The Role of the Chief Information Officer Presentation

The Role of the Chief Information Officer Presentation by Eliot Lee and Mark Guthrie November 12, 2005

What Do These People Have in Common? 3 1 4 2 5 6 7 11 8 9 10 12

Presentation Overview Chief Information Officer profile - Demographics - Salary data - Employment information - Topic relevance In-depth case studies of 3 CIOs Best practices: Role of the CIO

Role of the CIO Is Evolving Quotable quote: “It is no longer useful or meaningful to talk about the ‘role of the CIO. ’ ” – Barb Gomolski, senior research director, Gartner, Nov. 27, 2000 1 Rationale n n n No single “one-size-fits-all” position description CIOs wear many hats; work in various roles Different types of CIOs are driven by background and interests Industry and organizational differences affect role

Definition: Chief Information Officer Job title is commonly given to the senior executive in charge of information technology and computer systems that support an organization’s business goals. As IT has become increasingly important, the CIO is typically viewed as a key strategist within the organization. In many companies, the CIO reports directly to the Chief Executive Officer (CEO). In some companies, the CIO sits on the Executive Board. Usually, a CIO proposes IT strategies to achieve business goals and works within an established budget. - Search. CIO. com Definitions 2

CIO Demographics 87% are male 70% moved up through the IT ranks 5 years, 9 months is average time as CIO 4 years, 6 months is average time in current job 40% report to CEO 85% are responsible for enterprise-wide IT 76% do not plan to outsource outside of U. S. - Source: CIO Magazine 3

CIO Regional Salary Comparison Percentile Source 4 Midwest: Chicago East Coast: West Coast: New York Los Angeles Southeast: Miami 25 th Percentile $173, 434 $186, 163 $179, 640 $157, 841 50 th Percentile $214, 922 $230, 696 $222, 611 $195, 598 75 th Percentile $272, 348 $292, 337 $282, 093 $247, 862

CIO in the Government In 1996, President Clinton signed what has become known as the Clinger. Cohen Act. This act required major Federal Agencies to establish the position of CIO. - CSA High Technology Research Database with Aerospace 2001 5

CIO Employment Turnover 5 Years: Average tenure of a CIO in a single position – examples: n n n Joseph Eckroth, former CIO of Mattel (Toys), left position after 5 years. Joined New Century Financial (Real Estate Investment Trust) Patricia Morrison, former CIO of Office Depot, left after 3. 5 years to join Motorola Frank Hood, former CIO Krispy Kreme Doughnuts, left shortly to join Quiznos 6 Some CIOs seek resume-building experiences rather than a long-term career with a single employer. 7

CIO Turnover Rate Comparison 77 business executives surveyed – majority believe CIO turnover is equal to other senior positions 8* 8% – “CIO turnover higher than other senior positions in the company” 62% – “CIO turnover is the same” 31% – “CIO turnover is lower than other senior executive positions” * Darwinmagazine. com

CIO Employment Outlook CIO job search during downturn could last as long as 12 to 18 months Recruiting for CIOs increased in 2005 Nationwide n n CIO job listings increased 30% from 2004 Overall IT sector hiring increased 37% from 2004 9 Locally, CIOs are increasing hiring of IT professionals, according to Robert Half Technology n n 11% of CIOs surveyed in St. Louis planned to add to staff; 10% surveyed planned to reduce staff Net 1% of CIOs planned to hire in the third quarter of 2005 – increase of 2 percentage points from second quarter 10

Chief Information Officer Corporate Case Studies Three different companies. Three unique CIOs. Three insightful perspectives.

CIO Profile: Centene Corporation Glendon Schuster 11 Chief Information Officer Centene Corporation Joined company in company June 2005 on an interim basis. Became permanent in October 2005. Senior Management Team Member B. S. , Electrical Engineering

CIO Profile: Glendon Schuster Professional IT Background Title Company Description Partner Accenture Consulting Provider of programming consultants Head of Information Technology Gamut Interactive A start-up company focusing on electronic couponing interacting with TV/Print Media Development Lead Deluxe Check production Various roles (designer, application architect, development lead, etc) Walgreens Pharmacy

Centene Organizational Chart Michael Nierdorf President and Chief Executive Officer (CEO) Glendon Schuster Chief Information Officer (CIO) CIO reports to the CEO

Centene Corporate Overview Managed care provider for Medicaid Services: claims processing and client reporting Operates healthcare plans in Indiana, Kansas, Missouri, New Jersey, Ohio, Texas and Wisconsin Contracts with other companies to provider special services including behavioral health and disease management 288 IT employees – 159 full-time corporate; 79 contractors Year Total Company Revenue Annual IT Budget 2004 $1 Billion Proprietary 2005 $1. 5 Billion Proprietary

IT Culture at Centene 159 Full-Time Employees 79 Consultants Dynamic Expanding Reorganizing Very structured

The Biggest IT Challenges at Centene Creating more customer-based reporting Increasing disease management Development of “trending” systems Regional Health Information Organizations Ability to bring fast reliable information to patients, doctors and hospitals

What Keeps the Centene CIO Awake at Night? Balance between controls (security, permissions, signoffs) and administrative overhead Giving people more authority to work on tasks (e. g. , migrate code) is generally more efficient, but can lead to risks in security, regulatory procedures, compliance and litigation Locking down authority tends to tie up the organization in administrative overhead

CIO Relationship with CEO Reports directly to the CEO Weekly senior management meetings Average CIO communication with CEO occurs five times per week – “IT rules” at Centene. Redefining the role of the IT department Major emphasis on teamwork

CIO’s Biggest IT Success at Centene Major reorganization of the IT department. Aligned the IT groups within functional areas. Quotable quote: “Change by evolution, not revolution. ” – Glen Schuster, CIO

How does IT drive business at Centene? IT drives the business at Centene IT should be reacting to the business IT should develop systems that complement the business Quotable quote: “IT should support the business objectives. ” – Glen Schuster, CIO

Trends Impacting Centene in the Next Five Years Disease management n Design systems that do trending analysis based on the amount and types of claims received n Develop software that can help predicate a patient’s predisposition to a disease Customer-based reporting Regional health information systems

The ‘Untold’ Story from the CIO Perspective CIO is not a technology expert. CIO has more “power” than he actually has. CIO can install and “fix” software problems. CIO is not involved with the daily activities of the IT department. CIO does not run the business; takes direction from the business.

CIO Profile: Express Scripts Inc. Patrick Mc. Namee 12 Chief Information Officer Express Scripts Inc. Joined company in February 2005 Senior Management Team Member Corporate Resource Council Member M. S. , Electrical and Computer Engineering and B. S. , Biomedical Engineering – Marquette University

CIO Profile: Patrick Mc. Namee Professional IT Background Title Company Description President and General Manager MISYS Physician Systems Provider of information management software for physician practices President and General Manager Orthopedic Equipment Corp. (General Electric) Surgery X-ray manufacturing business (GE Medical Systems) Chief Information and Quality Officer NBC (GE) Television Network Chief Information Officer GE Transportation and General Manager Systems e. Business Transportation Chief Information Officer GE Power Global Power Plants

Express Scripts Corporate Overview Leading pharmacy benefits management (PBM) company Services: claims processing, mail pharmacy, specialty prescription fulfillment, benefit design consultation, drug utilization review, formulary management, and drug research Wide range of corporate and organizational clients including Dell Computer, United States Department of Defense (Do. D), Citigroup Recognized in Information Week’s “ 500 Most Technologically Progressive Companies” 1, 030 IT employees – 772 full-time corporate; 258 contract Year Total Company Revenue Annual IT Budget 2004 $15. 1 Billion $190. 4 Million 2005 $17. 1 Billion Projected $223. 8 Million

Express Scripts Organizational Chart George Paz President and Chief Executive Officer (CEO) David Lowenberg Chief Operating Officer (COO) Patrick Mc. Namee Chief Information Officer (CIO) CIO reports to the COO

A ‘Typical’ Day for the Express Scripts CIO 4 a. m. – Blackberry buzzes on night stand to alert about a Severity One “Sev 1” critical systems issue Joins conference call to discuss troubleshooting and assess impact on systems and users Half-hour to get ready for work at the office Time allocation during the day: 1. Leadership and staff meetings 2. Specific topical meetings (Corporate Resource Council, Medicare Part D, Strategy/Planning) 3. Dealing directly with employees (on-on-one meetings) 4. External boards: St. Louis CIO Forum, Community Health and Patient Services (CHPS)

What Keeps the Express Scripts CIO Awake at Night? Performance and reliability issues – No. 1 priority of any IT organization Human resources, staffing – responsibility for nine direct reports; managing turnover; developing leadership Managing change Communication – ongoing at all levels Quotable quote: “It’s all about communication and sharing information. ” – Pat Mc. Namee, CIO

CIO Perspective: Business, People, and Technical Skills People – Behaviors and values around leadership and teamwork are paramount. Business – Express Scripts is in a complicated business; expertise in healthcare is important. Technology – Technical skills are very important; however, technology is a “commodity. ” (Nicholas Carr said this too!) Quotable quote: “We have accountability and the creation of teams that are empowered … non-bureaucratical. ” – Pat Mc. Namee, CIO

CIO Relationship with CEO Weekly senior management meetings Weekly meeting with Chief Operating Officer (COO) – direct reporting line Average CIO communication with CEO occurs five times per week – “IT matters” at Express Scripts. Single, dedicated operations team Teamwork underscores everything

CIO’s Biggest IT Success at Express Scripts In nine months on the job, reduced… Severity One “Sev 1” systems alerts – 74% n Outage minutes – 60% How success was achieved: 1. Dedicated Sr. Director position created to focus on supporting systems performance and reliability 2. Changed responsibility of applications team by reallocating infrastructure ownership/accountability to new team 2. Heavy investment in performance monitoring – “robots” provide early alerts Lessons learned: Goals from IT strategic plan can be achieved with proper planning, hard work, appropriate allocation of resources and team effort. IT teams can cross the “finish line, ” although there always new goals to attain in IT. n

The Biggest IT Challenges at Express Scripts Performance and reliability of systems Express Scripts is an organization built through acquisition Not well architected – many diverse applications make it a challenge to sustain the platform Aligning IT with key industry initiatives such as HIPAA (Health Insurance Portability and Accountability Act) and Medicare Part D (prescription drug benefit) Huge amount of price pressure in the marketplace for pharmacy benefit management (PBM) companies Customers have unique program requirements; differentiation affects IT Striving for perfect systems performance

How Does IT Drive Business at Express Scripts? Introducing new technologies tied to industry initiatives – Example: Consumer. Driven Healthcare Work with technology start-up companies (third-party vendors) to develop lowestcost, highest-reliability systems Quotable quote: “If IT demonstrates that systems are reliable, customers will choose us. ” – Pat Mc. Namee, CIO

Trends Impacting Express Scripts in the Next Five Years Price pressure n n n Develop lower-cost solution (impacts IT spend) Differentiate service (innovation, performance) Client and patient service group focuses on technology component (number of calls, cost-per-call, etc. ) Industry initiatives n n Carve-In Healthcare Programs Consumer-Driven Healthcare Transparency n n Requires Express Scripts to develop tools that allow customers to understand the company’s programs Evolve Web portals to let customers truly see the business

CIO’s Most-Important Lesson Learned IT is all about service. Teamwork – goal of collaboration is to make others successful Establish trust Develop priorities Quotable quote: “IT is a service organization. It is not of any value as an independent entity. Many [IT organizations] fail because they don’t identify one role … to serve. ” – Pat Mc. Namee, CIO

The ‘Untold’ Story from the CIO Perspective IT forces people to have a deeper understanding of business processes (operations, accounting, strategic planning). It’s not just about technology. Automating processes takes leadership and industry acumen. CIOs are not technology introverts. Express Scripts’ IT department develops talent. Goal of CIO is to develop staff and move people out of IT department and into other areas of the company. This “spreads expertise” (learned through IT) among the organization’s key departments.

CIO Profile: Spartech Corp. Michael Lane 13 Chief Information Officer Spartech Corporation Joined the company in February 2001 General management/auditing career background Quotable quote: “I never touch the keyboard, I am surrounded by good people. ” – Michael Lane, CIO

Spartech Corp. Organizational Chart George Abd President and Chief Executive Officer (CEO) Randy Martin Chief Operating Officer (CFO) Michael Lane Chief Information Officer (CIO) CIO reports to the CFO

Spartech Corporate Overview Largest plastic-sheet supplier in the U. S. 45 manufacturing plants worldwide Corporate headquarters in Clayton 25 IT employees Year Total Company Revenue Annual IT Budget 2004 $1. 1 Billion N/A 2005 $1. 4 Billion $9 Million

IT Culture at Spartech Corporation “Best in St. Louis” Relaxed Consultant-like atmosphere 25 full-time employees – small staff supports large IT program

CIO’s Biggest IT Success at Spartech Had upper management recognize IT as an important department in the organization Implementation of VOIP network through out the company Implementation of Oracle financial systems Provide maximum support with minimum staff

The Biggest IT Challenges at Spartech Corporation Proving IT can deliver on it’s promises Smooth implementation of the ERP project Keeping up on cutting-edge technology

How Does IT Drive Business at Spartech? IT is “almost” a partner at Spartech. 4 years ago, IT was a “necessary evil. ”

CIO Relationship with CEO Reports to the CFO Weekly senior management meetings Average CIO communication with CEO occurs 2 to 3 times per week “IT is almost a partner” at Spartech.

Trends Impacting Spartech in the Next Five Years Oil Prices - Largest supplier of plastic sheets in America Healthcare Costs - Healthcare costs are rising China - China becoming a “major player” in the market

CIO’s Most-Important Lesson Learned Don’t over promise. Don’t jump the gun on technology. Under promise, over deliver. Develop an efficient team.

The ‘Untold’ Story from the CIO Perspective The leadership the position requires CIO to have CIO is salesman CIO has to hire good people Loyalty is a “two-way street”

CIO Best Practices: People Skills IT executives fight image of being too technical, introverted and tactical n n Santa Clara University study notes that stereotyping creates “missed organizational opportunities” Study proposes that IT work “provides the best possible training ground for senior managers. ” 14 Technical skills AND people skills are equally important n University of Dayton study found no differences between CIOs with technical backgrounds and those with general management backgrounds 15

CIO Best Practices: Innovation IT innovation is important for leading companies n n n n CIO Magazine study found 71% of CIOs stated that innovation was a key element of their company’s business strategy 80% of respondents stated that the CIO is responsible for corporate innovation 16 More than half of 83 CIOs in the study said innovative IT ideas have increased in the past two years 17 65% of CIOs in the study said developing innovative IT ideas is a “significant or dominant aspect of their roles. ” 17 CIO should be committed to lead innovation; CEO should support optimistically for success 18 CIO should help business units identify IT new solutions 19 Smart companies partner with CIO to develop innovative ebusiness initiatives 20 CIO role defined as “teacher” or “prophet” vs. “technologist” 21

CIO Best Practices: Communication Clear communication is key. CIO should avoid “techno-speak” and jargon 22 Organizational communication has a significant impact on: n Employee attitudes n Employee behavior n Employee perceptions about managing change 23 Quotable quote worth quoting again: “It’s all about communication and sharing information. ” – Pat Mc. Namee, CIO, Express Scripts

Lessons Learned: Typical CIO Awake at Night IT project delays Staffing and user demands Competition Management changes Vendors Quotable quote: "IT is like the CIA. Nobody knows our successes, but the failures are public knowledge. " – Shawn Schwegman, CIO, Overstock. com 24

Lessons Learned: Status Impacts CIO Role CIOs in many organizations are challenged by internal perceptions IT is often perceived as having a lower status than other business functions 25 Status can be defined as “recognition from the organization of the IT function’s capabilities and value. ” 25 Status does matter for CIOs Corporate culture affects status

Lessons Learned: Outsourcing Room for outsourcing in non-mission critical IT functions Outsourcing should only be done on call center functions Cognizant Technology Solutions is the latest offshore services firm to report blockbuster year-over-year growth. - Information Weekly 11/1/2005 26

Lessons Learned: IT Effectiveness Slow economic recovery created lean IT organizations Opportunity to determine IT effectiveness CIOs should have metrics for determining IT effectiveness Consequence of not measuring IT effectiveness is corporate ambiguity and perception of the CIO “flying blind” 27

Role of CIO Summary CIO role is still relevant Important for general managers to understand this pivotal senior position Communication, leadership, and people skills – essential to CIO success Closing quote for discussion: “The role of the CIO could disappear within 10 years… it’s only a matter of time until every ‘C’ level officer needs to have the same level of information as the CIO. ” -- J. P. Rangaswami, CIO, Dresdner Kleinwort Wasserstein, at the 2005 Triple i Convention 28

Reference Sources 1 Gomolski, Barb, “CIOs Face Identity Crisis as the ‘One-Size-Fits-All’ Job Description No Longer Fits” www. infoworld. com, November, 27, 2000. (www. itworld. com/career/1916/IW 001127 opgartner/pfindex. html, viewed November 2, 2005). 2 Definitions = Search. CIO. com, http: //searchcio. techtarget. com/s. Definition/0, , sid 19_gci 213620, 00. html, viewed November 2005. 3 Demographs = CIO. com http: //www. cio. com/archive/100104/survey. html 10/1/2004, viewed November 2005. 4 Hotjobs. com, viewed November 2005. http: //hotjobs. salary. com/salarywizard/layoutscripts/swzl_compresult. asp? zipcode=&metrocode=98&statecode=CA&state=California&metro=Los+An geles&city=&geo=Los+Angeles%2 C+CA&jobtitle=Chief+Information+Technology+Officer&search=&narrowdesc=IT+All&narrowcode=IT 03&r=hotjbs_swzttsbtn_psr&p=Htjbs 95&geocode=&jobcode=IT 10000049&altername=Enter+search+term. http: //hotjobs. salary. com/salarywizard/layoutscripts/swzl_compresult. asp? zipcode=&metrocode=107&statecode=FL&state=Florida&metro=Miami&cit y=&geo=Miami%2 C+FL&jobtitle=Chief+Information+Technology+Officer&search=&narrowdesc=IT+-+Executive%2 C+Consulting&narrowcode=IT 06&r=hotjbs_swzttsbtn_psr&p=Htjbs 95&geocode=&jobcode=IT 10000049&altername=Enter+search+ter m http: //hotjobs. salary. com/salarywizard/layoutscripts/swzl_compresult. asp? zipcode=&metrocode=34&statecode=IL&state=Illinois&metro=Chicago&city =&geo=Chicago%2 C+IL&jobtitle=Chief+Information+Technology+Officer&search=&narrowdesc=IT+-+Executive%2 C+Consulting&narrowcode=IT 06&r=hotjbs_swzttsbtn_psr&p=Htjbs 95&geocode=&jobcode=IT 10000049&altername=Enter+search+ter m http: //hotjobs. salary. com/salarywizard/layoutscripts/swzl_compresult. asp? zipcode=&metrocode=119&statecode=NY&state=New+York&metro=New+ York&city=&geo=New+York%2 C+NY&jobtitle=Chief+Information+Technology+Officer&search=&narrowdesc=IT+-+Executive%2 C+Consulting&narrowcode=IT 06&r=hotjbs_swzttsbtn_psr&p=Htjbs 95&geocode=&jobcode=IT 10000049&altername=Enter+search+ter m 5 CSA High Technology Research Database with Aerospace 2001 viewed November 2005 http: //www. umsl. edu: 2099/pqdweb? RQT=305&query. Syntax=PQ&search. Interface=1&more. Opt. State=CLOSED&TS=1131598901&h_pubtitle=&h_pmi d=&client. Id=45249&JSEnabled=1&SQ=+%28 LSU%28%7 BDEMOGRAPHICS%7 D%29+OR+LSU%28%7 BSOCIOLOGY%2 C+DEMOGRAPHY%7 D %29%29&DBId=1&date=ALL&on. Date=&before. Date=&after. Date=&from. Date=&to. Date=&pubtitle=&author=&FT=0&AT=any&rev. Type=review&rev. Pos=all&STYPE=all &sortby=REVERSE_CHRON&search. Button. Image. x=28&search. Button. Image. y=8 6 Levinson, Meridith, “A Strong Job Market For CIOs” CIO Magazine, October 1, 2005. 7 Strassmann, Paul A. , “The Cost of Short-Term CIOs” Computerworld, May 5, 2004, article reprint. 8 Darwinmagazine. com, http: //64. 28. 79. 73/learn/research/surveyreport. cfm? id=44 Viewed November 7, 2005. 9 Kolbasuk Mc. Gee, Marianne, “Help Wanted: CIOs” Information. Week, October 24, 2005, p. 92. 10 PR Newswire, “St. Louis CIOs Forecast Increase in Third-Quarter Hiring: Survey Measures Employment Optimism Among Local Technology Executives” June 9, 2005 (Robert Half Technology: Information Technology Hiring Index and Skills Report) 11 Interview with Glendon Schuster, CIO of Centene Corporation, interviewed in person by Eliot Lee, September 30, 2005.

Reference Sources 12 Patrick Mc. Namee, CIO of Express Scripts Inc. , interviewed in person by Mark Guthrie, October 31, 2005. 13 Michael Lane, CIO Spartech Corporation, interviewed in person by Eliot Lee, November 4, 2005. 14 De. Lisi, Peter S. and Danielson, Ron, “Thinking Styles of IT Executives and Professionals” MIT Sloan Management Review, Summer 2002, Vol. 43, No. 4, p. 11. 15 Kwak, Mary, “Technical Skills, People Skills: It’s Not Either/Or” MIT Sloan Management Review, Spring 2001, Vol. 42, No. 3, p. 16 CIO Research Reports, “IT Enabled Innovation” CIO. com, April 1, 2005. (www 2. cio. com/research/surveyreport. cfm? id=86, viewed November 3, 2005). 17 Varon, Elana, “State of the CIO: Reality Check” CIO Magazine, April 1, 2005. 18 Kuczmarski, Thomas D. , “What Is Innovation? And Why Aren’t Companies Doing More of It? ” Journal of Consumer Marketing, Vol. , 20, 6, 2003, pp. 536 -541. 19 Leidner, Dorothy E. ; Beatty, Robert C. ; and Mackay, Jane M. , “How CIOs Manage IT During Economic Decline: Surviving and Thriving Amid Uncertainty” MIS Quarterly Executive, Vol 2, No. 1, March, 2003, pp. 1 -14. 20 Rifkin, Glenn, and Kurtzman, Joel, “Is Your E-Business Plan Radical Enough? ” MIT Sloan Management Review, Spring 2002, Vol 43, No. 3, pp. 91 -95. 21 Nolan Norton Institute, “Say Goodbye to the CIO, Welcome to the Business Prophet” Information Management & Computer Security, MCB University Press, 9, 2001, pp. 123 -125. 22 May, Thornton A. , “Chief Information Officer ABCs” Information Management & Computer Security, MCB University Press, Vol. 3, 5, 1995, pp. 23 -24. 23 Schraeder, Mike, “Organizational Assessment in the Midst of Tumultuous Change” The Leadership & Organization Development Journal, Vol. 25, 4, 2004, pp. 332 -348. 24 cioupdate. com, http: //www. cioupdate. com/insights/article. php/3561866, viewed November 2005. 25 Kaarst-Brown, Michelle L. “Understanding an Organization’s View of the CIO: The Role of Assumptions About IT” MIS Quarterly Executive, Vol. 4, No. 2, June 2005, pp. 287 -301. 26 Information Weekly http: //www. informationweek. com/show. Article. jhtml? article. ID=171200304 11/1/2005, viewed November 2005. 27 Kurien, Priya; Rhaman, Was; and Purushottam, V. S. “The Case for Re-Examining IT Effectiveness” Journal of Business Strategy, Vol. 25, 2, 2004, pp. 29 -36. 28 Riley, John, “Chief Information Officer’s Role Could Disappear ‘Within a Decade’” Computer Weekly, 9, 2005, p. 10.

Photo Credits Slide 2: 1. Sylvia Steinmann, CIO, Swiss Re 2. Aaron Gibbs, CIO, St. Augustine’s College 3. Dennis Thiebeault, CIO, Curry College 4. Cindy Stoddard, CIO, Neptune Orient Lines 5. Jane Aboyoun, CIO, Reed Business Information 6. Craig Berry, CIO, UGS 7. Beth Brigdon, CIO, Medical College of Georgia 8. Beth Roose, CIO, Pennsylvania Dept. of Transportation 9. Sam Segran, CIO, Texas Tech University 10. Terri Morgan, CIO, Railroad Retirement Board 11. Eric Jackson, CIO, Morehouse School of Medicine 12. Lee Colaw, CIO, Pacific University