When a CFO assumes oversight of IT, it may be cause for congratulations — and condolences. Information technology is often an underleveraged asset, and a leader who can tap its full potential will make a major contribution to the business. On the other hand, such an advance is sure to entail headaches and frustration.
Despite the complexities, CFOs seem to welcome the role. "It surprises me how much CFOs are interested in technology and eager to get involved," says Gartner analyst Barbara Gomolski, who specializes in IT finance. "I haven't encountered many who are asked to take on IT and dread it."
But Stephanie Hauge, president of the Financial Women's Association and a former divisional CFO who also acted in a chief information officer role for AT&T, warns that finance executives not well versed in technology can be "hoodwinked" by IT leaders bent on building or buying systems that don't deliver suitable return on investment. "Working with the latest technology is part of what keeps them motivated," she says. "If you're not knowledgeable, it's easy to be trapped by the lingo and their passion."
That raises the thorny question of just how down in the weeds a CFO needs to get. If a CIO claims 50 people are needed to support a new enterprise-resource-planning project, for example, does a CFO need to provide a solid counterargument as to why 20 will suffice? Most experts say no, and that the most important thing is to know enough to ask intelligent questions and provide guidance.
Michael Dinkins, CFO at USI Insurance Services, a large brokerage, calls it "issue-level recognition." At a prior company that was rolling out a relational database, Dinkins had little knowledge of database languages and methodologies, but he was aware enough about the advantages of moving to a relational structure to feel comfortable signing off on the project. "You want to be able to add value to the CIO," he says. "You can't walk into a room where they're talking about cloud technology and have a blank look on your face."
If necessary, make IT people explain, and re-explain, anything you don't understand, Dinkins counsels. Don't merely pretend to understand, and don't let ignorance push you to delegate significant spending decisions completely to the CIO.
There is a lot more to overseeing IT, however, than becoming conversant with established and emerging technologies. The following action plan can help CFOs manage IT with maximum effectiveness.
First Step: Ask Questions
In the early weeks and months as IT overseer, CFOs should define the company's IT objectives, governance, and mission by asking several important questions:
• What is the overall mandate for change? Determine whether IT is in sustainment, turnaround, or realignment mode, advises Susan Cramm, an executive coach and a former CFO and CIO.
Sustaining a well-functioning department requires relatively light oversight, but if IT is in turnaround mode (for example, critical systems are dying and product isn't being shipped) you'll need to take a field-general approach: roll up your sleeves, do root-cause analyses, and make decisions with a focus on time, not consensus. Don't let the reporting relationship with the CIO stop you from, say, talking to help-desk staff about what kind of calls they're getting, Cramm says.
Even more challenging is realignment mode, where IT is operating well but retooling is required — for example, for a new business strategy, like a big acquisitions push. You may not have to alter IT's capabilities overnight, but start educating the CIO right away about the strategic shift the business will undergo. The goal is to drive the future view down through the IT organization so that by the time change is at hand, the right people and skills are in place.
• What role does IT play in the organization? It may be a "solid utility," which predominantly supports the business through back-office processing; the requirements there are for high volume and reliability at a low cost, says Forrester Research analyst Craig Symons. It could be a "trusted supplier," which also develops applications to improve the business. At the far end of the spectrum is the "partner player," which provides a high level of strategic innovation such as a high-growth or financial-services business might require.
Determining the role isn't difficult, says Symons, but CFOs should beware the temptation to always view IT through a cost lens and thus mislabel a partner player as a solid utility.
• What is the relationship between IT and the organization's key risks? Get a feel for the IT-related controls over risks involving compliance, operations, industry-specific regulations, and data security. If an IT-specific risk assessment has not been performed recently, make it a priority, says Khalid Wasti, director of enterprise risk services for Deloitte & Touche. Look at how controls are tested and make sure they conform to an integrated control framework like COBIT. The CFO of a public company already will have attested to the adequacy of controls, but the IT-oversight role can provide a platform for a more informed view.
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