Dynamic Trio
Perhaps one reason that the CFO-CIO battle seems a perennial stalemate is that there are actually three parties that must come together: CFOs, CIOs, and business units. "In most business cultures, there's no partnership between the business person, the finance person, and the technology person," says Karen Rubenstrunk, executive vice president of executive services at Stamford, Connecticut-based Meta Group Inc.
She believes all three constituencies have distinct roles when it comes to aligning business strategy with IT. "The business person is responsible for saying, 'Given current business needs and within the scope of the strategic plan, this is a valuable business project,' " she explains. "The technology person is responsible for saying, 'Under our current infrastructure and within our current architecture, from a technology perspective this project is doable.' And the finance person must take on the greater role of proving the business case behind the project before spending money. All three must come together before they go forward, yet that rarely happens."
When companies do align themselves so that finance, IT, and business units cooperate, good things can happen. At Office Depot Inc., the $11.4 billion retailer of office supplies and equipment, CIO Patricia Morrison reports to the CEO, and says, "In all respects, our CFO [Charles E. Brown] and I are peers. We have offices across the hall from each other and address IT issues in concert."
Office Depot favors a portfolio-management approach to IT projects, balancing a project's risks against anticipated rewards and then comparing it with other projects in the pipeline. "Charlie and I work together closely to develop the business case for a project and the related capital-management procedures," says Morrison. They approach ROI by agreeing that some projects can provide specific, predictable, and quantifiable returns, while others are more strategic and resist easy cost-justification. In either case, it's left to Morrison to source IT capacity, either internally or by using third-party vendors, and bring the project to fruition. Then she and Brown are held jointly accountable for meeting the specified objective. "At times it's difficult to determine who's in finance and who's in IT," Brown says, "because we share a passion for technology."
Where does the business unit come in? "Ideally, projects must be championed by the business units," says Morrison. "They put their best and brightest dedicated resources behind it," she explains. "With specific people in a business assigned to work with specific people in IT and finance, it becomes a truly shared effort." As one example, she points to a major Web-enabled human resources-finance system implementation under way right now, a project that is global in nature. It's driven by finance but also represents one of the largest initiatives ever undertaken by IT and HR; therefore, the project manager reports to the head of HR, the CFO, and Morrison. "The poor guy has three bosses," she says, "but the system works. It's the kiss of death when an IT project is led by IT."
This three-pronged strategy is also in play at Safeco, where CFO Christine Mead says, "If a project initiates in finance, I don't toss it over the wall to the CIO. It will be addressed by my organization, IT, and the business units that are impacted by it — as a whole."
Direct Retorts
Any discussion of solid working relationships is bound to come down to reporting relationships. While many CIOs report to CFOs, the trend is toward parallel positions. Historically, CIOs reported to CFOs because the first computers were assigned to automate accounting and payroll systems, which fell under CFO oversight. IT was therefore deemed a cost center requiring financial controls. Yet a study by executive search firm Spencer Stuart indicates that 64 percent of CIOs now report to either a company's CEO, president, or COO. Rubenstrunk says that a change in reporting structure is often the catalyst for a new working relationship between CFOs, CIOs, and business units, but that cooperation can be achieved regardless of who reports to whom. "The key thing is understanding that the roles of the finance chief, the CIO, and the business-unit heads are equal when it comes to determining the investment value of a project, and the follow-through," she says, because the project serves the business, is based on technology, and costs money.
CIOs insist that any change in reporting relationships is not about ego-gratification but about the very nature of information technology and how it's used by corporations. "You don't see a senior sales executive interested only in sales-information systems," says Len Couture, CIO at Enterasys Networks Inc. "He wants supply-chain data, credit information from finance, and other intelligence as well." As newer systems become more sophisticated and reach across the enterprise, he says, CIOs must integrate information across company boundaries, tailor it to different users, and "tighten the information cycle" from beginning to end. Consequently, "the CIO has become much more of a strategic adviser."
Enterasys doesn't ignore the business groups, however. Couture is part of an executive leadership team that comprises the heads of worldwide sales, marketing, HR, and finance (represented by CFO Richard "Rip" Haak). Haak says it's less a case of dictating from on high than of making sure that "every project is user-driven — that it has a strategic or tactical benefit." In fact, Couture says that user acceptance is a key part of the company's approach to ROI. "Someone may propose a project that will do great things for the first link in the supply chain," he says, "but then causes links 2 through 10 to suffer to the point where the investment isn't worth it." By cooperating and communicating with everyone up front, that kind of pain can be avoided.
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