The Chief Information Officer (CIO) and CFO have long had an adversarial relationship. CIOs are charged with driving technological development in a company while CFOs focus on keeping expenditures within profitable margins. For a long time, the CIO and CFO have been at odds mostly due to the starkly different mindsets they need to do their jobs effectively.
That antagonistic relationship is changing for the better. A 2021 survey by Gartner revealed that a collegial and business-centric relationship between CFOs and CIOs is important for successful digital investments.
The traditional and emerging CFO-CIO relationship dynamic
Information is the most precious commodity in today’s economy, timely information can put a company ahead of competitors. The CIO secures and processes information for the benefit of the company. That requires infrastructures that cost money.
Perhaps due to how swiftly technology advances, CIOs tend to be quick to act and spend. CFOs are traditionally the voice of caution and are often the final authority on budgets. The bottom line of any company expenditure is to increase revenue. The CFO is responsible for ensuring that IT expenditures do just that.
One key factor that is driving the need for a more collaborative relationship between CFOs and CIOs is the rising importance of data. Companies that want to stay relevant in this data-driven era need to make business decisions based on data analytics. Also, employees expect technological conveniences they experience in their personal lives to follow them to the workplace.
Gartner survey findings
The Gartner survey had 183 CFOs and CIOs respondents. It sought to examine the relationship between those two offices and understand the dynamics driving the collaborative change we now observe. Here are some quick statistics culled from the research.
- Only 30% of CFO-CIO relationships show strong collegiality and business centricity.
- Where strong CFO-CIO relationships exist, funding for digital initiatives is 51% more likely to be secured.
- With strong CFO-CIO relationships, digital spending is 39% more likely to remain in line with the budget plan.
- Intended business outcomes are 18% more likely to be achieved where a business-centric and collegial CFO-CIO relationship exists.
Two key attributes were used to describe strong CFO-CIO relationships in this survey; collegiality and business centricity. Those attributes have to proved essential in achieving the best digital investment outcomes. Where they are absent, one would find a function-centric and adversarial relationship between the CFO and CIO.
Without the right kind of CFO-CIO partnership, a company would struggle to fund digital initiatives. The absence or slowness of funds for such initiatives can result in the company losing out on valuable opportunities. Weak partnerships often see digital spending going out of budget and incurring debt.
Better partnership will see to it that the expectations from tech expenditures are understood company-wide. Then the executive leadership can align to ensure that it delivers the intended outcome.
The present business environment is prone to inflation, putting a lot of pressure on CFOs to ensure that digital investments offset margin erosion. Having the right kind of relationship with the CIO is a critical part of delivering that value.
Key Actions to Digitize CFO-CIO partnership
1. Shift from project-based models of digital spending to product-line-funding models
The traditional project-centric funding for operational IT expenditures has several flaws. Cost estimates are made before the scope of the project is fully understood, so necessary changes are slow and difficult to implement. Moreso, it is usually locked in for the fiscal year and doesn’t allow the IT team much flexibility when the market dynamics or company priorities shift.
Shifting to product line funding models allows a flow of perpetual stable funds that can be reallocated according to changing business dynamics. It gives room for improving processes and products that can boost long-term value creation. This makes it possible for CFOs to strengthen collaboration with CIOs to highlight the operational and strategic benefits of digital investments funded from opex.
2. Expand performance metrics for digital investment analytics
It seems that finance emphasizes different performance metrics for digital success than CIOs do. For the IT team, user engagement, digital response speed etc are indications of success. But finance usually does not take all that into account.
CFOs need to see from the CIO’s point of view what constitutes digital success. They should expand their measurements of digital investment success to include those operational metrics the CIOs emphasize. That helps with reframing expectations for digital investments.
With this, the business can analyze business performance on how user engagement impacts sales, for example. It leads to the use of a common performance management framework to measure business KPIs. Because the finance and IT team should be on the same page when it comes to overall business KPIs.
3. Early involvement in the tech team’s road mapping process
The finance team can help the IT team by getting involved early enough in road mapping discussions. Advice and guidance can be provided early enough to save time and resources spent on creating technology roadmaps. Conducting early financial analysis ensures that the financial feasibility of technology plans is known before concrete decisions are made. It is also an opportunity for the CFO to influence and clarify the objectives of digital investments.
4. Equip IT with tools that promote digital-cost-structure transparency
The strength of finance lies in linking costs to output. They can collaborate with IT to help with communicating the value of digital costs to the bottom line. Service-based costing models, for example, are preferred tools for achieving the level of transparency CFOs desire.
How to strengthen CFO-CIO Relationships
- CFOs should think of their CIO as a fellow business strategist, rather than just a budget owner.
- CFOs should identify areas where collaboration with CIOs can help with the dispensation of the CFO’s primary roles.
- Establish effective communications One major challenge to effective communication between CFOs and CIOs is that one speaks the language of finance, the other technology.
- Identify opportunities to collaborate on delivering value to the agency. CFOs can also help CIOs articulate how IT impacts specific, key business processes.
With the rise of data analytics in almost every facet of the business, technology expenditures are a priority. But they remain so only when they bring measurable financial value to the business. Companies with strong CFO-CIO partnerships fare better compared to their lacking peers in managing digital investments.