, has been offered since 2004. It's pricey--$35,000 per--but Guengerich says he knows of a half-dozen alumni who have made it to CIO, including Manoj Chouthai, CIO of PSEG; Jim Knight, global CIO of Chubb; and Mike Giresi, CIO of Godiva Chocolatier. CIO succession can involve as much culture as training. Kathy Owen, CIO of Unum, started as a programmer with the employee benefits provider 32 years ago. Having been with the company so many years, Owen has a deep understanding of the business, a very important aspect to the CIO job, she says. Over the years, she has moved into a variety of business technology management roles. Before being named CIO about nine months ago, she was one of two IT managers who reported to Unum's chief operating officer, Bob Best. That's because Best, another Unum veteran, wore the dual hats of CIO and COO for several years. He's now COO full time, and Owen still reports to him. "We have great opportunities here," she says. "We tend to retain people, help them manage their careers." And IT talent development is something Unum takes seriously. "We ask ourselves all the time, 'What's our pool of talent look like?' and make sure they're aligned with our critical skill needs," she says. INSIDERS' DISADVANTAGE Insular corporate cultures can present their own problems. CIO-turned-consultant David Scott, author of I.T. Wars: Managing The Business-Technology Weave In The New Millennium (BookSurge, 2006), says a Washington, D.C., company where he was consulting put a well-regarded executive director, a 27-year veteran of the company, in charge of IT. It was "a desperation move" on the part of upper management, Scott says: The executive director was a trusted performer but had little experience with technology. A bigger problem, as it turned out, was that he was a "people person," well liked by colleagues and company personnel and proud of that reputation. The company was struggling with a $1.5 million software application implementation, and a big part of that struggle related to resistance to change on the part of programmers. Scott, as consultant on the project, figured out that the programmers weren't learning the system fast enough, and their productivity wasn't improving as a result. But the executive in charge of IT was hesitant to act because he "had a vested interest in showing he was everybody's buddy," Scott says. That forced Scott to create productivity metrics to make it obvious that the programmers weren't meeting their requirements. Finally, they were replaced, and the executive director was relieved of his IT management responsibilities. Even when there's a formal strategy for developing IT management talent, it doesn't mean it will result in a linear progression to CIO. Gail Farnsley, former CIO at Cummins, spent considerable time and effort developing a Six Sigma-based process for spotting and nurturing technology management candidates. "We weren't pushing our people to have those skills," she told me in an interview last year while she was still tech chief at the multibillion-dollar engine manufacturer. However, when Farnsley left last spring for a position at Purdue University, Cummins hired an outside CIO--Bruce Carver from auto parts manufacturer Dana--to fill the spot. "Bruce brings a great deal of IT leadership experience, much of it in automotive-related businesses, which will be invaluable to Cummins as we pursue our ambitious growth goals over the next several years," said Tom Linebarger, Cummins' executive VP, to whom Carver will report, in a statement when Carver was hired. A big disadvantage to internal candidates is that they can get in over their heads. James Tarala says he's seen the "deer in the headlights" look of a CIO promoted from within who isn't up to the challenges. Tarala has the title CIO/CTO at Schenck Business Solutions, an accounting and business services firm. Before taking on that dual role, Tarala was a consultant and a value-added reseller, so he's been on both sides of the CIO desk. One of Tarala's "bigger challenges" as a VAR was getting freshly minted CIOs "to open their eyes to what was really out there, and shift directions and platforms," he says. The problem is that CIOs from within can be tied to their tried-and-true systems and resistant to change. It's a variation of "that old mentality, 'I can't get fired for buying IBM,'" he says. Still, expectations are higher for CIOs brought in from the outside than for internal candidates, says Chris Patrick, who runs the global CIO practice for executive recruiter Egon Zehnder. So they better be prepared to make an impact quickly. "I'm seeing a lack of patience for individuals who can't deliver results quickly," Patrick says. "They hired you to have impact. You can't go in and lay out the five-year program that kicks in in year four." That's why, at the same time they're developing their architecture plans, newly ensconced CIOs must look for easy victories, Patrick says. "Find the squeakiest wheel and fix that right away," he says. "Buy yourself time." It's not an IT project, but Minto's Chu says he's rushing to finish writing a primer on business process engineering, what his CFO refers to as his "Strategic Planning For Dummies" book. This will impress the three brothers and give him a lot of business cred in the organization, he says. Juniper's Goins is taking the long view. She's "partnered at the hip" with executive VP Smith, who runs the company's business process reengineering effort, known as Project Orion. Together, they're working on the requirements for scaling the company to meet its global aspirations. "The IT team is driving the question of how," she says. As for a quick hit, Goins says she's in the process of "significant vendor consolidation." When it comes time to replace the CIO, there are two alternatives, both with advantages and disadvantages. An internal candidate brings deep knowledge of a company's systems and processes, and a familiarity with how things get done, but can be limited in experience and insular in his or her thinking. An external candidate brings top management experience and the potential for radical, rather than incremental, improvement, but expectations can be unrealistically high. Companies must select their CIOs carefully, considering all potential sources. And it helps to have an idea of where you're going before you start.