The strategic CFO is different than the “1975 Controller CFO”
Traditionally, CIOs have tended to work with what one CIO called a “1975 Controller CFO”. For this reason, the relationship between CIOs and CFOs was expressed well in a single word “contentious”. But a new type of CFO is emerging that offers the potential of different type of relationship. These so called “strategic CFOs” can be an effective ally for CIOs. The question is which type of CFO do you have? In this post, I will provide you with a bit of a litmus test so you can determine what type of CFO you have but more importantly, I will share how you can take maximum advantage of having a strategic-oriented CFO relationship. But first let’s hear a bit more of the CIOs reactions to CFOs.
Views of CIOs according to CIO interviews
Clearly, “the relationship…with these CFOs is filled with friction”. Controller CFOs “do not get why so many things require IT these days. They think that things must be out of whack. One CIO said that they think technology should only cost 2-3% of revenue while it can easily reach 8-9% of revenue these days.” Another CIO complained by saying their discussion with a Controller CFOs is only about IT productivity and effectiveness. In their eyes, this has limited the topics of discussion to IT cost reduction, IT produced business savings, and the soundness of the current IT organization. Unfortunately, this CIO believe that Controller CFOs are not concerned with creating business value or sees information as an asset. Instead, they view IT as a cost center. Another CIO says Controller CFOs are just about the numbers and see the CIO role as being about signing checks. It is a classic “demand versus supply” issue. At the same times, CIOs say that they see reporting to Controller CFO as a narrowing function. As well, they believe it signals to the rest of the organization “that IT is not strategic and less important than other business functions”.
What then is this strategic CFO?
In contrast to their controller peers, strategic CFOs often have a broader business background than their accounting and a CPA peers. Many have, also, pursued an MBA. Some have public accounting experience. Others yet come from professions like legal, business development, or investment banking.
More important than where they came from, strategic CFOs see a world that is about more than just numbers. They want to be more externally facing and to understand their company’s businesses. They tend to focus as much on what is going to happen as they do on what has happened. Remember, financial accounting is backward facing. Given this, strategic CFOs spend a lot of time trying to understand what is going on in their firm’s businesses. One strategic CFO said that they do this so they can contribute and add value—I want to be a true business leader. And taking this posture often puts them in the top three decision makers for their business. There may be lessons in this posture for technology focused CIOs.
Why is a strategic CFO such a game changer for CIO?
One CIO put it this way. “If you have a modern day CFO, then they are an enabler of IT”. Strategic CFO’s agree. Strategic CFOs themselves as having the “the most concentric circles with the CIO”. They believe that they need “CIOs more than ever to extract data to do their jobs better and to provide the management information business leadership needs to make better business decisions”. At the same time, the perspective of a strategic CFO can be valuable to the CIO because they have good working knowledge of what the business wants. They, also, tend to be close to the management information systems and computer systems. CFOs typically understand the needs of the business better than most staff functions. The CFOs, therefore, can be the biggest advocate of the CIO. This is why strategic CFOs should be on the CIOs Investment Committee. Finally, a strategic CFO can help a CIO ensure their technology selections meet affordability targets and are compliant with the corporate strategy.
Are the priorities of a strategic CFO different?
Strategic CFOs still care P&L, Expense Management, Budgetary Control, Compliance, and Risk Management. But they are also concerned about performance management for the enterprise as whole and senior management reporting. As well they, they want to do the above tasks faster so finance and other functions can do in period management by exception. For this reason they see data and data analysis as a big issue.
Strategic CFOs care about data integration
In interviews of strategic CFOs, I saw a group of people that truly understand the data holes in the current IT system. And they intuit firsthand the value proposition of investing to fix things here. These CFOs say that they worry “about the integrity of data from the source and about being able to analyze information”. They say that they want the integration to be good enough that at the push of button they can get an accurate report. Otherwise, they have to “massage the data and then send it through another system to get what you need”.
These CFOs say that they really feel the pain of systems not talking to each other. They understand this means making disparate systems from the frontend to the backend talk to one another. But they, also, believe that making things less manual will drive important consequences including their own ability to inspect books more frequently. Given this, they see data as a competitive advantage. One CFO even said that they thought data is the last competitive advantage.
Strategic CFOs are also worried about data security. They believe their auditors are going after this with a vengeance. They are really worried about getting hacked. One said, “Target scared a lot of folks and was to many respects a watershed event”. At the same time, Strategic CFOs want to be able to drive synergies across the business. One CFO even extolled the value of a holistic view of customer. When I asked why this was a finance objective versus a marketing objective, they said finance is responsible for business metrics and we have gaps in our business metrics around customer including the percentage of cross sell is taking place between our business units. Another CFO amplified on this theme by saying that “increasingly we need to manage upward with information. For this reason, we need information for decision makers so they can make better decisions”. Another strategic CFO summed this up by saying “the integration of the right systems to provide the right information needs to be done so we and the business have the right information to manage and make decisions at the right time”.
So what are you waiting for?
If you are lucky enough to have a Strategic CFO, start building your relationship. And you can start by discussing their data integration and data quality problems. So I have a question for you. How many of you think you have a Controller CFO versus a Strategic CFO? Please share here.