Leadership

CIO-CFO Partnership Woes: A Q&A With Ajit Kambil and Khalid Kark


The CFO and CIO have a shared destiny. In today's world, they have to be collaborative to deliver the company to its clients and shareholders effectively. But it's challenging when both come from very different backgrounds and training.

FEI Daily spoke with Ajit Kambil, Global CFO Program Research Director, Deloitte LLP and Khalid Kark, US CIO Program Research Leader, Deloitte LLP on the CFO-CIO partnership: where it can falter, how to improve it, and why it’s so vital for the futures of organizations.

FEI Daily: The CFO-CIO relationship is becoming closer and more collaborative. But oftentimes CFOs and CIOs struggle to get on the same page. In what ways do CFOs and CIOs differ?

Ajit Kambil: It's really about understanding each other's mutual roles and what people have to do to be successful as a CIO or as a CFO and getting aligned on that. And what we have found really helpful is this notion of the four faces of an executive and the CFO, they have to run the financial organization, manage risk, catalyze change, and support the growth strategy of the firm. The CIO has some very similar task set in that they have to be a strategist and help the growth strategy by providing technology for growth, they have to catalyze changes that improve performance. Any IT system demands some change level efforts towards innovation, and then they have to run an IT shop and be a technologist that provides a stable infrastructure for the future. So the first step is to have a mutual understanding of each other's roles and then I think it's really also recognizing the personalities that exist, because CFOs tend to be very driven but they can also be fairly guardian-oriented as we call it.

They can be very methodical, systematic, risk averse. I think CIOs can also be driven, but they can also be very much pioneering and looking for the next new thing and they have to effectively learn how to communicate with CFOs who are guardians. CFOs need to help CIOs bring structure to things in a way that helps satisfy them about the financial implications, the delivery timelines of projects. So I think it's really about establishing mutual understanding about roles and communication styles as a starting point to a broader collaboration.

Khalid Kark: The only comment I'd add is I think there's a lot of talk out there in terms of stereotypical behaviors of CIOs and CFOs and I think one thing that we recognize and realize as I interact more with the CFOs - and Kambil obviously has a tremendous amount of experience working with CIOs - we tend to find that those stereotypes obviously do exist in certain cases, but there is a very solid appreciation for each other and what's at stake for organizations if the CIOs and the CFOs aren’t able to collaborate.  We're finding that in organizations where CIOs and CFOs collaborate, they tend to report better results overall.

FEI Daily: What do you consider to be the main barriers preventing a closer relationship between CFOs and CIOs?

Kark: I personally think that some barriers have to do with what they have on their plate as business leaders. Twenty-two percent of CIOs globally report into CFOs, and as part of that relationship there is a give and take. So there may be instances or areas where a CIO, with respect to their mandate or driving or leading certain transformations, may need to spend a lot without recognizing the broader business context. On the other hand, a CFO may want to be conservative. I think it's about open communication and dialogue. And I think a lot of times, at least as I interact with CIOs, I find that they tend to say things in a way that makes IT feel like a black box to a lot of other executives. We do stakeholder interviews from other executives, understanding what CIOs could do better and the one thing that we hear over and over again is, "I want transparency." And I would add in addition to transparency, perhaps a little more predictability. Because at the end of the day CFOs have to manage the expectations of the street to a certain extent. Having greater predictability in the expenses of IT is something of value to them.

FEI Daily: Is it more common for CIOs to report to the CFO now than in years past?

Kark: I'm not sure if it's a higher or lower percentage, but I think I would say  that I think we tend to focus on this percentage a lot, and I don't think we need to or we should as much. The fact is that every organization's circumstances should drive where the reporting relationship should be, or what the organizational structure in general should be. And in many, many, CFOs tend to be driving revenue or tend to be on a growth trajectory, and so CIOs should report to the CFO if that's their mandate as well. But if there is a conflict or if the interests of these two entities could collide, or the organization is driving to a much bigger, broader tech strategy that goes beyond one or two areas and there's an agreement across the business leadership, then maybe the CEO is a better fit.

Even within the same industry, within the same size company, within the same geography, you could have very similar companies that may have very different business strategies, that may have very different perspectives, competitive landscapes, etcetera, and therefore they may need different types of leaders in different positions to be able to counter that.

FEI Daily: What is “business chemistry” and what part does it play in fostering collaboration?

Kambil: Business chemistry is a typology of personality types. There are many different typologies out there and the value of the typology is the recognition that somebody else may have a different personality type and inclination to receive communications and communicate in a different way. And if you understand their personality preferences from a communications and interaction perspective, then you've become a more effective communicator to get to that transparency predictability and all those attributes that are important for effective collaboration. What we do with business chemistry is just help people become more self-aware about their own preferences as well as the preferences of others and think through how they communicate.

For example, we have four types, drivers, pioneers, guardians, and integrators. Drivers want information very quickly and very directly and then the justification after the main points as needed. Guardians often want a detailed description of how you got to your perspective. Pioneers may think at a 30,000 foot level and so on. Integrators may have a very different communication style. So, recognizing communication style and diversity in the leadership team, adapting your communication, and, as a CIO, always sharing the business value of technology and implications from a cost execution point-of-view, is very critical. And the same goes for CFOs. CFOs tend to be drivers and guardians, CIOs tend to be, as Kark called it, pioneers and integrators, fairly opposite types on the average.

Kark: I think the basic responsibility for CIOs is to not just to manage technology but to drive new ways of thinking around how technology could benefit, and that's why they tend to be more pioneers. And so, that's a function of their role, that even if they are not, that they have to do some of that and recognizing that what the other person's role is and where they're coming from, would go a long way in the way you communicate. And that builds rapport and trust and that leads to better transparency and trust building later on.

FEI Daily: By implementing a framework for IT investment governance, what can a CFO hope to achieve?

Kark: I do a lot of transition labs and what I find is when you ask CIOs, "How good is your governance?" They're typically not paying too much attention to it. I think what is really the crux of the issue is that, for a long time, technology has been somewhat independently making tech decisions that have huge business implications, because they haven't really had business step up or they haven't really given them the opportunity to step up, whatever the case is. And so, for a long time, a lot of these very high value tech investments have been done with the knowledge but not a clear understanding from a business. There are three levels of governance for tech investments. There's a business technology level which is really trying to understand the business strategy, aligning to that, making sure you're prioritizing, you're identifying really strategic investments, and looking ahead and trying to drive that. The second level is the operational level around some of the status, and how you're doing against your goals, etcetera. And the third level is trying to understand what you're doing from a technology perspective and specifically tech architecture perspective to drive some of that.

What I would say is, the first level is the really critical one where the CFOs need to be in sync with the level of risk, the level of investment, and the capacity to drive future growth and that's a key issue for CFOs and CIOs, and building that capacity is going to be fairly significant. In fact, I typically recommend CIOs do not become the leaders for that governance. Let the business drive that and have a very strong perspective, but do not be the person driving it because business needs to drive those investments, and you're supposed to drive the implementation across those business strategies. And if that doesn't happen, there is a silo that exists, technology does their own thing, and business does their own thing, and there's that lack of governance.

Kambil: I concur with Kark and let me put it in two tangible kinds of examples. One is, imagine as a CFO, you're looking ahead and say, "The way our company will grow is through a series of acquisitions, and in order to make those acquisitions work, and get the synergy out of those acquisitions, either I'm going to have to have an IT system in place that can absorb these acquisitions.” And so that becomes an important capacity for the growth of the company and those kinds of decisions, "This is our growth strategy. How do you support it from an IT perspective?"

Now, another kind of thing that I've seen is where a company has outsourced a ton of stuff and all of a sudden they're trying to grow through acquisition. Maybe your outsource infrastructure cannot keep up with the acquisition or the cost of them executing on the acquisition goes up considerably. Aligning the long-term strategy to technology and delivering choices of technology at a high level, and thinking through the risks are all what needs to be done at the top level of governance. And then you go cascade from that down to the more detailed set of choices.

Kark: Absolutely. And that needs to happen fairly regularly. Obviously today’s strategy doesn't stay static. Technology changes, strategies change, etcetera and unless you're having that conversation very, very regularly it becomes very hard for you to stay in sync with what's going on.

FEI Daily: Why is it so critical for the CFO-CIO relationship to be a collaborative one?

Kambil: CFOs increasingly touch all areas of operations of a firm and CIOs are the other key role because they’re providing the systems that drive those operations. Oftentimes, the single largest expense that a company has is technology and the uses of technology. It's also, from a competitive perspective, a vital tool by which you connect to customers or you do analytics to deliver better offers to customers. So for all of those reasons, getting IT right or better, is just vital and without an effective partnership it can go off the rails. IT projects can be over budget and under delivered and not on time. CFOs can sponsor a lot of things that support a CIO from the governance system, to holding business leaders also accountable to a certain extent, to support the CIO in the delivery of technology.

Kark: The only thing I'd emphasize here is, and Kambil mentioned it, competitive advantage. I think today the one thing that can give you competitive advantage is technology, much more so than other areas. If you as a business leader, as a CFO, even as a CIO, need to drive competitive advantage, this partnership has to happen. This has to happen because you need the financial acumen to drive shareholder value. CIO's can do a bunch of things and use the best technology out there but if it's not driving shareholder value that won’t be as good for the business. It’s about growth, it‘s about really driving future shareholder value.

The second thing I'd say is, we talked about personalities earlier and I think the CFOs can bring a really good balance to the CIO role, where they bring the discipline, where they bring the financial acumen that can help CIOs understand some of the specifics of how to really drive value. On the other hand, CFOs potentially could benefit from CIOs thinking out of the box, "Hey, here's how technology could drive a new revenue source." Or, "Here's how technology is helping other business areas." The partnership is just great because they come from two very different perspectives and melding them together could become really powerful.

I'd say the one "aha" for me as we did this research was the real thirst and the real push to understand how technology can drive value and growth from a CFO perspective. Obviously, I interact a lot with CIOs and I have that perspective, but interacting with CFOs and their level of interest going deep into understanding the levers that they could use to drive growth and value was just great. Kambil and I did a couple of sessions for CFOs where the conversation very quickly went into specifics on, "Okay, what architecture, what technologies could help us?" And that was just amazing for me to see. CIOs need to step up and drive to that and not think that technology is going to be too complicated to explain. At the end of the day, they have to figure out a way to do it, otherwise they'll be hindering the growth and the value that they provide.