SIDEBAR: Making Nice to Your CFO

While most CIOs would prefer a direct line to the CEO, the top IT post at many firms still reports to the CFO. Here are some tips on making the best of that relationship.

• NEGOTIATE A SEAT on the operating committee or an executive committee.

• FORGE A STRONG RELATIONSHIP with the CFO. It could later aid in getting funding for IT projects.

• REQUEST THE LATITUDE TO MEET with different departments to get a better understanding of how IT spending should be prioritised.

• HONE YOUR COMMUNICATIONS SKILLS to effectively communicate with and educate the CFO on the strategic importance of IT to your organisation.

• SHOW REAL-WORLD POSITIVE EXAMPLES of strategic projects already under way in your industry whenever possible.

• KEEP AN EYE ON IMPLEMENTING IT cost reductions when warranted, so your CFO won't have to usurp that duty.

• DEVELOP GOOD MEASURES to demonstrate that there's a strong return on investment for IT expenditures.

• ALIGN IT PROJECTS with the CEO's vision for the company.

SIDEBAR: So Who Is the Real Chief

To whom the CIO should report can still cause a good debate. If it is not to the CEO, why not, asks Charles Wang, founder of Computer Associates.

"By handing over IT to finance, it could end up as an adjunct to bookkeeping rather than a strategic asset that serves the whole company," Wang says.

The trend is away from finance, though. According to Gartner's March 2002 survey of its Executive Program (ExP) members, 42 per cent of CIOs now report to the CEO, slightly more than those who report to the CFO (41 per cent) or another executive. More interestingly, perhaps, by 2005, 80 per cent of survey respondents expect to report to their CEO.

CFO of convenience store chain 7-Eleven Andrew Manning admits that it is historical rather than by design that their IT head reports to him and that conceptually it is wrong. However, in practice he says it has worked well because of their particular personalities and it suits them to continue that way. John Smyrk, a strategic planning consultant and a visiting fellow at the National Graduate School of Management at the Australian National University, on the other hand, believes that it can still be appropriate for the head of IT to report to the CFO.

"Where IT is purely a support role it's like any other functional area of an organisation. Corporate services may report through finance, for example, and in many cases IT is no more important than any other of those subordinate functional areas. So then it makes a lot of sense for IT to report into the second tier of management rather than into the first tier," Smyrk says. However he says that the CIO often ends up reporting to the CFO simply because the CEO does not have the time or interest to look after IT directly.

Smyrk also concedes that CIOs are rarely happy or comfortable reporting into the second tier of management, as they believe they should be reporting to the CEO, especially if the CFO knows very little about IT and is unable to act as an appropriate promoter or sponsor. He uses the junior minister concept as an analogy.

Hemant Kogekar, ex IT chief of Citibank and Franklins, also thinks that reporting to the CFO instead of the CEO does diminish the CIO's credibility with other executives. Even though he was on the executive committee at Franklins, Kogekar says he was not quite seen as a peer while he was reporting to the CFO and this also diluted the business units' sponsorship of IT.

"Even when the CEO is not interested in IT, by reporting to the chief operating officer, rather then the CFO, you get better business ownership from the operating units of the problems you're trying to solve and better delivery and results," Kogekar says.

According to Smyrk, for the CIO-CFO relationship to succeed, it is essential that the CIO does report into the right area for that specific organisation, whether it be to the CFO, the CEO or whoever. However, he thinks it is just as essential that CIOs have a realistic appreciation of their own importance and the importance of their role, and consequently a realistic expectation of where they should sit.

CFOs also need to assume the role of promoter and champion of IT as readily as they act as champion of any other areas that may report to them, and it is particularly for IT that that role of champion is recognised, Smyrk says. In addition, CFOs need to have a sophisticated knowledge and understanding of where IT fits in their particular organisation.

"If those things happen, then I think there's a reasonable chance of a good working relationship between the two," he says.

Indeed, Smyrk does think the disconnect between CIOs and CFOs is lessening these days, not least because many of the younger CFOs have completed MBAs in which strategic IT management is a core subject and are capable, he thinks, of exercising appropriate strategic control over the area.