What I Was Thinking... the Last Time the CEO Called Me Into His Office

Michael Hugos, Principal, Center for Systems Innovation | 8/27/2013 | 26 comments

Michael Hugos
Editor's Note: This is part of a series written by CIOs discussing their thought processes and lessons learned from major events in their tenures as CIO. Check back tomorrow for a companion post.

There had been a quiet but intense political power struggle going on that year. We all knew the CEO was going to retire in a year or two, and the issue at stake was to determine who would replace him.

In the politics of deciding who would be the next CEO there was one contender who openly supported IT and advocated for new investments in our systems infrastructure. The other major contender advocated continuing to cut IT budgets. This would be made possible by eliminating all new development work and scaling back on systems already in place. IT would go into a strict maintenance mode and nothing else. At the same time though, business needs were changing rapidly and sales volumes and revenues were increasing. I backed the contender who was in favor of spending more money on IT.

I had been cutting the IT budget each year for the last several years. On one hand it had helped me learn to be ever more resourceful and agile, and get things done quickly and simply. We had some notable project successes that year. But I also felt we were getting to the point where the budget cuts had to stop. I honestly could not continue to tell the board of directors or shareholders that the IT budget was adequate to support our business needs.

There had been some awkward moments that year when big customers and important prospects had asked about our IT capabilities. I was unable to give the answers they wanted to hear, so I dodged the questions and passed them off to other executives on the business side of the house. They were no more comfortable than I was in providing the expected answers.

I put together a budget for the following year that showed selected increases in IT spending and development work in order to provide the systems infrastructure I felt we needed. At the request of several board members I sent them copies of my proposed budget. I had approval to circulate my budget to certain people. The political process of selecting the next CEO was coming to a close, and I did what I could to help my preferred candidate.

Yet, I just didn’t see a way forward if the other candidate came to power. At senior levels there is a strong need to be part of the management team and be a team player. That means showing a united front to customers, staff, and everyone else. It means supporting company plans and policies and doing so in public. If the plans were to continue cutting the IT budget, then I knew I had no place on that management team.

From time to time there are points where I have to assess what I believe in and what I am prepared to say and do. I need to figure out where the danger zone is and be careful about crossing into it. When I see serious risks to myself and to the company resulting from certain courses of action, I find it impossible to remain silent for long.

There was a scheduled meeting where I was to officially present and explain my budget. At the last minute that meeting was canceled, and the next morning a new meeting was suddenly scheduled. I saw it when I checked my calendar. It was accompanied by a note asking me to come alone.

I sensed I was about to find out something important. Come back tomorrow to find out what I learned and whether I had read the politial tea leaves correctly.

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Michael Hugos   What I Was Thinking... the Last Time the CEO Called Me Into His Office   9/23/2013 8:59:51 AM
RE: cutting IT budgets
Hi Anand - I don't want to give away the story; you can read what  happened by reading my follow up post to see what I learned. Here is the link to the post where you can find out what happened - http://www.enterpriseefficiency.com/author.asp?section_id=2741&doc_id=265841&

Best regards,

Michael

 
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Anand   What I Was Thinking... the Last Time the CEO Called Me Into His Office   9/23/2013 3:48:55 AM
RE: cutting IT budgets
For quite some time now the IT departments have often been viewed by management as costly for nothing. This has therefore resulted in the departments being reduced their budget allocations. This is not the case however since they play a major role in the service delivery since most customers nowadays rely on technology on large scale. That said I totally agree with the move to provide the budget proposals and I can only guess why you were called into that office. It was approved. Am I right?
sherly_mendoza   What I Was Thinking... the Last Time the CEO Called Me Into His Office   8/31/2013 3:51:39 AM
Re: A budget too far
"...it's been defined as a pure cost center"...If this is how majority of companies and organizations really think, then I believe it is high time for everyone to sit down and start learning all that they can about IT departments and their significance to any group, org, or company. It should not only be the CIO carrying most of the burden of this issue; the people under him should also be passionate and dedicated enough to shed light on the value of CIOs and IT departments. I wonder what will happen to a company that closes down its IT dept?
kicheko   What I Was Thinking... the Last Time the CEO Called Me Into His Office   8/29/2013 12:00:03 AM
Re: A budget too far
That is like what I am saying. That its going to be more difficult to cut IT budgets.
mejiac   What I Was Thinking... the Last Time the CEO Called Me Into His Office   8/28/2013 7:49:20 PM
The IT Power Struggle
Excellent article Michael,

this is the type of circunstances that CIOs encounter that are not easilly know to those that are on the side lines.

I'm actually amazed that, in today's world, cutting IT spending is considered part of getting to the bottom line. I mean, I'm all for smarter spending, establishing clear priorities, and using analitices to determine what the next potential step is, but not to proactively seek cutting IT spending, which at the end hurts operations as a whole, since you won't be able to respond if demand spikes.
WaqasAltaf   What I Was Thinking... the Last Time the CEO Called Me Into His Office   8/28/2013 2:45:52 PM
Re: A budget too far
Kicheko, the basic reason why SaaS was successful was because it brought down the expenditure of IT functions by saving upfront licensing costs. Reaching to a level where services by SaaS vendors are also exhausting budgets reflects how organizations are rapidly benefiting from the services and as a result more services have become a requirement.
CurtisFranklin   What I Was Thinking... the Last Time the CEO Called Me Into His Office   8/28/2013 12:34:59 PM
Re: A budget too far
@SaneIT, the disturbing part of these conversations is how quickly a "X$ will let us eliminate YY jobs" discussion will get the attention of other executives. It's a crazy state of affairs.
CurtisFranklin   What I Was Thinking... the Last Time the CEO Called Me Into His Office   8/28/2013 12:32:42 PM
Re: A budget too far
@kicheko, the secret is going to be for CIOs to convince the rest of the organization that IT is still important when it's serving as much as integrator as service provider. It's a political trick that may be tough for many people to pull off.
CurtisFranklin   What I Was Thinking... the Last Time the CEO Called Me Into His Office   8/28/2013 12:31:12 PM
Re: A budget too far
@nimanthad, you're right of course: IT's contributions certainly should be considered. The question is how to accurately measure those contributions, since we all know that factors that aren't measured aren't truly considered when it comes to budget time.
SaneIT   What I Was Thinking... the Last Time the CEO Called Me Into His Office   8/28/2013 7:57:43 AM
Re: A budget too far
I can't tell you how many times I've been part of conversations around this issue.  Even other departments that do not generate revenue get a less critical look than IT.  Let's use accounting as an example.  Say payables are slow to be processed, they will look at hiring or spending money to speed up that process and it is accepted because it means money coming in faster.  If IT went to the table with similar examples it would be much easier to get their budgets passed.  If you go in saying "we need $X to keep running" it gets scrutinized very closely.  If you go in saying "if we spend $X we can improve this process and cut our cost to do business" things go much more smoothly.  IT department heads need to learn how to sell projects and budgets rather than just saying this is the number take it or leave it.
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