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CIOs, Constituents and Cooperation

Former CIOs, headhunters weigh in on best practices for managing relationships.

Art by Hayden Maynard


To do their jobs, CIOs deal with many constituencies—IT, the board, and the executive team, to name a few. Depending on their governance structure, they may need those parties’ cooperation for anything from adopting a new custody bank system to staying on top of accounting changes or getting approval for a different asset allocation. But dealing with each constituency poses its own challenges and, if not handled with finesse, means the difference between a successful tenure or the opposite.

The upshot: Relationships must be actively and continuously managed by the CIO. “You have all these different moving pieces in an organization and they become headaches for CIOs trying to get things done,” says a former CIO. “And you have to maneuver while still steering the ship of your portfolio.” Or, as Charles Skorina, who heads Charles Skorina & Co, an executive search firm focused on CIOs and other senior financial professionals, says, “Being a CIO is like herding cats.”

While dealing with multiple constituents is an issue for any executive, it’s especially troublesome for CIOs, according to many observers. For one thing, they work in a part of the organization that, typically, few others are familiar with. As a result, to many constituents, the CIO’s role and importance aren’t clear. “There aren’t a lot of portfolio strategists and asset managers elsewhere in a company or organization,” says Greg Williamson, head of strategy for Pluribus Labs and former CIO of The American National Red Cross and BP America Inc. But, if something goes wrong, everyone likely will hear about it. Plus, partly because the role is misunderstood, other employees, especially in public pension funds, may resent CIO pay, not to mention frequent trips to meet with managers and the like.

Common Issues

What are the most common bones of contention that arise? That depends on the relationship. For operations and back-office functions, often problems come up when accounting doesn’t keep CIOs apprised of changes in tax reporting requirements. Another is when CIOs need to ask the back office to examine or change a long-standing process. Case in point: According to that former CIO, soon after starting at one organization, he realized the custody system was “several generations” out of date. For example, it couldn’t account for private debt, so all those transactions had to be handled manually. But when he discussed the matter with the folks in accounting, much to his surprise, he hit a brick wall. “They said everything was fine and they didn’t want to make any changes,” he says.

Ultimately, CIOs are at a particular disadvantage when working with operations functions that don’t report directly to them. “You’re getting someone to help you who has no vested interest in doing so,” says Williamson. That’s especially true in organizations where certain functions, like IT, are a shared service and, therefore, staffed by personnel whose jobs don’t depend on winning the goodwill of the investment officer.

Boards and the executive team, especially the treasurer, are another matter. Certainly, they have a vested interest in having a successful investment office. Still, typically CIOs get pushback for proposing anything from an investment strategy change to different hiring policies. That’s especially true if it means diluting the board’s power or asking for a bigger budget allocation. For example, two big bones of contention, especially among many public pension funds, are giving staff more discretion to pick fund managers and paying higher compensation to attract top talent. One CIO has been trying for two years to get approval from board members, all of whom are financial neophytes elected by the organization’s membership, for a more competitive pay structure for his staff. “It’s really hard for them to imagine that an investment officer should be paid hundreds of thousands of dollars when a city planner is making $70,000 a year,” he says. “There’s a giant disconnect.”

Relationship-Building Strategies

For CIOs, keeping constituents on their side calls for building a consensus, especially when they’re pushing forward a big change. That necessitates keeping all concerned parties informed and encouraging their input. Skorina points to the CIO of a major university who, shortly after joining, wanted to get buy-in for a sweeping new investment strategy. With that in mind, he assembled a working document and sent it to not only board members, but faculty, administrators, retirees and others, asking for their feedback. After about a year of back and forth, he produced his final 4,000-word report, which laid out in detail the CIO’s duties, plus investment strategies and their implications. It was widely read. “The objective was to get buy-in from all the groups who could potentially cause him trouble,” says Skorina. Plus, he had written evidence to point to should anyone question his decisions later on. “Memory is short-term and unreliable,” says Skorina.

In some cases, creating allies requires turning to a third party for back-up. That former CIO who encountered resistance when he tried to update the organization’s custody system? He ended up getting approval from the board to hire an outside consultant who could evaluate the current set-up and help with a request for proposals (RFP) for a replacement, if necessary. It was a successful ploy. “The consultant assessed the system and explained to accounting that it was 15 years behind the most-current version,” he says. “That opened their eyes.” When they sent out an RFP for a new system, the accounting staff suggested not even including the old provider among the candidates.

The most critical constituency for CIOs is probably the board, since they’re ultimately the boss. Frequently reminding them of the company’s investment policy, and especially their responsibilities, is useful, particularly for those times CIOs want to adopt, say, a new asset allocation or need to put a stopper on a board member’s dubious suggestion. The object is to relate how the change relates to the overall plan. When hedge fund managers and other finance experts in alternative investments would ask him why he wasn’t more heavily weighted in such options, Williamson would regularly point to his policy. “I could tell them, for what we’re trying to achieve now, that won’t work,” he says.

Building relationships with boards, as well as other key executives, involve one-on-one discussions, so CIOs can understand members’ pet peeves and address their concerns in private. “Never go to meeting with a request about which you don’t know the answer before you get there,” says Williamson. “It should be a fait accompli when you get to the formal vote.”

Also important is winning cooperation from the treasurer. That department, with its focus on sources and uses of funds, as well as reporting requirements, needs one particular thing from CIOs. “They don’t want any surprises,” says Williamson. For that reason, CIOs should make sure investment objectives are part of the year’s budget and liquidity needs are communicated well in advance. Also staff should report frequently on how they’re doing. Endowments that make regular payments to the treasurer’s office to fund operations should also provide updates about that. CIOs also suggest that, to make sure the treasurer, as well as accounting, keep the investment office aware of new tax reporting rules that could affect their jobs, CIOs should have a two-way reporting structure for giving each other a heads-up about changes. It’s one more way to cultivate important relationships and allow CIOs to get the job done.

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