The Role of the Chief Information Officer

1. CIO The Role of the Chief Information Officer Presentation by Eliot Lee and Mark Guthrie November 12, 2005

2. CIO What Do These People Have in Common? 3 4 2 1 5 6 7 11 12 8 9 10

3. CIO Presentation Overview • Chief Information Officer profile - Demographics - Salary data - Employment information - Topic relevance • In-depth case studies of 3 CIOs • Best practices: Role of the CIO

4. CIO Role of the CIO Is Evolving • Quotable quote: “It is no longer useful or meaningful to talk about the ‘role of the CIO.’ ” – Barb Gomolski, senior research director, Gartner, Nov. 27, 2000 1 • Rationale • No single “one-size-fits-all” position description • CIOs wear many hats; work in various roles • Different types of CIOs • CIOs are driven by background and interests • Industry and organizational differences affect role

5. CIO Definition: Chief Information Officer • Job title is commonly given to the senior executive in charge of information technology and computer systems that support an organization’s business goals. • As IT has become increasingly important, the CIO is typically viewed as a key strategist within the organization. • In many companies, the CIO reports directly to the Chief Executive Officer (CEO). In some companies, the CIO sits on the Executive Board. • Usually, a CIO proposes IT strategies to achieve business goals and works within an established budget. - SearchCIO.com Definitions 2

6. CIO CIO Demographics • 87% are male • 70% moved up through the IT ranks • 5 years, 9 months is average time as CIO • 4 years, 6 months is average time in current job • 40% report to CEO • 85% are responsible for enterprise-wide IT • 76% do not plan to outsource outside of U.S. - Source: CIO Magazine3

7. CIO CIO Regional Salary Comparison

8. CIO CIO in the Government • In 1996, President Clinton signed what has become known as the Clinger-Cohen Act. • This act required major Federal Agencies to establish the position of CIO. - CSA High Technology Research Database with Aerospace 2001 5

9. CIO CIO Employment Turnover • 5 Years: Average tenure of a CIO in a single position – examples: • Joseph Eckroth, former CIO of Mattel (Toys), left position after 5 years. Joined New Century Financial (Real Estate Investment Trust) • Patricia Morrison, former CIO of Office Depot, left after 3.5 years to join Motorola • Frank Hood, former CIO Krispy Kreme Doughnuts, left shortly to join Quiznos 6 • Some CIOs seek resume-building experiences rather than a long-term career with a single employer. 7

10. CIO CIO Turnover Rate Comparison • 77 business executives surveyed – majority believe CIO turnover is equal to other senior positions 8* • 8% – “CIO turnover higher than other senior positions in the company” • 62% – “CIO turnover is the same” • 31% – “CIO turnover is lower than other senior executive positions” * Darwinmagazine.com

11. CIO CIO Employment Outlook • CIO job search during downturn could last as long as 12 to 18 months • Recruiting for CIOs increased in 2005 • Nationwide • CIO job listings increased 30% from 2004 • Overall IT sector hiring increased 37% from 2004 9 • Locally, CIOs are increasing hiring of IT professionals, according to Robert Half Technology • 11% of CIOs surveyed in St. Louis planned to add to staff; 10% surveyed planned to reduce staff • Net 1% of CIOs planned to hire in the third quarter of 2005 – increase of 2 percentage points from second quarter 10

12. CIO Chief Information OfficerCorporate Case Studies 1 2 3 Three different companies. Three unique CIOs. Three insightful perspectives.

13. CIO CIO Profile: Centene Corporation • Glendon Schuster 11 • Chief Information Officer • Centene Corporation • Joined company in company June 2005 on an interim basis. Became permanent in October 2005. • Senior Management Team Member • B.S., Electrical Engineering

14. CIO CIO Profile: Glendon Schuster Professional IT Background

15. CIO Centene Organizational Chart CIO reports to the CEO

16. CIO Centene Corporate Overview • Managed care provider for Medicaid • Services: claims processing and client reporting • Operates healthcare plans in Indiana, Kansas, Missouri, New Jersey, Ohio, Texas and Wisconsin • Contracts with other companies to provider special services including behavioral health and disease management • 288 IT employees – 159 full-time corporate; 79 contractors

17. CIO IT Culture at Centene • 159 Full-Time Employees • 79 Consultants • Dynamic • Expanding • Reorganizing • Very structured

18. CIO The Biggest IT Challenges at Centene • Creating more customer-based reporting • Increasing disease management • Development of “trending” systems • Regional Health Information Organizations • Ability to bring fast reliable information to patients, doctors and hospitals

19. CIO What Keeps the Centene CIO Awake at Night? • Balance between controls (security, permissions, signoffs) and administrative overhead • Giving people more authority to work on tasks (e.g., migrate code) is generally more efficient, but can lead to risks in security, regulatory procedures, compliance and litigation • Locking down authority tends to tie up the organization in administrative overhead

20. CIO CIO Relationship with CEO • Reports directly to the CEO • Weekly senior management meetings • Average CIO communication with CEO occurs five times per week – “IT rules” at Centene. • Redefining the role of the IT department • Major emphasis on teamwork

21. CIO CIO’s Biggest IT Success at Centene • Major reorganization of the IT department. • Aligned the IT groups within functional areas. Quotable quote: “Change by evolution, not revolution.” – Glen Schuster, CIO

22. CIO How does IT drive business at Centene? • IT drives the business at Centene • IT should be reacting to the business • IT should develop systems that complement the business • Quotable quote: “IT should support the business objectives.” – Glen Schuster, CIO

23. CIO Trends Impacting Centene in the Next Five Years • Disease management • Design systems that do trending analysis based on the amount and types of claims received • Develop software that can help predicate a patient’s predisposition to a disease • Customer-based reporting • Regional health information systems

24. CIO The ‘Untold’ Story from the CIO Perspective • CIO is not a technology expert. • CIO has more “power” than he actually has. • CIO can install and “fix” software problems. • CIO is not involved with the daily activities of the IT department. • CIO does not run the business; takes direction from the business.

25. CIO CIO Profile: Express Scripts Inc. • Patrick McNamee 12 • Chief Information Officer • Express Scripts Inc. • Joined company in February 2005 • Senior Management Team Member • Corporate Resource Council Member • M.S., Electrical and Computer Engineering and B.S., Biomedical Engineering – Marquette University

26. CIO CIO Profile: Patrick McNamee Professional IT Background

27. CIO Express Scripts Corporate Overview • Leading pharmacy benefits management (PBM) company • Services: claims processing, mail pharmacy, specialty prescription fulfillment, benefit design consultation, drug utilization review, formulary management, and drug research • Wide range of corporate and organizational clients including Dell Computer, United States Department of Defense (DoD), Citigroup • Recognized in Information Week’s “500 Most Technologically Progressive Companies” • 1,030 IT employees – 772 full-time corporate; 258 contract

28. CIO Express Scripts Organizational Chart CIO reports to the COO

29. CIO A ‘Typical’ Day for the Express Scripts CIO • 4 a.m. – Blackberry buzzes on night stand to alert about a Severity One “Sev 1” critical systems issue • Joins conference call to discuss troubleshooting and assess impact on systems and users • Half-hour to get ready for work at the office • Time allocation during the day: 1. Leadership and staff meetings 2. Specific topical meetings (Corporate Resource Council, Medicare Part D, Strategy/Planning) 3. Dealing directly with employees (on-on-one meetings) 4. External boards: St. Louis CIO Forum, Community Health and Patient Services (CHPS)

30. CIO What Keeps the Express Scripts CIO Awake at Night? • Performance and reliability issues – No. 1 priority of any IT organization • Human resources, staffing – responsibility for nine direct reports; managing turnover; developing leadership • Managing change • Communication – ongoing at all levels Quotable quote: “It’s all about communication and sharing information.” – Pat McNamee, CIO

31. CIO CIO Perspective: Business, People, and Technical Skills • People– Behaviors and values around leadership and teamwork are paramount. • Business – Express Scripts is in a complicated business; expertise in healthcare is important. • Technology – Technical skills are very important; however, technology is a “commodity.” (Nicholas Carr said this too!) Quotable quote: “We have accountability and the creation of teams that are empowered … non-bureaucratical.” – Pat McNamee, CIO

32. CIO CIO Relationship with CEO • Weekly senior management meetings • Weekly meeting with Chief Operating Officer (COO) – direct reporting line • Average CIO communication with CEO occurs five times per week – “IT matters” at Express Scripts. • Single, dedicated operations team • Teamwork underscores everything

33. CIO CIO’s Biggest IT Success at Express Scripts • In nine months on the job, reduced… • Severity One “Sev 1” systems alerts – 74% • Outage minutes – 60% How success was achieved: • Dedicated Sr. Director position created to focus on supporting systems performance and reliability • Changed responsibility of applications team by reallocating infrastructure ownership/accountability to new team • Heavy investment in performance monitoring – “robots” provide early alerts Lessons learned: Goals from IT strategic plan can be achieved with proper planning, hard work, appropriate allocation of resources and team effort. IT teams can cross the “finish line,” although there are always new goals to attain in IT.

34. CIO The Biggest IT Challenges at Express Scripts • Performance and reliability of systems • Express Scripts is an organization built through acquisition • Not well architected – many diverse applications make it a challenge to sustain the platform • Aligning IT with key industry initiatives such as HIPAA (Health Insurance Portability and Accountability Act) and Medicare Part D (prescription drug benefit) • Huge amount of price pressure in the marketplace for pharmacy benefit management (PBM) companies • Customers have unique program requirements; differentiation affects IT • Striving for perfect systems performance

35. CIO How Does IT Drive Business at Express Scripts? • Introducing new technologies tied to industry initiatives – Example: Consumer-Driven Healthcare • Work with technology start-up companies (third-party vendors) to develop lowest-cost, highest-reliability systems • Quotable quote: “If IT demonstrates that systems are reliable, customers will choose us.” – Pat McNamee, CIO

36. CIO Trends Impacting Express Scripts in the Next Five Years • Price pressure • Develop lower-cost solution (impacts IT spend) • Differentiate service (innovation, performance) • Client and patient service group focuses on technology component (number of calls, cost-per-call, etc.) • Industry initiatives • Carve-In Healthcare Programs • Consumer-Driven Healthcare • Transparency • Requires Express Scripts to develop tools that allow customers to understand the company’s programs • Evolve Web portals to let customers truly see the business

37. CIO CIO’s Most-Important Lesson Learned • IT is all about service. • Teamwork – goal of collaboration is to make others successful • Establish trust • Develop priorities • Quotable quote: “IT is a service organization. It is not of any value as an independent entity. Many [IT organizations] fail because they don’t identify one role … to serve.” – Pat McNamee, CIO

38. CIO The ‘Untold’ Story from the CIO Perspective • IT forces people to have a deeper understanding of business processes (operations, accounting, strategic planning). It’s not just about technology. • Automating processes takes leadership and industry acumen. • CIOs are not technology introverts. • Express Scripts’ IT department develops talent. • Goal of CIO is to develop staff and move people out of IT department and into other areas of the company. This “spreads expertise” (learned through IT) among the organization’s key departments.

39. CIO CIO Profile: Spartech Corp. • Michael Lane 13 • Chief Information Officer • Spartech Corporation • Joined the company in February 2001 • General management/auditing career background Quotable quote: “I never touch the keyboard, I am surrounded by good people.” – Michael Lane, CIO

40. CIO Spartech Corp. Organizational Chart CIO reports to the CFO

41. CIO Spartech Corporate Overview • Largest plastic-sheet supplier in the U.S. • 45 manufacturing plants worldwide • Corporate headquarters in Clayton • 25 IT employees

42. CIO IT Culture at Spartech Corporation • “Best in St. Louis” • Relaxed • Consultant-like atmosphere • 25 full-time employees – small staff supports large IT program

43. CIO CIO’s Biggest IT Success at Spartech • Had upper management recognize IT as an important department in the organization • Implementation of VOIP network through out the company • Implementation of Oracle financial systems • Provide maximum support with minimum staff

44. CIO The Biggest IT Challenges at Spartech Corporation • Proving IT can deliver on it’s promises • Smooth implementation of the ERP project • Keeping up on cutting-edge technology

45. CIO How Does IT Drive Business at Spartech? • IT is “almost” a partner at Spartech. • 4 years ago, IT was a “necessary evil.”

46. CIO CIO Relationship with CEO • Reports to the CFO • Weekly senior management meetings • Average CIO communication with CEO occurs 2 to 3 times per week • “IT is almost a partner” at Spartech.

47. CIO Trends Impacting Spartech in the Next Five Years • Oil Prices - Largest supplier of plastic sheets in America • Healthcare Costs - Healthcare costs are rising • China - China becoming a “major player” in the market

48. CIO CIO’s Most-Important Lesson Learned • Don’t over promise. • Don’t jump the gun on technology. • Under promise, over deliver. • Develop an efficient team.

49. CIO The ‘Untold’ Story from the CIO Perspective • The leadership the position requires CIO to have • CIO is salesman • CIO has to hire good people • Loyalty is a “two-way street”

50. CIO CIO Best Practices:People Skills • IT executives fight image of being too technical, introverted and tactical • Santa Clara University study notes that stereotyping creates “missed organizational opportunities” • Study proposes that IT work “provides the best possible training ground for senior managers.” 14 • Technical skills AND people skills are equally important • University of Dayton study found no differences between CIOs with technical backgrounds and those with general management backgrounds 15