Staying on top

Addressing the challenges and responsibilities of CIOs and other IT leaders is increasingly relevant as the investment management industry becomes more technology-driven. We interview Dr Jonathan M. Mitchell, author of ‘Staying the Course as a CIO’, for his views on how IT leaders can survive and indeed thrive at the top of the investment management corporate ladder. In this article, he shares some of the insights and experiences that have made him appear on lists of the most influential global CIOs in Information Week, CIO Magazine, and Computer Weekly.

Journal: Thank you for taking this exclusive opportunity to share with our readers your views on how a CIO ‘stays the course’ in today’s investment management industry. To begin, what motivated you to write the book ‘Staying the Course as a CIO’?

Jonathan Mitchell: The life expectancy of a CIO in most major corporate organizations is shockingly short. This applies to the investment management industry as well. In Europe, few CIOs last longer than three years in the post, while in the USA it can be even shorter. Amazingly, I found one major global technology company has recently been changing its CIO every year! Having myself survived the best part of a decade as a CIO and built up a network of serving and former CIOs who have similarly enjoyed above-average longevity, I thought it would be helpful to share our thoughts.

Journal: The first couple of chapters of your book are pretty much devoted to ways of aligning IT and business, or ‘linkage’ as you term it. Why is this so important for CIOs?

Jonathan Mitchell: IT organizations often get into trouble because they see themselves as a ‘service provider’ where the business is considered the ‘customer’. This can lead to business managers at relatively low organizational levels demanding and getting alarming levels of IT spending on parochial and often tactical projects. If CIOs are not properly integrated into the executive leadership teams, then any investment management agenda that can transform and improve the enterprise becomes incredibly difficult to achieve.

Journal: IT is often seen as an enabler, being brought into the mix after the business strategy has been completed; how can CIOs change this methodology so that they are involved from the start at the top level?

Jonathan Mitchell: There are two facets to this. First, most aspiring CIOs yearn to be executive committee members, reporting to the CEO. However, the credibility of many IT functions and its leaders in the enterprise can be quite low in the face of never-ending demands and particularly if service levels are also poor. CIOs I’ve met who’ve broken free from these constraints have specific qualities. They are confident leaders who not only understand the business but talk in terms of the business rather than the technology. The very finest practitioners see process and IT as closely linked. You improve the business through process change and an IT system is now an essential ingredient to provide the enablement. My second point leads on from the first. A credible, business-oriented leader can now have a meaningful dialogue with his or her executive colleagues. This means they can ask the right questions – and get the right answers.

Journal: Can you expand a little on the term ‘Dislocated Stakeholders’ you refer to in the book as a challenge for CIOs and why you think it’s so important?

Jonathan Mitchell: The challenge for CIOs is that the IT function interacts with pretty much everyone in the organization together with many customers and suppliers as well. Everyone wants something different. The needs of an end-user, for example, are very different from a middle manager, executive committee member, customer, supplier, or board director. I think it is important that a balance is struck between what will undoubtedly be a series of conflicting requirements. You need to meet the tactical needs of employees in the enterprise and the strategic change programs of top managment. If you deliver true business transformation but leave tens of thousands of unhappy people with slow, outdated equipment and unreliable computer services, you will fail.

Journal: Running on from that, why do you think the tenure of the majority of CIOs is so short compared to other C-level positions?

Jonathan Mitchell: There are two issues to consider here. First, IT systems are critical components that are essential to modern business. They are not only the glue that holds everything together, IT systems also enable firms to meet their business goals. Most organizations simply can’t operate without their IT systems for more than a few hours. The second issue is that for a CIO, there is a great deal that can go wrong. For example, I have seen CIOs fired after a succession of damaging service outages. Others have departed after flagship projects have been holed below the waterline and sunk without trace. Others who have simply failed to connect with their senior ranking colleagues find themselves quickly regarded as irrelevant. Sometimes the expectations and requirements are unclear – I’m thinking of where the CIO has not been part of the strategy process long enough to have achieved clear alignment of expectations on both sides, i.e. business and IT. The saddest examples I have seen is where well-meaning IT leaders try to keep everyone in the organization happy. There simply isn’t enough money in most firms to give everyone what they want and so unfortunately some leaders end up bleeding the company’s money away on projects and services demanded by those who shout loudest from all levels of the organization.

Journal: With more and more regulation in the investment management industry, IT systems are expected to adapt quickly to change. How can CIOs respond to this pressure and come out on top?

Jonathan Mitchell: It is important that leading CIOs in the industry interact and engage with the regulators directly or else through their regulatory compliance colleagues so that important legislation can be implemented in a controlled and sensible fashion. Otherwise, well-meaning administrators might introduce measures that unintentionally create thousands of man-years of often futile work. I can think of a couple of cases in recent years where it took considerable debate to get a sensible answer. For example, I am aware that the new IFRS 9 accounting standard and EMIR reporting requirements have been something of a challenge for many organizations.

Journal: What are some of the concrete ways CIOs working in asset management can deliver value to the business and hence extend their “shelf-life”, as you put it? For example, how does a CIO ensure IT supports portfolio managers in creating alpha and hence a competitive advantage?

Jonathan Mitchell: Being really close to your fellow senior ranking colleagues is key here. I think the creation of alpha is most easily achieved through process change with IT systems supporting, enforcing, and policing those processes, rather than through the concept of IT projects as an end in themselves. IT does not work in isolation; it exists to support the business and drive it forward – that’s how CIOs ensure success and help create competitive advantage.

Journal: With strong evidence that CIOs aspire to become full C-level players in the industry, once they have attained a strong and established position, what is it they need to do next? Is it simply by engaging in the business goals and strategy, entering a dialogue where IT comprehends what it takes to achieve these goals, or what else does it require?

Jonathan Mitchell: I think the CIO role is evolving. I’ve mentioned those who essentially run an ‘overhead’ function and those who are seen as ‘weak service providers’. I passionately believe, however, that the destiny of the CIO is to be the ‘agent of change’ for the business. We are already seeing the emergence of ‘Business Process Improvement’ Directors where the process change and IT functions are merged. This approach also provides further career paths for CIOs.

Journal: Taking these factors into account, what in your view is the secret ingredient that a CIO needs to be effective in an organization, both generally and more specifically applied to investment management?

Jonathan Mitchell: I don’t think there is a single secret ingredient for success, but if a CIO is business- rather than technology-oriented, if he or she has gravitas and credibility with the other members of  senior team and finally, if he or she is focused on achieving significant and positive business outcomes for the enterprise, then I think they have the best chance of success. But it’s a two-way street. The most successful CEOs will know they need this type of IT leader and they will be looking for these qualities in candidates they interview. However, if C-level executives are not interested in IT, and take little interest in who is hired, then they should not be surprised if they end up with a mundane IT function that doesn’t add much value.

Journal: What are some of the key areas within IT that CIOs should be investing in and why? In other words, and bearing in mind your reference to them being ‘harder than climbing Mount Everest’, what are the kinds of investment projects that really make a difference if CIOs wish to survive and prosper in asset management firms?

Jonathan Mitchell: My comment in the book that delivering IT-rich projects is harder than climbing Everest relates to historical performance. Around 25-29% of Everest mountaineers succeed, whereas according to respected research, less than 18% of IT projects are successful. It’s shocking but it’s true. I think the key to success is to pick projects that really make a difference to your company and organization. This extends to include IT system and vendor selection. Getting the right IT system and vendor is critically important. Again, this is easy to say but hard to do. It isn’t just about picking winners. The other critical feature relates to project management and the right way to go about a project, like a system selection, for example. I think IT functions need to ensure their project management teams are as strong and professional as they can make them. A project is just a waste of money if it is never delivered. To address this, I advocate a stern and disciplined project management approach.

Journal: Summing up, what practical advice would you give CIOs working in the investment management industry on successfully integrating their departments into the organizational hierarchy and business strategy? Is ‘safe software’ the only answer? And how should CIOs best approach the delicate issue of outsourcing?

Jonathan Mitchell: We’ve talked a lot about CIOs making sure they integrate themselves into the leadership team as equals and directing their organizations to be an enabler rather than a weak service provider. You mention safe software. In the book, I encourage CIOs to use packages wherever possible and only bespoke where there is good reason for doing so. Outsourcing is probably the most volatile topic in the IT industry. If you choose outsourcing, you must allocate a sufficient amount of management resources to oversee your provider(s). These resources could potentially be greater than the ones saved by outsourcing – not to mention the loss of control that inevitably comes with outsourcing. My own view is that you should either outsource because someone can do it cheaper than your in-house organization, or else because someone can do it better. If someone can do it both cheaper and better, then it's no contest.

Journal: Last but not least, what in your view does it take for a CIO to stay the course and remain successful in such a cut-throat environment as the investment management industry?

Jonathan Mitchell: Today is probably the toughest time I’ve seen in industry since I joined it in the early 1980s. There appears to be no sign that things are going to get any easier near-term. CIOs have to focus with laser-like intensity on ensuring they deliver massive benefits to their organization. To this end, my advice from the main chapters of the book would be:

1. Don’t ever become dislocated from your stakeholders
2. Don’t ever let your projects become deadly and pathogenic
3. Be extremely carefuly with software – it’s seriously shaky and can shake you out of your tree
4. Don’t get obsessive about outsourcing and make sure your consultants are not chronic
5. Lastly and importantly, ensure your strategy is clear and free from schizophrenia and that you are not bleeding your budgets away

Journal: Thank you for your penetrating observations. We hope your valuable insights will contribute to a constructive dialogue among CIOs in the investment management industry.