CFO: Get in Touch with your Inner

FOR THE CIO, chief financial officers have historically been adversaries at worst, obstacles at best. This magazine has done more than a few articles on how to relate to the CFO (see a list of those articles at www.cio.com/printlinks). Although fewer CIOs are reporting to CFOs these days, the moribund economy and the tightening of the expense screws have once more pitted the CFO against the CIO. Again we leap to the rescue with advice on how to work well with CFOs. But this time the wisdom comes not from one side or the other, but from people who have simultaneously occupied both roles and seen the conflicts and solutions through one pair of eyes. David Goltz and Vincent Laino both fill a dual CIO/CFO role at their respective company—Bethesda, Md.-based Destiny Health insurance company (where Goltz was interim CIO through June 2002) and West Chester, Pa.-based environmental consulting service Roy F. Weston. Here they offer CIO readers their unique perspective.

CIO: Where do CIOs and CFOs get disconnected? What are the typical points of disagreement?

Goltz: It's pretty straightforward. CFOs always look at [a proposal] and say, What's my return on investment? How can I make this pay for me? CIOs are typically saying, If I spend this much more on technology, I can deliver this wonderful functionality or product or service, though nobody can say, Here's how much time and money it's going to save. So to the CFO, it looks like technology for technology's sake, without any real gain for the company. And the reality is, in some cases it is technology for its own sake. But on the other hand, technology is a fact of business life; you have to have it in order to provide a certain level of service or access to your constituents and customers. Some of it is just overhead you have to have.

What's the most effective way for the CIO to communicate with the CFO? Particularly when it comes to getting a budget or project approved.

Goltz: The most obvious approach is to say, Look, we need to spend money on this project; this is how it will support our business objectives. Some IT projects have that immediate impact. But the next level of difficulty—and this is where you're going to have to educate the CFO—is when you have to spend money to stay in stable technology. If you buy a PC today, it's shipped with Windows XP; it's not NT anymore. So at some point we're going to have to move all of our PCs to XP in order to keep a stable platform. The question is, When do you do it? What's it cost—not just in terms of the cost of the software, but also what we're spending in terms of support and so on? Then, the best approach is to come into the discussion with your CFO armed with lots of information: If we upgrade now, here's what it will cost, and here are the savings we'll have for supporting a single platform instead of multiple versions. But here are the risks: XP is not the most common operating system out there. So you're presenting it as a business case, even though it's not always about ROI specifically.

Laino: You must be able to have the conversation around value—not numbers, but value. For example, we worked on a portal project last year, allowing employees to customize our website for their individual use. You have to do a prototype, and sit down with the people in senior functions and say, This is what I think is going to help you do your job every day. Am I close? And have that kind of open conversation about the benefits of what you're creating. If you get their buy-in—Yes, that would really help me—then you can drive down to the math, figuring out how much time it's going to save every day. Then it's just a question of whether we have the money to get the project done this year.

Because of the economy, one could assume that CIOs and CFOs alike are focused on ROI. Yet there's also an IT spending backlash due to years of heavy investment and disappointing return. So are CIOs and CFOs on the same page, or are they still locking horns?

Goltz: The successful companies in the long term are going to be the ones that say, I'll live with not quite the profits I might have had, and I'll invest in technology, product development and things that will carry us into the future. Some CFOs understand that. But if they don't, then the CIOs should be locking horns with them right now.

Laino: That makes sense, and I'll give you an example. We're working on a learning management system. Right now I probably can't fund that project. I can fund a piece of it but not a lot. We're looking at what it's going to cost us to: A. put the infrastructure together, meaning the learning system itself; and B. fill in the infrastructure with content. My guess is that this will be a three-year project, and we may do 10 to 20 percent of it this year, depending on how well we do as a company. Those conversations are happening now on a rolling quarterly basis, so we can anticipate the need for cash flow and forecast when we want to spend this money.

So today there's still debate between CIOs and CFOs. What is the CFO really looking for? How does the CIO make the CFO his ally?

Goltz: CFOs typically look at business plans and the intentions of the business, and then they spend their time building a budget and capital allocation plans behind that plan: Here's how we're going to grow our business, here are the sales targets and expectations. They do a functional analysis and ask each department or area, including systems, What is it you need in order to be able to support this plan? To get the CFO on your side, the best thing you can do is understand that business plan and the dynamics and the cost structure of whatever your particular function is. Know what it's going to cost to build each piece, and always have options. Don't paint yourself into a corner and say, This is the only way to do something—unless of course that's truly the case. To have the CFO in your corner, you want to present a recommendation but also give options. The recommendation part is important. The worst thing you can do is go to the CFO with options but no recommendation, because then the choice is always going to be whichever option is cheapest. The more information you can provide them so they can make an informed decision and the more you support the business strategy, the more they'll be your ally. That's good advice no matter what your position is.

Laino: There are a lot of technical decisions you have to make about the infrastructure. And those things are very hard to present because people don't see direct value. I'm upgrading to Windows 2000 because I need to keep a stable platform to provide all these services, and the natural response is, But the services have been stable for two years; I don't see why we have to spend money on it. However, I've gotten to the point where I have an annual range of dollars to do infrastructure work, and it's not questioned. I rolled it up into one big infrastructure project, the network, the data storage, and said, "Here's our infrastructure upgrade project for the next year, the sum total is $700,000," and I don't even do an ROI anymore. That's because of my relationship with the senior leadership team. If the cost is within your decision-making authority, you can go ahead and do it.

Goltz: This is where the typical CIO fails: They don't [establish that credibility by] looking at technology in the scheme of how the company wants to position itself. The best CIOs understand that and say, I don't need the latest version of Oracle. I don't need to be out there pushing that. We're a health insurance company with a leading-edge product, but I don't need bleeding-edge technology to deliver it.

What else do CIOs do that drives CFOs nuts?

Laino: Whether you're in the CIO role or any significant leadership role, you can't do the job in a vacuum. If you make decisions about things that impact many people without getting input, you're going to fail. This is something that frustrates me even among my own IT staff. We've got maybe a dozen corporate reengineering initiatives right now, and we haven't been looking at the impact of the sum of all this on the folks who have to go out and earn money every day—those who have to change their processes or workflows. So we're stepping back to make sure we're not asking the same person to do 15 different things at once.

Goltz: There are CIOs who think they're building software to save the world. They get all bound up in rational unified theory, system development life cycles, release management. All those things are great if you're a software development business, but for me, I don't care. The real question is, How does that move our business forward? So CIOs who can't move beyond that are difficult to deal with.

Then you get CIOs who just want to say they've got the latest and greatest technology. Guys come up with solutions that are killing a fly with a stick of dynamite. I understand that people in systems push hard because they want to be on the bleeding edge, to do the latest and greatest thing to advance their careers. But that doesn't help the business. It's difficult to balance those needs, but CIOs have to do it.

Well, since you're filling both roles, presumably you can avoid that conflict altogether. Do you cut your CIO-self any slack when it comes to cost-justification and budgeting?

Goltz: That's absolutely the case. Systems people come to me on a day-to-day basis for stuff they know they need, and if the cost is reasonable, I just tell them, "Go." If I were solely the CIO, I probably couldn't do that. As CIO and CFO I can, up to a certain spending level. And they like that. But getting back to the issue of making the CFO your ally, your ability to commit funds and resources to projects is far greater if you've built the credibility. Once you've established that credibility, the CFO isn't going to get in your face. They're just going to ask, How are we doing against what we said we would do?

Laino: In a sense I cut some slack in that I don't have to do an ROI on every single project. But understand that the areas I'm responsible for account for something like $10 million in expenses, and I have to stand up for that in front of 13 other executives. Other people in the group stand up and say things like, We're delivering $4 million of profit margin to the company this year, and I'm standing up saying, I'm spending $10 million of that margin. I'm accountable for that, so I have to be sure that I'm delivering the right, high-quality services. If I do my homework and build my budget numbers through conversations with the guys who report to me, it's not a tough role.