CIOs and CFOs: The Need to Communicate Is Greater Than Ever

CIOs are increasingly reporting to the CEO, rather than the CFO, while taking on a more strategic role in their companies — a reflection of the growing importance of information technology (IT). A recent survey by CIO magazine highlights the trend. Nearly half of the more than 500 CIOs responding to the survey report to the CEO compared with 41% a year earlier, and just 16% said they now report to the CFO, a decline from 23% a year ago. What is more, almost 75% of CIOs now sit on their company’s executive management committee, compared with 68% just two years ago.

And even where CIOs still report to the CFO, the CIOs and their staffs generally are growing more involved in business strategy and execution, and building and training their staffs to support those efforts, the survey noted. It’s the CIO, points out Ravi Aron, a professor of operations and information management at Wharton, who helps senior management determine what kind of new service the firm can introduce in the market. And it is often the CIO who will make the call about whether a given information-based strategy is realistic.

Yet, regardless of whom the CIO reports to, it’s more important than ever for CIOs and CFOs to communicate closely. For one thing, IT now takes up more than half of all capital spending. For another, IT has a growing role in monitoring compliance with financial regulations. In the wake of the Sarbanes-Oxley Act (SOX), for example, CIOs and CFOs should have found good reasons to continue working closely together to create a unified perspective on the value of IT investments. Following the announcement of SOX, many software companies rolled out new enhancements in compliance and auditing (including, even, some whistle-blower features) – hoping for a seamless integration of critical new IT and Finance responsibilities.

But SOX did not have that effect. In fact, surveys shows that only a minority percentage of CFOs feel that Sarbanes-Oxley created a tighter working relationship between Finance and IT. One reason could be that the controls required for SOX drove CFOs back to the basics — numbers — and away from the level of strategy that an integrated IT/Finance program requires.

So, does all this mean that the two functions are moving back to their respective silos, despite the need to remain wired to each other? David Wessels, an adjunct professor of finance at the Wharton School of the University of Pennsylvania, doesn’t think so. “The companies that succeed in the future will be the ones that embrace a joint IT-Finance initiative. In today’s competitive environment, it’s no longer an option — it’s increasingly becoming a necessary step in the development of competitive advantage.”