Numbers game: how the CIO and CFO can work together effectively

On Nike’s lat­est earn­ings call, CFO Matthew Friend made the busi­ness case for IT invest­ment. By invest­ing in areas like dig­i­tal ful­fil­ment, pre­dic­tive mod­el­ling and per­son­al­i­sa­tion, dig­i­tal rev­enue was about 10 points high­er than whole­sale rev­enue.  

CFOs use such cold, hard facts when agree­ing CIOs’ bud­gets. Friend’s com­ments sug­gest Nike’s CIO had suc­ceed­ed in sell­ing the impor­tance of IT invest­ment.

Today, CIOs are more than tech spe­cial­ists; they’re strate­gic mem­bers of the C‑suite. The mod­ern CIO must be just as com­fort­able talk­ing to board mem­bers as they are to mem­bers of their own team.

That’s espe­cial­ly true when mak­ing the case for invest­ment, where it’s essen­tial to speak the CFO’s lan­guage. A glob­al sur­vey by Deloitte Glob­al and Work­day shows that 60% of “pro­gres­sive” CIOs see strate­gic part­ner­ships with the CFO and oth­er stake­hold­ers as key to suc­ceed­ing in the role. These CIOs try to ensure their pri­or­i­ties are strate­gi­cal­ly aligned with those of the wider busi­ness and well under­stood by all key stake­hold­ers.

“As a CIO you’re going across all the dif­fer­ent depart­ments, you’ve got to talk the same lan­guage as every­one you’re deal­ing with. The CIO has gone from being some­one who’s very tech­ni­cal to some­one who’s about find­ing solu­tions and deliv­er­ing val­ue, and there­fore that lan­guage has got to change,” says Ger­ard McGov­ern, CIO for The Guide Dogs for the Blind Asso­ci­a­tion.

Understanding investments 

It’s fun­da­men­tal that CIOs under­stand the lan­guage and the nature of busi­ness, McGov­ern says. They must be able to demon­strate a clear under­stand­ing of the return on any invest­ment and present it in com­pelling lan­guage that the CFO under­stands.

“So you’re talk­ing about net present val­ue, return on invest­ment, dis­count­ed cash flows. You’re not just say­ing, ‘well it’s going to cost £100,000, it’s going to give us £100,000.’ Because the CFO will turn around and ask: ‘Is that £100,000 now? Is that £100,000 In five years’ time? What’s the return?’”

How­ev­er, it’s impor­tant to recog­nise that not all IT invest­ments are the same. Stephen O’Donnell, CIO at work­place pen­sions provider The People’s Pen­sion, points to three types of IT sys­tems.

First is “com­modi­ties”, where the crit­i­cal suc­cess fac­tor is to keep them run­ning reli­ably and as cheap­ly as pos­si­ble: email and doc­u­ment man­age­ment sys­tems, for exam­ple. Sec­ond is lega­cy sys­tems “where exec­u­tives are only inter­est­ed if the reg­u­la­tor or ICO has them in their sights”. Final­ly, there are key sys­tems that “move the busi­ness nee­dle and are core to deliv­er­ing a com­pet­i­tive advan­tage for the organ­i­sa­tion”, like dig­i­tal cus­tomer-fac­ing sys­tems, logis­tics plat­forms or oth­er crit­i­cal appli­ca­tions that “exec­u­tives are des­per­ate to invest in”.

It’s this third invest­ment type that’s caught the atten­tion of many com­pa­nies with the accel­er­a­tion of dig­i­tal over the past 18 months: one that can deliv­er a com­pet­i­tive advan­tage. The good news is there’s cur­rent­ly no short­age of bud­get for IT activ­i­ties, says O’Donnell.

“Covid has made many boards aware of the crit­i­cal impor­tance of becom­ing a dig­i­tal busi­ness. Across all indus­try sec­tors, this impe­tus to embrace a dig­i­tal oper­at­ing mod­el is essen­tial for sur­vival,” he says, point­ing to areas like cus­tomer self-ser­vice. 

A place at the table

Anna Bars­by is a for­mer CIO of Asda, Mor­risons and Hal­fords. She’s now a co-founder of Tes­siant, which pro­vides access to senior exec­u­tives who can guide busi­ness­es through key stages of tran­si­tion.

Bars­by believes CIOs should be invit­ed to board meet­ings where key deci­sions are being made. “If organ­i­sa­tions want the CIO to speak the CFO’s lan­guage, then they need to ensure that the CIO is in the room when those busi­ness, finan­cial and com­mer­cial con­ver­sa­tions are tak­ing place,” she says. For exam­ple, if a CIO can explain how a tech­no­log­i­cal invest­ment will get more prod­ucts on the shelves at the right time and improve sales by 10%, “this is speak­ing the lan­guage of the CFO.”

How­ev­er, many CIOs report to CFOs, she notes. This “deval­ues the CIO role and it’s not ide­al that the CIO is work­ing for, rather than along­side the CFO. If the CIO reports in to the CFO this also cre­ates the per­cep­tion that IT is a cost cen­tre with­in the busi­ness, when IT should be viewed as a prof­it cen­tre, an enabler of suc­cess­ful busi­ness out­comes and a dri­ver of com­mer­cial suc­cess and increased share­hold­er val­ue,” she explains.

Best friends?

CIOs can some­times strug­gle to describe the impact of a request­ed IT bud­get on busi­ness per­for­mance. McGov­ern says he ben­e­fit­ed from study­ing for an MBA and sug­gests CIOs famil­iarise them­selves with the basics of finance.

“It doesn’t need to be inten­sive, it’s just so you know the cor­rect words, phras­es, con­cepts that you’re deal­ing with. You don’t need to go into the minu­ti­ae of bonds, advanced finance, the risk-free rate of return – you just need to under­stand the basic con­cepts.”

Ulti­mate­ly, the CIO today is charged with help­ing to take the com­pa­ny to the next lev­el through inno­va­tion. For this to hap­pen, McGov­ern says the CFO should be the CIO’s best friend.

“They’re the per­son, oth­er than the CEO, who’s going to sign the cheques and make sure that what you’re doing is finan­cial­ly jus­ti­fi­able. And if you can prove that, they’ll be your biggest sup­port­er.”