Tag Archives: CFO
Recently, I had the opportunity to interview half dozen CIOs and half dozen CFOs. Kind of like a marriage therapist, I got to see each party’s story about the relationship. CFOs, in particular, felt that the quality of the relationship could impact their businesses’ success. Armed with this knowledge, I wanted to see if I could help each leader build a better working relationship. Previously, I let CIO’s know about the emergence and significance of the strategic CFO. In today’s post, l will start by sharing the CIOs perspective on the CFO relationship and then I will discuss how CFOs can build better CIO relationships.
CIOs feel under the gun these days!
If you don’t know, CIOs feel under the gun these days. CIOs see their enterprises demanding ubiquitous computing. Users want to use their apps and expect corporate apps to look like their personal apps such as Facebook. They want to bring their own preferred devices. Most of all, , they want all their data on any device when they need it. This means CIOs are trying to manage a changing technical landscape of mobile, cloud, social, and big data. These are all vying for both dollars and attention. As a result, CIOs see their role in a sea change. Today, they need to focus less on building things and more on managing vendors. CIOs say that they need to 1) better connect what IT is doing to support the business strategy; 2) improve technical orchestration; and 3) improve process excellence. This is a big and growing charter.
CIOs see the CFO conversation being just about the numbers
CIOs worry that you don’t understand how many things are now being run by IT and that historical percentages of revenue may no longer appropriate. Think about healthcare, which used to be a complete laggard in technology but today it is having everything digitalized. Even a digital thermometer plugs into an iPad so it directly communicates with a patient record. The world has clearly changed. And CIOs worry that you view IT as merely a cost center and that you do not see the value generated through IT investment or the asset that information provides to business decision makers. However, the good news is that I believe that a different type of discussion is possible. And that CFOs have the opportunity to play an important role in helping to shape the value that CIOs deliver to the business.
CFOs should share their experience and business knowledge
CFOs that I talked to said that they believe the CFO/CIO relationship needs to be complimentary and that the roles have the most concentric rings. These CFOs believe that the stronger the relationship the better it is for their business. One area that you can help the CIO is in sharing your knowledge of the business and business needs. CIOs are trying to get closer to the business and you can help build this linkage and to support requests that come out of this process. Clearly, an aligned CFO can be “one of the biggest advocates of the CIO”. Given this, make sure that you are on your CIOs Investment Committee.
Tell your CIO about your data pains
CFOs need to be good customers too. CFOs that I talked to told me that they know their business has “a data issue”. They worry about the integrity of data from the source. CFOs see their role as relying increasingly on timely, accurate data. They, also, know they have disparate systems and too much manual stuff going on in the back office. For them, integration needs to exist from the frontend to the backend. Their teams personally feel the large number of manual steps.
For this reasons, CFOs, we talked to, believe that the integration of data is a big issue whether they are in a small or large business. Have you talked to your CIO about data integration or quality projects to change the ugliness that you have to live with day in day out? It will make you and the business more efficient. One CFO was blunt here saying “making life easier is all about the systems. If the systems suck then you cannot trust the numbers when you get them. You want to access the numbers easily, timely, and accurately. You want to make easier to forecast so you can set expectations with the business and externally”.
At the same time, CFOs that I talked to worried about the quality of financial and business data analysis. Once he had data, he worried about being able to analyze information effectively. Increasingly, CFOs say that they need to help drive synergies across their businesses. At the same time, CFOs increasingly need to manage upward with information. They want information for decision makers so they can make better decisions.
Changing the CIO Dialog
So it is clear that CFOs like you see data as a competitive advantage in particular financial data. The question is, as your unofficial therapist, why aren’t you having a discussion with your CIO not just about the numbers or financial justification for this or that system and instead, asking about the+ integration investment that can make your integration problems go away.
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.