When Finance and the IT Team Do Not See Eye-to-Eye

“Are CFOs from Mars and CIOs from Venus?” This was the intriguing title of a 2008 study that detected a failure to communicate and collaborate among CFOs and CIOs in poorly performing companies. The finance folks complained about IT’s lack of understanding of financial realities; the tech guys groused about inflated expectations and unrealistically low budgets.

Fast forward to 2013, and the issues appear to be the same. This time around, though, the need to communicate and collaborate is far more urgent because finance and other lines of business – sales and marketing, to name two – now regard technology as essential to provide insight, create effective controls and drive efficiency. 
“Technology is a dilemma for finance,” says Brian Tsui, research director at advisory firm CEB. “It is increasingly being viewed by CFOs as an enabler for business management and performance reporting, but most finance teams are not equipped to manage the high expenses and expectations from technology investments.”
Yet it is absolutely crucial for finance and IT to be aligned with regard to business process- enabling IT investments, says Sandeep Sen, Group CIO at industrial gas and engineering firm The Linde Group. “Technology is getting increasingly expensive,” he notes, “and lack of alignment between the CFO and CIO will limit the potential of technology on the organization’s performance.”
The disconnects
A recent global survey of large companies conducted by CEB found that just 24% of finance leaders believed they were realizing a positive ROI on their finance IT investments.  A similarly low proportion of respondents expected to break even or see an improved ROI moving forward.
But the majority (65%) felt certain that better finance IT is the answer to yielding more insights to drive business performance. “Finance doesn’t need more data,” explains Tsui. “They need cleaner, higher quality data for improved business analytics. They need better systems to free up time spent on data extraction, so more time can be spent making sense of the data.”
The seemingly perennial disconnect between finance and IT is making the task more complicated than it should be. Sen is of the opinion that IT investments are often approved on grounds of intangibles, which are difficult to quantify as part of a benefits realization exercise
“The benefits of IT are often justified on the basis of productivity, or where they are enabling other projects like shared services,” he notes. “It’s difficult to precisely connect the benefits with the IT investments. As an example, the extent to which a CRM investment results in top line growth or avoidance of business loss is difficult to prove. But CRM business cases are often justified on [these grounds anyway].” 
Misplaced priorities with regard to choosing a product could also contribute to the disconnect between the two departments, says Tsui. “When evaluating new IT investments, some finance departments might be inclined to select the vendor that appears most sophisticated, thinking these vendors can fulfill all their needs.” 
But to IT’s frustration, such situations could lead to the neglect of fundamental IT governance aspects such as data quality and end user adoption. “Most importantly, [finance] sometimes lacks focus on whether a particular new system is aligned with business needs,” says Tsui.
“Finance departments need basic IT knowledge to ensure their investments are in line with corporate IT and business strategy,” he adds. “Conversely, the CIO and the IT department need to understand finance operations to better offer help. The issue here is they don’t know when and where they can.”
Minding the gap
Bridging the finance-IT divide is still a work in progress and disconnects are still apparent, especially at the execution level, says Tsui. “Many finance IT projects fail due to a failure to define cross-functional roles and responsibilities, with both parties underestimating the importance of clearing crucial question marks.”
Sen is one CIO who does not view conflict as necessarily negative, so long as there is a process for the parties to work things out and there is an element of trust. “We have experienced disagreements in vendor choice between IT and other business units, and even within the IT department itself,” he recounts. 
In significant cases, he would sit through the major vendors’ presentations before putting his case to the CFO and other decision makers, listing aspects such as risks that need to be managed. “IT needs to recognize that other functions are becoming increasingly tech-literate and a joint decision making process often improves the overall decision quality,” he says. 
In the case of a major Singapore-based bank, a forum co-chaired by its CIO and CFO has been set up to close the gap between both parties’ differing concepts of key performance indicators. The forum is meant to evaluate project deliverables against a benefit map. Factors such as fluctuating interest rates may sometimes affect a project’s outcome. The forum helps the company exercise rigor to ensure the business case remains valid throughout the project.
Building trust
The value of these processes and forums is that they force finance and IT to interact and communicate – and build trust between them and with the board. 
From IT’s viewpoint, according to Sen, a major aspect of trust building lies in on-time delivery and keeping to the allocated budget. “Success breeds trust,” he says. “If you deliver on time and demonstrate that you are managing money carefully, trust is established. And once trust is established, there are collaboration benefits which in turn help the enterprise.”
As an example of a collaborative decision-making process, Sen cites the example of a recent exercise to select a new expense management platform. Initially, the finance function wanted a SAP-based solution. IT recommended they review a cloud-based solution, which could be implemented fast at low capex and enforce a template approach.
As a result of IT’s deep dive, finance changed their approach and adopted the recommended solution, which was recently approved. Trust in the IT department had encouraged the finance team to seriously look at IT’s recommendation. 
“If there was a lack of trust, they would have either stuck to the original more expensive solution or brought in consultants for validation, leading to further cost and time delays,” says Sen. 
He also stresses transparency. “Projects are not always smooth,” says Sen. “It’s important to be transparent if a deployment is not proceeding to plan as originally projected. If there is a problem, IT needs to be transparent about it and share the mitigation plan  to reduce the cash burn and even take feedback from finance and other functions. This will build credibility in the IT function.”
He is somewhat of an anomaly, being an accountant by training who entered technology a few years into his career. Sen credits his finance background for enabling him to communicate effectively with his CFO and “speaking the same language.” 
According to Tsui, it is more common these days for CFOs to be more technology-literate. “We’re seeing an emerging trend of CFOs equipped with IT backgrounds, particularly with regard to the Asia Pacific operations of Fortune 100 companies,” he notes.
This idea of a middleman who speaks the language of both technology and finance appears to be a key success indicator in managing effective communication between IT and finance. Says Tsui: “We’ve observed the most successful companies assign a finance IT champion at the mid-manager level and that person functions as the liaison between the IT department and finance staff.”
Action steps
And five years on, the recommendations of the 2008 CFO-CIO study, which was commissioned by PricewaterhouseCoopers, look more relevant than ever. Among the action steps:
Require communications and collaboration. One of the companies surveyed even created a steering committee that meets regularly to evaluate the quality of finance-IT collaboration.
Ensure that IT has a voice at the highest level. The CFO is often already on the board. The CIO does not need to have a board seat, but he or she must have a voice at the highest levels of decision-making.
Rotate business experts into IT, and give IT employee opportunities in the business. This helps IT understand the business and speak the language of finance and business, and vice versa. 
Don’t be afraid of the natural tension in the relationship, but manage it. Differences in opinion should not degenerate into rancor, but should be seen as opportunities to elicit fresh ideas or avoid wasting resources on mistakes. 
About the Author
Singapore-based Melissa Chua is a Contributor at CFO Innovation. 

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