Strategic Influence

It's the ultimate game of piggy in the middle: Should the CIO report to the CEO or CFO? But increasingly CIOs agree that it's all about relationships, not reporting structures.

When the CEO tells you he no longer either wants or needs you as a direct report you have to ask yourself one question: Is this a sign you have performed your duties so well that he no longer cares to meet with you directly, or are these the slings and arrows of outrageous fortune - a signal he thinks you are no longer worthy of his time amidst a sea of troubles of his own?

Most CIOs know that in these cost-conscious times their very credibility depends on being able to talk the language of finance. Becoming best buddies with the CFO can certainly help. With so much of the emphasis on slashing expenditure, anyone wanting to succeed as a CIO must have at the very least a working knowledge of finance and finance terms or risk having the finance director ignore them and the CEO view them with the usual jaundiced eye.

When the CIO cannot walk the talk of financial accountability, approval for vital IT expenditure can go wanting, as others who understand the numbers push their pet projects at the cost of IT's more vital ones. But this does not mean that all CIOs in all circumstances gain by reporting to the CFO. Indeed most CIOs in most nations still see reporting to the CEO as essential to their credibility and those that report to other business heads continue to worry about diminishing influence.

Take Dimension Data CIO Paul Christensen. Catch Christensen on a good day and he will tell you the fact that he used to report to CEO Stephen Nola but now reports to CFO Craig Goldberg is a sign that he has excelled at his job. Catch him on one of those days when all hell breaks loose, and he will confess it sometimes feels more like a demotion. "Honestly I think [reporting to the CFO] has got pros and cons. However, to be quite fair, within our organization there is a reasonably flat structure so it's not a case of saying, well, now I only talk to the CFO. Certainly not," Christensen says.

"I think some of the advantages are that a CFO has a better appreciation for the dollars and typically is somebody that it is a lot easier to work with around those sorts of numbers, although I'm certainly not implying that the CEO is not close to numbers. But at a senior level there's always a challenge about making sure that strategy is portrayed in the right way at the right levels.

It seems to me that having watched this for a number of years - because there is always an article coming out every year about who is the CIO going to report to: is it the CEO, is it the CFO or the COO - the focus of articles last year or the year before was that reporting to the CFO was a demotion, but I think things have changed."

In the Lead

In fact that can depend on the origin of said articles. It seems these days it is Australia that is showing the way, serving as an early indicator for emerging trends. In the US, CIOs have been getting closer to the CFO by the year over recent times as organizations face up to the realities of an increasingly complex regulatory environment, and particularly, the exigencies of the Public Company Accounting Reform and Investor Protection Act of 2002. Also known as the Sarbanes-Oxley Act, "Sarbox" for short, it has been hailed as the single most important piece of US legislation affecting corporate governance and public accounting since the passage of the National Labor Relations Act in 1935 and requires the CEO and CFO to personally certify the accuracy of financial statements on the pain of massive penalties.

"IT is going to become much more intertwined with the finance function for a while," John Parkinson, senior vice-president and chief technology officer for the Americas at Capgemini, told US Computerworld recently. "CFOs and operational executives are going to want a lot more evidence that IT is doing what they think it's doing."

The US regulatory environment is forcing CIOs there to have more knowledge of business controls and accountability. And, as they are be forced to show much more concern for issues like data integrity, security and the interplay between controls and systems, US CIOs are working in closer partnership with their CFOs.

However, if the increasingly onerous regulatory environment has raised the visibility of the CIO in the US, it does not follow that the role has become more important, since the burden of regulations like Sarbanes-Oxley and the USA Patriot Act falls on CEOs, CFOs and business unit leaders, with CIOs playing merely a supporting role in compliance efforts. In fact some people see such regulations as the beginning of the end of the prominence of the CIO role.

Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.

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