It was an amusing question and one that resulted in some interesting dialogue about c-level reporting lines, says David Gee
22 April, 2015 09:48
Why don’t CFOs report to CIOs? This question –
which many people will find totally ridiculous – was posed at my table
during a breakout session at a recent conference I attended in Sydney.
For
a brief moment, everyone was amused. But strangely, what followed was
an interesting dialogue around how this could be a possibility, as silly
as it sounds.
This question arose from an
earlier comment made by Jetstar Airlines group CFO, Race Strauss, who
said the CIO reported to him and this was the most suitable situation
for his company.
He went on to describe how well
this setup worked and it ensured that the CIO was connected to the
business. Race explained that the CIO even went to meetings in his place
when he wasn’t available.
While I have no past experience working at Jetstar, I do understand that the company was a ‘disruptor’, a Qantas offshoot that was setup to segment the market and appeal to travelers with low cost airfares. It is apparent that JetStar has been used to drive some degree of innovation within the Qantas Group.
However, I’d argue that Jetstar is not an R&D-driven organisation but a low cost producer and running the business lean is the airline’s primary focus.
Its previous CIO, Stephen Tame, told me the airline’s IT systems are
heavily outsourced and it runs a team of only 6 to 8 full time
technology staff.
My belief is that a CIO should not be reporting into a CFO in a world
where IT chiefs are being asked to drive innovation inside the
organisation and their role is not just to reduce costs.
The real question is about the CIO reporting to the CEO, and not about the CFO being a subordinate of the CIO.
The holy grail for the CIO will be to focus on changing and growing the business. A recent McKinsey report, Why CIOs should be business-strategy partners, found that performance has a positive correlation to CIO involvement in shaping business strategy.
So the question is ‘how can a CIO be shaping strategy, when they report to a CFO?’
I’ve
reported to a CFO twice in my career when it was explained to me that
the CEO had too many direct reports. In both instances, I had respectful
discussions with the respective CFOs, indicating that I will need his
or her support to succeed. At the same time, I was aligned elsewhere
when the CFO’s personal priorities were different than those of the
business.
This got me a seat at the boardroom table, enabling me, as the CIO, to help shape the strategic agenda. Having
this access to executive peers and being able to have that seat, simply
means that there is a better understanding of the near and longer term
technology needs.
I’ve seen examples of this both at the cost cutting end and also with strategic initiatives. Having that context and being in the discussion versus having this relayed third person to you, makes a huge difference.
In
my view, a CIO has to have a seat at the table. In instances where we
are relying on hearing (or worse, reading minutes of a management
committee), it is a significant battle to be able to effectively
contribute strategically.
Part of the issue has
been that we, in IT, have always talking about being 'aligned' with the
business. It’s almost like we are referring to another superior being
that has all the answers.
This doesn’t mean that IT can do anything that it wants, there needs to
be alignment but IT as part of the business can be intimately involved
in shaping its direction.
Where does the CFO overlap with the CIO?
From
my experience, this occurs usually in a more narrow sense – around the
ERP and specialist financial planning and treasury systems. Moreover,
there can be examples of where the CFO has been the custodian of
‘information’ and sees that he or she should control business
intelligence.
Another area that can bring the
two parties into some contention is procurement. There are organisations
that have added the capability of procurement to IT’s remit.
Since they are often the largest spenders in the enterprise, this has much merit. GE, the industrial conglomerate, has often combined IT and procurement into one function.
This also forces the CIO to be very commercial in their approach and
less geeky and it’s a good look. The c-suite expects the CIO to have
‘commerciality’ and be as accountable as any of his or her peers.
High performing IT
A
high performance IT team is highly desirable for any CEO and there
would be little resistance to this for any executive. Given this, it is
still surprising that IT is relegated to report to a support function.
Perhaps
we can see this as a past failure of IT and the CIO to get the strategy
and execute to this desired end state? As illustrated in the McKinsey
study, there is a strong linkage between CIO involvement and
performance.
“At companies with the most
involved CIOs, executives are also much likelier than others to say IT
facilitates business activities including new market entry and the
creation of new products,” the study said.
The
right answer, of course, is to have the CIO report to the CEO. There is a
clear upside and the performance of IT will improve. It is only when
the CIO acts as a business partner and not just a technology geek, that
this will transpire.
David Gee is the former
CIO of CUA where he recently completed a core banking transformation. He
has more than 18 years' experience as a CIO, and was also previously
director at KPMG Consulting. Connect with David on LinkedIn.
