With the emergence of CTOs as board members and having potentially equal footing with the CFO, comes a new dynamic that requires management to ensure the finance and IT functions work effectively together.
Anthony Stevens is a partner at professional services firm KPMG and its chief digital officer. He says outside the box thinking is required to bring finance and technology functions together.
“There's creativity required on both sides to establish an effective rhythm and alignment to the overall structure. Today strategy, vision and agility in execution are critical," says Stevens.
However, conflict can arise in the way the two areas approach operational matters. The finance function tends to have a more traditional structure compared to IT in terms of the way the department is run and the way investment funds are allocated.
Paul Harapin, Senior Vice-President and General Manager of cloud-based business intelligence platform, Domo says the ideal relationship is a collaborative one.
“Often what you see is that the CTO is doing his own thing and doing what he thinks is right." he says. "But he's not really engaged in executing the strategy. On the other hand the challenge all CFOs have is making the transition from strategy to execution."
“Technology is the enabler here, particularly with all the digital change taking place. If the CTO is not helping the executive team understand this change, their replacement will," says Harapin.
As an example, Harapin says he recently worked with a CFO charged with delivering strategy across cross-functional goals, with different departments and different goals. These goals translated into operational metrics to guide execution of the strategy.
“The CFO worked with the technology team to map out operational metrics so everyone understood them and their contribution to the execution of the strategy on a daily basis," he says.
Harapin says one way issues can arise in the CFO/CTO relationship is when a CTO asks the CFO for money without due consideration to strategic purpose.
“The more dynamic CTOs seek to align with corporate strategy and use technology as the lever to execute it," he adds. “So the ideal relationship is where technology is part of the corporate strategy, and execution is related to driving KPIs."
Despite the dominance of digital technologies, the traditional areas of control maintained by the CTO and CFO may have not changed. Stevens says as a result, for many companies, it is important to focus on the current business model while the firm builds new business models suitable for a digital business environment.
“In this context, CFOs will typically spend ninety-five per cent of their time on the here- and-now. But it's arguable that because of the increasing pace of change, more time should be spent on the unknown; the future, what it will look like and the strategic thinking that goes with that," Stevens says.
Nevertheless, he says, shared understanding and mutual respect for each other's roles and the factors influencing their decisions is the best way for the CFO and CTO to work together.
“For a CFO, the idea is to work towards a position where they are able to make decisions based on less information, but with better analytic skills," says Stevens. "For the digital leader, it's an idea to run through the process of quarterly reporting and related issues to get a better understanding of this area."
Ultimately, says Harapin, the CFO should have an overarching eye on the business and a firm hand on the purse strings.
“The CFO should work closely on strategy and execution. But the CTO's role relates to how technology helps accelerate achievement of company goals. If any IT investment doesn't contribute to this, don't do the investment," he says.
Building open and ongoing lines of communication between the IT and finance functions to work cohesively together can ensure all actions and investments are aligned to the company's strategic goals.
- Traditional responsibilities of the CFO and CTO have not changed, despite the dominance of digital technologies.
- Two areas of potential conflict need to be managed: allocation of investment funds to IT and agility in acting on investment decisions.
- Allocation of funds to technology should be strategic rather than piecemeal.