How CFOs and CIOs Can Be an Effective Team

Used to be that everyone thought the CIO was prey for the CFO.  But times have fortunately changed, with more collegial and valuable relationships being established between the two roles.

In “So, You’re the Boss of the CIO.  Now What?” of March 1st in CFO.com, the author cites results of  a LinkedIn survey that asked finance executives whether it was a good idea that IT reports to the CFO.  The results were 2/3 ‘yes’ and 1/3 ‘no’.  Responses ranged widely — no surprise — from “The CFO does not have an understanding of the risks” to a more measured “It depends on the person in charge.”

What drew my attention was the undeniable fact that IT is increasingly under the finance organization.  Gartner’s research and that done by the Financial Executives Research Foundation found that nearly half of IT departments (in firms of all sizes) report to the CFO.

Given this fact, what can the CIO do to ensure he or she has an effective relationship with the CFO and the rest of the finance department in order to provide the expected leadership?

Here are my suggestions:

  1. The world of IT is becoming more turbulent with ’emerging technologies transforming both the IT function and the relationship between IT and the business.  Software as a  service has enabled business leaders to implement applications outside tradition IT (and finance) controls…and workforce mobility has increased the support needs for a broadening set of devices.’  This is a very difficult environment to keep up, assess costs and risks, and design a one-size workable solution.  Simply said, there is no way any CFO could maintain (attain?) sufficient knowledge to manage any of this directly.  The CIO must step in, realize it is his/her job to build confidence with the CFO by bringing this Tower of Babel under control and creating trust with the CFO.  Even the least technology-aware CFO realizes that technology is complex, with unanticipated risks arising as soon as new technology is implemented.  That’s why the CFO needs someone he or she can trust and turn to, and someone who can explain the environment in simple, straightforward terms, in a language that anyone could understand.
  2. Technology has two parts:  that which is behind the scenes (the infrastructure) and what the client sees (the applications).  Each should be portrayed distinctly to the CFO and managed against different criteria.  “CFOs need to understand that you have to keep the core running.”  Unfortunately, investments in core don’t always yield an obvious ROI — this means the CIO  should spend time explaining the different layers of IT.  While a new phone system will merely get you better listening clarity and some additional features, a new accounts receivable application that yields  cash faster will have a hard dollar benefit.  A CIO’s ability to explain the differences is quite nuanced, and he/she must be sensitive to how the CFO will want the story delivered.
  3. A big part of the delivering the story — beyond knowing how the CFO wants information and decisions explained — is ’emphasizing the difference between finance and IT.’  In IT there are jobs that drive revenue (e.g., ‘web enhancements that attract new customers’) and others that don’t (e.g., ‘systems maintenance’).  This is likely to be a novel fact to the finance staff and will make forecasting ROI very tricky.  ‘Instead, CFOs should look at potential gains’ as opportunities to improve the business overall and the experiences of staff and customers and evaluate projects on these criteria when hard ROI is not determinable.  Working with the CFO, the CIO can suggest how to prioritize projects, using categories of benefits and including ROI whenever available.  A successful CIO recognizes that a CFO thinks differently.

For effective IT management, a ‘CFO needs to know enough about IT to balance the risk of investing against the risk of not investing, and enough to balance the forms of IT that make money with those that don’t but are essential.’

“CFOs and CIOs are in it together, no matter who reports to whom.”  And as in all relationships of this type, understanding and talking are the elements for success.

 

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