Barclays PLC, the giant international banking group, illustrates this organizational setup well and is evidence of how effectively this structure can facilitate an enduring and positive relationship between the CEO and the CIO. Not only is Barclays the U.K.’s leading Internet bank — for both consumers and businesses — but it is also completely overhauling its core technology infrastructure to offer new retail services to customers nimbly, without long, drawn-out launches. This endeavor has been greatly enhanced by the relationship CIO David Weymouth enjoys with CEO Matthew Barrett on the company’s Group Executive Committee. Mr. Weymouth is a 24-year veteran of Barclays, a nontechnologist who took over the bank’s vast technology operations (with a budget well over $2 billion) in 2000. Mr. Weymouth’s initial reaction to the importance of having a CIO on the Group Executive Committee is that it stretches the CIO’s role considerably, because it “forces me to create the strategy as well as deliver on it. I’m in the beginning of strategy generation, where there’s a competition for resources, human and monetary. And like any other member of the Executive Committee, I have to compete for them.”
This has given Mr. Weymouth a keen appreciation for the politics and priorities of business planning that are required for IT projects — and a deeper understanding that successful technology strategies, like all other critical ventures at a company, must be championed by a manager who has to build consensus and convince peers to agree on the plan. Being part of the executive board meetings forces a CIO to fit the technology to the corporate strategy, Mr. Weymouth says, and it imposes a discipline on the CIO to produce strict return-on-investment estimates for every project he or she recommends. “I can’t get away with anything but the most rigorous calculations,” Mr. Weymouth says. “Sometimes it has to do with value creation and what that’s worth compared to the cost of the project, and sometimes it’s simply careful benchmarks that can be tracked very closely to see if we’re meeting them. But either way, before I suggest anything, I know I have to justify it, and ultimately that ensures that the technology we implement will help the company to the maximum degree.”
All of this has impressed CEO Mr. Barrett, who has staked much of Barclays’s future on using technology to deliver significant benefits internally and externally (to customers). “We don’t get lots of detailed memos that say do this and do that,” Mr. Weymouth says. “He tells us that providing the best service to the market is important, and that technology is important to providing the best service. That’s the strategic framework, and my job is to work with the Group Executive Committee to devise IT answers that fit it.”
Bridging the Communication Gap
In contrast, the merger of the Union Pacific Corporation and the Southern Pacific Rail Corporation was a marriage made in hell. In 1996, Union Pacific, the U.S.’s No. 1 railroad, paid $4 billion to purchase Southern Pacific, in hopes of gaining a stronger foothold in the Southwest. But within a few months of the deal’s completion, hundreds of abandoned freight trains were strewn throughout Texas as Union Pacific lost track of entire cargoes of plastics, chemicals, coal, and grain. Some deliveries ran as much as 40 days late. And Union Pacific customers — the nation’s biggest shippers — suffered more than $2 billion in lost sales in the two years following the acquisition. Union Pacific itself fell nearly $700 million in the red in 1998. The main culprit: Union Pacific’s ambition had outstripped its common sense. Southern Pacific, a troubled railway for years, had been monitoring its trains with an outsourced computer network that was so ancient it was being held together with the logistics equivalent of baling wire. Unaware of this, Union Pacific tried to impose its more sophisticated, organized, and up-to-date tracking system on Southern Pacific’s creaky enterprise, and the result was one of the worst debacles in railroad history.