It’s well documented that the CFO/CIO relationship can be challenging for some. As technology continues to play a major role in strategic decisions made to create value, drive growth and maintain a competitive advantage, it’s more important than ever for the CFO and CIO to forge a strong partnership.
by Deloitte CFO Journal
With technology playing a larger role in driving company value and competitive advantage, it is more important than ever that CFOs be able to collaborate closely and effectively with CIOs. “The CIO relationship is an important one for CFOs to get right and one that many of them tell us they continue to struggle with,” observed Ajit Kambil, global research director of the CFO Program, Deloitte LLP, speaking on a Deloitte webcast, “Forging a New CFO-CIO Partnership—The Rise of the Chief Integration Officer?” He and Khalid Kark, a director in Deloitte Consulting LLP, and U.S. CIO Program research leader, discussed why the CFO-CIO relationship can be challenging and how CFOs and CIOs can improve their ability to partner more effectively on aligning IT investment with strategic growth plans and on improving business performance.
In a poll taken during the webcast, fewer than one-third of respondents said the CIO and CFO at their company share a strong partnership characterized by mutual understanding. “I think both CFOs and CIOs understand the importance of getting this relationship right,” observed Mr. Kark, noting that IT is not only one of the largest budget items but some CIOs may be reporting to CFOs. “The question we’re looking to answer is how to get CFOs and CIOs working together more effectively.”
CFOs can forge better mutual understanding by looking at the many commonalities that exist across the two roles, said Mr. Kark. “We are seeing that in many organizations, CIOs increasingly have a mandate that is similar to the mandate that CFOs have,” he observed. CFOs can identify commonalities by asking how IT and the CIO can collaborate under the “Four Faces” associated with the CFO’s primary roles:
Catalyst: What investments is IT making or identifying as critical for future scaling of the business?
Strategist: How is technology supporting the organization’s growth strategy?
Operator: Is IT delivering timely and accurate data that supports the delivery of predictable outcomes and insights on revenues, costs, market share, profits and earnings?
Steward: How is IT managing security risks and protecting core assets? Is there appropriate governance for technology investments?
It is often said that a major challenge to effective communication between CFOs and CIOs is that one speaks the language of finance, the other of technology. Mr. Kambil and Mr. Kark also observed that CFOs and CIOs tend to have different personalities. The result: differing communications styles and perspectives that prevent understanding and create roadblocks to productive collaboration.
“Understanding your own behaviors and communication patterns as well as that of the executive you’re working with can be enormously helpful in fostering collaboration,” Mr. Kambil noted. CFOs can employ the “Business Chemistry” framework to identify patterns of behavior and communication that can help them be more effective in getting their message across — and in understanding what their CIO is trying to communicate to them.
In the four basic personality orientations, CIOs tend to be Pioneers and/or Integrators, while CFOs typically are Guardians and Drivers, said Mr. Kark. “Pioneers are novelty-seeking, they like having a variety of possibilities, generating new ideas. Integrators value personal connection, seeing how the pieces fit together, are big-picture thinkers.”
On the other hand, the guardian personality values structure and loyalty, is much more methodical, detail-oriented and perhaps a little more risk-averse. Drivers are fairly similar, they value direct communications over small-talk, logic and a focus on results.
“When a Driver or Guardian CFO encounters a Pioneer CIO, it can be challenging because the two likely have such different perspectives and communication styles,” Mr. Kark noted. “So it’s really important to identify those differences and adjust your own communication styles to connect more effectively with each other.” Of course, he added, personality types can vary from the typical archetypes. “But the important point here is that irrespective of your counterpart’s personality type, both CIOs and CFOs need to be aware of the differences and the barriers that can arise from these personality differences and make conscious efforts to communicate with each other,” Mr. Kark said.
Mutual understanding and strong communications can form the basis for finding common ground to discuss how to jointly deliver value to the business. The third critical element to effective CFO-CIO collaboration is to connect IT initiatives to shareholder value.
“An effective approach is for CFOs and CIO to collaborate on IT investment strategies that drive shareholder value through revenue growth, operating margin, asset efficiency and the expectations the market has about future growth,” said Mr. Kambil. This approach enables both executives to look at shareholder value and to show the IT systems they want to invest in can create tangible shareholder value. For example, the CIO can demonstrate that investing in middleware can create flexibility to integrate future acquisitions, which aligns to boosting revenue growth.
“CFOs can also help CIOs articulate how IT impacts specific, key business processes,” added Mr. Kambil. “When discussing the sales process, for example, CFOs can help evangelize how the investment in IT will improve the information content of the process. Or in the case of a compliance process, CFOs could work with their CIOs to identify how IT investment would impact the accuracy and timeliness of data in that process.”
Understanding and communicating risk is a core capability many CIOs need to improve, and is an area that CFOs need to help them with, said Mr. Kark. “In our experience, often organizational leaders focus on tactical security and compliance activities, but don’t spend enough time when it comes to understanding a business risk and making decisions based on that risk,” he observed. CIOs and CFOs can help them here.
How can CFOs help? One important way is by collaborating to drive a common approach to IT investment decisions that looks at strategic risks—those that can undermine management’s assumptions or the organization’s ability to achieve its strategic goals—as well as other corporate threats, by establishing a comprehensive IT investment governance framework. “CFOs and CIOs should look at the opportunity of a given investment and the risk implications of the opportunity together, along with other key executives and possibly the board, so that risk governance isn’t a compliance activity after the fact,” Mr. Kambil said.
An effective governance framework for IT investments divides governance among three groups with the following responsibilities:
—Set vision/direction for technology investments
—Integrate technology in business strategy
—Define risk appetite
—Prioritize investment choices
—Monitor results and course-correct as appropriate
1. Operational Governance Council
—Evaluate/approve business case and project proposals
—Monitor program and project management activities
—Oversee execution of projects for timeliness, budget and other requirements and effective implementation
—Provide/approve resources (people/funding)
—Monitor risks, capabilities and benefits
2. Technical Governing Bodies
—IT strategy, planning and budgeting
—Facilitate IT decisions
—Govern enterprise architecture
—Monitor and manage IT procurement
—Provide quality assurance and regulatory oversight
Within this framework, CFOs can focus on establishing and co-facilitating the Business Technology Steering committee with their CIO counterparts and help set the parameters for the operational governance, while technology governance is the sole responsibility of the CIO. Perhaps the CFO’s most important role is in sponsoring a governance framework around IT investments that helps the CIO bring the right stakeholders together into the investment process. Ensuring that the business leaders are active and accountable stakeholders in the IT governance process and involved in supporting decisions around investments/risks and execution are often critical to the success of IT initiatives. “If the business is missing from the IT governance framework, both the CFO and CIO can inadvertently end up making decisions on behalf of the business that aren’t fully informed by the business stakeholders,” Mr. Kambil said.