Working with the CFO Boss

By Jodi Mardesich

In recent years, growing numbers of enterprises have chosen to restructure the hierarchy of their organizations so that the company's chief information officer reports directly to the chief financial officer. According to CIO Magazine's 2004 survey of IT professionals, the percentage of CIOs who report directly to CFOs climbed to 30%, up from 11% just two years ago. A separate survey by McKinsey & Co. supports this trend, finding that the number of CIOs reporting to CFOs doubled in 2003. The consultancy expects this figure to grow as companies search to obtain more value from IT.

Various factors are driving this new alignment. Among them are trends toward automation of financial controls, as well as the requirement of government regulation like Sarbanes-Oxley to institute IT-based proof of fiscal accountability. Combined with the declining number of CIOs reporting to CEOs -- just 40% last year, down from 51% two years ago -- an increasing number of reasons point to the need for the CIO to develop strategies for achieving success with the CFO boss.

Gaining the CFO's support may lead to larger IT budgets, and, importantly, lead to an ally who will promote the benefits of a strategic IT group to other top executives.

Fortunately for the CIO, opportunities for proving IT's worth are in supply. As one example, research company Hackett Group found that 47 percent of companies in a recent survey reported using stand-alone spreadsheets as part of their financial reporting. Spreadsheets are essentially manual controls for tracing and auditing processes. CIOs in those companies are the ones with the expertise to make suggestions for improving this reporting process in a manner that creates efficiencies and reduces costs If the CIO can position their automated solutions as being in support of the CFO's financial tracing and auditing process, a pattern of coordinated problem-solving can begin.

Cultivating the CFO involves more than presenting automated solutions to replace manual processes, however. CIOs must also demonstrate responsibility for purchasing and other decisions. CIOs should make a point of solidifying IT's goals and strategy -- created ideally with input from other department heads -- and setting a regular schedule for cost reviews. CIOs may take the initiative and perform frequent examination of ongoing IT investments in products and services. Existing solutions should be assessed for their ability to support overall business goals, and bad deals replaced where necessary. CIOs need to be as candid as possible about the trade-offs they face between controlling expenses and pursuing new investments. Presenting this review to CFOs will communicate a dedication to achieving the true benefits of IT strategies for the entire enterprise.

CIOs should explain to their CFO bosses what IT expenditures will accomplish, using business language. For example, a new Web-based inventory management system should be noted for the ways in which it will increase efficiency; upgrading the company's security infrastructure should be articulated as preventing financial losses that could occur if the corporate network's security is breached.

In addition, improving the CFO's own productivity through installing new software programs or upgrading to faster hardware will give CFOs hands-on, day-to-day experience with the value of IT, further solidifying the CFO's support of IT initiatives for the rest of the company. By delivering on objectives within budget and by making IT and other functions more efficient, CIOs can demonstrate to CFOs that they take responsibility for financial expenditures and have their companies' profitability as a goal.

Playing a role in Sarbox

The above strategies will lay a solid groundwork for the CIO-CFO relationship. But CIOs must do even more to ensure that IT isn't shut out of key decision-making processes such as Sarbanes-Oxley, where the number of companies excluding CIOs is staggering.

According to a recent survey by the Hackett Group, just 12 of 22 companies surveyed had IT representation on their Sarbox steering committees. Of all Sarbox compliance teams in the same survey, 72% were led by finance, while just 4% were led by IT. Furthermore, among 75 public companies that Gartner surveyed last fall, just 63% said IT was involved. As the responsibility of maintaining systems that meet compliance requirements will fall to CIOs over the long-run, CIOs should work strategically to gain a position on the compliance team from the outset.

CIOs can demonstrate their essential contribution, as well as their dedication to compliance success, in two ways: by presenting efficient plans for execution, and by building in aspects of IT accountability. IT already defines and manages many areas of the corporate infrastructure that are found in Sarbanes-Oxley requirements, such as automating and storing key financial data. CIOs can show how existing models can be applied to Sarbox, thereby reducing compliance costs. Furthermore, CIOs can propose a level of accountability for Sarbox areas for which IT is responsible. CFOs, and CEOs, may be the ones who sign off on the bottom line and compliance reporting, but CIOs may propose signing off on a certification of data reliability and accuracy to show they are willing to put their necks on the line, too.

Gaining a seat in the boardroom

According to CIO's 2004 survey, 69% of CEOs said they believed IT should be proactive about envisioning business opportunities, and using technology to achieve them, rather than playing solely a support role. The year before, only 42% saw IT in such a strategic role. As more CEOs acknowledge the strategic value of IT, the trend toward CIOs reporting to the CFO may reverse, giving CIOs more influence with the CEO and the board. In the meantime, the CIO must build an effective and beneficial relationship between the finance and technology branches of the enterprise to strengthen IT's standing.

Jodi Mardesich writes about business and is a former staff writer for Fortune.