The CIO, CFO, and CEO Reporting Circle

Thursday, September 09, 2010

Bill Gerneglia

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A report by Gartner and the Financial Executives Research Foundation suggests that the CFO is increasingly becoming the top IT decision-maker in many organizations.

The study, which is based on a survey of 482 senior finance executives, also found that more IT organizations report to the CFO than to the CEO or any other executive.

None of this is really surprising. Ten to twelve years ago, there seemed to be an increasing number of CIOs who were reporting to the CEO instead of the CFO. The Dot Com boom was at its zenith, helping to highlight the business value that technology can bring to organizations.

Much has changed since those glory days. The global economy has endured not one but two major economic downturns since then.

Following the post-9/11 downturn and in the wake of the run-up to massive Y2K investments, many CEOs began to question the amount of IT investments that had been made in the late 1990s and wanted to see these outlays stretched.

IT spending typically represents the biggest single area of capital expenditures within most organizations. Couple that with the kind of clout that CFOs typically gain during tough times along with the increase in regulatory and compliance activities in recent years (i.e. Sarbanes-Oxley) and it stands to reason why such a high percentage of CIOs and IT organizations now fall under the CFO’s watch.

Of course, who the CIO reports to depends on who you ask. According to IDG’s 2010 State of the CIO study, 43 percent of CIOs said they report to the CEO while just 19 percent said they reported to the CFO.

Some CIOs see the CFO reporting relationship as a curse. Many CIOs who report to CFOs feel like they have to cost-justify every nickel that goes into their IT budgets. It’s tough to do your job when you feel like you constantly have to look over your shoulder.

Reporting to the CEO is the promised land for many CIOs – excepting those IT leaders who vie to actually become the CEO. A lot of CIOs I talk to who either report to the CEO or wish they did talk about the importance of having a CEO who is a champion of IT and the value it can bring to a business.

Many CIOs who report to the CEO truly feel like they’ve become part of the inner circle and rightfully so. They typically don’t exude that warm, fuzzy feeling if they’re reporting to the CFO.

It will be interesting to see how the reporting dynamics shift over the next few years. Perhaps it will prove to be cyclical, akin to the kinds of swings that occur between centralized and decentralized IT operations following shifts in the economy.

As the current economy continues to improve and companies invest more in growth-oriented projects, this should give CIOs an opportunity to shine.

Cross-posted from CIOZone

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Mister Reiner Just some thoughts off the top of my head...

While I agree that the CIO should report to the CEO, who between the CEO and CFO is most capable of analyzing and measuring the business, operational and customer impact of IT expenditures?

What I always hate, is when you sell something to the boss, only to have it shot down by the CFO because there isn't any money. That's a real problem in many organizations.

Based on industry, a requirements driven mindset (or lack thereof) and the ability to show return on investment (hard and soft dollars), answering to the CFO might not be such a bad thing. I'm sure it makes sense in some cases.

I always keep this in mind: IT doesn't exist to serve itself. It exists to serve everyone else. If the other business units aren't getting the support they need to do their jobs, who cares what the CEO thinks? If a CIO can't work with individual business units to get them to see how they can leverage technology to the company's benefit, then he's worthless. The other business units should be the ones fighting for IT and IT dollars, not the CIO. The only exception to that is computer security. Think about it.

CEO management styles differ from company to company. Some CEOs like listening to the CIO and others don't. Some don't even understand IT, so they need an intermediary. In cases such as this, the CFO is the right choice.

Cheers
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