The C-Suite landscape is changing. With the introduction of several new C-level executives to manage HR (CHRO), Marketing (CMO) and Strategy (CSO), it is not easy for each of these individuals to have a prominent, influential seat at the table. Here Robert Gothan, CEO and founder of Accountagility, talks to Finance Monthly about the importance of the working rapport between C-level executives, for any business.
After the Chief Executive Officer, the secondary ‘leader’ of the business has historically been the CFO. Once responsible for departments such as HR and IT, as well as keeping the business financially stable, the CFO held an undeniably strategic role within the business.
The introduction of advanced technology has changed this however. Businesses across the globe now hold a CIO or CTO amongst their most trusted boardroom members, with influence and budget behind them. Our increasing reliance on technology has led to the rise of the CIO, who not only fulfils the ‘technical director’ role, but also acts as a key strategist, marketer and adviser to the wider organisation.
With different executives vying for boardroom prominence, offering high level strategy to benefit the growth of the business is vital. As such, the CFO and CIO must consider how they can form a partnership and add maximum value to their individual departments, and the business as a whole.
The focus on finance
The CFO’s role has now returned to its original focus – finance – but CFOs are also contending with mounting pressure to be a strategic presence within the boardroom. Today’s CFOs are not only expected to make recommendations on the future of the firm’s growth and profitability, but also to ensure the very existence of the firm itself. However, the main focus needs to remain on the finance function within a business.
For the financial services sector in particular, frustration with the IT function is not uncommon for CFOs – delays in projects, insufficient resources and constant restrictions can lead to discernible tension between the CFO and CIO. Further still, CIOs are often given budgetary freedom that has led to the rise of the ‘vanity project’ phenomenon, where senior IT directors use up capital and resource on highly technical projects which add questionable value to the business.
At the same time, IT departments often fail to meet the needs of the finance function. As a result, these employees are often left to rely on ineffective, quasi-manual tools such as Microsoft Excel. These solutions not only add to the increasing resource pressure on the finance department, but can also bring with them significant corporate risk.
That is only one side of the story, however. EY’s recent report ‘The CFO Agenda’ has highlighted a key setback in the CFO-CIO relationship – CFOs’ lack of understanding when it comes to IT issues. With clear collaboration needed between these two roles, a more productive relationship must be fostered.
In most organisations, these two boardroom heavyweights ensure that current business operations run efficiently and effectively. Alongside this, they also shape the strategy for future business growth.
EY’s report also shows an increased desire for these two roles to collaborate more often, with 61% of CFOs reporting increased collaboration over the past three years. The areas most improved in terms of collaboration were CFOs involving themselves in the IT agenda and adding value to the CIO by managing costs and profitability across the business, both of which are undeniably a positive step forward.
Despite this progress, the convergence of technology, investment strategy and risk in today’s digital business world has elevated the collaboration required between these two roles to new heights. As such, any disconnect will have a ripple effect throughout the organisation, and consequently put a spanner in a business’ technical advancement. For organisations to maintain their competitive edge, it is clear that the productive relationship needs to be kicked up a notch.
The future relationship
To date, the relationship between the CFO and CIO has historically been focused on cost, with the IT department’s budget a constant sore point. In fact, many CIOs have found themselves reporting to the CFO to keep an eye on hidden costs during the management of IT projects.
Nevertheless, technology is crucial to operational excellence and business growth in today’s business landscape. CFOs are already becoming far more aware of the strategic value that IT brings to an organisation, but need to see it as an essential tool for achieving broader efficiency goals and driving future innovation.
There are potential roadblocks ahead, however. Effective communication between these two roles is often prevented by the difference in language – another finance vs technology battle. There are also personality differences to contend with – CIOs are typically big-picture thinkers, whereas CFOs value logic and results. Being aware of these differences and barriers to communication will be a crucial part of creating a business partnership between these executives.
To achieve this goal, CFOs should consider employing a ‘Business Partnering’ approach in order to provide more technical, commercial business insights. To provide a higher level of strategic thinking, the CFO must utilise data which has been extensively analysed. The analysis itself will sit under the CIO’s remit, and demonstrates just one small area where these two roles can overlap and work together in modern businesses.
Ultimately, the relationship between the CIO and CFO can directly affect a company’s success, so both must come together to provide the strategic ideas which will propel the business forward. With some bold technology decisions coming up in the future, these two roles must work together to not only increase the CFO’s involvement in the IT agenda, but also to push data-driven decision making into the heart of an organisation’s future business strategy.