McKinsey on "the new normal" for CIOs

McKinsey & Co. held its annual online IT survey from October 13 to October 26, 2009, with responses from 444 executives representing all industries, regions, and company sizes.

According to the survey, CIOs overall should feel pretty good: from last year there is a continuing upswing in the importance of IT to strategic success, despite the recession. "CIOs have felt strong pressure to deliver ever greater levels of efficiency in the downturn"-and it seems they've delivered. Non-IT executives report overall satisfaction with IT organizations. Moreover, most respondents see IT investment increasing as a result of companies' applying IT to solve problems across the business. Meanwhile, with the increase of disruptive technologies affecting businesses, executives are pushing for closer integration between business units and IT.

Here are some numbers to illustrate these points:

• Among non-IT executives, 55 percent say current performance in providing basic IT services is very or extremely effective-five percent up from last year. That said, the level of satisfaction with higher-value activities, such as on-time, on-budget project delivery and proactive engagement from IT, is lower, the percentage holding steady from last year in the 30s.

• As for IT executives themselves, they are less satisfied with their own performance." Just under half of the IT executives surveyed say their management of IT infrastructure is extremely or very effective. Only 30 percent say their IT governance is extremely or very effective, while just 21 percent are happy with their ability to target places in their organizations where IT can add value (compared with 30 percent of non-IT executives who say IT is very or extremely or very effective on a corresponding measure)." Furthermore, IT executives' satisfaction with their performance is down across the board from last year. Authors Roger Roberts and Johnson Sikes suggest this drop "is driven by a continued sense of frustration among IT staff," who are being asked to do more with less. They conclude that IT execs must deal with this sense of dissatisfaction: "Clear and effective communication by both IT and business executives will be critical to ensure that the IT organization continues to understand how integral its efforts are to the success of the enterprise."

• Disruptive technologies-including competitors embedding IT in their products, executing strategies based on better analytics and information, and using IT to improve the effectiveness of their business processes-are a big concern for all executives, though eased slightly from last year. To wit: 50 percent of respondents say their companies are very or extremely at risk given the potential effects of information- or technology-based disruptions on their companies; 30 percent rate their companies as somewhat at risk-up from 19 percent last year.

• In the long term (i.e. when the economy rebounds) non-IT executives want to forge a closer partnership with IT in order to improve performance and better deal with future risks and disruptions. While only 16 percent of respondents have actually put this into practice, two-thirds indicate that this configuration would be their ideal. Write Rogerts and Sikes: "The level of strategy integration is strongly correlated to the perceived effectiveness of IT: for both business and IT executives, effectiveness materially increases as the strategies become more tightly linked."

Studying the Org Chart (Kellogg)

You can learn a lot from a firm's organizational chart, from its competencies and areas of competitive advantage to company culture-good to know when entertaining job possibilities.

Researchers David Besanko (Professor of Management and Strategy at the Kellogg School of Management) and colleagues Pierre Régibeau and Katharine Rockett (both of the University of Essex) explored two different approaches to organization: product-line organization and functional structure, meaning organization by business functions such as marketing, research and development (R&D), or manufacturing.

An important difference between the two organizational forms is how each informs executive compensation. Product-line organization offers a company advantages-including the ability to measure performance accurately and pay according. This type of org structure also makes cross-functional coordination come more easily.

On the other hand, firms with either significant variation in functional competencies or a particular function that dominates the others may find functional organization more useful.

For example, when marketing competencies are far more critical to the firm's success than any other function, the firm might benefit from a functional organization with a central marketing group responsible for the marketing decisions for all of the firm's product lines. This arrangement would allow the firm to provide especially attractive incentives to its marketing managers in order to elicit the high-quality marketing effort that is essential to the firm's success, while providing somewhat softer incentives in the functions that are less critical to a its success.