This article focuses on the role of technology in the business decision making process and the challenges to properly structuring business accountability in order to take full advantage of your technology assets.
Being a technology professional for as long as I have, I can remember a time when the technology department was rarely invited to business discussions. Even when it was clear the technology team could add value beyond their tactical skills, the opportunity to interact with the business never happened.
In today’s world, having the tech team report to a business function rather than the chief executive officer isn’t as common, but still happens and for good reasons in some cases and bad reasons in others.
The problem is determining which configuration is the most beneficial to your business and if you can realistically implement it with your current team or should you make changes in order to achieve the proper functional alignment.
The Good and The Bad
In my somewhat biased opinion there are few good reasons these days to hide your technology team behind another business unit. Properly engaged, your technology resources are some of the most well thought, analytical and creative staff members you will have in your company. And therefore a great source of new, potential growth ideas.
Analytical people tend to be free thinkers, are open minded and more than willing to engage on unique solutions; especially if there is a problem to solve. That being said, they are also pragmatists. If not represented and acknowledged as equal to other business functions, these individuals can withdraw and simply provide the minimum required productivity. While this can be said about staff in other departments as well, I believe this situation emerges more often within the technology teams and is more difficult to remedy due to the complex nature of their profession and their internal views of themselves.
So when is it a good idea to isolate your technology team?
I can only think of a few examples where it makes sense. The first and probably the most obvious is when you’re not operating a technical company. If your business is strictly non-technical or has very limited operational needs then your technology staff are administrative (i.e. they keep the office computers running or maintain websites) and aren’t needed to help improve the business. For example, legal firms, auto dealerships, bakeries, etc.
Another possible reason is when your company’s operations are very manual by necessity or preference, or your organization is heavily oriented towards operations. In these examples, Operations is front and center and most likely all of the other departments follow the chief operating officer’s lead anyway.
Bad reasons for pushing down your technology team.
One of the worst reasons is simply cronyism. Without going into detail on this topic, allowing an unqualified individual to lead your technology department, for any reason, is one of the best ways to lose your technology department. This holds true for any team, but I believe that technical resources are especially critical of being led by someone that doesn’t understand what they do or by someone they cannot respect.
Another bad use case is ineptitude. Not all executive team members, business owners or chief executive officers are knowledgeable enough regarding technology and some are intimidated by or afraid to interact with their technology counterparts on an equal footing. As a result, the technology team can end up relegated to a random business unit, in an unproductive and costly use of resources, because executive management doesn’t want, or understand how, to interact with their technology lead.
Examples of Technology Organizational Structures
The following examples illustrate the high-level placement of technology teams within a basic organizational structure. I will not attempt in this article to cover the myriad of hybrid or organic models in use by some companies. In this sense we will hold to a simple functional business model with only Operations, Finance, Marketing and Technology teams.
When Operations Makes Sense
As mentioned earlier, in organizations that produce non-technical products or services, there is an argument for Operations to manage the technology department. The strongest argument being that technology within the organization is mostly meant to support Operations and as such Operations should have priority over how technology resources are prioritized and spent.
This may not be a good choice if innovations for the company are happening outside of Operations. By having technology siloed under Operations, the opportunity for collaboration is diminished…meaning resources are being underutilized or misdirected.
This holds true for any scenario where the technology team reports to a business unit, but rank and file hierarchy will play a significant part in how well technology is utilized. When it comes to innovations, it will be completely on the shoulders of the chief operating officer to properly convey new technology ideas and opportunities to the executive team. The COO may bring the technology lead along to help support these initiatives, but unless the technology lead is active on a regular basis with the executive team (i.e. has a very good relationship with and is respected), the lack of trust and the COO’s inability to explain ROI will result in fewer ideas reaching implementation.
When Finance Is The Right Choice
There are a few reasons why it might make sense to have your technology team report to Finance.
First off, if your organization only utilizes technology for administrative purposes then having the CFO manage IT is a good idea. In this scenario, IT is purely a cost center. To properly maintain SG&A the CFO should have direct input to the technology budget.
Second, if your company is facing difficult times. In situations where an organization is forced to pull back, reassess or reorganize due to economic factors or industry changes, having the technology team report to the CFO might make sense. It makes the most sense when the technology lead has left the company and the organization is simply trying to stay afloat while refocusing. Reevaluating your organizational structure would be warranted at the point innovation and growth return.
Should Marketing Ever Control Technology?
In product-centric organizations where the Marketing department has a strong influence on what the company offers as products and services, the idea of having the marketing business unit manage technology resources becomes one of the arguments when deciding on an organizational structure.
On the surface, especially for a technology company, having Marketing and Technology tied together very closely seems like a good idea. Both departments are innovative and creative. Both like new and shiny things. But unfortunately, the reach of the technology team doesn’t always match the targets set by Marketing. Without checks and balances, Marketing can easily overconsume what the technology team can realistically deliver. As such, Marketing and Technology should always be peered together, generally speaking. I’m sure there are scenarios and individual teams that make this work, but as a rule having one creative organization managing another is not the best approach.
When Technology Drives the Business
For highly technical product and service companies, not only should the technology department have a seat at the business table, but the argument for the technology team to oversee marketing, product development and operations can easily be made.
Depending on the technology executive’s business acumen, having non-technical departments report up through them may or may not be a wise decision, but when the organization’s core business relies on technical expertise to determine product and service direction, innovation, and client sales, it makes sense for the company’s technology lead to have strong control over the delivery resources.
It can also be easily argued that in this scenario, the chief executive should be equally technical if not the actual technology lead. Regardless of the reporting structure, the technology lead must have considerable influence over product/service direction in order for the company to be effective.
When a Split Matrix Approach is Better
Complexity and cost aside, providing each business unit with its own technology resources has several advantages. For starters, and the most beneficial, each department has clear control over how and when their functions are delivered. Each department can tailor their technology needs to best fit their processes. And my personal favorite, each department can be easily held accountable for their technology spend.
This approach is best suited to larger organizations and companies with diverse technology needs. For example, organizations with an administrative need, an operational need and a technical product or service delivery need would benefit.
When attempting to maintain one technology organization, each disparate technology function within the company requires additional expertise and oversight. It becomes much more difficult for a single technology executive to provide clear guidance across departments and business units. It is also more difficult to schedule and prioritize resources. Executive leadership must be involved to set direction and resolve conflicts.
Administrative overhead is the primary downfall of this structure model. And while shared services will certainly help prune SG&A, bypassing dedicated resources to trim administrative expenses will not do business growth any favors.
Evaluating Best Fit
As I believe the examples have shown, the task of evaluating and selecting the best technology structure for your organization must be done on a case-by-case basis, but there are some high-level bullet points to follow.
- What is your core business? Companies that only require administrative technology support are much different than companies that rely upon technology to develop products or deliver services.
- Does your organization have more than one core business model and if so can they be easily segmented into units? The more succinct the separation the easier it is to determine how to structure the technology teams.
- How well does your executive team collaborate? If your team has always worked well together then including the technology team within the C suite should not be a problem.
- What is the level of trust within your organization? Does your executive leadership trust each other to share technology resources if assigned to a business unit?
- How technologically advanced is your executive team? Does your executive team need to understand technology, but struggles with the concepts and how technology applies to the business? Having a strong technical lead on your executive team bridges these shortcomings and provides new opportunities.
- How engaged are your technology team members? Do your engineers actively engage with each business unit? Do they understand the value of technology for the business? If you have a savvy tech team and you’re not providing them a chance to innovate, you’re missing out on potential opportunities.
- Do your teams communicate effectively? Similar to collaboration, an executive team that is forthright about their plans, openly communicates roadblocks and delays, and engages with the other team members will respond to team organization models differently than executive teams that do not communicate effectively.
- Does your culture promote teamwork? This should be a “no brainer”. If your culture is teamwork then the technology team is already a peer with the other business units.
- How aggressive are your strongest leaders? Containing opinions within the executive team can be challenging. Do you or your team allow a few voices to cripple the opinions of the remaining team members? Do those aggressive leaders bend organizational focus in their direction without regard for the greater good? This concept is closely related to trust.
- Is your technology lead equally business savvy? One of the most important considerations to make. Can your current technology lead properly understand executive management within each business unit?
Collectively, balancing core business objectives, team attributes, and innovation requirements are key areas to focus on when deciding your technology organizational structure.
As a business owner or executive team, deciding where technology fits within your organization can be as challenging as deciding an overall business structure. Adding to the challenge, executive teams are made up of individuals with agendas of their own, so the process of deciding department organization can become easily misguided.
In a perfect world, our teams would all be comprised of well-rounded, rational, collaborative and selfless individuals so the process of business structuring would be well measured, controlled, insightful and with universally accepted objectives.
In reality, we all understand our teams are composed of individuals with varying levels of experience, knowledge, abilities and commitment. These team disparities are the catalyst for poor organizational outcomes.
As the business owner or chief executive, it is your responsibility to assess your team’s capabilities and determine if you have the correct resources to properly define how your business will function.
This is when a business consultant can help. Bringing in an outside opinion to help assess and guide the process can achieve a positive outcome while providing a clear outlet for disagreements that arise from the interaction…ultimately maintaining your team’s collaboration and peer relationships once the new structure is put into place.
Overall, the reasons to isolate your technology team are very few and if you are considering doing so, I highly recommend seeking out a third party to help you weigh the benefits and detriments such a decision will have on your business.