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 / Third Quarter 2002 / Issue 28(originally published by Booz & Company)


CEO vs. CIO: Can This Marriage Be Saved?

But as bad as the merger was — and although Union Pacific is profitable again, it only now is getting Southern Pacific under control — the deal and its aftermath highlighted a far worse dysfunctional relationship in the Union Pacific family: Chief Information Officer L. Merill Bryan, Jr. was not among Chief Executive Officer Richard Davidson’s inner circle of advisors. In fact, Mr. Davidson hadn’t told Mr. Bryan about the purchase of Southern Pacific until after it was completed, even though numerous other top executives — even some sales and marketing managers — had sat in on some of the negotiations and had been asked by Mr. Davidson for their opinions.

In hindsight, Mr. Bryan says that had he been included in merger discussions, he would have warned top management that Southern Pacific’s computer systems couldn’t handle the complicated logistical strains of a modern railroad. And although he might not have recommended against the deal, he could have tallied up the millions of dollars it would cost to integrate Southern Pacific within the Union Pacific system, which could have put Union Pacific in a strong position to cut the price of the acquisition.

The repercussions of the large gap between CEO and CIO at Union Pacific were a very public embarrassment for the railroad company. But in perhaps less visible and quieter ways, this same relationship-on-the-rocks scenario, placing the CEO and CIO at opposite ends of the executive corridor, is being played out — with similarly costly results — at a large number of companies around the world.

The message is clear: Communication drives organization. Creating a management and decision-making structure at a company that includes a significant role for the CIO is only the beginning; after that, a CEO must strongly communicate support for not only the CIO, but also the technology that the CIO represents. Otherwise, turf battles between business units and technology champions will inevitably break out.

There are many ways for a CEO to publicly express backing for the CIO and mend the relationship. One is to put the CIO on the calendar for regularly scheduled meetings — once a week or so, or at least as frequently as the CEO meets alone with the head of sales, marketing, manufacturing, and the like. This is not just a formality. It’s a chance for the CEO to question the CIO about technological initiatives that are suited to the company’s current plans and those not even announced, and it’s an opportunity for the CEO to share private corporate information, such as the existence of ongoing merger discussions, and elicit the CIO’s opinion. On the flip side, it gives the CIO a platform to show that he or she is ready for managerial strategizing.

Another way for a CEO to communicate support for the CIO is for the CEO to equate the organization’s success with the implementation of the most advanced and highly leverageable technology; in other words, to make it clear that this dedication is one way the company can outrank its competitors. Simply investing in technology, however, is not enough. The CEO’s commitment must be grounded in targeting specific value opportunities created by technology. That, for instance, is what occurred at Kinko’s Inc., which has transformed itself from a campus-oriented copying center into a web of “branch offices” for small businesses fully outfitted with the latest networking, communications, and document-production technology. Kinko’s has also launched, which lets people design brochures, business cards, and other materials online and place an order to pick them up at a nearby retail store. CEO Gary Kusin, facing rivals that range from stores like Mail Boxes Etc. to major manufacturers like Xerox, Canon, and Kodak, has said at numerous investor and analyst meetings that the current technology initiatives are just the beginning for Kinko’s — faster equipment, wireless access, and more sophisticated networking with customers are all in the works — and that the company’s future success depends on doing much more.

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  1. David M. Katz, “It’s Good to Be King,”, June 5, 2002; Click here.
  2. Terry A. Kirkpatrick, “Research: The CIO’s Role,” CIO Insight, April 1, 2002; Click here.
  3. Esther Schein, “Judging Tech? It Ain’t Easy,”, March 5, 2002; Click here.
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