Building constructive relationships between CIOs and CFOs

Fifteen years ago, IT was regarded as a necessary evil by many non-IT executives, who were often heard saying they were “not sure what it does, but it sure costs a lot”.

CFOs, in particular, were characterised as being IT-spend averse, with little meaningful (or cordial) communication between finance and IT on the issue of how much was the right amount to invest. In fact, some would suggest that finance’s response to “how much” would almost inevitably be “as little as possible”.

But as technology’s business benefits have become better understood by non-IT people, there has been a fundamental shift in the way things are done. In fact, the pendulum may be swinging back the other way as CFOs begin to drive technology investment – in some organisations, anyway.

Indeed, a recent Gartner and Financial Executives Research Foundation (FERF) survey showed that the CFO is increasingly becoming a top technology investment decision-maker, if not the leading decision-maker in many organisations.

The study, conducted between October 2011 and February 2012, showed that the CFO’s role in technology decision-making increased in the past year with 44 per cent of CFOs stating that their influence over IT investment has grown since 2010. Forty-seven per cent say that it has remained the same, while only 9 per cent of those surveyed believe that their influence has decreased.

“The CFO and CIO are well-positioned to work together at generating business value from enterprise IT investments. However, this performance is often not achieved because of poor perceptions of IT, a parochial CFO or CIO perspective, or simply a failure to invest in the CFO-CIO relationship,” said John Van Decker, research vice-president at Gartner.

“This year’s results show that, in most organisations, the CFO and CIO work together to finance IT and provide information that supports enterprise processes. But there is also an opportunity for them to form a powerful alliance that generates more value for the enterprise.” The survey results showed that there are many ways that CFOs are involved in making IT investment decisions.

Forty one per cent said that they were the actual leader of a group responsible for IT investment, whereas another 41 per cent were part of a group responsible for IT decision-making, 16 per cent provide advice and 1 per cent said they were the sole decision-maker. Since the large majority was involved in group decision making about IT, engaging the CFO is clearly a critical issue.

They are usually powerful influencers and strict enforcers of policies and decisions because of their access to, and involvement with, senior business governance groups, and their strong influence and credibility with the CEO and board.

While the survey was conducted in the US, Peter Acheson, CEO of Peoplebank, Australia’s largest ITT recruitment company, believes the Gartner findings accurately depict what’s happening in many large businesses.

“Traditional tensions are to do with the fact that IT is a large area of capital investment spending,” he says. “At the start of the decade the IT manager or CIO role reported to the CFO, who then reported to the CEO.

This meant the CFO had responsibility for IT, but if they weren’t IT savvy and didn’t understand it, or were cost conscious, then they may not have supported a project.

“Now the IT manager position has evolved to the CIO role. The CIO has become a peer to the CFO, especially in utilities and telecoms, which has helped to improve relations.”

Acheson says CFOs today understand IT is an important part of the business and a core enabler. However, he cautions that CIOs still need to gain the CFO’s support when it comes to investment decisions.

“Just because they’re peers, it doesn’t mean the CIO can go to the board and ask for a major investment without the support of the CFO,” he says, explaining that it is a function of the fact that the CFO has ultimate responsibility for collating the overall capital plan. He points out that collaboration with the CFO is vital in gaining support for new IT investments. Bill Sinnett, director of research at the US-based FERF, agrees.

“While CFOs certainly appreciate reduced cost through the more efficient delivery of IT, organisations need to understand that CFOs want technology investment that they can see business value from in the form of improved business processes. Therefore, their priorities are largely focused on analytics and business applications,” Sinnett said in response to the Gartner/ FERF survey results.

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Communication skills

Everything comes down to communication, says Acheson, who has seen a dramatic improvement in CIOs’ communication skills in the past five years. “As IT becomes more important, and is increasingly seen as a business enabler, a good CIO makes sure that the CFO is on board and supportive from the project’s inception.”

The CIO needs to be a master collaborator, he says, with strong negotiation and persuasion skills to help ensure success when dealing with key stakeholders such as the CEO, CFO and others executives who are responsible for running the business.

“They need to understand how IT impacts the business they work in and how IT helps enable the business’ core activity. This differs between industries and is a very important part of winning support for new projects,” he says.

“There is a reason that the CIO is elevated to report directly to CEO. They are extremely important to the success of the business and need to understand that and respond appropriately to the demands of their position.

“The CIO uniquely understands how IT underpins and impacts the business. Like any other role, to get other stakeholders on board it is important to establish a good track record of excellence and delivery of key projects, and to build a history of projects running on time and on budget.”

Thinking strategically

John Todd, CFO of Sydney’s City of Ryde Council, agrees that communication and collaboration are key, but adds that strategic thinking and long-term planning are also crucial to the mix. The City of Ryde manages $2.5 billion total assets including $1.3 billion worth of infrastructure, and generates more than $100 million in income each year from rates and other business activities.

He says that traditionally in most councils there is a close alignment between finance and IT functions, and that they work closely together to meet the needs of the communities they serve.

“For us, IT initiatives are driven by [departmental] business managers, who have an idea for a new project or initiative that utilises the skills and services of IT to expand the usability of the system,” he says.

“IT plays a supporting and advisory role rather than initiating new programs. “One of the advantages of councils is that they are required by legislation to look four to 10 years ahead,” he adds. “Depending on their size, many companies are only forecasting in the relatively short term: 14 to 16 weeks for some smaller organisations.

“Because of this requirement the City of Ryde is able to think strategically and plan for the long term, which gives our projects a good chance of success.”

He says that like any relationship, the CIO-CFO relationship takes work. “You can’t expect it to work if you’re dictatorial – both sides need to be able to compromise for the relationship to work for the benefit of the business.”

Stephen Copplin is the managing director of the CFO Centre Australia, which he established in 2009 to provide experienced finance professionals to the SME sector. He also believes that while tension between IT and the CFO may have been common in the past in both large and small companies, CFOs have recently become much more tech savvy, while at the same time CIOs now really ‘get’ the business. And everyone is benefiting.

“They have undertaken a lot of continuing education programs and had exposure to IT people and systems that have deepened their understanding of the benefits the appropriate technology can bring to a business, so IT is no longer seen as black magic,” he explains.

“CIOs are also more business savvy, thanks in part to the training they receive at university,” adds Copplin, who is also an adjunct professor at the University of Queensland in the Business School and the IT and Electrical Engineering School. “Universities have made a concerted effort to get more business skills and entrepreneurship into courses where there wasn’t that kind of training offered before.

“If a CIO understands the overall strategy of the business and is fully aware of the business vision they will be better able to align their plans with the company’s. Both CFOs and CIOs have been guilty of not understanding the whole business vision, just the bit they’re involved in,” he says. “Try to understand the strategic direction of the organisation clearly,” he advises, “so you bring your ideas into alignment and demonstrate how they can add value to the business.”

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Vision impairment

Copplin says another reason that great ideas stall is because everyone is operating from a different base. “If you ask people from IT, finance and sales about the company’s vision you often get different answers from everyone.”

Max Vit agrees. He is IT and operations support director at NICTA, Australia’s largest dedicated ICT research organisation, where he is responsible for running the IT department, managing the organisation’s IT strategy and providing vision for new IT services to sustain the business and enable impactful research.

“One of the reasons for tension developing between various functions is that people are not subscribing to a common vision,” he believes. “This is often because the vision is not readily available to the people involved.

“When an organisation does not have a clear vision, or its vision is misunderstood, this can cause a misalignment at the moment of hiring the right people to support the organisation’s objectives.” He says one of the reasons for NICTA’s success is that its goals are clearly defined and communicated to the organisation by the CEO and senior management, namely to create wealth for Australia and achieve research excellence.

“This underpins the way the entire organisation works,” he adds. “NICTA is built around research groups and business teams – and the interaction between these two groups,” he explains. “Each group needs to interpret the goals and vision of the CEO and align with these – always within governance and compliance requirements.”

He says the role of NICTA’s IT department is not straightforward. “We are there to make the research groups’ jobs easier and support their work by providing flexible platforms and services, and to be responsive to the evolving needs of research projects.

“Researchers are free to choose between Windows, Mac or Linux operating systems – whichever best suits their research – and it is up to us to make it work.”

He observes that in the past some projects have been put on hold or derailed because of different camps subscribing to different agendas, leading to delays, additional expenditure or for the project to be shutdown.

Like other commentators, he recommends bringing a CFO on board by showing them the project’s value and how it aligns with the organisation’s vision and benefits the business.

“For example, if the facilities manager proposes to buy a $200k asset management system, we look at how it might help us meet our goals or assist us in achieving research excellence and wealth creation.

If the request’s value is only to streamline asset management administration then the degree of separation from our primary objectives is too big, and we need to find an alternative solution.”

However, he says if a research team wants to implement new virtualisation infrastructure because it will save their research time and will result in a significant research outcome or commercially viable technology, then that is more likely to meet with approval.

It is also important to accept that sometimes you have to agree to disagree. “This is central to NICTA’s culture. You may not agree with what’s proposed, but everyone is given the opportunity to have their say and if it’s what others want, and meets the organisation’s fundamental goals, then the project may be given the green light to proceed.”

While the Gartner study showed that business intelligence, analytics and performance management are at the top of the list of things that CFOs would like to invest in, four major technology trends – the nexus of social, mobile, cloud and information – are also on the CFO’s radar and are expected to drive technology planning, investment and usage in 2012 and beyond.

Perhaps persuading them to come on board with your project may not be as hard as you think.