Unusual Suspects

Is it time to toss out the traditional job description that accompanies the title CIO? Most carriers remain leery of looking outside the IT organization for leadership, but CEOs have made it clear knowing the technology is just one part of the CIO's job description today. On the flip side, insurance companies have hired CIOs who have risen through the ranks of the legal department or marketing. These CIOs may not have grown up with technology, but they have focused on the idea technology is an enabler for the success of the enterprise. So, making assumptions regarding what it takes to be a CIO today is ill advised.

Alan Mercaldo, CIO of MAG Mutual, has seen the role of chief information officer expand beyond the realm of technology in his 14 years with the specialty lines carrier. "It's become more of a role dealing with the business side in terms of how to gain more productivities and efficiencies out of workflow and processes the business units have in place," he says. Mercaldo, who has been CIO for the last eight years, maintains his role is no longer implementing the nuts and bolts of hardware or a software system. "It's managing the efforts of new business processes, especially as they involve technology concerns," he says.

Michael Fergang, CIO of Grange Insurance, had been with the property/casualty carrier for five years before being named CIO in November, but he comes to the property/casualty insurance world with a background on Wall Street and a stint in the life/health world. "Having a financial perspective was in-valuable [to my career]," says Fergang. Still, he believes there are a great number of similarities. "Products are tweaked and distribution might be a bit different, but a lot of the principles around financial products are similar," he says.

Bruce Skaistis, CEO of the consultancy eGlobal CIO, asserts many companies have become frustrated with CIOs who have focused more on information technology and less on business issues. One solution some companies have adopted is to put a business person into the CIO seat. "CEOs and CFOs feel they are spending an awful lot of money on IT but are not seeing bottom-line results," he says. CIOs need to make sure whatever projects they are doing with IT are helping the business either compete more successfully or operate more profitably. "Old-school CIOs are a bit enamored with technology and believe if they do the right technology, good things will follow," says Skaistis. "But that's not necessarily the case as time has proven over and over again. [Carriers] have a lot of challenges on the business side, and they want the CIO to use IT to address those business challenges."

Moving into a property/casualty operation several years ago, Fergang knew he needed a better understanding of the business, and one of the first things he did was to get to know the business and the business leaders. "I don't know how you do systems without understanding your business cold," he says. To rectify the situation, he got himself invited to staff meetings on the business side to understand its pain points and began reading any information he could find.

A major responsibility of CIOs is to establish a working environment with their internal business clients and external clients, believes Mark Cyphert, principal in Deloitte Consulting's insurance technology practice. They must understand what it takes to offer a superior level of service, put together a plan to achieve those capabilities, and manage that process to deliver the plan at an expected service level. "Management is key, but if I had to put a term around it, I would say it's more about customer service," he says. For CIOs who deal with both internal and external customers, Cyphert indicates they ultimately are beholden to their internal customers.

Except for projects designated as infrastructure related, every task performed by the Grange IT department is driven by the business partners, according to Fergang. That doesn't mean programmers and analysts sit around waiting for business units to discover new solutions on their own. "With our expertise in technology and business, we are expected to bring solutions to the table," says Fergang. "We are there as partners, but sometimes I think the expectation is even higher if we understand both the business and direction. We should be bringing solutions to the business [business leaders] may not be familiar with."

CIOs have gone through a long struggle to be considered a natural part of the C-suite, notes Cyphert. In today's business world, he believes the odds are about even as to whether the CIO is considered to be in the same league as the COO or CFO. CIOs' ability to get to that level depends on how well they have been able to keep the COO and the operational group happy, minimize issues, and be responsible to external customers, as well, he explains. "Performance will get you there," he says.

CIOs who have delivered in the past and maintained a high level of customer service have a much easier path into the C-suite, Cyphert reports. "It's not like [CIOs] have a right to be there like a CFO does," he says. "You have to be someone with the talent and capabilities to show you not only have been a consistent performer but have added value to the bottom line of the organization and helped the company achieve its strategic goals."

Cyphert also believes a C-suite mentality exists where business leaders make a point of having the technology leader around when the talk turns to goals business needs to achieve. "Where is the guy who is holding 40-plus percent of the operational costs?" he asks. "There are organizations in which if they had a person with the right set of skills and a strong track record within the organization, they naturally would open the door for that person to be part of the process. But I see other organizations with a more traditional way of thinking, and I believe it will be a while before all organizations naturally think of the technology leader as one of the leaders of the [overall] organization."

CIOs are bright enough to adapt to the changing needs of their jobs because, by and large, they are a pretty bright group, in Skaistis' view. "[CIOs] have analytical backgrounds," he says. "Once they understand the importance of grasping more than just technology, they can cross that bridge effectively."

He is not opposed to having a business person serve as CIO because he's seen examples of good people who have stepped into that role. But he's also seen examples where grasping the technical issues was tough for nontechnical CIOs, and they end up relying on other people to help them make those technology decisions. "Sometimes [such CIOs] depend on the right people and make good decisions," he says. "But unfortunately, they sometimes depend on the wrong people, and those decisions can lead them astray."

From inception to implementation, CIOs should be involved in strategic planning, contends Mercaldo. He gives his input in board presentations dealing with all the strategic initiatives studied by the carrier. "It's not just on the technology side but also the business processes and how I think some of these new initiatives can be best implemented within the organization," he says.

In the old days, "if it didn't have a plug on it, IT wasn't involved," continues Mercaldo, adding the Internet was one of the influencing factors in changing the way technology is used and viewed in business. "The Internet took down the walls of organizations, and it made the role of technology and systems apply to more than just processing, transactions, and keeping track of financials," he says. "[The Internet] has pushed technology out to customers and all consumers of information."

"CIOs have to earn their credibility as business people before they are included in strategic discussions, Skaistis asserts. "They do that by understanding the business issues, speaking the business language, and showing the organization how it can use IT to achieve its objectives," he says. "[CIOs] have to be proactive in terms of grasping the business issues and understanding the business challenge."

While some insurance carriers include the CIO in strategic planning, others do not, according to Cyphert. "I have clients that have achieved that level of maturity in terms of being an organization that looks at all the different cylinders required to be successful," he says. "Delivering technology is clearly one of those."

Pulling the CIO into strategic planning is the very beginning of the process, explains Cyphert. Keeping the CIO part of the senior management team as the team assesses how everyone is doing in relation to the plan is a second factor. Still another factor involves pulling the CIO into areas where the company needs to address problems and close some gaps. "All three points–strategic planning, ongoing management, issue resolution and tactical activities–are the three areas the successful CIO should be playing in," he says.

One CIO whom Cyphert has followed began as a technical bits-and-bytes person and over time has changed the way he thinks and talks about insurance operations and what needs to be achieved in terms of growing the business and reducing costs. This CIO has been able to move up to the level of leading an operational transformation across the board with front- and back-end business processes, new business, and claims. "Technology is an enabler, but it's been amazing how this person has been able to learn the business and know it as well as the people in charge of a specific operation," he says. "By demonstrating its ability to plan and manage, IT has been given an opportunity to participate in planning and managing the entire operation."

Another area of change for IT leaders is the lessened priority on technical skill, which is no longer the single driver of an employee's career path. "Now, the key in that mix is people who can communicate effectively and understand the 'whys' of what you are doing and not just the 'hows.' You have to be able to put someone in the business unit's shoes to look at why business is doing what it's doing and how that relates ultimately to requirements and how you implement your system," says Mercaldo.

At the top of the skills list for CIOs is the ability to understand the business and help focus on business issues. More traditional CIOs with a strong technical background are advised by Skaistis to work on understanding business issues to provide a better long-term solution for companies. Some companies have lost patience, though. "There's a knee-jerk reaction of getting the technical CIO out and putting the business CIO in," he says. At the same time, he warns, while business-trained CIOs speak the business language, the technical hurdles they face are huge and there is just as much risk for them. "Technical CIOs have to learn the business and speak the business language," he says. "That's the first step in establishing credibility with their peers in the C-level."

Many organizations have programs in place to move senior business leadership around, growing and cultivating an individual by giving that employee different opportunities. "There are insurance companies that purposely have a management track of different exposures, and CIO is one of the stopping points," says Cyphert. "CIO is a stopping point as opposed to the ultimate destination." Not as many CIOs get the opportunity to move in the other direction, though. "Most CIOs who have grown up on the technology side rarely get the opportunity to run another part of the operation," he says. "I don't see a lot of traditional technology players moving up to something else."

Grange has an IT succession plan in place for key positions, according to Fergang, who was a beneficiary of that plan when former CIO Charlie Carter announced his retirement plans earlier this year. Still, Grange always has been open to outside perspectives, and Fergang views that stance as refreshing for a company. When he joined Grange, Fergang didn't have any P&C experience. "Coming in and asking questions about steadfast ways we were doing business was a good way to learn why we did it and challenge why we did it," he says.

Turnover has been limited to as low as two or three percent in the IT department over the last three years, Fergang reports. "It's much lower than the industry average," he says. "Any position we've needed to fill might take a little longer because there is a demand for good IT people, but we've been able to fill it. We don't have many openings, so it's not a laborious task to fill those spots in an expeditious manner."

Grange reviews its succession plan annually to refine it. "With my promotion, there were at least three other people who were promoted or took additional responsibilities," says Fergang. "That's what anyone wants in an organization. Our succession plan is based on leadership, technical know-how, communication skills–all the criteria we look at for management."

There is some degree of misalignment in what schools are teaching students in technology and what's out there in the real world, Mercaldo remarks. "You hear a lot about the demise of COBOL, but I'd say 80 percent of our support still is done in COBOL," he says. "There is a mismatch between what's being taught for the future and what's needed to support the current. I think that complicates things and provides more challenges to executives who are looking to staff departments properly."

Technology leaders whom Cyphert has observed operating with other executives do not discuss technology issues unless they have to. "They do not get into bits and bytes and talk about problems with servers," he says. "The most effective ones talk about what they need to do in the context of something, such as increasing claims processing, rather than the need for server upgrades. They keep what they are trying to discuss in business terms and then establish the context and what needs to be done from the technology side."

Most business executives are turned off in their interaction with IT leaders when they begin hearing technical terms, Cyphert comments. "It's like someone walking in and spouting off regulatory jargon," he says. "Speak in business terms. If you place your needs, requests, and opinions in the context of business objectives, it makes for smoother sailing. Know your audience."

Insurance often is viewed as lagging in technology when compared with other financial services. Fergang agrees there is a gap in some areas, but he believes the insurance industry is addressing some of those shortcomings. Self-service is an area in which the industry has a great opportunity to improve itself, indicates Fergang. By contrast, there is a lot of energy being spent by insurers on data mining, business intelligence, and understanding the customer, he adds. "Growing up on Wall Street, those were the ways we did business, and [insurance] firms are finding that's the way they have to do business to be competitive," says Fergang. "The tools are out there, and the standards are being greatly enhanced from an insurance perspective. My thinking is the industry is determining the value of those applications."

IT people must know how to communicate in business language for their internal customers yet still understand the language of IT, maintains Mercaldo. "What I find is that often occurs simultaneously when I have both the technical folks and business folks at the same meeting," he says. "I'll turn to one side of the table, ask questions, and get answers, and then I sometimes find myself looking to the other side of the table and translating on the spot on what [the other side] really means from a systems or process standpoint."

IT departments have used project leaders for years, when someone from IT was needed to talk to the business units. "[The job] would be passed on to someone who could translate or write high-level design specs, then passed on to someone who would write low-level technical specs, and then passed on to a programmer," Mercaldo says. "That really has flattened out, especially with the speed at which things change. You can't go through those tiers anymore. Programmers have to have some of those skills to communicate, write their own requirements and specifications, and then start developing them. It has made individuals become multifaceted in what we look for."

The majority of CIOs welcome the opportunity to make business decisions, relates Skaistis. "That analytical background they bring to the discussion of issues can be very positive, but they have to stay away from the technology jargon," he says. "The CIOs who can't make that transition are going to fall by the wayside. The future of CIOs and IT is all about the business side of the business."