It is essential for the CIO and CFO to have a strong relationship. Cloud computing, mobility, and big data are driving a shift from functional silos (like finance, technology, or HR, for example) to cross-functional partnerships based on aligned incentives that drive collaboration.
Just as innovation in customer experience begins with a deeper understanding of the customer, understanding organizational financial drivers and investment goals can help every CIO be a more effective corporate leader. Still, creating a meaningful partnership with the CFO can be hard.
Given the profound value of building a solid CIO/CFO partnership, I asked the chief financial officer of ServiceNow, Gina Mastantuono, to share advice for CIOs. She appears as a guest on episode #708 of the CXOTalk series of conversations with people shaping our world.
Digital transformation and the CFO / CIO relationship
If you don’t have alignment with a CIO early in the process, you’re not going to enable great outcomes. That alignment is especially critical today more so than ever.
I’m blessed and lucky that I have such an incredible CIO [at ServiceNow} like Chris Bedi. We partner from the get-go.
Before we even budget for projects, we talk about the business needs and what business challenge we’re trying to solve. Then we work together to ensure that we have the investment dollars required, that we have the bandwidth of the people. One piece of it is investment dollars; the other piece is making sure that you have the capacity internally to drive it.
If you’re funding things and the company is not ready to manage them, then it’s a waste of money. Understand that from the get-go.
On the other side when we’re finalizing, making sure that we’re really holding the organization accountable for the ROI, for the outcomes that we talked about at the beginning of the project, working together from start to finish is really going to help that.
The CFO / CIO relationship is the connective tissue that helps organizations see around the curve to understand what we need to do in the future. It drives value cross-functionally across the different organizations within the company.
We are pushing our teams to be more collaborative. If you’re not working across the company and you’re just focused on one area, you’re not going to have the great outcomes that digital transformation can drive. Silos have to be broken down if you’re really looking for successful digital transformation.
Cross-team collaboration and innovation
Building relationships within the organization (not just within your teams) becomes more and more important as you rise as a leader. Collaborating cross-functionally is the best way to ensure the right and the best outcomes, is a huge part of the future of leadership and the future of CFOs and how they think.
Never lose sight of the bigger picture and always know that people come to work to do their best job and their best work every day. And so, to put yourself in their shoes and think about collaboration in an empathetic way, as opposed to just focusing on what you need to do to get your job done. If you’re helping others achieve their goals, you’re all going to get to a better place in achieving the wider company goals.
CFOs are always focused on the numbers, obviously, especially reducing expenses, sometimes. [However,] if they don’t think about innovation, they can miss opportunities by staying on the sidelines.
Modern CFOs are learning to understand the importance of continuous innovation, thinking about digitization projects through the lens of maximizing value to the business.
I think there’s more upside to growing the pie versus saving each crumb.[At ServiceNow,] we think about R&D investments in a couple of different buckets:
- We have R&D, which we call Horizon One, when we expect to see ROI on those investments within a year. That’s about 60% of our spend.
- Then we have Horizon Two, which are emerging technologies and new products for future growth. We expect to see ROI in one to three years. That’s about 30% of our spend.
- Then Horizon Three,which includes future bets on next-generation technologies for future growth. We hope to see ROI on that in three to five years. That’s about 10% of our spend.
We need to be comfortable, as CFOs, understanding the need to experiment. Not every project is going to yield the ROI that you anticipate. You need to give the company some freedom to do that.
By collaborating cross-functionally and working across the C-suite with your CIO and your chief revenue officer and your chief product officer, you can be more comfortable making those bets and experimenting.
Advice to CIOs when talking with the CFO
First of all, talking to the CFO in ways and terms that they understand is critical and important.
Return on investment is always where I start: “So, you want to spend all this money. Okay. What’s the benefit? What’s the return on investment that we’re going to get?” It needs to be a rational and reasonable return on investment. There needs to be a solid business case behind it. Try to turn operational metrics into dollars and cents.
What do I mean by that? [For example,] if you’re looking to put in an on-boarding or off-boarding system in HR that’s going to drive lower attrition, or whatever operational metrics you’re looking at, how do you turn that into, “If my attrition levels change or go down by 10%, do recruiting costs go down?” Turn that into dollars and cents. That always helps.
Make sure the CFO is involved early so they are not blindsided by a huge investment ask that hasn’t been planned for. [Explain] the long-term, strategic, two-, three-year planning horizons and what you need to do over that period, so there are no big surprises and so they can plan for it. That’s always going to help get the CFO to buy-in. Understand the overarching impact to the business and articulate it well.
The CFO’s role is to hold people accountable. Not everything is going to pay off. You also need to know when to shut things down. You need to know when to say, “You know what? That’s not going to work. Let me cut my losses sooner rather than later.”
CXOTalk offers in-depth conversations with people shaping our world. Thank you to my research assistant, Sumeye Dalkilinc, for help with this post.