Spelling out the need for CFOs and CIOs to speak the same language
Deloitte’s Lou DiLorenzo and Steve Gallucci detail why refining a shared vocabulary between the CFO and CIO regarding technology and oversight practices can serve as a fortified lever for growth and promote better digital transformation.
If it wasn’t the case before, the last two years have cemented technology as a fundamental growth driver for many organizations. Technology, when used effectively, plays a key role to improve efficiencies and create new capabilities for an organization, not just maintain the status quo. The CIO has traditionally been seen as a gatekeeper of operational continuity, not an integral function of long-term strategy and growth. But modern innovations like cloud-based tools, AI, and blockchains are shifting that narrative, and organizations need a CIO who can contextualize how technology is creating value for the business.
As a result, the CIO’s relationship with the CFO has never been more important. For IT functions to be accurately understood as a driver of growth, the modern CIO has to be equipped with the tools and knowledge to communicate technology’s value creation to finance, even though IT doesn’t typically capture revenue. At the same time, the modern CFO should have a strong understanding of the IT lexicon and the ability to show the CEO and board how technology is creating efficiencies throughout the organization. And to continue driving growth, finance and IT leaders need to facilitate greater transparency and cultivate a closer working relationship to break down any barriers.
Assessing IT oversight
According to Deloitte’s Q1 2022 CFO Signals survey, a quarterly poll of Fortune 500 CFOs on business sentiment and strategy, 35% of respondents indicated they had oversight of their organization’s IT leader, with 28% reporting direct oversight. The data suggests that many organizations still grapple with the connection between technology management and value creation. Another recent report from Deloitte found that only 35% of surveyed companies have a clear process for prioritizing IT investments even though when asked about how IT spend is allocated, CFOs said they understand the importance of IT to maintain existing operations as new capabilities are created.
The division of IT spend between maintaining and upgrading existing functionality versus creating new capabilities underscores the challenge CIOs and other tech leaders face demonstrating IT value. In fact, Deloitte found that many respondents in its 2021 Chief Strategy Officer (CSO) survey said they can’t easily recognize the full value of technology, as only 6% of surveyed managers believe their company is deriving maximum return from digital investments. Without strong cybersecurity tools and protocols, organizations struggle to operate effectively in our digital-centric business environment, as do CIOs to quantify the value of cyber in real dollar terms. So to unlock digital transformation, organizations need to embrace a value-based approach to IT procurement and strategy, and the CIO-CFO relationship is at the heart of this imperative.
Speaking the same language
Facilitating a strong bond between the CFO and CIO requires a shared vernacular. CFOs are math-oriented in how they view business health and investment priorities. They want to see how an investment is driving new revenue or cutting costs. Deloitte’s report on the impact of technology on business value notes that only 52% of surveyed companies have tech investment decision-making processes jointly owned by IT and business, again signaling the linguistic disconnect between C-suite leaders. In fact, when asked in the Q1 2022 CFO Signals survey about the main obstacles to realize value from the IT function, “complexity and non-standardization” and “business partnering and alignment” ranked as two of the top three choices. To overcome these, CIOs have to communicate to the CFO more readily about how IT supports business goals to capture value. New technologies can greatly support these efforts, of course, and business analytics and AI can help provide real-time snapshots of how technology is driving efficiency. By leveraging these tools and presenting takeaways with value-based terminology, CIOs can better communicate the successes and needs of their teams.
CFOs also have a role to play to improve this dialogue. IT is typically the largest line item in selling, general, and administrative expenses, so by focusing on how improvements in the “I” and the “T” can enable value and mitigate risks in tangible business processes, CFOs can champion a shared language among CIOs to evaluate IT spend. As many CFOs typically assign performance metrics to specific business processes, those measures can become another component of the language needed to assess IT.
The modern enterprise is usually reliant on technology to achieve its mission, but technology leaders still wrestle with contextualizing the subsequent value of investment in their function. Other C-suites can also fail to understand the intricacies of IT tools and practices, but the CFO and CIO are integral to assure that IT is seen as a lever of growth across the organization. By creating a common language around technology and reevaluating oversight practices, CFOs and CIOs together can help to unlock digital transformation and prime their organizations for sustainable long-term growth.