The CIO’s status and influence is growing in the enterprise, according to the Harvey Nash/KPMG CIO Survey 2016, in which 3,352 CIOs and technology leaders from 82 countries participated. The survey found that 34% of respondents now report directly to the CEO, while 57% sit on the executive board or committee.
With increased executive power comes an increased need to form strong executive partnerships, and one of the most useful partnerships is that which can exist between a CIO and CFO. In many organizations, the CIO will still report to the CFO, but the trend is for a direct reporting relationship between CIO and CEO. In general, that’s good for the CIO, but it brings complications, as well.
One of the major complications is the business expectation that comes from a direct reporting relationship with the CEO. Another is the increasing importance of a digital strategy in most businesses.
On the one hand, the rising importance of the digital strategy is part of the CIO’s rising influence. On the other hand, more executives with titles like chief digital officer are expected to have a hand in formulating that strategy. For the CIOs to retain their influence, they must form alliances with other executives — ones who can champion their cause and join their project teams.
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Why is the CFO such an important executive partner? The answer boils down, of course, to money, but the money is reflected in influence. In most organizations, the CFO is a principle trusted ally of the CEO and a key member of the executive committee.
The influence represented by the CFO can be critical when it comes to finding the resources required to move forward with a CIO’s agenda and do the job that the CEO and executive committee expect of the CIO.
This list is about the “why” of the relationship: The “how” is a much different discussion. Before we get there, though, let’s agree that this is a relationship that deserves attention.
You’ll see five reasons here, but I suspect you can think of others. I’d be interested in knowing what those reasons might be, so let me know in your comments. I would also be interested in knowing whether you think my premise is wrong that the CFO is not a key ally of the CIO.
If you think I’m barking up the wrong executive tree, here, definitely let me know, because I would love to get your ideas on who the CIO should befriend among those in the corner offices.
You Need Investment
Yes, the world is moving to the cloud. Yes, a cloud-based infrastructure means that you need fewer server racks sitting in a data center. But even if you make the strategic decision that the future of your data infrastructure is in the cloud, you’re going to have to make investments in hardware, in services, and in people, if you want to be successful.
The investments don’t stop when the balance of spending shifts from hardware to software and services. The investments change, and understanding those changes can require the assistance and cooperation of the CFO. Making the most of the changes — turning them from a source of uncertainty to a foundation of progress requires the partnership of a CFO who’s willing to work with you to cast the numbers in the proper, most flattering light.
As a CIO, of course you have as deep an understanding of finance as any executive. But what you don’t have is as deep an understanding of your organization’s finances as your CFO does. Further, you probably don’t have time to pull together all the financial details that your CFO will have at his or her fingertips. Use the friendship to get better information with less effort and build your proposals on fact. You’d be amazed at just how effective the right facts can be when making the case for investing in a project.
Security Costs Money
Let’s lay down some facts, here. Security is a major priority for pretty much every organization that owns a computer. There is no such thing as free security. Put all these facts together and it means that a CIO is going to spend some serious time and political capital explaining and justifying something that is a pure expense. If you’re going to do that and keep any leverage for other projects, you’re going to need the CFO on your side. While that alliance is important, there’s an even more important consideration to keep in mind.
When something is a pure expense, those who build their professional lives around finance can look at those expenses and want to shrink them. Smaller numbers in the expense section mean larger numbers at the bottom line. As CIO, you understand that there are levels below which you can’t go when it comes to buying effective security. When you have the CFO on your side, you’re much less likely to have someone with the CEO’s ear insisting that you starve the security program.
This is one of the situations in which having the CFO on your side is important. Having the CFO on your side, and having educated the CFO on the importance of security and security investment is even more important. So be sure you keep your friend, the CFO, educated on what’s happening in security and the best practice in coping with the challenges. You’ll find that effort paying off when it’s time to put together your security budget for each quarter.
You Have To Understand Revenue
The CIOs responding to the Harvey Nash/KPMG Survey 2016 said that 37% have a CEO who is focused on projects that save money. The other 63%? They have CEOs who are focused on IT projects that make money. That’s a major change in the way that most CIOs think, and a critical shift in the way that each CIO will approach the impact of the projects they direct.
One of the things that most CIOs have to understand is that revenue is farther from the bottom line than are expenses. Put another way, when you reduce an expense by a dollar, in general you’ll see more of that dollar drop to the bottom line than is the case when you increase revenue by a dollar. This is one of the reasons that so many CFOs love reducing expenses the impact can be immediate and dramatic.
When your focus shifts from expense to revenue, you’ll need to have an understanding of all the factors that weigh on revenue in your organization. When the CFO is your friend, you’ll find that you can get better advice on those factors and a more sympathetic interpretation of expenses that might be weighed against those revenues. Get some understanding, and get a sympathetic expense judgement. You might well find that the executive committee is seeing the revenue from your projects in a much more favorable light.
You Must Retain Talent
When you shift your infrastructure from on-premises to the cloud, you might get away from capital expenses, but you don’t do very much to reduce your reliance on development and operations expertise. In many cases, you’ll actually find that you need more staff members with more expertise — and you don’t want to build the budget to replace those highly skilled workers on a regular basis.
So how do you retain your employees? You invest in them. Some of the investment is quite straightforward you pay them higher salaries. Some of the investment is a bit more subtle you provide funds for education and travel to industry conferences. You also do things like make sure that your employees have the tools they need and a productive environment in which to work. Each of these things costs money, though some of them cost more than others.
A CFO will understand precisely how much it costs to replace a skilled IT employee. When you have the CFO as a friend, you’ll have opportunities to explain how the modest expenditure in employee retention will replace the much more significant costs of replacing developers and operational specialists. It’s a good conversation to have especially with a CFO who’s on your side.
The Team Matters
IT projects today are rarely so simple that they only involve the IT department. Especially when many projects are initiated by business units away from IT, partnerships in the management group are critical. If a CIO has a clear vision of what they’d like to see happening in their organization’s IT operations, a team of like-minded executives will help them see their vision brought to life. When they’re putting together an executive team, it’s hard to imagine a more valuable player than the CFO.
The CFO stands astride all the money flows into and out of the enterprise. Whether an individual project is focused on the money coming in or the money going out, the CFO is quite correctly seen as the individual who has the best position for understanding the nuances of the cash flow. If that individual says that your understanding of how IT will have an impact on that flow is correct, then you’re much more likely to get agreement with your numbers within the executive committee. When that happens, you can argue your case on the facts rather than on interpretations of the money stream, and that puts the argument much more firmly in your favor.
There are other reasons why you should build a partnership and friendship with the CFO beyond these five. Put some time into developing your relationship with the person who controls the organization’s money and you’ll find that many of your arguments don’t happen they become discussions about how you’ll succeed, not whether you’ll be allowed to try with a particular plan.
Date: October 07, 2016