Keys to credibility

CFOs and CIOs are often at odds with each other. However, smoothing over hostile dealings may be beneficial to both parties.

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The CFO can be one of the most influential individuals in your enterprise, in terms of how IT is perceived and managed. However, at times, the two do not see eye to eye and view each other as stumbling blocks to achieving their individual and enterprise goals. This is particularly problematic when a “parent/child” relationship exists because the CIO reports to the CFO. I hear recurring (and disturbing) themes from CIOs that many CFOs think:

• IT is a cost to be controlled and reduced.

• IT projects continually go wrong.

• External service providers can deliver value and control their costs better than an internal IT organisation.

• IT organisations have no clear idea about their efficiency, relative to others and the market.

Improving the CIO/CFO relationship

Given that IT has a substantial credibility gap in the eyes of many CFOs, there are actions that CIOs can take to drive improvement. Here are a few that can get at the core of many of the challenges IT leaders face.

Plan for improving IT-cost visibility.

Although most organisations track total IT spending, they are often unable to segment costs by business unit or IT service. CIOs should work proactively to improve the visibility corporate executives have into IT costs. Go beyond the basics to provide support for “what if” analysis and scenario planning, such as:

• What if we grow our business by 20 per cent next year? How much will our IT budget need to grow?

• What if we expand into new geographies? How much will we have to spend on IT infrastructure to support that?

Be ready to kill projects that have gone bad.

Smart CIOs are prepared to dispassionately kill projects that have gone awry. Too often, CIOs prolong difficult project decisions hoping a miracle will occur and the project will get back on track or conditions will change. Not making a difficult decision (when one is desperately called for) makes any leader appear weak. Do not let sunk costs be a rationale for continuing to channel good money into bad projects. CFOs will appreciate this ability. Projects tend to have high burn rates and the expenditure can be diverted to other areas of the business or returned to the bottom line. CIOs that can kill projects demonstrate a sense of fiscal responsibility that inherently appeals to CFOs.

Be willing to benchmark your team’s work.

Undertaking regular bench-marking exercises within IT, provides the CFO with a level of comfort that the IT organisation is competitive and on a path of continuous improvement. It is best to benchmark proactively, as opposed to doing it in response to criticism and distrust. Regardless, being willing to have the efficiency of the IT business evaluated by a third party can help establish a level of credibility and respect lacking in many CFO/CIO relationships.

Show awareness of market conditions and costs.

I often hear CIOs complain CFOs are pushing for more IT out-sourcing in the hope of saving money. That’s because CFOs are hearing (often, directly from IT-service vendors) an increasing amount of one-sided information about the economics of IT outsourcing. Instead of acting like preservationists for their IT organisation, CIOs must be proactively scanning the market as well, and must be competitive with external service providers. A CIO should be continually asking, “Is the time right for outsourcing in a particular area of IT?” The answer may be “No” but the question must be asked.

Communicate risks.

Risk management is essential to maximising business value. A critical role of the CIO is to make the CFO aware of IT-related operational risks. Many of the IT disasters we see today — from breaches of customer privacy to system failures that put companies temporarily out of business — can be traced to a deficiency in operational risk management and poor communication between the CIO and CFO.

Not all CIO/CFO relationships can be rescued. If you are at odds with your CFO, then it might be for good reason. But making the relationship more successful might be possible with a few proactive actions. I’d suggest that you give it a go before you decide to go... or someone decides for you.

Mary Ann Maxwell, group vice-president, executive programmes, Gartner, will be a keynote speaker in the CIO Conference 2007 with the theme “The new CIO agenda: Business leadership and innovation” on 18-19 September, Sky City Convention Centre, Auckland. Please visit cio.co.nz/conference for more details.