Getting the CIO-CFO relationship right

American journalist Sydney J. Harris once differentiated the words information and communication by stating: “Information is giving out; communication is getting through.”

CIOs and CFOs should heed this difference in fostering their relationship, which has become more tightly coupled as IT’s stature has grown. “Getting through” should be a key goal for both highly synergistic and codependent roles, as CIOs seek funding to accelerate digital initiatives and CFOs seek sound justification for investments.

CIO-CFO cohesiveness has been especially important during the pandemic.

“A strong strategic partnership between the CIO and CFO has been critical during the COVID-19 pandemic, especially as many companies have had to scale back on expenses and rethink their digital capabilities,” says Greg Douglass, global lead of technology strategy and advisory at Accenture. “As data has become increasingly important to manage and analyze for businesses to succeed, CFOs depend on CIOs to help translate the data and insights into actionable initiatives, driving optimal results for the business.”

The pandemic mainly impacted the relationship for the better with both sides recognizing the need to work together to achieve accelerated business goals. Isaac Sacolick, president of digital consultancy StarCIO, says executives he has advised have told him that CIOs got investments for tools they never otherwise would have gotten.

“Whether it was moving to the cloud or a conference tool we just spent however much on, … you never would have gotten the CFO to sign off on that” pre-pandemic, he says.

The CFO is a CIO’s “best friend when it comes to driving efficiencies, implementing automation, or really reducing risk, and a detractor when you’re trying to grow the business or deliver innovation or employee experiences and [new] ways of working,” Sacolick says.

Figuring out how to strengthen the relationship is key to aligning IT investment with strategic growth plans and business performance, according to Deloitte. “Many CFOs and CIOs understand the importance of getting this relationship right: For CFOs, IT is often one of the largest budget items, and for CIOs, 22% report to their CFOs.”

Here, CIOs and CFOs lay bare the ins and outs of their relationships, including the pain points in working together and tips for getting the CIO-CFO relationship right.

A level playing field

CIO-CFO relationships differ largely based on reporting structure. For workwear and outdoor apparel maker Carhartt the setup in the C-suite makes for a level playing field between Chief Digital and Information Officer John Hill and CFO Susan Telang, who both report to Linda Hubbard, president of the company. That’s a good thing as far as Hill is concerned. At some organizations, the CIO reports to the CFO or COO, Hill says, but being peers allows for the kinds of tension that can be beneficial to the business.

“You want the CFO to push back a little bit and say, ‘Hey, do we really need to spend money on that?’ And similarly, the CIO should push, too,” Hill says. That is a key foundational element of a healthy relationship.

“If you’re talking about driving digital engagement across the organization and you need to build some capabilities, sometimes they’re foundational and may not be as clear-cut as to ROI,’’ he adds. Given the importance of digital, there should be constructive arguments at a peer level, he says.

Hill is well aware that CFOs have a lot of competing initiatives, and they are trying to prioritize investments. For example, he and Telang recently discussed whether to invest in an omnichannel ecommerce model, and if so, whether to do that now or wait. Telang wanted to hold off.

“She had the view that we could wait, and my view was, it’s important now for our position in the marketplace,’’ Hill says, adding that “both perspectives are equally valid.”

Ultimately, Hill prevailed, but the important thing is to listen intently whenever the other party puts forth a different lens, he says.

Hill and Telang both agree they have a good relationship. “We have a running joke that he thinks things are easier than they are and he’s at the 50,000-foot-view,’’ Telang says. Referring to the Staples trademark easy button, Telang says, “I’ve said I’m going to get him a shirt that says ‘easy’ on the front and on the back it’s going to say ‘no, it’s not.’”

If there’s anything Telang would like to see improved, it is Hill “understanding the level of complexity within systems or platforms in a large company. Finance is on the back end of most systems. If it doesn’t work from a financial perspective, it will show up … and it has to be unwound.”

Hill, whose main focus is on new foundational technologies even if they don’t present ROI right away, says he could always provide more transparency. “I could do more to make sure she has a full lens into the whole IT organization and the investments I’ve made and how they’re going and lessons learned,’’ he says, adding that this transparency doesn’t have to be total, just at a level that meets the CFO’s needs for details. “I’d call this a ‘first-world problem’ and not a major source of friction, for sure.”

And like any relationship, Hill recognizes that friction can occur because everyone has their own style for how they do things. Having a healthy understanding of how a peer approaches a situation makes it much easier to work through it, he says.

Hill and Telang’s relationship was tested this year when Carhartt was undertaking two significant implementations: a new ERP system and a new ecommerce platform, both of which went live this summer. Hill says Telang’s team played a key role in supporting both.

Improving the CIO-CFO relationship requires having direct conversations, he says. “You’ve got to be comfortable expressing a view but also listen to the interests of the CFO,’’ Hill says. “I tend to be pretty financially literate, so I know when she’s talking about something from a business standpoint.”

If a CIO has some financial acumen already, the challenge is more about the relationship itself. “There are probably CIOs out there who don’t spend time understanding the financial side of things, and as a result they aren’t able to have a conversation with their CFO about the cost and shape of the business,” Hill says.

Learning to speak the same language

Like Hill, Fei Tong also believes the CIO-CFO relationship should be bolstered by “healthy challenges.” Tong, who is SVP and CFO of North America operations at Schneider Electric, is collaborating on a new relationship with Abha Dogra, who came on board a few months ago as SVP of digital technology and CIO, and reports to the CEO.

For Tong, the CIO and CFO must have the same end goals in being aligned and driving profitable growth. Dogra strongly believes “financial efficiencies cannot be diluted … eventually, the numbers have to make sense.” She credits Tong for “ensuring I’m being a good corporate citizen while being innovative and doing my job.”

Coming on board during uncertain times has made for some give and take in the relationships, largely because of financial pressures that recent global supply chain issues have caused, Dogra says. “We have huge growth potential within our industry with lots of orders and sales increasing. From a tech perspective, you want to do new things and enable more digital transformation in a rapid manner, but at the same time, the financial pressure is real and checks and balances are real, so we continuously have to negotiate.”

For Tong, a key issue in the CIO-CFO relationship “has always been: We speak a different language,” she says. “I’m more [about] financial, economic, internal investments, tech investments. [Dogra] focuses on the big picture and I’m kind of into both.”

Tong says that 70% of her time is focused on profit and loss (P&L) and she also spends “a reasonable amount of time” on future planning.

Another pain point is being able to reasonably assess resource allocation, Tong says. “How much do we need to really invest in things we’ll be able to get immediate return on, and how much should we spend on our future?”

For example, Tong recalls when Dogra came on board earlier this year, there was a proposed ERP project on the table for one of Schneider Electric’s business units. “ERP is always lots of money and when the business case first came my way, I [did] not feel we needed to do this immediately, especially this year,’’ given continued financial uncertainties and supply chain challenges, Tong says.

But in spending time talking with Dogra, Tong realized she needed to consider that if funding was delayed until 2023, “how much efficiency will we lose and [whether] the current business digital transformation will be slowed down because of the technical limitations of the older system.”

Tong wanted Dogra to quantify the financial impact of not deploying a new ERP system. IT and finance worked together, and Tong says that while IT can’t always calculate immediate ROI, finance can look at the hard savings and revenue generation a new system will bring.

“At the end of the day, I agreed this is a valid business case and we’ll get reasonable ROI from implementing it now,’’ Tong says. “The system implementation will accelerate the business transformation, so it makes this tech project more valuable.”

Tong believes the pandemic changed the nature of the CIO-CFO dynamic because of Schneider Electric’s desire to accelerate its digital transformation. “We’re trying to digitize as much as possible, which makes my relationship with the CIO more strategic and important.” She says her relationship with Dogra over the past four months has been more collaborative and productive than the time she spent with the previous CIO in the past year.

A new way of working and changing customer purchasing behaviors required new data sets and speed to market, and both she and Dogra played integral roles in facilitating that, Tong says.

Pragmatic frugality

TIAA Bank CIO John Elton calls his relationship with CFO Steven Potts “excellent” and believes the pandemic improved it. “It forced tighter collaboration,” he says, “and that collaboration has paid off and built stronger trust between [finance and IT] and on an individual basis.”

The economy has indirectly influenced the relationship, too, because of “the war for talent” and a realization that IT could implement technology in smart ways to help.

“That has led to a lot of discussions about how technology really supports the expense structure and a reduction of expenses across the organization, as well as using it to help business units that support business development,’’ Elton says.

There are also “moments of debate” between him and Potts. “Part of that is that tech represents one of the most expensive items on the income statement,’’ Elton says. “Justifying the appropriate use of technology is exceedingly important, so the CFO puts a fair amount of pressure on expenses.”

While healthy debate leads to productive outcomes, there is room for improvement in terms of ongoing education around how new technologies work and what integration means and the complexities involved, Elton says. “A lot of the debates we’ve had are around investments to make sure things are integrated.”

At the same time, “people without a deep tech background don’t often realize the complexity that integrations require,’’ Elton adds.

Another area of potential conflict is around increased cloud usage. “There may be some tension there because the model changes how the expense is structured” from CapEx to OpEx, he says. “I’m not sure that raises a huge amount of conflict, but it does raise more discussion.”

As Elton looks at what needs to be done for return-to-office investments, he says the regulatory environment around end of life for tech assets helps. So too, does the fact that “admittedly, I’m also pragmatic and more frugal, and honestly, don’t spend on things that are frivolous.”

The team approach

Brinks Global Vice President and CFO Keith Barthelmeus has a unique relationship with CIO Rohan Pal, because both they and Brinks’ corporate CFO and CEO came to the company together from another company.

“We’ve been together just over nine years,” Barthelmeus says. At the previous company, Recall, “we ran a similar playbook.” After Recall was sold to Iron Mountain, “we all came here. We became a package deal.”

Barthelmeus reports to Pal, who is also executive vice president and chief digital officer at Brinks. He says his responsibilities go beyond finance and include technology, product, strategic sourcing, innovation, and transformation.

Brinks is in the throes of redefining itself as a transportation and logistics company to the fintech space, which requires a fairly significant transformation, he says.

“We took a very entrepreneurial approach early on and looked to grow in a lean manner where there were synergies between responsibilities,’’ Barthelmeus says. The “carrot” for him in joining the company was being given the responsibility “to drive innovation in new business development.” Being able to digitize a 160-year-old company was “a tremendous opportunity,’’ he says.

CIOs should definitely report to a CEO because they are “the new strategist and they’ve got to be tightly coupled with the overall enterprise strategy and not have conflicting views of the world,” he says. In some cases when the CIO reports to the CFO there could be competing priorities. Barthelmeus believes the relationship should be more peer-focused.

He says his relationship with Pal is strong and that they have the same vision for the company. Many financial organizations or financially-focused CFOs “may lose opportunity by not investing dollars to further differentiate or drive capacity or new opportunities in their environment,’’ Barthelmeus says.

Technology is tightly coupled with almost any corporate strategy and helps drive savings through operational excellence, he adds.

“A lot of CFOs are too tight with the purse strings to take on strategic investments if they’re just focused on the bottom line,’’ he notes.

Any pain points he and Pal have are more at a personality level. “We’re yin and yang. He’s going to consult with me on most things that are needed, but the pain comes in where he’s leveraging intuition instead of leading with data,” Barthelmeus says.

What he needs to do is to make sure he speaks Pal’s language and for him to reciprocate, Barthelmeus says. Yet, if anything, he says, the pandemic strengthened their relationship. To fortify the bonds between CIOs and CFOs, both need to be clear and transparent about their agendas and expectations.

“Historically, a lot of CFOs have looked at business cases and approved them and never held CIOs accountable on outcomes,’’ Barthelmeus says. “Constructive conflict is also important.”

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