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What CHROs need to know about CIO succession

The cost of poor CIO succession is significant, both from a financial and morale perspective. In addition to heightening risk and the interruption to technology projects, the board loses its ‘right hand’ on all technology matters and the business loses a critical enabler of the core strategy.

The CIO is mission critical; not just for a company’s IT operations but for achieving the overarching organisational strategy. Technology is now integral to business success with investment in digital capabilities accelerating rapidly; business IT projects skyrocketed during the pandemic and spending is projected to continue increasing this year by 5.1%. The CIO plays an indispensable role in the decision-making of these investments; 80% of senior executives have little confidence their leadership could employ technologies such as AI and automation. With tech capabilities inseparable from strategic goals, having a tech specialist within the senior leadership team is crucial.

CIOs are also essential for risk management. Many of an organisation’s most critical risks are technology-related, and importantly, other non-technology oriented leaders, are for the most part, ill-equipped to handle these challenges. The CIO is therefore a critical position within the senior leadership team and must possess the right capabilities to deliver in an increasingly complex landscape.

The cost of poor CIO succession is significant, both from a financial and morale perspective. In addition to heightening risk and the interruption to technology projects, the board loses its ‘right hand’ on all technology matters and the business loses a critical enabler of the core strategy. Despite this, CIO succession is undeveloped in most organisations, creating significant problems for CHROs and the organisation at large.

Below, we explain how the CIO role has changed, what the current talent market looks like, and why CHROs should build a robust pipeline of future CIO talent.

How has the CIO role evolved over the past three years?
Traditionally, the CIO role was focused on managing and maintaining an organisation’s IT infrastructure. However, the digital landscape has evolved considerably and the CIO role now encompasses a much broader range of responsibilities.

CIOs are expected to be strategic business leaders, capable of using technology to drive growth and innovation. They should understand the business and be able to translate its needs into technology solutions. Over the past three years, the role has become even more integral to a range of business functions; CIOs and their teams cannot operate in a silo. They must be able to work closely with other business leaders to understand the company’s goals and objectives and develop strategies for using technology to achieve them.

The pandemic highlighted the necessity of adaptability, and CIOs must be comfortable straddling the line between strategy and operations. The role has become cemented as the board’s ‘tech guide and advisor’, and therefore requires someone who can communicate at all levels and is capable of influencing those at the top of organisations. Importantly, they are also a function leader; this requires the emotional capacity to retain, inspire and raise the collective performance of the technology function, while remaining more tech-aware than ever.

In short, the role has become more complex since the pandemic, demanding a broader range of skills and greater credibility at a senior level.

How hard is it to find high-performing CIO talent?
There is an absence of well-developed succession planning in most organisations. Few companies prioritise succession and lack even a basic succession process. Even companies with highly governed HR processes that are great at defining ‘top talent’ can fail to create the opportunities for individuals to take on step-up/stretch roles. Given the deep technical nature of the function, this kind of flexible development is necessary for CIO candidates to gain leadership skills and exposure to areas like marketing, finance, the supply chain etc. Likewise, those with a leadership programme can also fall short of keeping up with the changing responsibilities and technology knowledge required of the CIO role.

It is important to note that the average tenure of a CIO is three years ten months but this slowed slightly during the pandemic. Since then, the typical churn has increased and is continuing to escalate, indicating that for many organisations, CIO departure may be on the horizon in the short-term. Those with a poor succession plan in place will be forced to go to market. However, the hiring environment is far from easy; despite headlines in 2022 about tech job cuts, competition for top CIOs remains fierce.

This has led many companies to appoint interim CIOs as they search for a permanent replacement. While interims can be highly effective, this still poses risks, creates disruption to the organisation, incurs a financial cost, can lead to missed technology opportunities, and can take a toll on morale and productivity.

Across the board, internal CIO succession has become more difficult for organisations. Tellingly, since 2010 the number of CIOs appointed internally has dropped from 71% to 46%. Regardless of whether a HR leader looks to appoint internally or hire externally, finding high-performing CIO candidates is a challenge.

Why should I build a strong pipeline of CIO talent?
Unplanned succession costs firms an average of $1.8 billion in shareholder value – and succession challenges have been identified as the second biggest risk facing organisations on a 1-year and 10-year horizon.

Most organisations have a talent pipeline gap internally and there’s a war for CIO talent externally, which will only grow in the next few years. The most effective and cost-efficient approach is to build a robust cohort of internal candidates who can be developed as future candidates for the CIO role. Building a pipeline of strong CIO talent means investing in training, establishing mentoring programmes, partnering with external organisations like universities and industry bodies, and being flexible in development needs.

But importantly, it also often requires an external, objective provider who can come in and evaluate the IT talent from an unbiased perspective and help identify those with potential, as well the critical talent gaps. This approach ensures HR leaders pick the best candidates while also mitigating the chances of selecting the wrong candidate. All too often talented individuals who ‘seem capable of more’ are coerced into taking on greater responsibility and the result is simply taking a productive team member and making them less so by pushing them in a direction they didn’t want to go.

With technology now a cornerstone of the business strategy, CIO succession planning should be high on the CHRO’s agenda. However it is achieved, the most effective succession planning programmes involve an embedded development process rather than an isolated exercise to replace the top job. This collectively upskills the entire IT function, increasing the team’s capability to respond to future organisational needs, and ensures tech leadership gaps are all but non-existent.

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