Should the CIO be on the Executive Board?

The news that the CIO of Co-operative Group (which has a
minority holding in Co-operative Bank), Andy Haywood, is to move off the
Executive Board but to remain Group CIO brings a further spotlight onto what is
the role of the CIO going forward and, whilst not directly related to the
demotion of Mr Haywood, specifically what is the future role of CIOs in banks.

The reporting lines of CIOs have evolved with the increasing
use of technology in organisations. Even the title of the person responsible
for IT has evolved alongside the technology.

When computers were first introduced into banks their sole
purpose was to act as a giant calculator and move what was held in physical
ledgers onto computers so that the bank’s financial position could be
calculated. The person responsible for making that happen would have had one of
a few titles including EDP (Electronic Data Processing), MIS (Management
Information Systems) or simply Computer Manager. The role would have reported
to the Finance Director or Chief Accountant as that was the department that was
primarily serviced by computers. Indeed today in many organisations today IT
continues to report to the CFO.

As automation started impacting the back office operations
of the banks and IT started being used outside of Finance, the Head of IT or
CIO may have found the reporting line moving to the Chief Operating Officer.
For many banks today that continues to be the case.

However with the rise of digital, IT has increasingly
permeated beyond the back office and accounts departments and an increasingly
large proportion of IT expenditure is being consumed by Marketing.

Banks in particular, where fundamentally the vast majority
of their commercial, money-making operations are conducted electronically and
not in the physical world, IT is increasingly seen as the lifeblood of a
successful business. You only have to observe how little a bank can actually do
when its IT systems crash and customers cannot access their bank accounts or
their card transactions are not processed to see how important IT is to the
operation of a bank.

There have been some interesting experiments in terms of
what the right organisation structure for IT should be.

For instance at Barclays when Shayghan Kheradipir was Chief
Operating and Technology Officer, he had a model where the COO and CIO of each
business unit jointly reported to the CEO of that unit. (See CIO/COO
joined at the hip
). This meant that IT had a voice at the table for the key
strategic decisions for that business unit rather than merely being represented
by the COO.  With Mr Kheradipir leaving
Barclays to be the CEO of Juniper Networks, it will be tempting for Barclays to
revert to the more traditional model.

Commonwealth Bank of Australia has gone further than
Barclays did by having the CIO reporting directly to the CEO. It is interesting
to note that subsequent to that organisational change Commonwealth Bank has
spent significantly more as a proportion of overall costs than other banks on
refreshing its IT but as a consequence has one of the most advanced IT
architectures and platforms of any retail bank of size globally. It is now
being able to exploit that new platform to launch new products and services far
faster than its competitors.

However with IT increasingly being outsourced, (whether it
by the traditional route of selling IT assets to an outsourcer and buying back
services or through the use of the cloud), the demands of digital and
increasingly Business Intelligence and data analytics, there is a bigger
question as to whether there is a role for the traditional CIO at the Executive
table? If it isn’t the traditional CIO then who should be providing the
strategic input of the role that IT can do to both lead and serve the bank? The
skills are far more aligned with a business savvy enterprise architect who has
no vested interest in building an internal organisation but is more interested
in providing a pragmatic solution, wherever it is sourced from, who knows how
to form strategic alliances, both within the bank and outside and who is driven
by the desire to use technology to deliver the best value to both internal and
external customers.

That doesn’t appear to be what the latest announcement from
the Co-op regarding the role of the CIO is saying, indeed the organisational
change sounds like a regressive step. But then the Co-op has far bigger
problems to address than how to more effectively exploit IT.

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