LEADERSHIP The CIO’s Leadership Journey: A promising start Microsoft is committed to walk the leadership journey with the CIO. The CIO ‘Board Readiness Survey’ is the first in a series of ‘peer surveys’ – bringing insights, provoking thought and highlighting ‘best-in-class’ paths to scale the next summit. Table of contents Executive Summary 3 Introduction 4 Methodology and the Survey Universe 5 The CIO and the Corporate Hierarchy: What is the global story? 6 The India Story: Are trends in India different from global trends? 7 Towards getting Board Ready 12 Appendix: Respondent companies list 13 The information contained in this document represents the current view of Microsoft Corporation on the issues discussed as of the date of publication. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information presented after the date of publication. 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Unless otherwise noted, the example companies, organisations, products, domain names, e-mail addresses, logos, people, places and events depicted herein are fictitious, and no association with any real company, organisation, product, domain name, email address, logo, person, place or event is intended or should be inferred. For more information on this report or to receive future reports from Microsoft Executive Circle Leadership Series please contact: [email protected] 2 Executive Summary "The function of leadership is to produce more leaders, not more followers." The Microsoft ‘Board Readiness’ Survey examines whether CIOs are ready to assume top management positions in organisations, epitomised by the ‘Board’. - Ralph Nader The complexity of organisations demands senior representation from different functions to navigate the future. Specifically, the seminal role and impact of technology within businesses and across business functions has meant that CEOs are looking to CIOs as business partners. They are asked to make strategic business contributions, provide inputs on corporate strategy, head revenue-producing business units, and assume varied responsibilities outside their traditional roles. By any stretch, this is a tall order on today’s CIO. "Management is efficiency in climbing the ladder of success; leadership determines whether the ladder is leaning against the right wall." In this context, the Board Readiness Survey sought answers to key questions - Are organisations in India ready to accept CIOs for a senior leadership role? Can they become CEOs? How ready are their companies? Are they adequately represented in the highest decision making bodies? To facilitate a fuller understanding of these issues, the evolution of the CIO in India was also benchmarked against global trends. - Stephen R. Covey "If you do not know where you are going, every road will get you nowhere." - Henry Kissinger "We must be the change we wish to see." - Mahatma Gandhi This survey records the ‘inside-out’ view of the CIO i.e. how the CIO views his community and himself. Our CIO ‘Board Readiness’ Survey revealed the following: CIOs are being considered for a senior leadership role; albeit in a limited manner. A ‘CIO plus’ role in other functional positions and business units is common in India, reflecting the global trend. But their presence on the Board is, as yet, rare. The strategic nature and importance of IT today has created a considerable advantage for CIOs, putting them in the right position to drive business value as compared to their C-level peers. CIOs felt that their ability to leverage/align IT with business strategy, the strategic role of IT for business and their enterprise-wide view - in this order - were the most significant reasons for their rise in India’s corporate hierarchy. CIOs rated themselves highly on certain top management characteristics - having a global mindset, an acceptance of the fact that business leads technology, and the ability to change and lead business transformation. However, they gave themselves a 'below average' rating in terms of leadership and management skills. The survey findings clearly indicate that 'leadership skills' and ‘team management skills’ are areas where CIOs seem to be deficient. This may well explain why CIOs are not yet considered universally ‘Board ready’. In conclusion. CIOs in India, like their global counterparts, are transcending their traditional domains, and heading towards a position on the Board. But to be truly ‘Board Ready’ they must hone ‘top management skills’. In addition to the usual elements of leadership, the list includes: the ability to influence peers and people management to begin with. 3 Introduction - The CIO ‘Board Readiness’ Survey CIOs seek ‘leadership positions’… ‘What next’ is a common refrain amongst successful people. And the equally common answer is to move into a leadership position or become a ‘good leader’. It is not surprising at all that CIOs, who have grown in stature and importance in the last few years, now see the ‘Board’ or a top management position as their ‘next stop’, as revealed in Microsoft’s recently concluded ‘Board Readiness Survey’. Microsoft has always believed that CIOs must lead. Beginning with the Leadership Conclave, Microsoft continues its commitment to exploring and walking the leadership journey with CIOs. A recent survey, undertaken with The CIO Institute, suggests that the CIO’s leadership journey has begun in earnest. What does this path entail? What is driving ‘CIO Leadership’? CEOs need more partners… Organisational structures evolve over time to reflect the critical nature of different functions. The CEO, who some decades ago was the end-all and beall of a business, feels the need for a ‘partners’ table’. The complexity of organisations, today more than ever before, demands senior representation from different functions to navigate the future. Beginning with the CFO and the HR function – and a parallel presence of the Board – CEOs are looking towards their CIOs for a strategic business partnership as well. The strategic role of technology in business plays a role too… The increasing role and impact of technology on businesses and business functions in recent times, is largely responsible for this need. In India too, much like the rest of the world, the journey for CIOs to join the ‘partners’ table’ has begun. Is the CIO’s task a little tougher? CIOs must cope with a faster pace of change than their counterparts… The fact that technology changes rapidly has also meant that the role of the CIO has had to evolve much faster than other business functions – i.e. the CFO and Chief HR Officers. Moreover, to play the strategic business partner to the CEO, CIOs must stay ahead of the already fast-paced demands on their role. In some sense, they are coping with a faster pace of change compared to their counterparts in other functions. …and can’t refer to history for answers What makes this a bigger challenge than usual is the fact that the role of a Chief Information Officer, in India, is less than 20 years old. Given the relatively short period in which this role has emerged, CIOs cannot refer to history for answers to their current problems and challenges. Best practices must evolve and the powers of ‘collective wisdom’ must be harnessed to help find the right response. In keeping with the way businesses are run, CIOs have the unenviable task of balancing the role of technology for growth and technology for governance – the two pillars of sustainable growth. Is this similar to international trends? 4 The ‘Board Readiness’ Survey is an initiative to assess where CIOs are in their journey to the top echelons of the corporate hierarchy in India. Like their other C-level counterparts, CIOs are making their way to a seat at the Board, Management Committee etc. But are organisations in India ready to accept CIOs for a senior leadership role? Can they become CEOs? How ready are their companies? Are they adequately represented in the highest decision making bodies? These are some of the questions the survey seeks to answer. To gain insights into these issues the survey also benchmarked the path of the ‘new generation CIO’ in India against global trends to identify what works and what doesn't, as well as how to replicate successes and avoid mistakes. Methodology and the Survey Universe The survey was conducted by the CTO Forum magazine and The CIO Institute in partnership with Microsoft. The results are based on 85 individual responses representing 77 companies. (Please refer to the Appendix for the complete respondent companies list) Respondent companies by sector Respondent companies by size and origin Pharma & Engineerin Consulting Healthcare g& 5% Chemicals 9% Constructio 8% Diversified n 9% 6% Consumer goods & Retail 5% IT&ITES 13% Mid-size Indian Large Indian Large MNC 36% 40% Electronics 4% BFSI 17% Media 4% Logistics 4% 24% Paper & PSU & Others Textiles Telecom Packaging 3% 3% 7% 3% 5 The CIO and the Corporate Hierarchy: What is the global story? Globally, IT has evolved to become a true strategic enabler for businesses… …and has led to the birth of a new generation of CIOs who significantly contribute to business performance Technology has rapidly changed the global competitive landscape across industries and businesses. As a result, IT has already evolved to become a true strategic enabler - as opposed to a mere support function. Attention shift amongst CIOs (Amount of time spent on traditional IT) Less than 20% 20% - 39% 40% - 59% 49% 10% 3% Associated with this 60% - 79% 16% evolution is the birth of a new generation of CIOs 80% and 22% that significantly more contribute to business performance. Once considered to be a strictly independent position that was solely responsible for the running of IT, this new breed of CIOs is often called upon to find ways for IT to transform the company. They are asked to make strategic business contributions, provide inputs on corporate strategy, head revenue-producing business units, and assume responsibilities that vary from managing supply chains to international expansions. The rise of the ‘CIO plus’ role The ‘CIO plus’ role is often in IT-related domains… ...but has begun to go well beyond it According to a global survey by Gartner Executive Programmes, more than 50% of the 1500 CIOs surveyed reported having responsibilities outside of IT. This confirms the emerging trend of the ‘CIO plus’ role around the world. But unlike the 90s, when the ‘CIO plus’ role was mostly industry-specific or was IT related, the ‘CIO plus’ roles today are different. They are more strategic, enterprise-wide and revenue generating. The primary force driving this trend is technology adoption and penetration, both within and across organisations. Roles beyond, but related to IT Most common additional responsibility Informationa security 69% Business process improvement/transformation Corporate website/online identity Innovation/change management Business continuity The strategic role of technology in businesses is the key driver… 62% 40% 38% 34% It is now the norm that technology permeates the organisation. This places CIOs in an excellent position to understand core business processes and drive value in different units. Cognisant of their growing importance, CIOs too have worked hard to demystify IT and are choosing to speak business first. 6 …and CIOs are grabbing the opportunity to play business manager Most of their additional roles are a ‘reward’ for success with an IT initiative. This in turn depends on the level of technology penetration in their organisation. The higher the technology penetration, the higher the chance for additional responsibilities. The most common ‘CIO plus’ roles are related to information security; but go beyond IT as well to include business process improvement/transformation, corporate website/online identity, innovation/ change management and business continuity. The India Story: Are trends in India different from global trends? CIOs in India too, like the rest of the world, are taking on responsibilities beyond their traditional IT roles according to the Microsoft CIO ‘Board Readiness Survey’. ‘CIO plus’ role is common in India, but CIOs are not quite ‘Board Ready’! Additional responsibilities include security, logistics, and CRM... Similar to trends at the global level, a ‘CIO plus’ role is becoming common in India – however the additional responsibilities are almost always ITrelated/focussed. The most common additional responsibilities include security, logistics, and customer relationship management. These are areas where technology has played an important role – either as a supporting, facilitating or strategic role. ...but go into strategic roles in a few sectors where technology penetration is high The presence of CIOs at the ‘Corporate High Table’ or the ‘CEO Partner’s Table’ and management/ executive committee is growing. But, the CIO’s presence on the Board is almost non-existent. The very first traces are appearing in a few industries – such as BFSI, Telecom, IT&ITeS and Retailing. As expected, these are sectors where technology penetration defined as ‘ICT spends as a percentage of total turnovers’ is high and the strategic or compliance related role is critical. Areas where CIOs are present Rating on a scale of 1 to 7 where 1=never; 4=sometimes and 7=very common Other functional positions 4.4 BU heads 4.0 CEO positions 4.0 Management/ Executive Committee Board of Directors 3.9 3.7 What comes in the way? The organisations’ mindset and the CIO’s own mindset are the biggest hurdles... While the emergence of a CIO with responsibilties in other business units is a significant step forward, it is clearly not enough for a CIO’s transition to top leadership positions i.e. to be considered ‘Board Ready’. And CIOs believe that at least half the problem lies in the prevailing mindsets – not just that of their companies’, their CEOs and other functional heads, but equally their own! While top management needs to accept the fact that the CIO’s role in an organisation has evolved from a mere support function to a true strategic 7 enabler that can drive value in different business units - CIOs, too, need to recognise that keeping the IT utility running is no longer considered a valuable job; it’s an expectation! Therefore they need to work hard, learn, think and speak business first for a seat at the corporate high table. How ready are organisations? CIOs are considered for a senior leadership role; but in a limited manner... Indian organisations lag behind their global counterparts in terms of recognising and accepting the ‘CIO’s leadership potential’. Only 37% of the respondents felt that their organisations are ready to consider CIOs for a senior leadership role. Are organisations ready to consider CIOs for a senior leadership role? Yes 37% To a certain extent 59% No 4% As with all emerging trends, the jury is still out on the new hybrid role of CIOs. Most companies accept the criticality of the CIO’s role for business, but are still in the process of acknowledging their leadership potential. A majority of the CIOs surveyed believe that organisations in India are willing to consider CIOs for a senior leadership position, but only in a limited manner. What is driving ‘CIO Leadership’ in India? CIOs believe that their knowledge of the company’s technology needs holds them in good stead… …as does their enterprisewide view The majority of CIOs surveyed believe that their familiarity with technology and the technology needs of the organisation differentiates them from their Clevel peers in understanding the cross functional needs/challenges of the organisation. The fact that technology plays an important supporting/ facilitating role in core business functions – from finance to HR to logistics and customer management – puts CIOs in an excellent position to gain insights into all business unit processes and operations. This, they believe, has endowed them with cross functional overviews and insights. But leadership skills and the ability to manage a large team do not figure yet… While CIOs are beginning to contribute in strategy meetings, the critical reasons for their entry into senior leadership positions are on the basis of: their ability to leverage/align IT with business strategy; strategic role of IT for business; and CIO’s enterprise-wide view – in this order. A preliminary analysis reveals that these are skill sets one acquires through a traditional CIO role. Leadership skills and the ability to manage a large team, although considered critical for ‘Board Readiness’ - did not figure prominently among the reasons for the CIO’s rise in India’s corporate hierarchy. ...perhaps, the critical next step for CIOs ‘Leadership’ and ‘managing teams’ are non-negotiable skills for the rise of an individual to a ‘top management’ position. In our view, this is the single-most important gap that CIOs must overcome to become ‘Board Ready’ i.e. transcend the functional hat and move into top corporate hierarchies. 8 Reasons for considering CIOs for senior leadership positions Rating on a scale of 1 to 7 where 1=not significant and 7=critical reason Experience of managing large teams 4.8 Bring a specialist perspective 4.9 Help preserve and secure information… The Reds, Oranges and Greens in a CIOs journey to top leadership positions 5.0 Strong capabilities & leadership skills 5.1 Play an important role in managing risk 5.2 Help cope with dynamic environment 5.4 Have an enterprise-wide view 5.5 IT has strategic role for business 5.7 Can leverage/align IT with business … 5.9 Do CIOs in India believe they are ready for top leadership positions? The ‘Readiness-Willingness’ Gap... Research on the growth of corporate functions, over time, demonstrates a ‘readiness-willingness gap’. Often, individuals are keen/willing to take on a more senior responsibility – but are not quite ‘ready’ for it. Specific self- and professional- development measures are the answer! The ‘Board Readiness’ survey sought to assess the willingness of a CIO as opposed to his/her readiness for a ‘CIO plus’ role. This was gauged through questions on ‘what CIOs are currently a part of’ (to indicate readiness) and ‘what senior leadership positions (in their judgment) they are ready for’. Responses revealed significant ‘readiness-willingness gaps’ for four major leadership positions. The survey revealed significant ‘readinesswillingness gaps’ in four major positions Readiness vs Willingness Responsibilities CIOs are a part of (i.e. what CIOs currently are) Responsibilities CIOs are ready for (i.e what CIOs want to be a part of) 58% Ready but not that keen! 27% Management/ Executive Com 23% 12% Other functional responsibility 14%12% BU Head Willing but not ready yet! 23% 18% 5% Other top management responsibility 0% Board of Directors 0% 9% CEO Management committee positions are an expectation now… The graph above suggests that CIOs are completely ready for the Management Committee and other functional responsibilities (mostly ITrelated as they already occupy these positions). However, there is a significant ‘willingness versus readiness’ gap in other top management responsibilities i.e. the Board of Directors and CEO level positions. …and CIOs’ presence at the ‘corporate high table’ will continue to increase… More than 58% of the CIOs surveyed are already a part of the Management/Executive committee. The ‘CIO plus’ role - as demonstrated by this role extension is common in India – and hence, more an expectation than 9 an ‘aspiration’. However, even for this presence – a significant 27% is ‘willing’ but has not got the opportunity yet! But CIOs as a part of the Board or with CEO-level responsibilities are negligible… …and many CIOs don’t even openly aspire for these positions Interestingly, almost no CIOs in the sample were a part of the Board or had a CEO-level responsibility. But this is expected to change soon. 23% of the CIOs surveyed expressed their keenness to be a Member of the Board. However, only 9% felt they were equipped to take on the role of a CEO. 5% of the respondents in their ‘CIO plus’ role have a top management responsibility other than their traditional CIO role and 18% felt they were ready for other top management responsibility. Although this 5% when compared to developed countries like the US, Japan and Germany is marginal, it is expected to increase in the foreseeable future. And this will largely be because CIOs recognise where they can go. Some trend-setting CIOs are also clear about what they must do to get there… The ‘trend-setter’ CIOs and their ‘self-view’: shape of things to come A new and confident ‘leader CIO’... The ‘Board Readiness’ survey revealed that there is a new and emerging group of CIOs who rate themselves highly on several fronts – indicating their readiness for ‘top management positions’. Forerunners amongst these were: The ‘collective’ versus the ‘individual’ The self-view is flattering... a global mindset, acceptance of the fact that business leads technology and ability to change and lead business transformation. With these critical ‘strategic management’ characteristics, it is a surprise that more CIOs do not occupy seats on key decision-making bodies in their companies. A deeper dive into the CIO ‘viewpoint’ revealed some potential answers. Individual rating of CIOs Rating on a scale of 1 to 7 where 1=poorand 7=excellent Understand and participate in business strategy Are equipped to develop and manage senior talent 5.3 5.5 Can influence peers/top management 5.8 Insights into your company's business 5.8 Can lead operations and execution 5.8 Can manage change and lead business transformation 5.9 Accept that business leads technology Have a global mindset 6.0 6.1 10 ...their view of their ‘community’ is less so CIO's rating of the CIO community's skill sets Rating on a scale of 1 to 7 where 1=poorand 7=excellent Ability to influence peers/top management Have a global mindset Are equipped to develop and manage senior… Can manage change and lead business… Understand and participate in business… Can lead operations and execution 5.0 5.0 5.1 5.1 5.2 5.3 Insights into their company's business Accept that business leads technolgy Accepting that business leads technology and participating in the company’s business are universal skills... 5.4 5.6 Individual CIOs think lesser of the community than of themselves…! In fact, a comparison of the charts above shows a difference in the entire scale – the personal ratings are higher across most characteristics. (Other than the top 2 skills, for all others the rating for the community is lower than the lowest rating for personal skills at 5.35). The skills that are acknowledged universally are: ...some universal deficiencies the CIOs ability to understand and accept that business leads technology the insight into their company’s business, and lead operations and execution There is some agreement on deficiencies too. For example: the CIO’s ability to influence peers and have high personal impact, and the ability to develop and manage teams are both rated quite low. But some glaring differences too... Other than that, some sharp differences are evident in personal assessment versus that of peers. For example: Ideas for next ‘leadership’ steps... Global mindsets: Individuals believe it is one of their strengths – whereas for the community it is amongst the lowest rated skills Managing change and leading business transformation is also rated significantly higher for the individual as compared to the collective rating An examination of the ‘self-assessed’ skills suggests that the focus is still, very much, on the CIO role and what it means for business. Most individuals are gracious about accepting these skills in their peers too. But as a community, there is significant inadequacy amongst CIOs on the ‘nonnegotiables’ required for becoming ‘Board Ready’. Leadership and people skills are right on top. But equally important is their hesitation to accept any role that has ‘business accountability’. As an example, more CIOs are keen to be on the Board than handle a P&L responsibility as a CEO! The findings of the survey point clearly towards next steps in the CIO’s quest to become ‘Board Ready’… 11 Towards Getting ‘Board Ready’ Preparing CIOs for ‘leadership roles’ Microsoft is committed to walk the leadership journey with the CIO. Based on our ‘Board Readiness Survey’ findings, we outline key next steps, where we promise to partner you. Next steps: Programmes and coaching in leadership skills According to Ralph Nadar “The function of leadership is to produce more leaders, not more followers." Similarly, as CIOs in India take on hybrid roles they need to develop and train their subordinates to become leaders so that they can take on new and bigger responsibilities. Given the technical nature of their traditional duties, most CIOs do not acquire these skills i.e. the skill to develop and execute a clear succession plan. Dedicated training programmes and coaching on leadership are the need of the hour. Team-building and people-management skills Dual roles also means managing people from different functions, who have been trained and developed under different leaders/executive styles. As revealed from our interviews, CIOs who fail to respect others’ ways of working perform sub-optimally. Working with teams and bringing the best out in your people is a skill that must be acquired. There are academic and experiential programmes to facilitate this growth which must be incorporated into the CIO annual calendar. A pocket MBA to allow for ‘taking on P&L responsibilities’ The strategic role of IT has placed CIOs in an excellent position to understand core business process across functions. This has enabled many CIOs to provide savvy ideas about new business applications across functions. But this alone is not enough to drive business value. CIOs need to be more accountable to their new add-on roles and responsibilities by assuming P&L responsibilities. Basic ‘general management’ courses would be a valuable add-on to your already impressive track records. And learning how to influence peers/counterparts As revealed from the subjective responses to the survey, CIOs who seek higher leadership role face many challenges. They understand that they alone can’t drive changes in functions under the control of other executives. They are also aware of the fact that more IT leadership is demanded from them. To meet the new demands on their role, CIOs must be able to ‘negotiate and influence’ their way through large and complex organisational structures. A focussed effort on ‘softer skills’ – communication, resolving conflicts and having tough conversations’ – are important agenda items. Given the collaborative nature of leadership positions, as a first step it is important to determine how CEOs and other functional heads perceive the CIO. Might some answers lie there? The next edition of the ‘CIO Leadership Journey’ will examine perceptions of CIOs amongst CEOs, COOs, CFOs and HR Heads; and explore optimal responses towards ‘Board Readiness’. 12 Appendix List of respondent companies 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. AC Nielsen AFL Alstom Projects India Amtek Group Automated Data Processing Bajaj Electricals Ballarpur Industries Bank of America Bank of India Carrier Airconditioning and Refrigeration CESC CFC India Services Cognizant Technology Consim Info DCB DLF Group Eicher Motors Elbee Express Engineering Projects (India) Evalueserve Forbes and Company Fortis Healthcare Gati GlaxoSmithKline Consumer Glencore India Godrej Industries Gujarat Heavy Chemicals HDFC Bank Henkel CAC Hindustan Construction Company House of Pearl Fashions HT Media HTMT Global Solutions Indian Oil Corporation Intrex India (Essel Group) Jindal Stainless Jubilant Organosys K Raheja Corp KPMG Landmark Group 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51. 52. 53. 54. 55. 56. 57. 58. 59. 60. 61. 62. 63. 64. 65. 66. 67. 68. 69. 70. 71. 72. 73. 74. 75. 76. 77. Mahindra & Mahindra Financial Services Mahindra Special Services Group Matrix Laboratories Max New York Life Insurance Moser Baer India Motherson Sumi Systems Nagarjuna Fertilizers & Chemicals NH Securities Pfizer India Philips Electronics Piramal Health Care PMC Raymond Reliance General Insurance Reliance Life Insurance Repco Bank RPG Enterprises Sanofi-Aventis Group Satyam Computers Shoppers Stop Sify Technologies SMIFS Securities Spanco Telesystems and Solutions SpiceJet SRF SRL Ranbaxy / Fortis Health World Star India Tata Capital Tata Chemicals Tech Mahindra Tulip Telecom Unitech VIP Industries Walmart India Web18 Securities WM India Yes Bank Ltd 13
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