Why Is the CFO Still Boss of IT?
It's a battle IT leaders have been waging for years: At some companies, CEOs still think IT should report to the head bean counter. A debate among CIOs on this topic has created some valuable food for thought.
Wed, April 21, 2010
CIO — Just about five months ago, management consultant Don Rekko posed this question to CIO Forum members on the social-networking site LinkedIn: "What makes a CFO uniquely qualified to be heading up IT?"
At first glance, the question might sound rather generic, seemingly trodding upon an age-old topic unlikely to unleash a furious debate among the various CIOs, IT professional and other forum members. It's kind of like asking: Why are there so many potholes on the streets of Massachusetts in February? The answer is that it just kinda happens, you can't really do much about it, and that's the way it'll always be in Massachusetts, though it's not necessarily that way in other states. (Insert shrug of shoulders.)
Rekko is managing director of METRI, a boutique management consulting firm that works with large European user organizations and system integrators. He's seen lots of "strong CIOs" and plenty of "weak CIOs" over the years, and this question has proved eternally interesting to him. Which is why he asked it.
"What I can't fathom is why, particularly in the 'weak CIO' scenario, the person ends up reporting to the CFO," Rekko says via e-mail, in early April. "After all, a COO would be a more logical choice: Running a data-center has more in common with, say, running a plant or other shared services operations, than with finance, accounting and controlling." He also posed the question because he was curious how a global audience—the CIO Forum members—would react.
In response, a few of the early commenters harangued him about the relevance of this "tired" discussion: Why dredge the topic up again? The virtual conversation could have died there.
But this one had some legs. Several months and more than 200 comments later, the question and answers have proved to be a revealing, protracted and insightful debate about the modern-day CIO reporting structure. Impassioned yet reasonable give-and-take played out, even surprising Rekko a bit.
"I know from my daily practice that the subject is a great conversation starter with CIOs, and so I wasn't surprised by the quantity of responses, especially because I formulated the question in a provocative way," Rekko says. "What surprised me was the high quality and polite tone of the conversation: This has not devolved in a shouting match. And over 80 percent of the responses were very insightful, written with craft and well though-out by LinkedIn members with very impressive backgrounds."
But for all of the discerning discussion and online back-and-forth, one simple, broadly applicable answer was not to be found.
Why the CFO?The generally accepted account of why CFOs have been installed as IT's de facto boss is this: IT was forged in finance departments to help with the digitization of accounting functions; thus the majority of "IT spend" in the early days was on financial computing initiatives. It was only logical that that's where IT was placed on the org chart.
And that's where IT and its de facto chiefs stayed for decades.
There was also, perhaps not coincidentally, always a little breathing room between CEOs and the expanding and bewildering IT departments. IT executive Scott Brower, commenting in the forum, offered this rationale: "As a support organization, [IT] was not something that the CEO felt the need to keep close so it made it sense to have real financial stewardship controlling it," Brewer wrote. "This also created a buffer where the CFO, knowing business, could deliver the necessary message to the CEO rather than some techies speaking in 1's and 0's."
Of course, the CFOs spoke in 1's and 0's too—but the gulf between the two departments always seemed vast: balance sheet 1's and 0's versus programming code 1's and 0's don't fit together well. But over the years, CEOs wanted constant control over ballooning IT spend. And who better to do that than the Chief Bean Counter?
Several commenters in CIO Forum discussion pointed out this salient fact, however: IT is where it is (still under the CFO at many companies) because that's where the CEO wants it to be. In other words, don't blame the "clueless" bean-counter for the reporting assignment, who may not even want the responsibility in the first place. Talk to the head honcho.
Ennis Alvarez, EVP and COO at IT consultancy Brivea, sensibly wrote on the forum that "when the executive team makes the decision to have IT report to the CFO, it is mainly because we (the IT management team) have failed to 'earn the seat' at the top by not clarifying the value that IT is contributing to the organization, nor being clear about where the IT budget is being spent and why that is the best return on that investment."
A C-Level Exec with No CacheSince the forum consisted of self-selected IT types, the tenor of the responses to the question—What makes a CFO uniquely qualified to be heading up IT?—can best be summed up this way: absolutely nothing. Other snarky responses included: Why doesn't the COO or CMO report into the CFO? And then there was a clever flip of the initial query: What makes the CIO uniquely qualified to be heading up finance? (Take that!)
The more practical responses centered around an "it depends" line of thinking: In some organizations, the CIO-to-CFO reporting relationship actually makes sense; in most others, it just doesn't and never should have. No big surprises there.
But the nagging question that won't go away any time soon is this: If you are a C-level businessperson in charge of a critical function—you are the Chief Information Officer and have that same "C" title as every other top exec—then why would the CEO not want to mirror the same reporting structure as every other C-level exec?