CIOs and CFOs often experience friction over the budget needed for technology projects. Here's how the two can better work together.
The CIO and CFO play integral roles in any organization, but the two have historically faced challenges working together over budgets and technology investments. But with digital transformation projects underway at the majority of organizations, these professionals must learn to collaborate effectively and drive business value together.
The role of the CIO began evolving as far back as the 1960s and 1970s from a data manager on the backend to a real C-suite executive, said Khalid Kark, US CIO program research leader at Deloitte. That transition has brought different interactions with other members of the C-suite, including the CFO. "As technology became more strategic, CIOs and CFOs started to work together a bit more, and then as technology budgets started to increase, there was more attention paid by the CFO to the CIO role," Kark said.
In the last 20 years, the two professionals have had to collaborate on many projects, to the degree that about 20-25% of CIOs report directly to the CFO. About 30% of CIOs report directly to the CEO, putting them on equal footing with the CFO, Kark said.
"Now is the time where the relationship needs to work in sync--both the CIO and CFO need to work together to drive the value that they bring to the organization," Kark said. "It's one relationship that, if CIOs can get it right, they can catapult themselves into a different sphere in their organization."
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Budgets are the largest point of friction, as those are not typically a strength of the CIO. On top of that, many times CIOs are investing in assets that may not have direct ROI.
"If there isn't a clear return on investment or value proposition being laid out by the CIO, there is going to be pushback," Kark said. "Typically CIOs are being squeezed by the business to deliver something quickly, but they have these budget constraints they need to work within to keep the lights on. It's a conundrum that CIOs find themselves in, where to do things quickly, they need to build environments that may not really serve the needs for today, but for five years from now."
On the flip side, CFOs often feel that technology is a black box, Kark said. "They don't understand any of where the spending is going, and they don't have a lot of transparency in the way it's being spent," he added.
Technology can now enable businesses to deliver better experience for customers in a rapid timeframe, and the CIO is at the forefront of these efforts, said Matthew Guarini, vice president and research director at Forrester.
"Doing this successfully requires that the IT team be well aligned with business outcomes and have the funding necessary to deliver on the technology agenda," Guarini said. "This, however, can be at odds with the CFO agenda."
CFOs are tasked with driving profitability, and this often means they must place parameters on the IT function that can limit the moves the CIO wants to make.
"We recognize that the CIO does need to deliver on these base cost and efficiency metrics, however, the long-term winners will be those companies that aggressively invest in new technologies that allow them to win, serve, and retain customers," Guarini said.
Holding business leaders accountable for investments and benefits of technology becomes a core effort that CIOs and CFOs can work on together, Kark said. "It becomes a huge benefit to CIOs if the CFOs are on their team, trying to help them drive through some of the more strategic conversations," he added.
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Improving the relationship
The first step CIOs can take to improve their working relationship with the CFO is to deliver on the foundational elements, Guarini said. "Providing the cost and efficiency table stakes is critical," he added.
Beyond that, the CIO must demonstrate to the CFO that they are an equal partner in the C-suite, capable of delivering business value, Guarini said. This may involve the CIO rethinking the metrics used to evaluate IT to those that use business outcomes. This shows that IT is delivering value for the firm, rather than only providing a service, Guarini said.
The CIO also needs to show that their team can think innovatively and produce new technologies that deliver stronger outcomes for customers. "There is no one better placed than the CIO for providing this expertise--the opportunity is turning that expertise in pilots and eventual commercialization," Guarini said.
At a basic level, the CIO and CFO need to understand one another's perspective, Kark said.
"They may have different personalities and wear slightly different hats, but they have very similar roles within the organization," Kark said. Both are basic architects who develop specific capabilities for the company, and can be catalysts for change. They also are both strategic partners to the CEO.
In the past, Kark has recommended CIOs take their CFOs to dinner. "You have your perception of the CFO and the CFO has their perception of a CIO, you being a techie and the CFO just being a person who's going to push back on budgets and money and so on," Kark said. "In fact, the reality's very, very different. If you make the effort to understand the pressures that the other executive is facing, the CFOs are being pressured to drive value, additional value, and CIOs are exactly in the same boat."
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