While technology investment is a critical factor in an organization’s financial performance, less than a third of CIOs report a strong working relationship with the chief financial officer (CFO).
This can result in underinvestment and underperformance, or worse — the squandering of investments because they’re poorly integrated into business value streams.
Only by working closely together can the power partnership of CIO and CFO maximize the performance of spending on technology across the enterprise.
Gartner analyst Stewart Buchanan advises starting by developing a strategic financial plan that looks multiple years ahead.
“This should deliver measurable stakeholder value while addressing technology debt,” he says. “Nothing sours a CIO-CFO relationship like nasty surprises about unbudgeted tech debt.”
Business strategy, scenario planning, risk assessment and sensitivity analysis all play important roles in ensuring that multiple rounds of investment are not just technically successful but also business successes.
He says CFOs must be confident about the financial results they publish, but many CFOs lack confidence in explaining how financial results are achieved in non-financial business terms.
“Gartner data shows CIOs rate the executive understanding of technology value far more highly than CFOs,” he says. “CIOs can use value streams to map and visually communicate the value of technology in business operations.”
Balancing Needs and Expenses
Jake McClean, CIO at Tanium, says the partnership between a CIO and CFO must balance the need for a commitment to technology investments — which can drive business success — against the need for predictable expenses and maximized ROI.
“Put another way, technology acquisitions rarely pay off the day the check is written, so CIOs and CFOs must carefully align technology strategy, investment strategy, and business needs,” he says.
He cautions failure to do so may result in underfunded initiatives or poorly architected roadmaps which lack staying power.
Suman Raju, CFO at Ivalua, adds CFOs ultimately are responsible for costs and cash flow, with IT investments comprising a growing share.
“As key members of the C-suite, both have a better perspective on company strategies and priorities than many decision-makers in the business,” he says. “As such, both should be critical influencers in IT selection decisions and, for certain types of technology, how systems are configured.”
By working together, they can ensure that technology decisions are optimized in the broader interests of the company, helping to unify processes and data rather than create silos.
Best Practices for Effective Collaboration
From Raju’s perspective, effective cooperation begins with aligning on the company strategy.
“In large organizations with many different stakeholders, it can be difficult to get teams to see the big picture and focus on the greater good of the organization,” he says. “This is where CFO-CIO alignment is critical.”
Together, they can determine which systems and projects are most closely aligned to the top company objectives and ensure resourcing and funding are allocated appropriately.
McClean explains CIOs must keep pace with and embrace the financial realities of their business while CFOs must understand the operational, security-driven, and ever-changing technology landscape.
“On both sides, taking time to address the ‘why’ behind the ‘what’ is essential,” he says.
Jorge Llano, virtual CISO at NuHarbor Security, explains a successful three-tier methodology includes transfer, endorsement, and transparency.
“Early-stage knowledge transfer allows for early alignment of effort and understanding for better business planning,” he says. “Endorsement is the second key — the business benefits when a technology initiative is fully supported at the top.”
It’s also an opportunity for co-branding the decision-making process, allowing both the CFO and CIO to have a mutually beneficial stake in the technology investments.
The third leg of the strategy, transparency leads to more trust and a more realistic budget lifecycle.
“While the idea is simple, it helps reduce surprises during technology planning,” Llano notes.
Measuring and Replicating Success
A strong CFO-CIO relationship requires both executive roles to focus on uniform business KPIs as their North Star, rather than siloed goals that aren’t informed by the needs of the other.
McClean says as CIOs, CFOs, and other C-suite members discuss technology investments, a focus on clearly defined and measurable outcomes — and the resources required to achieve those outcomes — can help drive long-term success.
“Objective and transparent assessment of overarching KPI’s will drive long-term alignment and can directly inform tactical pivots or changes in strategy, which may be necessary along the way,” he explains.
Buchanan adds that without strong CFO-CIO partnerships, many organizations simply don’t know if their digital spending is successful.
“Digital outcomes are often lost within larger business P&Ls,” he says. “Measurability is key — measuring the flow of value to build enterprise confidence and competence in successful strategy execution.”
Raju agrees strong CFO-CIO relationships drive better digital spending outcomes by ensuring broad stakeholder requirements are considered when technology is selected.
“Both are guardians of the organization — CIO from a security and data perspective and CFOs from a budgetary and cash flow perspective,” he says. “The better the relationship, the more likely that IT investments will support long term value.”