CFO and CIO: How to Smooth out Conflicting Roles
It's no secret that there's often conflict between the CFO and CIO in IT organizations, even though both executives are working toward the same goals.
Industry-wide, the success – or failure – of IT enterprises is highly dependent on leadership dynamics. While rank holders, such as the chief financial officer (CFO) and chief information officer (CIO), are positioned to direct an organization toward realizing its business objectives, they can – and often do – fall into a trap of difficult contradictions. Here we'll take a look at why these two executives often butt heads and what they can do to reduce the friction.
An Overview of the CFO and CIO Roles
A business's chief financial officer and chief information officer each look at the business through a different lens. For the CFO, it's finance that matters, while for the CIO, the key focus is on technology. This affects how they evaluate business plans and make decisions.
According to David Goltz, who has served both as CFO and CIO of Destiny Health Insurance, a CFO evaluates business objectives and business plans and then generates a budget. The position’s focus is to set sales targets for business growth while managing budget allocations for maintenance. The CFO assesses proposals from each department and makes decisions on whether each plan is a sound investment. The focus is on spending in a way that creates the greatest return on investment (ROI).
For the CIO, the technology always takes center stage. The CIO evaluates the company’s IT infrastructure, systems and strategies, and explores how these can be improved with respect to IT's current best practices and standards. A CIO understands the value of investing in IT, which is why sustaining the stability of systems and upgrading hardware and software are constant concerns.
Based on a survey conducted by Gartner and Financial Executives Research Foundation (FERF), 42 percent of IT organizations or executives report to the CFO. In smaller corporations with revenues from $50 million to $250 million, the percentage goes up to 60 percent. When it comes to IT investments, 26 percent are approved by CFOs, while only 5 percent are approved by CIOs. This scenario opens up the debate about which executive has the final word in IT decisions.
Because IT decisions are largely determined by CFOs, CIO confidence appears to have dropped. In CIO Magazine's State of the CIO survey for 2016, 54 percent feel that they are blamed for other departments' shortcomings. And in a previous survey, only 33 percent of CIOs reported viewing themselves as a trusted peer in their organization. Only 31 percent perceived themselves as valued service providers. Even worse: A meager 11 percent believed that IT serves as a competitive distinction for a business!
These numbers speak volumes about what appears to be a battle line drawn between these two executives. Both CFOs and CIOs have business development in mind, but the nature of the types of people who hold these two positions leads to conflict.
Where the "Conflict" Lies
In an blog post on CFO.com, Susan Cramm, former Taco Bell CIO and Chevys Mexican Restaurants CFO, called the CFO-CIO conflict "schizophrenic," – and for good reason. The CIO and CFO tension often arises, Cramm says, because of the CIO's common IT budget request setup and demands rationalization for the request.
One of the typical points of disagreement between a CFO and CIO is ROI. When a CIO approaches the CFO, what he posits are the excellent functionalities provided by a technology. But for the CFO, the first question to ask is, "What’s my ROI?" CIOs can’t provide ROI numbers, but they can propose a general scenario of value. When no numbers are given on involved time and money savings, the CFO may conclude that investing in the technology is superfluous.
Another reason for conflict is technology for technology’s sake. CIOs have more interest in IT and how technology constantly changes. Some CIOs believe that IT investments for system development life cycle or release management are sound and justified. The fact that a business uses IT is enough to necessitate IT upgrades. CFOs, for their part, are not sympathetic to technology for technology’s sake. Unless an upgrade or new tech investment has significant remuneration, the answer tends to be "No."
To be fair, IT investment backlash over the past years has also turned CFOs wary. Many enterprises that spent money on technology are still waiting for the promised ROI. After all, not all IT investments deliver promised productivity and revenue gains. However, CIOs know that there’s more value to IT than investment returns.
Is "Conflict Resolution" Realizable?
Especially when the economy is in a downturn, part of a CFO's job is to keep costs down. On the other side of the coin, CIOs are excited by advances in technology. Is there a point of compromise for these two executives? How do CFOs and CIOs get past hurdles in priority and communication in order to make the right decisions for the business?
Goltz suggests that CIOs should speak to CFOs with a lot of information to support a proposition. CIOs should provide a primary recommendation and several alternatives that are on par with the organization’s IT goals. This way, CFOs don’t have to choose the cheapest solution. CIOs must plan technology investments that are suitable to business objectives and processes. It’s a must that they emphasize the value of platform stability. Furthermore, Goltz cautions that CIOs need to hold back on non-essential IT upgrades.
Showing senior executives the business value of a technology through prototype presentation is another key way to promote a relationship where the CIO and CFO can meet in the middle. This way, CFOs can see the benefit they can attain and the additional features they might need.
Patience and understanding are called for when dealing with the CIO, says Hyatt Hotels and Resorts CIO Mike Blake. CFOs should make it clear to CIOs that the issue is not just about year-over-year cost cutbacks, but more about increased business opportunities through IT. CFOs and CIOs must also have transparency in their relationship to ensure that IT opportunities are not overlooked.
CIOs, for their part, also need to communicate clearly and avoid keeping CFOs in the dark. He believes that with the consumerization of IT, CFOs now want to dabble in IT. CIOs should relay risks and opportunities in a clear manner.
Can We Be Friends?
The conflict that can arise between CIOs and CFOs may be partially due to the different perspectives required by these two positions. However, businesses work better when executives communicate and work together. Therefore, it's up to CIOs to avoid pushing technology for technology's sake, and try to think more like a CIO when making requests on the budget. By the same token, CFOs need to learn to look at the business through a technological lens when it comes to making decisions about IT.