February 5, 2019
History of IT Departments
It is no secret that computers crunch numbers. So, it was natural that one of the first fields in which they were widely used was accounting. Computers probably have saved billions in dollars over the years by making accountants’ lives easier. It was therefore natural, for many years in business, to consider the computer department, or in modern parlance, the IT department, part of Accounting. We’re here to tell you that it is time to ditch this archaic concept, and your business may depend on it.
Strategy vs Operations
So, which kind of planning brings the most long-term growth to your business: strategic or operational? Day-to-day operations are important to be sure, but when it comes to long-term, sustainable growth, strategic decisions matter the most. It is easy to get mired in daily decision making about what raw materials to order, or which jobs to produce first, so naturally it is common for business owners to want to delegate. They delegate those operational decisions, so they can focus on what they know builds their business: strategy.
Let’s bring this back to IT though. Is IT strategy or operations? It absolutely must be both.
Why then do businesses so commonly then have the IT department report to a Controller or Head Accountant? Usually it is because that’s the way it has always been done, and it is really doing businesses a disservice. Accounting is probably the most operationally pure part of a business. Unlike many other parts of business, there are literally rule books for accounting, and all accounting must follow those rules, so it leaves very little room for strategic thinking. Sure, there are financial forecasts and such, but that falls more into the realm of statistics and analysis. Computers can certainly help with that, and that’s the operational part of IT. But does that mean that the whole department must report to Accounting?
The Duality of IT
IT has the unique position of requiring great strategic thinking to be effective, but also must be operationally efficient. We submit that there is no other part of business that must operate in both realms constantly. (If you disagree, perhaps your IT provider isn’t helping you with strategy, or you’ve never considered them a strategic resource.)
Businesses the world over spend money on IT, roll out great tools, but then drop the ball. They fail to think about how to best use those tools to gain a strategic advantage over their competitors, and they don’t sufficiently train their users to get the most out of their investment. We see it time and time again, but why? Because decisions that should be made at a strategic level are being made by operational thinkers. So, how do we fix this?
Fix the Org Chart
Whether you have an in-house IT department, or use a service provider, connect those people directly with the head of the business. We’re not suggesting giving the nerds unfettered access to pester the CEO with constant requests for new stuff. Rather, form the IT department so that the head of the department is a strategy-oriented person. This person commonly holds the title of Chief Information Officer (CIO) or Chief Technology Officer (CTO), but titles are irrelevant. That person must not only have a strategic mind, but report directly to company ownership. Fortune 500 companies have figured this out long ago, and it is surprising that we still encounter people that think that is because “those companies are huge.” No. Those companies “are huge” because they realized the strategic value of IT and have a CIO (among other factors, of course).
IT Strategy in SMBs
How can small and medium businesses get in on this action though? If the person that heads up your IT department can’t help the business strategically, it might be time for a change. Either the ownership hasn’t thought to include IT in strategic planning, or the IT department needs a better leader. In small IT departments it can be hard to find someone with vision and operational skills, which is why we have our Virtual CIO service, which gives SMB’s access to both vision and operations. You might also be able to restructure who IT reports to, such as someone already within the company in a strategic role such as a COO.
Certainly though, capping IT’s potential by sequestering them in the Accounting department helps no one, especially during the tax season!
We often see this disconnect in older, established companies that just haven’t though to reorganize over the years. We hope that after reading this you might consider unlocking your IT department’s potential. Of course, if you need assistance, please reach out to us.