IT Chiefs to Top Boss

CIOs talk about bringing their expertise to executive suite

By Ann Dee Allen

Just as technology has rapidly evolved to encompass higher levels of complexity and sophistication, the role of chief information officer has expanded in kind. Community bank CIOs are now responsible for a wide variety of executive duties involving human resources and significant technology expenditures and systems.

So as technology is increasingly integrated into banking business strategy, it only follows that the CIO track should be considered often as a viable career path to the community bank CEO’s office.

Two community bankers who traveled the technology highway to become CEOs highly recommend this roadmap to success. Sam Vallandingham, president and CEO of The First State Bank in Barboursville, W. Va., with $305 million in assets, rose through the ranks of the bank his family owns—as an IT professional. David Hayes, president and CEO of Security Bank in Dyersburg, Tenn., and CIO of the six-community bank Security Bank Holding Corp. of Tennessee, served as senior vice president of data services at the former Union Planters Bank in Memphis before moving to Security Bank as CEO. Security Bank has $170 million in assets; Security Bank Corp. of Tennessee’s assets total $835 million.

Vallandingham is a fourth-generation community banker and has been involved in the family business for 21 years. He was named president and CEO in April 2013, after beginning his career in the mortgage department and leveraging his education in technology to manage the bank’s IT operations for nearly 15 years. He studied computer technology and has hands-on experience building computers, managing operating systems and working on networks.

“One of the things that I’m able to bring to the table is that I bridge the gap,” Vallandingham says. “I can sit down and bring the technology to the banking side of the organization in a way that they can understand it, and I can also bring the banking side to the technology portion of the bank.”

As CEO of Security Bank for the past 22 years, Hayes has had time to reflect on extensive changes in banking and technology. He has watched the level of internal technical experience increase, not only among IT staff but also all bank employees. He contends that technology is now a common tool in banking and the line between people who know how to leverage it and those who don’t is fading.

Future career path

Considering the level of knowledge and business acumen necessary to be an effective CIO, it stands to reason that IT expertise would transfer well to the CEO’s office. The long-term business decisions involving IT operations, architecture, integration, purchasing and the mobile environment represent only a portion of a CIO’s responsibilities. The CIO also oversees technology security, policies, staffing, outsourcing and management—with significant oversight of personnel and vendors.

“A CIO is used to managing people and projects,” Hayes says. “Whether you’re a CEO or CIO, those skill sets are required. What you bring to the table [as a former CIO] is a better understanding of the technology that you have in place, where technology may be going and how to do cost-benefit analysis on the technology.”

“A chief executive officer has that same requirement,” he adds. “How do we deliver our product, our service, how do we manage people, and how do we manage cost?”

With IT management positions no longer confined to the back room, it’s increasingly common for technology professionals to have a seat at the strategy table. Capital expenditure decisions involving technology heavily depend on making a business case for emerging technology. Savvy CIO-CEOs may be better at making profit-driven IT decisions and resisting high-tech trends that lack financial rewards. When CEOs have both IT and bank management experience, they may be more likely to look at IT from a big-picture, bankwide perspective.

“Somebody with a CIO background has an opportunity to create efficiencies, especially operational, because they have a better understanding of how the systems work,” Vallandingham offers. “In many cases, we buy a computer system and we have to build our process around it. Having an IT background gives you an opportunity to make your institution more functional and more efficient and gain integrations that your more traditional CEOs may not be able to accomplish.”

One of the primary attributes of effective CEOs is knowing the right questions to ask, and asking them until the complete picture comes into view. With his experience, Hayes says, he can “drill down” to the heart of the matter, even though his IT staff sometimes lightly chides him about his good cop-bad cop approach. “I can tell when I’m getting a line and say, ‘I know this is slick, but where does it help me with the bottom line, where does it help with our customers, where does it help my other employees serve our customers?’” he explains.

As long as they lead with the CEO role rather than the IT operational role, CIO-CEOs have a business advantage. “The challenge is, when you change roles, recognize that you changed roles,” Hayes adds.

The right experience?

Is there a downside to moving up the ladder from IT? Can training and education close the “gap” that might exist, either for a community banker who needs a higher level of IT expertise or an IT expert who needs more banking knowledge?

Vallandingham and Hayes agree that CEOs must—and can—attain a general understanding of security issues and their core IT systems and capabilities. They both note the “glaze” that can appear in the eyes of low-tech CEOs when technology discussions turn technical. At a minimum, community bank CEOs need to acquire a basic understanding of technology to communicate effectively with their IT leaders.

“As a CIO, you have to make business cases and you have to go out and talk to your management about how to spend money,” says Vallandingham. “With the CEO having an IT background and understanding what’s required, 1) you can make smarter decisions, and 2) you better understand what’s at stake and what’s relevant in terms of capital investments.”

“My job is to ask the question that they don’t want me to ask,” Hayes adds. “I am trying to make absolutely sure that they are confident that this is the right decision.”

Any disadvantages to a CIO becoming CEO due to inadequate mainline banking experience can be overcome by the acquisition of knowledge about credit and lending, as well as extensive management experience, leadership and a solid management team, Hayes and Vallandingham agree.

“No matter how you get around it, credit is the challenging piece,” Hayes says. “If you have a half-million-dollar loan that goes south, you can buy a lot of technology for what that loan cost you.”

“CIOs typically don’t have the commercial lending background, and that’s your largest asset in a commercial lending institution,” Vallandingham adds. “So you would have to have a strong CFO and strong chief credit officer to support that side of the house.”

As technology continues to become more important in addressing customer demands, security, regulatory requirements and operational needs, the community banking industry may indeed see more CIOs rise to the top. Regardless of how many people take the IT route to the corner office, they will need to have a depth and breadth of banking knowledge to be successful.

As Vallandingham says: “Commercial lending is an art form—don’t ever undersell it—and technology is, too.”

Ann Dee Allen is a writer based in the Midwest.

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