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The Growing Importance Of CFO - CIO Collaboration

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The CFO’s job is complex. After all, it is the CFO’s job in an organization to minimize financial risks, to hit numbers, and to control spending.

The CIO's job has a much different purpose. It is often the CIO’s job to advocate for change through the smart adoption of technology. That’s because technology has become a major factor in helping companies stay at the top of their industries. Part of that means being an early adopter and assuming the level of risk inherent with doing so.

This often puts these two essential members of the management team at odds with each other.

ROI vs. Cost Cutting

The CFO aims to make costs as predictable as possible in order to achieve the CEO’s financial goals. However, IT investment is often not predictable as a CIO works on innovation and ever-greater efficiencies in order to increase ROI.

Andreas Ludwig put it this way in CFO Magazine: “A business usually cannot expect to have both a great ROI for IT and cut costs at the same time. And it’s hard to both manage expectations and explain the performance of IT if you’re the one responsible for it. What CFO would want to put himself in that situation?”

And that’s what leads to CIO – CFO relationships that are often fraught with conflict.

The Importance of Collaboration for Optimal ROI

It is increasingly important that the CFO and CIO collaborate to ensure overall resources are best employed in support of the company’s goals and ultimate performance.

As a study on The Chief Information Officer and Chief Financial Officer Dyad suggests, the way these two key players perceive the other’s strategic role within the organization is a key indicator of the ultimate performance of each individual and of the firm as a whole. When the relationship between the CIO and the CFO is positive, the individual effectiveness of each person improves and their strategic interests become further aligned.

The way to create this smooth, cooperative working relationship, the study says, is to put these two players on an equal playing field. It notes that the indicator that most aptly predicted whether IT was seen as a strategic resource or a cost was whether the CIO was part of the top management team and therefore a peer of the CFO.

In contrast, when the CIO reported to the CFO, the study found that IT was mostly excluded from strategic planning. This would naturally lead it to be less effective with a lower ROI.

Unfortunately, the trend seems to be moving towards an unequal playing field according to this Gartner study. It shows the number of CIOs reporting to CFOs has actually increased, rising from 42% in 2011 to 45% in 2012.

How is technology viewed at your organization? Is it a strategic resource, or a cost?