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Should the CFO report to the CIO?

Should the CFO report to the CIO?

It was an amusing question and one that resulted in some interesting dialogue about c-level reporting lines, says David Gee

Why don’t CFOs report to CIOs? This question – which many people will find totally ridiculous – was posed at my table during a breakout session at a recent conference I attended in Sydney.

For a brief moment, everyone was amused. But strangely, what followed was an interesting dialogue around how this could be a possibility, as silly as it sounds.

This question arose from an earlier comment made by Jetstar Airlines group CFO, Race Strauss, who said the CIO reported to him and this was the most suitable situation for his company.

He went on to describe how well this setup worked and it ensured that the CIO was connected to the business. Race explained that the CIO even went to meetings in his place when he wasn’t available.

While I have no past experience working at Jetstar, I do understand that the company was a ‘disruptor’, a Qantas offshoot that was setup to segment the market and appeal to travelers with low cost airfares. It is apparent that JetStar has been used to drive some degree of innovation within the Qantas Group.

However, I’d argue that Jetstar is not an R&D-driven organisation but a low cost producer and running the business lean is the airline’s primary focus. Its previous CIO, Stephen Tame, told me the airline’s IT systems are heavily outsourced and it runs a team of only 6 to 8 full time technology staff.

My belief is that a CIO should not be reporting into a CFO in a world where IT chiefs are being asked to drive innovation inside the organisation and their role is not just to reduce costs.

The real question is about the CIO reporting to the CEO, and not about the CFO being a subordinate of the CIO.

The holy grail for the CIO will be to focus on changing and growing the business. A recent McKinsey report, Why CIOs should be business-strategy partners, found that performance has a positive correlation to CIO involvement in shaping business strategy.

So the question is ‘how can a CIO be shaping strategy, when they report to a CFO?’

I’ve reported to a CFO twice in my career when it was explained to me that the CEO had too many direct reports. In both instances, I had respectful discussions with the respective CFOs, indicating that I will need his or her support to succeed. At the same time, I was aligned elsewhere when the CFO’s personal priorities were different than those of the business.

This got me a seat at the boardroom table, enabling me, as the CIO, to help shape the strategic agenda.

Having this access to executive peers and being able to have that seat, simply means that there is a better understanding of the near and longer term technology needs.

I’ve seen examples of this both at the cost cutting end and also with strategic initiatives. Having that context and being in the discussion versus having this relayed third person to you, makes a huge difference.

In my view, a CIO has to have a seat at the table. In instances where we are relying on hearing (or worse, reading minutes of a management committee), it is a significant battle to be able to effectively contribute strategically.

Part of the issue has been that we, in IT, have always talking about being 'aligned' with the business. It’s almost like we are referring to another superior being that has all the answers.

This doesn’t mean that IT can do anything that it wants, there needs to be alignment but IT as part of the business can be intimately involved in shaping its direction.

Where does the CFO overlap with the CIO?

From my experience, this occurs usually in a more narrow sense – around the ERP and specialist financial planning and treasury systems. Moreover, there can be examples of where the CFO has been the custodian of ‘information’ and sees that he or she should control business intelligence.

Another area that can bring the two parties into some contention is procurement. There are organisations that have added the capability of procurement to IT’s remit.

Since they are often the largest spenders in the enterprise, this has much merit. GE, the industrial conglomerate, has often combined IT and procurement into one function.

This also forces the CIO to be very commercial in their approach and less geeky and it’s a good look. The c-suite expects the CIO to have ‘commerciality’ and be as accountable as any of his or her peers.

High performing IT

A high performance IT team is highly desirable for any CEO and there would be little resistance to this for any executive. Given this, it is still surprising that IT is relegated to report to a support function.

Perhaps we can see this as a past failure of IT and the CIO to get the strategy and execute to this desired end state? As illustrated in the McKinsey study, there is a strong linkage between CIO involvement and performance.

“At companies with the most involved CIOs, executives are also much likelier than others to say IT facilitates business activities including new market entry and the creation of new products,” the study said.

The right answer, of course, is to have the CIO report to the CEO. There is a clear upside and the performance of IT will improve. It is only when the CIO acts as a business partner and not just a technology geek, that this will transpire.

David Gee is the former CIO of CUA where he recently completed a core banking transformation. He has more than 18 years' experience as a CIO, and was also previously director at KPMG Consulting. Connect with David on LinkedIn.

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