Don Doherty spends a fair amount of time these days doing something most CFOs don’t: cheering up his IT staff. The technology team at MI Windows and Doors is eager to implement new systems, but the budget is tight at this $200 million manufacturer, which was hit hard by the recession. “When they’re not allowed to pursue what may be possible, they tend to think they’re not adding value,” the finance chief says. “On a day-to-day basis, I try to console them and realign their thought processes.”
Ironically, the IT team has never performed better, at least in terms CFOs can appreciate. The department has improved phone-system usage, renegotiated service agreements, and found many ways to apply existing technologies to current problems. “They are very much a part of finding cost savings, and that was not so much the case before,” Doherty says. Of course, the fact that the staff has been cut by half over the past couple of years may be highly motivational in that regard.
The need to align the mission of IT with that of the overall business has been a perennial challenge for both CIOs and CFOs, and efforts to do so often reveal a large perception gap between finance and technology executives.
In a survey conducted last fall by CFO Research Services, for example, there was broad disagreement over how well information systems support strategic-planning initiatives. Only 30% of the 100 finance executives agreed with the statement, “Decision makers rely on the IT function to provide the information they need to make strategic decisions,” but fully half of CIOs agreed. Similar disparities were revealed when it came to IT’s role in identifying new opportunities or business models.
In some cases, such disparate perceptions lead to palpable frustration. At a recent seminar hosted by CFO, the vice president of finance for a major bank said aloud what many only grumble about. CIOs are “always coming up with these very capital-intensive programs that are essentially faith-based initiatives,” he said. “The projects are not well supported with metrics, but [CIOs] want to run off and take the risk.”
That is a valid complaint, according to Tom DeGarmo, leader of the technology practice at PricewaterhouseCoopers. If a CIO is unable to make IT spending relevant to business strategy, the relationship with the CFO will be “very difficult,” he says.
But some finance executives caution that there is more to such misalignment than the inability of IT to “get it.” William Miller is the CFO of a subsidiary that manages the technology operations for Nationwide Insurance; in essence, he serves as a liaison between finance and IT. While the accounting profession is hundreds of years old, he notes, with a long heritage of very mature, well-understood metrics, IT is in comparative infancy, “still struggling to figure out basic norms and how to measure things with consistency.”
Miller also gives credence to IT’s common, if stereotypical, view of finance: too focused on costs, risk-averse in the extreme, and unable or unwilling to see the potential for a technology initiative to transform the company. While it is finance’s job to be skeptical, he says, CFOs should take risks to improve the business, “and IT should be able to do the same.”
While such perception gaps are far from new, it may be more urgent to bridge them now, because emerging technologies threaten to undermine the status quo and create a huge divide between companies that take advantage and those that remain hamstrung by infighting.
Keith Taylor, finance chief at private-equity firm Exigen Capital, predicts that within a few years, companies that migrate from conventional in-house IT architectures to low-cost “cloud-based” solutions will attain a vast competitive advantage over those that don’t. For that reason, “it’s more important than ever that CFOs and CIOs get on the same page,” he says. “If they don’t put their heads together on strategic investment analysis, their companies will be left behind.”
But wherever a company’s technology resides, a failure to collaborate can hurt. For example, with larger IT programs there is often a disconnect on the costs of post-implementation “care and feeding,” says Pat Lawicki, CIO at PG&E, the California utility. During the planning phase, the parties must reach a shared understanding of what the ongoing maintenance costs will be, such as for server, storage, or network upgrades, or even new hires. “If you don’t do that, it’s going to be, ‘How come these costs went up? Where did this come from?’ You have to do it for project after project after project,” Lawicki says.
Sunny Side Up
That said, relations between finance and IT seem to be improving. Lawicki says that whereas CFOs once regarded big projects as being inevitably late, over budget, or doomed to fail, they now expect success. In part, IT has had to raise its game from a technology standpoint (becoming more efficient in applying new technologies to business automation tasks, for example), but better communication and a more collaborative mind-set have also had an impact, Lawicki says.
“By nature, technical people are optimists and finance people are pessimists, so there is opportunity for conflict,” says Mark Friedgan, CIO for consumer lender CashNet USA. “But at the same time, both sides now understand that about each other, so conversations end up being tailored to that imbalance.”
Recently, Judith Glaser, CEO of consulting firm Benchmark Communications (which works with businesses to improve relationships between linked stakeholders such as sales forces and customers, managers and employees, and so on), began evaluating communications between CFOs and CIOs.
Her research found that CFOs and CIOs have a high degree of mutual respect and trust, a shared understanding of the current business environment, and open sharing of information needed to successfully execute technology strategies. And both sides are on the same page when it comes to jointly addressing obstacles to IT strategy execution, and have a shared sense of urgency for implementing technology strategies.
But there were also some markedly differing perceptions, most notably regarding whether each party knows what it needs to know in order to implement technology strategies. On that point CFOs were quite positive, CIOs far less so.
Friedgan says that disparity actually makes sense. “Somebody in charge of technology will know enough to know there are a lot of unknowns,” he says. “But if a CFO asks the right questions about expenses, analytics, and projections, then he has everything he needs to know.”
Glaser says that harmony hinges less on actually agreeing on specific points and more on finding a way to proceed even when agreement is lacking. “What I try to do is measure the agreements people have so they can celebrate successes around those,” she says, “and then build on that by putting the conflicts on the table so they don’t become toxic.”
David McCann is senior editor for technology at CFO.