Journaloflriformation Techology (1991) 6, 128-139

The chief executive officer and the chiefinformation officer: the strategic partnership

YASH P. GUPTADepartment ofManagement, University ofLouisville, Louisville, KY, USA

Abstract: Information technology (IT) has become a strategic resource for many firms today. Coordination of this resourcerequires strong leadership and cooperation within the firm. The relationship of the Chief Executive Officer (CEO) and theChieflnformation Officer (CIO) is crucial for the effective, successful utilization oflT for competitive advantage.

This paper first explores the CIO position, giving reasons for its development, tracing its evolution, and pinpointing certainresponsibilities associated with the position. The paper then highlights the CIO's concerns and identifies the futureimplications for the CIO. The second portion of the paper takes the CEO's perspective towards IT and the CIO's position.Special attention is directed towards describing the CEO's perspective on the CIO's qualifications, addressing the problem ofoverblown CEO expectations for the CIO position, and discussing 'old-line' CEOs' attitudes towards IT and the CIO position.Also addressed is the exploration of the common CEO perception of the CIO as an 'empire builder' and an analysis of theCEO's perspective on the future need for a CIO position.

Finally the paper focuses on developing this 'strategic partnership' between the CIO and the CEO. Suggestions are providedfor the CIO and the CEO to help achieve this ideal partnership. Although these suggestions are not all conclusive, they arecritical to the 'partnership'.

Introduction

Information technology (IT) has evolved from asupport function to a critical resource for competitivestrategy for many firms. What sort of impact does theIT evolution have on the organization in terms ofpeople, groups, structure and processes? This paperfocuses on how executive management and ITmanagement must adapt to this IT evolution.

Historically, information technology was a supportmechanism and not a strategic resource. Executivemanagement did not focus on managing IT becauseIT did not have any impact on competitive strategy.Likewise, IT management did not manage or haveexpertize in managing a strategic resource so there wasno need for IT management to participate in strategicplanning. As a result, IT management's perspectivetowards information technology has evolvedindependently from executive management'sperspective.

The effective use of information technology is nowstrategically important for many firms. ITmanagement's knowledge, skills and perspectivetowards managing IT must now be merged withexecutive management's knowledge and skills in orderto develop a perspective of managing not only IT, butthe firm as a whole. Cash et at. (1988, p. 144) say itsuccinctly,

'Partnership is necessary. IT experts understand theeconomies of the technology and know its limits. Theycan also help move the organization towards thepotential of tomorrow's technology... Generalmanagers bring insight to the overall businesspriorities. They have detailed knowledge of thevarious value chains and their potential in the realworld and can help identify the paths of least staffresistance in implementation.'

The purpose of this paper is (I) to analyse theevolution and nature of the IT manager's perspectivetowards managing information technology, (2) to analysethe evolution and nature of the executive manager'sperspective towards managing information technology,and (3) to suggest actions to forge the critical partnershipbetween IT and management and executive management.

CIO's perspective towards IT managementand the firm

The influence of information technology in businessmanagement has led to the introduction of a newmanagement position, the Chief Information Officer(CIa), whose development has been a slow processwith much controversy attached to the title. AsMandell (1988) concludes, 'to some, the eIOrepresents MIS/DP's rise in status to the corporateinner circle. To others, the CIa is a fairly meaninglessexercise in title inflation' (p. I).

There's a new breed of manager surfacing in theexecutive suite. As countless chief executives come tograsp the importance of information to their business,they're seeking people ... and assigning them a high­stake mission: Figuring how to fashion a confusingarray of often-incompatible computer andcommunications equipment into a cudgel that canclobber the competition. Some members of this newinformation elite sit behind such recognizablenameplates as senior vice-president, vice-president forinformation services, or information resourcesmanager. Others are beginning to get a higher­sounding title to reflect their status: chief informationofficer, or CIa.

CIO's organizational responsibilities: management and IT

CIOs must have business knowledge and technicalknowledge to lead their firm strategically (Figure I).As Bock etal., (1986) observe 'although the CIOs havemany responsibilities, their main responsibilities canbe summarized in three categories: (I) they oversee allthe company's technology, including data processing,office systems, and telecommunications; (2) theyreport directly to a high-ranking executive such as theCEO or chairman; and (3) they concentrate on long­term strategy and planning while leaving the day-to­day operations of the computer room to subordinates.The CIO must have a thorough knowledge ofbusinessapplication and cannot come from the rank and file ofdata processing' (Bock et al., 1986, p. 160). Too manycompanies create CIOs simply by promoting theirdata-processing managers or information systems

From the above research, we can see not only theneed for the management of IT, but also how it hasevolved.

It is no longer used only for accounting applicationsbut rather as a strategic means of competition. Cash etal. (1988) have summed up this situation verysuccinctly when they point out, 'for someorganizations IT activities represent an area of greatstrategic importance; for other organizations they play(and, appropriately, will continue to play) a cost­effective, useful, but distinctly supportive role' (p 114).Using McFarlan's (1984) strategic grid, companiescan position their information systems as support,factory, turnaround or strategic. Thus, firms in theturnaround and strategic positions on the grid wouldbe those which most likely have a CIO or need a CIO.Another example of the development of the CIO isprovided by Business Week (Bock etal., 1986, p. 163):

The CIO and the stages ofIT growth

IT development has created the need for the CIO.From applications managers to systems analysts toCIOs, the winds of change are blowing across the ISlandscape (Carlyle, 1988). The change in IT from the1960s, the 1970s and 1980s has led to differentpositions within the IT department. Using Gibson andNolan's (1974) four stages of electronic dataprocessing (EDP) growth, we can see the developmentof the CIO. First come cost-reduction applications,followed by proliferation of applications in allfunctional areas. This leads to new applications withemphasis on control and finally to data-baseapplications. As a firm progress into the fourth stageand beyond, a need for the CIO develops.

The role ofthe CIO has developed with the stages ofIT and its development. In 1974, Davis described theISorganization as consisting of an executive with threeresponsibilities: analysis, programming, andoperations (Davis and Olson, 1985; Benjamin et al.,1985) Synnott and Gruber (1981) describe anorganization with four responsibilities: dataprocessing, telecommunications, methods, andsystems development. Later, Nolan (1982) identified anumber of critical IT issues based on interviews withsenior managers:

(I) Balancing the supply and demand for computingresources as well as rationalizing the managing ofIT as a profit centre;

The chief executive officer and the chief information officer: thestrategic partnership 129

Development of the CIO: a comparison amongexecutive (2) Measurement of effectiveness, centralization,positions planning and control, project selection,

The evolution of the CIO occurred during the leadership;information age of the 1980s. The term CIO was (3) Forecasting and administrative costs (in terms ofcoined in 1981 by Synnott (1987). The development of future opportunities).another executive office seemed appropriate to some,while to others it was seen as the influx ofmore middlemanagement. By 1989, 40% of Business Week top1000 companies had a CIO (Borbley, 1985). Thedevelopment of the CIO is much likened to thedevelopment of the Chief Financial Officer (CFO).The CFO became responsible for the transition ofaccounting into a modern competitive weapon forevaluating the economics of new processes, pricingnew services, and budgeting the cash flow of potentialacquisitions (Wood, 1988).Just as the CFO's positionwas developed for accounting, the CIO is needed tomanage the information technology of the firm.Another analogy to the creation of the CIO goes backto the Great Depression, when companies respondedto the growing complexity of manufacturing bycreating a vice-president to oversee factory operations(Goldstein, 1987). As business competition changes,consequently, those firms that don't realize the needforkey management people become reactive in the waythey conduct business.

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Managerial Skills and ExpertizeStrategic PlanningFinancial PlanningHuman Resource ManagementCommunications: Written and OralProject ManagementLeadership

Technical Skills and ExpertizeComputer Hardware AcquisitionDatabase Design and ManagementTelecommunicationsSystem AuditingSystems AnalysisInformation Service ManagementApplication Development

Source: Online May 1985 p. 93

Figure 1 CIO skills, managerial and technical

managers (Keen, 1990). But the CIO must receivesupport from other areas of the firm's managementand must be a part of the firm's total strategic plan.This upward movement in the rank of the IS functionalhead is attributed to the increasing recognition thatinformation is a strategic resource and that the newlyemerging information technologies can be used to gaina competitive edge (Raghunathan and Raghunathan,1989), which leads us to discuss the CIO'sresponsibilities in greater detail.

The CIO concentrates on long-term strategy andleaves the running of computer systems to technicalexperts. To convey his or her ideas on using technologyfor competitive advantage, the CIO must have accessto top management, as he/she has ultimateresponsibility for selecting, buying, and deploying allthe company's technology, including equipment andstaff used in data processing, office automation, andtelecommunications (Bock et al., 1986). The CIO'scommunication skills are important since he or shemust communicate with the end-users to find theirneeds. Thus, the CIO must be able to talk with theCEO in order to develop an IT strategy for the firmand look at the larger picture since the strategicplanning of IT for the firm is the responsibility of theCIO. As Watson (1990, p. 21) remarks, 'An ISmanager, as a link between IT and an organization'smanagers, should gather information about newinformation technology and advise fellow managers onits effective deployment. In order to perform thisboundary-spanning role, IS managers must scan theexternal environment for IT developments andscrutinize the internal environment for opportunitiesto marry external developments with internal

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opportunities'. In the end, the CIO must be constantlyaware of IT changes which could create competitiveadvantages for the firm.

CIO's management issues, critical successJactors andJuture areasojconcentration

There have been many studies in IT journals on CIOsand their development into the management circles ofthe firm. These studies have focused on the key issueswith which the CIO must be concerned in order tomanage the technological aspects of the firm. As aresult, the critical success factors approach toidentifying management's information requirements isuseful because it focuses attention on areas where'things must go right' if the organizational unit is to besuccessful. Critical success factors were used in manyof the studies and were developed as more firms werestudied. These success factors list the concerns of theCIO and their role in IT and the firm, such as in'Critical Success Factors for Information CentreManagers' by Magal et al., (1988) (Figure 2).Additional research in articles like 'IS Manager's

A Competent StaffCommunication with usersTop-management supportReliability of applications developedEnd-user trainingUnderstanding of users' business and problemsTraining for IC (Information Centre) staffOrganizational acceptance oflC conceptStandardized hardware and softwareLiaison functions with end-users departmentsSupport software packagesCost effective solutionsManage end-user expectationsPromote IC servicesAtmosphere for usersCommitment of end users to the IC conceptDefine IC missionCareer paths for IC staffPriority criteria for workProvide services to distributed sitesControl procedures to ensure that standards,policies, etc. are adhered toSystem performanceMonitor and coordinate end-user applicationsdevelopmentUsers' understanding of data processingResponse to applications requestsEstablishing chargeback criteria

Source: MIS Quarterly September 1988, p. 419.

Figure 2 Critical success factors of the CIO

Thechiefexecutive officer and thechiefinjormation officer: thestrategic partnership 131

Source: MIS QuarterfyJune 1990, p. 222

Figure 4 Sources of information on informationsystems management issues.

Future implications jor the CIO: communication withthe CEO andanalysis ojmanagement issues

The future of the CIa in the firm depends on how theCIO can keep the IT structure in line with the strategic

Hardware vendor newsletters/reports 91%Industry seminars or courses 91%Discussions with other professionals 86%Industry newspapers (e.g., Computerworld) 84%Software vendor newsletters/reports 84%Visiting other organizations 84%Internal reports prepared by staff 77%Datamation 70%Professional books 65%Local morning newspapers 51%Consultants 51%Academic journals 40%Seminars or courses at a university 28%

EDP managers spent an average of7.5 hours per weekscanning for information. Hence, scanning the ITenvironment has not been an increased issue to theCIa, which is important now that the CIa hasbecome a manager of people, with an emphasis ontechnology.

According to Watson's study, the most widely usedsources of information (cited by 91% of respondents)are hardware vendors' reports and industry seminars(Figure 4). The reported sources for managementissues concerning the CIa are financial newspaperslike the Wall Street Journal and discussions withcolleagues. The exhibits are based on Watson'sresearch with Australian IS managers. In his research,Watson found that the IS managers were directlyaffected by opinion leaders. At seminars or inpublications, if the opinionated leader focused on end­user computing, then the IS managers would stress theissue of end-user computing. It concluded that ISmanagers should look at the benefits to their own firmbefore incorporating these ideas.

A Coopers and Lybrand/Datamation study of 500CIOs led to the question: 'How does CIO spend his orher time?'. Those surveyed said they spend 23% oftheir time - the largest percentage - working withbusiness unit peers, while IT-specific planningconsumed 21% of the CIa's time (the second largesttime consuming item). The CIa surveyed also spentan average of 16% of their time on administration, 13% on managing operations, and 10% on corporatestrategic planning (Carlyle, 1989).

Percent UsingSource of Information

• Improving IS strategic planning

• Specifying, recruiting, and developing humanresources ofIS

Spending time on scanning current issues andallocating time is important for the CIa to see ifhis orher goals are being met. According to Watson (1990),IS managers report spending an average of 4. 79 hoursper week keeping up-to-date on informationmanagement issues, with reported hours per weekvarying from I to 10 hours. An average of2.68 hours isspent on maintaining knowledge of managementissues with reported activity varying from I to 15hours. Overall, IS executives report spending about7.5 hours per week (i.e. about 15% of their totalworking time) on scanning for information to keep upwith the current knowledge in the field. A much earlierstudy by Kefalas and Schoderbek (1973) found that

• Developing an information architecture

• Aligning the IS organization with that of theenterprise

• Improving the effectiveness ofsoftwaredevelopment

Source: MIS Quarterfy June 1990 p. 231

Figure 3 The top five key issues

CIO'sconcentration onscanning current IT issues andthe CIO's timeallocation

Perceptions of Key Issues' by Watson (1990) lists fivekey issues that concern the CIO (Figure 3). Accordingto Levis Strauss's CIO, Bill Eaton, there are fourchallenges a CIO needs to focus on and work withothers to achieve (Melymuka, 1990):

(I) Getting the IT platform ready for the future. Thisincludes systems, architecture - traditional CIOfunctions;

(2) Getting business processes ready to takeadvantage of the IT platform;

(3) Getting the organizational structure ready forchanges in the way people work;

(4) Getting people ready for the future - not just ITpeople, but all the people, and not just technicallyready but physically, ethically and emotionallyready.

These areas of focus stress the managerial skillsrequired of the CIO, the organizational skills, and thetechnological know-how of the CIO. Management ofIT requires skills that have to be developed, since theCIa is, in effect, the CEa oflT. Since people skills arerequired by the CIa, the CIO must have humanresource skills in order to manage IT.

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plan of the firm. The CIO must be a salesman of newtechnology and of the CIO position. Rothfeder andDriscoll (1990) note that

'In the next few years, cia expertize will be a mustfor, among other things, forging electronic links forexchanging money and documents with customersand suppliers and building sophisticated data banksfor marketing sale, and decision support. Companiesignoring these technologies arc going to findthemselves playing an expensive game of catch-up.Thus, CIOs must guide the investments of newtechnologies and must be aware of cost justification.CIOs have been said to be guilty of 'empire building'- measuring their influence by the number ofcomputers and networks they control, not by whetherthey have helped to improve the company'scompetitiveness. But CIOs must communicate theirposition in the management ofthe firm and not beseenas 'empire builders'.'

Moad (1990, p. 75) says that 'in communicatingwith the CEO and other executives, the CIO shouldrefrain from using acronyms... [and] ... keep theconversation on technology in business terms'. CIOsneed to stay abreast of the current IT issues, theirstrategic planning is essential and must be in line withthe strategic plan of the firm. In addition, they mustwork on management controls and operationalcontrols of the IT function so that when analysing thestrategic plan of the firm, the CIO must establishframeworks to analyse the firm. Porter's five forces andvalue chain analysis are good frameworks for the CIOto use (Porter and Millar, 1985). Another frameworkwhich could be used is Kanter's underlying principlesof planning (Raghunathan and Raghunathan, 1989):

(I) The IT must be consistent with the corporatebusiness plan;

(2) Management involvement and commitment areessential;

(3) Planning is everybody's job;(4) It takes several cycles to institutionalize a

planning process.

In sum, the CIO must consistently work towardusing IT as a competitive advantage; he/she must be amanager, communicator, and human resource workerbefore being a technologist.

CEO's perspective on IT and the CIOThe CEO's attitude toward IT and the CIO is bestdescribed as difficult for many companies. The CEOhas often taken the view that the CIO is serving theinterests of the MIS department, rather than the wholecompany. He or she feels that the IT department,while providing an important service for the company,does not require representation at the executive level.But the CEO needs to know what the CIO can offer thefirm and how this contribution can be evaluated inorder to ensure effectiveness (Hayley, 1989).

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CEO's viewson thequalifications ofthe CIO

Ideally, the CEO wants a CIO who is in touch withboth the technical and business aspects of IT, anexecutive who has experience in applied technology aswell as in areas such as mergers and acquisitions(Burger, 1990). The CEO is often faced with pressurefrom personnel in the management informationsystems (MIS) department for a CIO position to beestablished, making the need appear self-serving onthe part of the MIS department and not reflecting atrue need for this position by upper management(journal of Accountancy, 1987). While it is oftendifficult to find such a person who can strike abusiness-technical balance effectively, the MISdepartment is the logical place from which to select aCIO candidate. Research by Khosrowpur has foundthat top executives prefer recruiting MIS people withmanagerial capabilities for positions such as the CIa(Khosrowpour, 1985). However, the CEO faces manydifficulties in trying to select an MIS person who canevaluate objectively IT projects and balance thetechnical and business aspects ofIT.

Problems ofoverblown CEO expectations with the CIO

The CEO often has unrealistic expectations about theCIO's capabilities within the company, often seeingthem as a panacea, as a way to turn the companyaround. The CEO may expect the CIO to immediately'take charge' and pull the company out of an existingIT crisis. Sometimes a lengthy period ofIT evaluationand audits are required to determine such issues as theamount of current IT expenditures, phase of ITassimilation by the company, and strategic impact, ifany, ofIT. But a problem may arise if the CEO expectsthe CIO to solve IT deficiencies swiftly. Thesedeficiencies are often more deeply rooted within thecompany and are usually the result ofIT expendituresbeing out of control, taken, as Carlyle says, ' ...without any unified vision or plan, and in a purelyfragmented manner' (Carlyle, 1988, p. 52).

The CEO expects the projects recommended by theCIO to reflect positively on the 'bottom line' within asomewhat short period. These expectations rarelyappear in the short-term. A partial explanation for thiscould be the CEO's viewing ofIT investment as costs,rather than as assets. Information technology, such ascomputers and telecommunications equipment,account for a large and increasing share of corporateexpenses (Keen, 1990). For many firms, IT is astrategic resource which should be managed as a long­term investment. In fact, Goldstein (1987) concludesthat' ... the major obstacle to leveraging computershas been scepticism on the part of top managementtoward proposals that don't immediately provide areturn on investment' (p. 59). Further, investments

The chiefexecutive o.fficer and thechief information o.fficer: thestrategic partnership 133

which the CIO may feel are necessary for the firm tobecome competitive are often inherently risky, makingthe risk-averse CEO more reluctant to approve suchprojects, despite the competitive advantage which thefirm could realize.

The risk-averse CEO also expects the CIO to beable to present sound justification for major ITprojects. According to Cash, et al., (1988) there arethree important project dimensions which influenceimplementation risk: project size, company'sexperience with the technology, and project structure.CIOs should consider these three dimensions whenapproaching the CEO with project proposals to lessensome of the CEO's concerns over risk exposure.

'Old-line' CEO's attitudes towards IT and the CIOposition

Information technology is a somewhat new resource inthe CEO's view. There exist many 'old-line' CEOswho are basically sceptical ofIT's capabilities for theirfirm and of the CIO position. Bock et al., (1986) notethat 'Many chief executives, having long confinedcomputer technology to the backwaters of the backoffice, are still not convinced that computers can beused to gain a competitive advantage' (p. 172). Whileinformation needs and IT use vary among firms,information is clearly becoming more important forthe company desiring to be more competitive. Forsome firms, it is actually essential for survival.

In some cases, the CEO may feel manipulated bythe CIO's command of IT, particularly if the CEO isone of the 'old-liners' and unfamiliar with IT. TheCEO's uncomfortable feelings toward IT may put himor her in a position, as Highbarger (1988, p. 53) notes'... to be manipulated by internal and external forceswhen it comes to assessing the quality of informationsystems operation, which lead directly to the tenureproblems of the CIO'. Not surprisingly, the averagetenure for a CIO today is about 2.5 years, down from3 years in the mid-1980s (Nylan, 1990). Further, thedismissal rate has been increasing recently, due largelyto conflicts with the CEO. Rothfeder reports that'Acording to Touche Ross and Co., the CIO dismissalrate doubled in [in 1989] to 13 % ... compared with 9%for all top executives' (Rothfeder and Driscoll, 1990,p.78).

Indeed, the implications for the company fordismissal of a CIO can be significant in the long term.The defeat of IT projects and the loss of executive ITleadership can result in a company losingopportunities for competitive advantage in its market.At the very least, the defeat or loss sets the companyback months or years in development andimplementation of major IT projects. In addition, thedismissal ofa CIO may lead the CEO to shrug off theneed for such a position in the future. If the CIO is not

dismissed, there will perhaps be increased pressuresfor the next person who occupies the CIO position.

The successful CEO is the one who undertakes ITinvestment in a proactive rather than a reactivemanner. The CEO sets the overall direction for thecompany and scans the environment for threats andopportunities. According to McFarlan (1984),company and scans the environment for threats andopportunities. According to McFarlan (1984),companies need to consider five basic questions indetermining whether IT could be used as a strategicresource requiring high-level attention. These are asfollows:

(I) Can IT build barriers to entry?(2) Can IT build-in switching costs?(3) Can the technology change the basis of

competition?(4) Can IS change the balance of power in supplier

relationships?(5) Can IS technology generate new products?

With a CIO's expertize, the CEO could answer thesefive basic questions by analysing proposed ITinvestments and by responding to the environment.

Information-dependent companies, i.e. airlines,banks, and insurance companies, are the ones whichare most likely to have CIO representation at theexecutive level (Welter, 1987) (Figure 4). In theseindustries, information is strategic, and itsmanagement requires strong leadership and direction,and CEOs and CIOs work together to carry out ITstrategies. For other industries information, whileimportant, occupies more ofa support role. As such, itsuse is directed more towards efficiency-orientedsupport activities which means that CEOs incompanies with non-strategic IT applications, wouldprobably not perceive a need for a CIO.

Often times, for the CIO to be effective, a completechange in attitudes, on the part of the CEO and uppermanagement, towards IT is necessary. Thus, the CIOis likely to meet resistance in obtaining approval forprojects which may create drastic change within thefirm. Trying to influence corporate culture is difficulti.e. changing attitudes towards viewing IT as astrategic resource when it was previously viewedmerely as a convenience. In the end, the CEO musttake the lead in implementing the necessary changeswhich IT often brings.

CEO's perception ofthe CIO as an 'empire builder'

Chief information officers know that control overcorporate information means power. In this vein,CEOs often view the CIO as an 'empire builder' whoseonly goal is to acquire as much IT as possible to controlcompany information and those who need access tothis information. This paternalistic attitude by the

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Percentage in Which cia Reports to CEO80 r------------------------,

EnergyManufacturingRetailInsurance Financial Serviceso

70f-----------------------~

60

eo

10

30

40

20

.1987 .1985Source: Joumal ofInformation Systems Management Summer 1989, p. 9.

Figure 5 Reporting structure ofCIO by industry

CEO reduces credibility with the CIO. The CEOwants the CIO to view IT as a resource that should bedistributed within the company, not a resource to bedominated and controlled.

The CEO also perceives the CIO as often beinginflexible in deciding on IT projects, unwilling to offera variety of alternatives, with information technologybeing acquired just for the sake of having it, ratherthan out of a true need. As a result, the CIO''S ITstrategy may run counter to the company's overallstrategy, or even parallel but with little coordination.This 're-inventing of the wheel' causes confusion andmay cause the CEO to restrict the CIO's powers. Onesurvey reported, for example, that 50% of CIOsthought that they were using their information servicesas part of their firm's overall plan, but only about 33%ofCEOs thought so. This suggests that there is a gapbetween the CEO's and the CIO's perceptions of ITcoordination with corporate strategy (Keen, 1990).

Another problem area that sometimes results inCEO-CIO disagreements is when the CIO tries toimplement projects which effectively centralize IT in acompany with a decentralized environment. Anextension of the 'empire building' idea by the CIO, thiscentralizing of the IT function creates manydifficulties. The 1990 Coopers & Lybrand/Datamation survey found that very few CIOs' ... relish the thought of managing in a decentralizedenvironment, since they yearn for something they cancontrol and get their arms around, not for some

amorphous organizational culture that makes controlmore difficult' (Carlyle, 1990, p. 30). Thusmanagement control of the IT must be within thecompany's unique culture if it is to be effective. TheCEO's job is made more difficult when it is realizedthat the CIO's own goals for IT do not fit the company.

CEO's perspective on thefuture need oftheCIO position

The ongoing leadership which a CIO can provide isimportant if companies are to employ IT effectively forthe long term. Often times, a CIO is brought into thecompany to coordinate 'damage control' after a majorIT fiasco. If the CIO is successful in turning aroundthe company, then the CEO may feel that this personis no longer needed once the crisis is over. But thiscould not be further from the truth. As soon as onecrisis has passed, another one will soon arise requiringthe effective leadership of an experienced CIO.

This discontinuity associated with the CIO'sposition spells more difficulties for US companies,which need strong IT guidance now and in the future.The CIO can provide such guidence, not only forinformation-intensive companies but for any companywhich has such a need. However, it should be notedthat the use ofIT and thus the need for a CIO dependson several factors, such as ' ... the stage ofdevelopment of the organization, its competitiveposition, [and] its use ofIT capabilities' (Rhodes, 1986,

The chief executive officer and thechief information officer: thestrategic partnership 135

p. 8). It will be the CEO's responsibility, along withinput from top management, to determine an existingor future need for a CIO position, clearly delineatingthe responsibilities of the position in order to ensurecoordination with corporate strategy.

Fortunately, more top executives are realizing, soKhosrowpour notes that c••• their informationresources comprize not just computers, but a collectionof machines, human resources and procedures, whichdemand planning and managing skills'. Informationwill be a key corporate resource for the 1990s andbeyond. However, it also tends to be difficult to valueand manage (Borbley, 1985). As Welter (1987, p. 47)concludes, the CEO wants in a CIO someone' ... whounderstands how technology applies to the overallbusiness strategy'. Managing this resource will requiretop executive vision and effective leadership which theCIO can provide with support from the CEO.

Developing the strategic IT partnership: theCIO and CEO

The CEO alone cannot effectively utilize IT as astrategically competitive resource, nor can the CIO goit alone. However, the partnership of the CEO and theCIa together brings the knowledge, skills andperspectives to effectively use IT as a strategicresponse. Thus, a manager's success depends on his orher ability to adapt. The CEO and the CIO must bothadapt to the evolution of IT and form a criticalpartnership to harness the strategic power of IT, thesubject of the remainder of this paper.

Actions the CEO shouldtake to develop the ITpartnership

Continuously scan theorganization's environmentfor keyissues(including IT, usinga multiple discipline approachIn Hambrick's (1981, p. 256) paper on power inmanagement teams, he quotes, 'Coping withuncertainty... is what gives power. .. Scanning - theprocess of learning about events and trends in theorganization's environment - is a form of coping byinformation'. In the end, the CEO contributes to his orher effectiveness by continuously learning about theorganization's environment through reading, listeningand networking with colleagues. Therefore, executivesshould not limit their scanning to areas of their ownfunctional expertize but rather expand their learningto all disciplines, including the IT area to understandthe changing environment and the relatedimplications for his or her firm. Without thiscontinuous education the CEO cannot lead theorganization in adapting to the constantly changingenvironment. For example, why would the executivemanager from a finance background consider movingthe IT manager in the organization structure if he or

she didn't know that IT was changing the way inwhich firms compete? (McFarlan, 1984). Whilecontinuous education may be elementary, it is the veryfoundation of adapting to change.

Perform a comprehensive industry andfirm analysis todetermine thestrategic importance ofIT

The CEO must understand the firm's environmentand how the firm competes before he or she can set thedirection of the firm through mission statements, goalsand critical success factors. The executive managershould use Michael Porter's industry and competitiveanalysis model (five competitive forces) to analyse thecompetitive nature of the industry (Cash et al., 1988).The CEO could then use the generic competitive gridto determine how the firm is competing or should becompeting. Next, the CEO can use the IT strategicgrid to determine ifIT serves the firm as support or asa strategic function. The value system and value chainanalysis can be used to determine where the firm canadd value or utilize IT. After the firm and industryanalysis, the executive manager will have theinformation necessary to determine whetherinformation technology is a strategically competitiveresource or a support resource. Although the purposeof this paper is not to discuss in detail the frameworksfor situational analysis, this analysis is essential todetermine whether a partnership between executivemanagement and IT management is necessary.

IfIT is strategically important, positionIT in theorganizational structure tofacilitate two way communicationThe reporting level of the CIO is associated with IT'sstrategic importance to the firm. According to a surveyby Raghunathan and Raghunathan the reporting levelof the IS executive may be a key variable thatmanagement should focus on efforts to increase theeffectiveness of their information systems. The CEOshould use the contingency approach to determine theposition of the IT department within theorganization's structure. If IT is used as a supportfunction it may not be necessary to position the CIO sothat he is reporting to the chief executive. Based onRaghunathan's survey, ifIT is ofstrategic importanceto the firm, the CIO should report directly to the CEO.

Richard Watson (1990, p. 225) in discussing theimportance ofreporting directly to the CEO concludesthat, 'The higher an IS manager is in theorganizational hierarchy, the more likely he or she hastwo-way communication with the CEO. This is notsurprising because a major purpose of a reportinghierarchy is to structure the vertical flow ofcommunication between a manager andsubordinates'. This partnership between the CIO andthe CEO is necessary and beneficial as they needinformation from each other to utilize IT as a strategic,

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competiuve resource. The knowledge, skills andperspectives of the CIO complement the knowledge,skills and perspectives of the CEO. Consequently,direct two-way communication is beneficial in bothdirections. As Watson observes, 'Managers who havetwo-way conversation with the CEO have a betterunderstanding of the goals, objectives, and direction ofthe organization.... ' Likewisc, the CIO hasspecialized information that will benefit the executivemanager.

Formulate a clearmission,cleargoals and criticalsuccessjactors and communicate themto the CIOWith the information from the firm and industryanalysis the executive manager should now set clearmissions, goals and critical success factors. The goalsand critical success factors should be specific,formalized, documented and communicated toeveryone in the firm, including the IT manager. Deepand Sussman (1990) state that one of the primarymethods of avoiding destructive conflict is to 'providesubordinates with clear goals' .James Belasco (1990, p.4) says 'make the vision clear enough to be used tomake decisions'. Consequently, to effectivelycontribute to the organization goals, the IT managerand other employees must clearly understand wherethe firm is going and what is important to get it there.

IjIT is strategically importantuseaparticipative managementstyle to share managingIT with the CIOLeadership styles form a continuum from anautocratic to a participative style, depending on theamount of participation and power allowed tosubordinates by the leader. According to the Vroom­Yetton (1973) model, appropriate leadership styledepends on a situation analysis. This model focuses onthe importance of the decisions, those who have theknowledge and the potential acceptance of the decisionby the followers.

The Vroorn-Yetton model has seven questions todetermine what leadership style is appropriate to aparticular situation. One of the questions fits thedescription of managing IT as a strategicallycompetitive resource: 'In decisions in which thequality of the decision is important, if the leader lacksthe necessary information or expertize to solve theproblem by himselfand if the problem is unstructured,the method of solving the problem should provide forinteraction among subordinates likely to possessrelevant information. Accordingly, ... [autocraticstyles] are eliminated from the feasible set [ofleadership)' (Ivancevich and Matteson, 1987, p. 422).If different elementary units exist with differentpreferences or different priorities and all preferredstates cannot exist simultaneously then a conflictsystem exists (March, 1962). This also describes thesituation ofusing IT as a strategic resource. Accordingto March, there are two primary ways to resolveconflict: impose a superordinate goal, or use the

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process of forming a political coalition. March sayssuperordinate goals are difficult to define in business sothat this political resolution process places the CEO asa broker/politician who organizes a coalition throughcollaboration, bargaining, and negotiation.Nierenberg (1968, p. 322) states that 'In a successfulnegotiation everyone wins... [therefore] negotiatedsolutions are likely to be longer-lasting when eachparty has gained a stake in maintaining theconclusions' .

In addition, the Vroom-Yetton and the Marchmodels both recommend a participative leadershipstyle in situations with characteristics similar to a firmusing IT as a strategically competitive resource. TheCEO must also consider where the firm is in relation toIT assimilation (Gibson and Nolan, 1974). A moreparticipative leadership style would be appropriateduring the innovation stages, and a more autocraticstyle would be appropriate during the control stages. Aparticipativve leadership style would also assist theCIO in the transition from monopoly power overinformation technology to the free market andregulated free market determination of IT use (Cashand McFarlan, 1989). The IT manager would feel thepower in decision-making related to informationtechnology. The CIO's power would then be based onknowledge, an expert power base, rather than theposition as manager of a central information servicesdepartment with complete power of controllinginformation, a legitimate power base (Ivancevich andMatteson, 1987).

Participation in planning and decision makingwould help the IT internalize the firms goals andcritical success factors, and facilitate motivation.According to Herzberg, 'extrinsic factors', such assalary, don't motivate because employees expect theseconditions. Herzberg goes on to say that 'intrinsicfactors or job content' such as recognition,responsibility, and meaningful work are conditionsthat facilitate employee motivation (Ivancevich andMatteson, 1987). In summary, if the firm is innovativeand using IT as a strategically competitive resource, aparticipative leadership style would facilitate thecritical partnership between the CEO and CIO.

ActionstheCIO should taketodevelop theITpartnership

Developtheknowledge and skills suited to managingIT as astrategic resourceThe critical success factors for the CIO (Rockart,1979):

(1) To provide acceptable service;(2) To effectively communicate (two-way commun­

ication);(3) To manage IT human resources;(4) To re-position the information systems function

The chiefexecutive officer and the chiefinformation ofjicer: the strategic partnership 137

'from back-office to a more ubiquitous functioninvolved in all aspects of business'.

Brancheau and Wetherbe conducted surveys in 1980and again in 1986 to ask CEOs and CIOs about the keyissues in information systems management. The writernotes that 'Two major trends were evident. First,management/enterprise issues have increased inimportance. Second technological/application issueshave steadily declined in importance' (Brancheau andWetherbe, 1987, p. 33). In general, CIOs and CEOsagreed on what issues were important. Rockartdescribes the consensus of the new informationsystems executive: 'Their critical success factors theker techniques, and processes they use to ma~ageCritical areas, and their common individualattributes... , taken together. .. provide a profile of anaggressive, proactive, communication-orientedexecutive who focuses heavily on helping hisorganization adapt to a changing technicalenvironment. ... He is assuming the more staff-likerole ...of strategy, planning, standard setting, andmanagement of research... he is the disseminator andsalesman ofideas and techniques rather than the directimplementer' (Rockart, 1982, p. 12). The drasticchange in responsibilities will require not onlytechnological expertize but also broad, multiplediscipline knowledge, skills and perspective. The oldinformation systems manager must have or developthe necessary qualifications to successfully make thetransition to the position ofCIO.

Recognize and accept thechange in the IT manager's source ofpowerAs discussed above, since the control of information isbeing taken from a centralized information systemsdepartment and diffused throughout the organization,the CIO's legitimate power is being eliminated. TheCIO must recognize and accept this development.From a behavioural context, this must be adiscouraging change for the CIO because the CIOmust recognize the potential of other power bases. Inother words, knowledge is power, the basic message ofthe expert power base (Ivancevich and Matteson,1987). The CIO, like the CEO, can also benefit fromenvironmental scanning. Hambrick (1981, p. 256)observes that 'executives who scanned the criticalsector of the environment had relatively great power,even aside from whatever power they possessed as aresult of their hierarchical level and functional level.Executives who transcend their functional boundariesto scan critical information apparently bolstered theirpower'.

Adopt andinternalize thefirm's perspective, goalsand criticalsuccess factorsTheCIO is no longer merely concerned with technicalapplications of IT, but must broaden his or her

perspective and adopt the perspective and goals of thefi~m as a whole, as set forth by the executive manager.Since the CIO is now participating in strategicplanning and decision making, the CIO is part ownerof the goals, strategic success factors and decisions ofthe firm. To be successful the CIO's must be identicalwith the CEO's goals and the firm's goals, certainly aprerequisite for a successful partnership.

Prioritization andperformance based ontheneeds andexpectations ofthe CEOPrioritizing the needs and expectations ofa superior isthe key to having a successful relationship with thesuperior (Deep and Sussman, 1990). The IT managercan obtain this information most effectively throughttwo-way commucation. All CEOs will have differentlevels at which they are comfortable dealing withinformation technology. The IT manager shouldevaluate this propensity in order to understand thateducational needs of the CEO, for it is critical that theCEO understands the limits of information technologyand that the CEO has realistic expectations of theinformation system's staff. The CIO must alsounderstand what the CEO expects of him or her interms ofcontributing to innovation, strategic planningand environmental scanning, since the theoretical'optimal' strategic partnership between the CIO andthe CEO is not necessarily the real world.

Prioritizeandperform based ontheneeds ofthefirmThe IT needs of the firm depend on how ITstrategically impacts the firm and the position of thefirm in the process of assimilating IT. The CIO, theCEO and other executives should assess the firm'sneeds. For example, education may be the primaryorganizational need during the innovation stage ofassimilating a particular IT. Setting standards forfourth generation software may be a more importantneed at another time. In essence, thinking and actingin terms of 'needs drive' prepares the IT manager foradapting to the inevitable future organizational andenvironmental changes.

Continuously scan the organization and the IT environmentusinga multiplediscipline approachWatson notes that 'IS managers tend to be somewhatinward-looking in their use ofsources of information toremain abreast of IS management issues....An ISmanager who wishes to get ahead ofcompetitors mightbe advised to take more notice of mass media reportsand seek information outside the immediate ISarena... IS managers who are seeking to innovateshould recognize that they are more likely to find newideas if they adopt a scanning strategy different fromtheir peers' (Watson, 1990, p. 226). IT managers, likeall managers, must continually adapt to change.Therefore, continuous environmental scanning and

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learning through reading, listening and networking ismandatory

Conclusion

Partnerships are formed because each partner hasdifferent knowledge, skills perspectives and otherresources that the other partner needs. Synergy resultsfrom forming the partnership - the whole is greaterthan the parts. Thus, managing informationtechnology as a strategic resource requires both thetechnically-orientated knowledge, skills andperspectives of the CIO and the broader managerialand operational knowledge, skills and perspective ofthe CEO. Truly, neither professional can manage thecomplexity of information technology alone.Managing IT as a strategic resource requires thecombination of both the CEO and the CIO - a criticalpartnership, indeed.

References

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Address for correspondence: Yash P. Gupta,Department of Management, School of Business,University of Louisville, Louisville, KY 40292, USA

Thechiefexecutive officer and thechiefinformation o.fficer: thestrategic partnership 139

Rockart, J.F. (1982) The changing role of the Biographical notesinformation systems executive: a critical success Yash P. Gupta is the Frazier Family Chair infactors perspective. Sloan Management Review, Autumn, Management at the University of Louisville. He

4,3-13. obtained his PhD from the University of Bradford.Rothfeder,J. and Driscoll, L. (1990) CIO is starting to Prior to this appointment he was Professor and Head,stand for career is over. Business Week, February, 3147, Department of Actuarial and Management Sciences,

78-80. University of Manitoba, Canada. Profes~or Gupt.a'sSynnott, W.R. and Gruber, W.H. (1981) Information current research interests are in the field of'informationResource Management (John Wiley, New York). systems strategies, just-in-time systems, ~ndSynnott, W.R. (1987) The Information Weapon.: Winning production scheduling in ~dvan~e m~nuf~cturmgCustomers and Markets with Technology (John WIley, New systems settings. He has published m varIOUS Journals

York). such as Decision Sciences, International Journal ofVroom, V.H. and Yetton, P.W. (1973) Leadership and Production Research, IEEE Transactions onDecision-Making (University of Pittsburgh Press, Reliability, Information and Management, INFOR,

Pittsburgh). European Journal of Operational. ~esearc~, LongWatson, R.T. (1990) Influences on the IS manager's Range Planning, National Produ.ctivity Review a~dperceptions of key issues: information scanning and Omega. He has consulted WIth several majorthe relationship with the CEO. MIS Quarter{y, June, international corporations.14,217-231.Welter, T.R. (1987) The chief information officer:what's behind the hype? Industry Week, June, 233,45-48.Wood, D.R. (1988) Do we really need the CIO.Financial Executive, November-December, 4, 35.

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