With technology constantly shaping and disrupting corporate strategy and the way organizations do business, its becoming more important to establish a relationship between CFOs and CIOs.
Today, more than ever, there is an elevated interdependency between the two C-Suite executives to ensure IT spending is aligned with corporate strategy. Its essential for the CFO and CIO to make sure their company is not left behind in a digital environment that is redefining how work gets done, both in the back office and in front line operations.
Modern business technology is more prevalent and accessible than ever before. That means almost any business can grow by implementing the right solution (whether it be CRM, business intelligence, accounting, or otherwise). However, it also causes more complications as companies have to sort through the market for software that holds value over "fluff", matching effective solutions with business needs, and reworking your existing IT infrastructure and systems. At this point, finance and IT leaders need to collaborate closely to assure new technological innovations such as, A/P automation or an A/R electronic lockbox, are aligned with digital growth and prove bottom-line ROI.
Why do they need to work together?
A few reasons why both the CFO and CIO have converged are due to analytics and data management, and the proliferation of cloud technology. CFOs can use business intelligence (BI) to increase profitability with advanced modeling and analytical tools (e.g. automation, sales forecasting, segmentation, customer experience mapping). CIOs, meanwhile, are responsible for choosing the best BI platform and managing deployment, integration, functionality, etc. However, it's common for IT and finance to disagree on new company initiatives because finance may say, "IT does not have enough measurable data", such as, key performance indicators (KPI's) or projected ROI, to reason why the organization should add on a new system. Or, IT may not understand the strategic importance of the CFO's proposal.
What's holding the CIO and CFO back from true partnership?
- Lack of common language: Many CFOs struggle to find straightforward business value in a project proposal full of technical jargon. In the same regard, CIOs often struggle to articulate IT priorities in a way that promises bottom-line ROI.
- CFOs overly-concerned with cost: CFOs have a reputation for hindering IT progress with budgetary limitations. This may only be true in some cases, but it reflects a more systemic problem: CFOs view IT as a cost center, instead of a source of growth, refinement, and innovation.
- Organizational hierarchy: A high percentage of CIOs report to the finance department, and by extension, the CFO. While there’s nothing inherently problematic about this structure, it can sometimes place CIOs in a position of perceived inferiority. Include CIOs at the leadership table to break down these silent barriers.
- Lack of accountability: Since CFOs are typically in the position of ultimate authority, it’s easy to paint them as overly-restrictive or unsympathetic to IT priorities. But CIOs still have an obligation to account for their investments. That means being able to prove ROI by presenting KPIs to finance in a clear, business language, and adhering to the same project management standards that govern the rest of the company.
One of the most important things that a CFO can do is gain a deeper understanding of the role technology plays in future investments and how data can help their organization make informed decisions about organizational investments. Although, there's a push-pull relationship between the two leaders, there is now more emphasis on collaboration. As Ernst & Young’s research found, over the last three years, 61% of CFOs said they have been collaborating more with CIOs, and 71% said they are more involved in the IT agenda.
Ways CFO and CIO can benefit the business
- Better management of IT risks: Information security, data privacy and cyber security issues are top of mind for both CFOs and CIOs. By maintaining an open line of communication about these business-critical topics, CFOs gain more insight into how IT is helping the organization to address IT risks and why certain investments are needed to protect data and users. CIOs, meanwhile, can stay apprised of compliance mandates and other business demands that may impact how the organization addresses IT security and risks.
Broader access to big data insights: As businesses work to become more analytics-driven, they need the CFO and CIO to collaborate effectively. CIOs play a vital role in evaluating and implementing business intelligence (BI) tools and hiring technical personnel to work with them. However, CFOs need to weigh in on these decisions so the business invests in tools that can provide the types of reports and insights the organization requires.
Stronger partnership with internal audit: Many internal audit leaders report to the CFO on either a direct or dotted-line basis. Chief audit executives are also collaborating more frequently with CIOs. Because of their relationships with internal audit, CFOs and CIOs have an opportunity to bring internal audit into their discussions, as appropriate, to help the organization stay on top of IT risk and compliance issues. In addition, these three executives can work together to find ways to use IT more strategically and cost-effectively for business enablement, helping IT to become more of a “value center” for the organization.
In today’s digital world, customers are at the heart of demand-driven, fast moving value networks. The most agile, customer-centric companies will win in the marketplace. Digital transformation is about closing the gap between what your digital customers expect and what your analog organization can deliver. The modern CFO has to go beyond traditional practices of reporting and become more strategically-focused, more value-focused, and more future focused. That means understanding the value and role technology plays in future investments and including the CIO at "the leadership table". Technology is no longer a support function. It is integral to corporate-wide policy and strategic direction.
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