Study – CFOs Still Calling the Shots in IT Decisions
The top IT decision-maker for many companies is not the chief information officer. Instead, the chief financial officer is, according to a Gartner study.
The chief financial officer is becoming the top technology decision maker in around half of businesses, according to Gartner research released in June, 2011, which is entitled: “Financial Executives International (FEI) Technology Study.”
In fact, more IT departments are overseen by the CFO, not the chief executive or other senior managers. But this is ill-advised, and I’ll explain later.
The study’s conclusions:
- 42 percent report to the CFO
- 45 percent IT investment strategies made by the CFO
- In 38 percent, the IT department is managed by the CFO
- In 7 percent, the CFO is the lone decision-maker
“Understand that the CFO views the impact on business process and business enablement as the top technology issues,” said Gartner analyst John Van Decker.
“Therefore, applications and analytics are the top investment priorities, and the enabling technologies that support these initiatives need to be viewed as equally important,” he added.
The study also indicated that analytics and applications are the No. 1 investment priorities by the CFO.
While this trend probably makes financial executives happy, it doesn’t make for best practices.
It raises at least three questions:
- Do such CFOs have the necessary tech knowledge to understand the value of each decision? Sufficient steps have to be taken to ensure due diligence in IT security and other decisions.
- When will CEOs reconsider such strategies because of the negative impacts on the teamwork and morale of IT departments? An IT thought leader will resent such intrusions on the chain of command in organization structure.
- What will CIOs do about it? CIOs must take the proverbial bull by the horns to exert more leadership.
My bottom-line: Agreed, the CIO should adhere to all financial checks and balances. But there should be balance. As with human resources management and marketing whom the chief people often aren’t sufficiently respected, in essence, the top IT decision-maker should be the chief information officer with input from the CFO and other managers.
From the Coach’s Corner, here’s related reading:
How CIOs Can Get More Respect in the C-Suite
Tech Trends: CFO’s the Boss, IT Departments Are Disappearing
Tech Planning: What If There’s A Double Dip?
“Men are respectable only as they respect.”
-Ralph Waldo Emerson
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Terry Corbell is a business-performance consultant and profit professional. Click here to see his management services (many are available online). For a complementary chat about your business situation or to schedule Terry Corbell as a speaker, why don’t you contact him today?
Career Strategies: How to Get a C-Level Job
If you’re climbing the corporate ladder and have designs on the C-suite – CEO, COO, or CFO – a Stanford University professor has some excellent advice. In essence, he advises getting a strong, generalist-background in business.
“The higher you get in an organization, the more likely you are to encounter problems from a variety of different areas,” says a Stanford Graduate School of Business labor economist, Dr. Edward P. Lazear.
He believes it’s important to be a generalist, especially for professionals wanting to become a CEO because of the broad issues the job entails. Dr. Lazear contends “those people have to be generalists” according to Stanford GSB News in its Sept. 2010 newsletter.
The economist has won numerous honors, and written 11 books and more than 100 articles. He was an economic advisor to President George W. Bush, and was chair of the Council of Economic Advisors from 2006 to 2009. He’s also counseled the governments of Czechoslovakia, Romania, Russia, Ukraine, and Georgia (Dr. Lazear’s profile).
“A good CEO is someone who’s very good, possibly not excellent, but very good, at almost everything,” he asserts.
“People who are most likely to end up in leadership positions are ones who have had many different roles throughout their career,” explains Dr. Lazear. He points out that successful companies make it a practice to give various jobs to talented employees to groom them for leadership. In other words, the broader the skills –the more desirable a person is for the CEO’s role.
A salient skill: The CEOs ability to hire the right people to fill the senior executive’s gaps in knowledge or experience is very important. CEOs must understand enough about the company’s needs in any given area to evaluate, recruit and hire talent.
“Putting together a team is a generalist’s skill. ‘Just hiring someone’ is not so easy,” says the economist.
He believes specific highly visible jobs, such as banking, high-level finance or marketing, are great catalysts leading to the C-suite.
Dr. Lazear says jobs in “publicly observed decision-making situations” puts ambitious people in the right environment at the right time so that others can watch them in action. He believes it’s inevitable that others will become followers as the leader is born.
But he has a warning for an ambitious person – don’t just go through the motions – don’t assume that a variety of jobs or working in a marketing job is enough. He suggests something akin to physical training for the Olympics – increase your strong points in multiple areas so “you can enhance your probability of going into leadership.”
From the Coach’s Corner, here is additional reading:
Tech Planning: What If There’s A Double Dip?
Pick any region. Most respected economists and other experts believe economic growth will be tepid, at best. There are continuing concerns about the world’s economy, and it’s important to ask a key question: Are you ready for a possible double-dip recession?
Certainly, many global economic trends are eye-opening. Here in the U.S., job-growth and the consumers’ inability to buy are major concerns.
Moreover, public policy at all levels – federal, state and county, and city government – is hurting the nation.
At the federal level, stimulus spending that totals more than $1 trillion has been inefficient. Relatively few jobs are being created and there are constant calls for more spending. Policies are detrimental. The healthcare reforms are anything but productive. The legislation created 19 new taxes, it lacks cost-controls, and insurance premiums are mounting.
For years, state and local governments have been fiscally dysfunctional, too. They are still increasing taxes and slashing services.
Businesses are disappointed. Many lack an incentive to invest in human resources, marketing and technology.
The aggregate impact: A further deterioration of Americans’ financial and political freedoms.
So, it was not a surprise that technology-research firm Gartner recommends in a study that chief information officers should get ready for another downturn. That requires planning.
Authors of the study, Plan for a Second Recession, Now, wrote: “We urge these CIOs to leverage their recent experiences by preparing their enterprises should another economic downturn occur within the next 12 to 18 months.”
Gartner believes it’s important that CIOs communicate closely with senior company executives on priorities. Which IT projects for the next 18 months could be postponed or even disregarded?
My sense is that very function or project should be comprehensively studied and any spending should be approved. The budget needs to be detailed and every item needs to be justified. That’s called zero-based budgeting.
Just to cover all the bases, your department’s finances need to be constantly reviewed.
If your company is in dire financial straits and is attempting a financial turnaround, it’s also important to understand the perspectives of both the senior executive and the chief financial officer. There must be a daily review in the form of a flash report. A flash report can be designed to monitor indicators on a daily basis and to evaluate your actual performance against the turnaround plan. For more reading, see Step-by-Step Solutions for a Company Turnaround.
If a poor relationships exist between IT and the finance department, which is often the case, it’s important to understand the CFO mindset. You might want to read: Tech Trends: CFO’s the Boss, IT Departments Are Disappearing.
Good luck. Start planning and strap in the proverbial seatbelt if the roller-coaster ride proves to be harrowing.
From the Coach’s Corner, if you’re thinking about getting into business for yourself, I’d recommend reading: Eight Strategies to Consider Before Starting A Tech Business.
Not convinced about economic conditions? Here’s an eye-opening headline: Gartner Trims Worldwide IT Spending Growth Forecast to 3.9 Percent.
Tech Trends: CFO’s the Boss, IT Departments Are Disappearing
Two developments are clearly underway in information technology. Increasingly, the chief financial officer is in charge and IT departments are shrinking in size.
First, regarding the shrinking size of IT departments, a Corporate Executive Board study indicates they’re diminishing in size, according to writer Joe McKendrick at SmartPlanet.com. It’s not a cutback in jobs, just a shift in how IT professionals are put to work. He writes companies are either are tapping IT service providers or clouds.
The study indicates IT department will be75 percent smaller by 2015, and 80 percent of IT budgets will be spent on IT vendors’ services.
What’s driving this phenomenon? Probably best-practices in consolidation as CFOs assume more authority.
A study by Gartner and Financial Executives Research Foundation (FERF) was based on the perspectives of senior finance managers. It’s entitled, “2010 Gartner FEI Technology Study: The CFO as Technology Influencer.”
Findings include:
- Forty-two percent of IT departments report to CFOs
- Thirty-three percent are supervised by the chief executive officer
- Sixteen percent report to the chief operating officer
- Two percent are overseen by the chief administrative officer
- Seven percent to other executives
Most importantly, the CFO has a major say in 75 percent of IT departments and a minor input in 20 percent. In 5 percent, the CFO has no influence.
“In most organizations, the CFO and CIO work together daily to finance IT and provide information that supports financial processes, but there is also an opportunity for them to form a powerful alliance that generates more value for the enterprise,” said Bill Sinnett, FERF’s director of research, in a statement.
“The CFO and CIO are well-positioned to work together at generating superior performance from the enterprise,” he added.
The study makes it clear IT department personnel, especially the CIO, should understand an organization’s big picture and how they can best contribute to the firm’s welfare via the CFO.
My Biz Coach conclusion from the two developments: IT success hinges on acculturation with the finance mindset as well as a higher degree of integration with the rest of the organization. It’s different but it’s the wave of the future.
Resource link: Mr. McKendrick’s article.
From the Coach’s Corner, TechRepublic’s Toni Bowers has apropos advice for IT professionals facing such trends in this blog: What to do when you get a new boss at your current company.
