This article was updated on June 17, 2018.
Frustration is an all-too-common theme when discussing CFOs and technology. According to CIO, IT project failure rates are disturbingly high. Yet with ongoing trends like time and labor management systems, big data, cloud computing, mobile apps and the overall digital transformation of business, investing effectively in technology has never been more important.
CFOs are increasingly making these investment decisions. One of the basic problems leading to IT project failures is the lack of stakeholder understanding of any project's complexities and risks. In terms of aligning an IT project with the strategic goals of the business, a close collaboration between CFOs and IT leaders is essential, yet obstacles to a CFO's effective oversight abound.
Communication Is Critical
CFOs and IT leaders must be on the same page in terms of understanding how an IT project will create business value and raising awareness of project risks. Problematically, however, the two sides are often speaking different languages and reading from different playbooks. According to Deloitte's CFO Insights, "one of the main challenges between finance and IT is communication," which can eventually turn into "a fundamental disconnect that hinders effectively investing in, and realizing value from, IT."
Bridging that communication gap is a major challenge, not only because CFOs are rarely experts in technology but because IT leaders are rarely experts in finance and risk. To offer optimal value for the organization, both perspectives are crucial components of any IT project. As Deloitte's CFO Insights explains, "CFOs and CIOs should establish a common language for assessing and communicating how IT creates business value. Specifically, the conversation should focus on how IT improves business processes, such as product development and pricing, rather than just talking about a specific technology or system."
When it comes to HCM systems, for example, the CFO and HR leaders should work together to define how those systems could be used to more effectively leverage talent to grow the business, and then consult with IT to implement the system.
Focus More on Outcomes, Less on Tech
As a CFO seeking to align an IT project with strategic business goals, such as enhancing human capital management, your focus should be on the "what," meaning the outcomes that create business value, and less on the "how," which is more about making technology choices to obtain that outcome. A dialogue between CFOs and IT leaders about technologies that could benefit time and labor management and analytics should focus on value creation and risk mitigation rather than the intricacies of software development. The CFO and IT leaders should map out relevant outcomes and performance metrics for the project, which will also help bridge the potential communication gap between CFOs and IT leaders.
If the technical parts of the project are so complex that a CFO can't understand how the project will lead to tangible value creation, then the CFO will play an essential role in challenging the project's sponsor to clearly and simply explain the value. The CFO's role is not to blindly trust in the "greater knowledge" of a project's sponsor, but to carefully scrutinize all financial outlays to ensure they are generating sufficient business value. If a project's sponsor can't show the value and explain how project risks can be mitigated, it begs the question of whether the project should be funded.
Making CFOs and CIOs Key Strategic Partners
As technology slowly creeps to the center of everything businesses do, including human capital management, the CFO and CIO need to be partners who speak a common language of value creation. Both sides must educate and inform the other about concerns around cost, risk and business opportunities driven by technology. CFOs should become a key strategic partner with IT, which will involve them both finding a common ground (and measures) to assess projects.
As former CIO-turned-CFO Jack Bergstrand writes in CFO Magazine, "business-IT alignment is a perennial issue and often gets worse as projects proceed over time. The CFO can be the CIO's best advocate and coach." Just as IT leaders have much to learn from CFOs about translating technical jargon into the language of value creation, risk and finance, CFOs have much to learn from IT leaders about technological developments. Both sides of the CFO and technology bridge must learn from, and teach, the other in order for ongoing collaboration to work effectively.