Why a strong CFO-CIO relationship is the key to success in the digital world
For the last 32 years, I have carried out financial roles within the field of technology. In other words, I’ve been juggling figures and analyzing bottom lines in a fast-changing world. Among the many trends and hype curves I’ve encountered, there is one thing that is irreplaceable: a frank and open chat at the coffee machine. As a CFO, I heartily recommend entertaining that tradition with your CIO colleagues. Let me explain …
CFO and CIO, bound for a win-win
In many ways, the digital age has made it easier for me to fulfill my duties. I am amazed at the way all my devices can sync to deliver the latest reports at my fingertips, allowing me to make important decisions in near real-time. That’s another reason you can find a natural ally in your CIO. He/she is the go-to person if you want to leverage new technologies and, more specifically, to make figures speak out in a rapidly evolving business context, anytime and anywhere. Now more than ever, CFO and CIO need to combine technical acumen with business expertise. For the CFO, the most obvious way to understand how a company can adapt to the new digital world is to get briefed by the CIO. And the CIO needs the buy-in of the CFO to realize IT transformation.
The time of working apart together is over. And luckily so, most CFOs and CIOs are aware of that. As a recent survey on IT Transformation conducted by Forbes Insights and Dell EMC indicates 96% of the C-suite see close CIO/CFO collaboration as being important or even critical to business success. Though this partnership has improved in recent years (to the extent that it is now described as excellent by 36 percent of CFOs), a large majority of respondents (89 percent) acknowledge that significant barriers still exist: conflicts arising over traditional reporting structure, CIO’s lack of business expertise and outdated attitudes from the CFO about the primary role of the CIO make up the top three spot of the Forbes survey.
In my experience in working with different customers and partners, I feel that the traditional stereotypes have not yet completely disappeared. The CFO continues to see the CIO as someone who has no good control of cost and spends lots of money on fancy new toys with no clear return on investment. On the other side, the CIO still tends to consider the CFO a risk-averse individual, blocking any attempt to innovate. By the way, let us not forget that in most companies, the CIO still reports to the CFO, and they are not exactly on a peer level, although this is becoming less true in companies that have set forth on a digital journey heavily investing in IT assets. But even in these more digitally-driven organizations, there is enough room for improving the partnership or each party to benefit from one another’s strengths.
Start from the same page
In fact, the entire executive team needs to operate as one if they want their company to succeed on their digital journey. But I am convinced that CFO and CIO have a special responsibility within that mission. If they are not on the same page, the CFO will not necessarily approve what the CIO advises to spend, and the propensity for a breakdown will increase.
So how do you avoid this?
The first step is to define what business value actually is before aligning with CFO and CIO. As a (digital) business, what is the ultimate goal we want to reach? Where do we want to go in terms of technology? Do we take all the bells and whistles at once, or do we want more of a phased approach over a longer period? All of these key questions will generate trade-offs at the start that will be conditions for success in the long run.
As a CFO in a tech-savvy environment, I invite my peers to contribute to a definition of business value that is not purely built around cost control. In other words, every new technology should not be looked at as a luxury item, but from the point of view of its long-term ROI.
The ability to start from common ground will also largely depend on the combination of short and long-term metrics. CIO and CFO should sit together to answer a few basic questions like:
- Do we have enough Capex budget for this year?
- Do we have an expense problem for this year?
- Do we need to buy new technology with free maintenance period?
This will help to build a common framework for the year to come that makes sense to both. Goals aligned from the start, based on a clear allocated Capex budget and a cohesive strategy, will facilitate practical day to day decisions for both a CFO who needs trustworthy reporting (P&L and Capex metrics in a given timeframe) and a CIO who wants to roll-out projects as soon as possible.
If this synchronization does not happen (with the backing of the whole management team, led by the CEO), the collaboration between CFO and CIO may still look fair, but the major risk is that the CFO will not really buy into the CIO’s plans and drip feed the required approvals, which will, of course, slow down the roll-out and, in the end, lead to runaway expenses, making both unhappy. This going off the track happens quite frequently.
My 5 tips for the CFO:
- Take the first step to overcome barriers. Given that he/she is often the more senior of the two, this honor usually falls to the CFO to reach out to the CIO. Otherwise, he/she will be left behind in a rapidly changing marketplace.
- Have a regular chat with your CIO at the coffee machine, at least once a fortnight. Do not hesitate to ask “silly” questions.
- Initiate discussions with customers and partners about their technological challenges and opportunities.
- Take part in (external) conferences around emerging technologies, such as AI, IoT and robotics. There are formats aimed at non-technical people, showing you how to leverage technology and to grasp the concepts. Afterwards, the CIO will be able to help you implement these new technologies.
- Read. There are some good books out there, including some that explain “digital transformation” and new technologies clearly and concisely. For example, I am currently reading “Big Data Demystified”, by David Stephenson (FT Publishing). I highly recommend it for any CFO.
Following the above steps and reaching out to the CIO will certainly help to keep the CFO abreast of new technologies. The modern CFO does not need super powers, he/she just needs to surround himself/herself with the right people and technologies if he/she wants to be a gatekeeper who is open to innovations, as well as a driver for growth.