Hail to the Chiefs

A CIO can help a small company use technology to fully realize competitive opportunities. Here's how to know when you need a CIO. Also: three companies that benefited from bringing one in.

Hiring a CIO for a tiny company may seem like dropping a whale into a koi pond. But a few small businesses are finding the investment pays off

Robert Rollo had been helping large companies recruit chief information officers for four years before he decided to get one for himself. His executive-search firm, Rollo Associates, has only nine employees, but it runs on information--rÉsumÉs, industry profiles, news stories about layoffs and companies on the move, and the assorted detritus turned up in background investigations. And although the company has computers, back in 1996 it was using them merely to hold all that information rather than to actually manage it. "We were using only 10% of our systems," Rollo says. "Technology wasn't driving us, and it should have been. I said, 'Let's go out and get somebody who's going to push us in that direction.'"

For a company as small as Rollo's, hiring a CIO--a management-level, business-focused technology leader--might seem as extravagant as buying a corporate jet. Salaries for experienced information systems (IS) directors often run north of $100,000, and major corporations may dangle seven-figure compensation packages before pedigreed candidates. (Last year CIOs' salaries at large companies jumped 61%, to an average of $264,700 base pay and $625,000 in bonuses, stock options, and other compensation, according to a study by executive-compensation consultancy Pearl Meyer & Partners.)

What those corporations are paying for are big-picture thinkers who can help them increase their value and seize new competitive opportunities. Small companies generally lack the resources to pursue such ambitious agendas; in addition, many see their technology needs as merely tactical and consequently fill them as simply and cheaply as possible. Typically, a small business will rely on the individual or collective knowledge of its existing staff to keep its computers running and will bring in contractors or low-level support people to troubleshoot and handle upgrades. When upper management sits down to plan, there is no voice saying, "Here's what is or will be possible" in the technology-centric future.

But companies of all sizes increasingly view technology as a strategic resource (as is stated at least 10 times in every business book written in the past five years, but no less true for that). Many small businesses seeking to enter the electronic marketplace, expand into global markets, or offer new technology-based products and services throw themselves on the mercy of a consultant. Working along with that consultant, however, must be someone with back-of-the-hand knowledge of both the business and the technology--or else the company risks getting less-than-optimum results. "The small-business environment is very intimate, and companies do a lot of brainstorming every day," says Rollo. "If technology is going to be a big part of your strategic direction, then you'd better have someone in-house working on it."

Not all small companies need a CIO; in fact, most will be able to muddle along without one for the foreseeable future. And the responsibilities of an IS director in a 20-employee business are obviously worlds away from those of a Max Hopper (of American Airlines fame) or a Ron Ponder (former senior vice-president and CIO of Federal Express). But businesses that rely on the efficient collection, analysis, and dissemination of information should at least start considering the investment now, some experts believe.

How do you know whether the time has come for your company? Paul Strassmann, CEO of Software Testing Assurance Corp., in Stamford, Conn., and a former Defense Department CIO, says that a small company can tell whether it needs a CIO by looking at the ratio of its capital assets to its "knowledge assets," which he defines as intellectual property, proprietary customer information, and employee skills. If knowledge assets are greater, says Strassmann, then the company needs a CIO to manage them.

If a company does intend to hire a CIO, it should do so early--ideally at start-up, advises Strassmann. That way, he or she can build from scratch a culture in which information technology is valued, instead of having to win over employees who may have soured on IT after suffering through a string of unspectacular support people or a disastrous consultant gig. Mike Christy, managing partner of the international-technology practice of executive-search firm Heidrick and Struggles, in Irvine, Calif., believes that while the precise order of management hires will vary, the CIO should be one of the first five. "Company founders wait too long to have a CIO on the senior executive team," he says. "I think the CIO should be part of the early management team to be part of the early strategy."

CIOs hired in a company's infancy can also forge immediately into new opportunities, such as budding markets and acquisitions. Many companies resist bringing in a CIO or senior IS executive until things are an unholy mess, according to Christy, and as a result the new executive spends more time mopping up than leading. "We're finally called in to find a CIO when the company's systems are in disarray and are not supporting the business," he says. "Every catch-up day costs a business money."

Once hired, the CIO should be expected to learn the business as thoroughly as any other high-level manager, attending management meetings and strategy sessions and working closely with business users as well as with the technology staff. IS directors who allow themselves to become ghettoized in tech departments won't be able to do what the majority of CEOs want them to do most, which is align information technology with corporate goals, according to a recent study by Ernst & Young and CIO magazine. That study focused on large companies, but Ken Norland, a partner at Ernst & Young, says that small companies have identical goals. "It's just a difference of scale," he explains.

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