Managers need to fill the communication gap

The chief financial officers (CFO) and chief information officers (CIO) in many companies face a large gap in their perceptions and perspectives, according to a study by consultancy PwC Česká Republika (PwC). The biggest issue between those two executives usually lies in a misunderstanding of company goals by CIOs and lack of communication from the side of CFOs.

Jiří Halouzka, a partner in PwC’s performance improvement department, told CBW the reasons behind this misunderstanding and how it can be solved, since IT has come to play a crucial role considering business success of the company. Halouzka says the major problem is a lack of communication between the CFO and CIO, which results in bad understanding of each other’s goals and in a lack of cooperation as well.

According to Halouzka, chief executive officers (CEOs) are usually aware of the problem, since it directly affects the performance of the company, and are using different ways to solve it. On the other hand, some tension between the CFO and CIO is desirable as well, since they contribute to finding a compromise solution, which usually is the best for the company.

* Q: How would you describe the goals of corporatemanagers such as CEOs CFOs and CIOs?

A: Generally speaking, they should all have the same goal. Only, each of the three functions has its own way, has its activities helping to achieve the goal. The primary goal of a chief executive officer is to pursue the firm’s core strategy, tomove the firm forward where he wants it to be, where the stockholders want it to be. A chief financial officer and chief information officermust work together to address the goal within their specialization.

A chief financial officer must make sure there’s enough money to implement the strategy, monitor the indicators to see whether they go in the right direction and supply information to the CEO.

A chief information officer must guarantee that if a system implementation is necessary to pursue a strategy, or another system solution [is needed], which is very frequent nowadays, hemustmake sure the systems are implemented.

What is certain, though, is that if everybody does things off their own bat, they probably won’t accomplish this. A system may be implemented, for example, that is unnecessarily expensive or fails to satisfy the needs of the firm.

* Q:Where do disputes arise between the CFO, the CIO and the CEO?

A: I probably wouldn’t call it disputes, although they sometimes arise, too. I’d prefer to call it a different perception of one side by the other side, and quite often, problems with communication. According to [our] study, most chief financial officers think that chief information officers don’t know the needs of the firmor the business strategy, and in turn, chief information officers complain that finance officers don’t communicate with themsufficiently and articulate the needs in some way. We see a lack of communication here and each party blames the other.

* Q: Sort of a vicious circle.

A: Exactly.

* Q: How can the cycle be broken?

A: This vicious circle can have rather serious consequences. Currently, IT is at the heart of the entire firm, and it is not just a support function somewhere in the background. Inmost firms it is not possible to pursued strategic projects without IT support. Of course, the state of affairs I described can have can have severe consequences in the implementation of projects, be they purely IT-related or projects for optimization processes, so it is really a major problem that companies must address. Now is there a way out? Companies employ several mechanisms. One that’s relatively important is to strengthen the importance of IT in corporate organizational structure. Historically, most IT used to be way down below, often under the finance department. In today’s corporations, where IT occupies a crucial role, the chief information officer is frequently a board member or senior manager. This has the advantage that hemay attend boardmeetings and hear and take in the real needs of the firm. He has occasion to tell the othermanagers about problems with IT. The communication is better. Q: Yet not every firmattaches so much importance to IT by appointing the chief information officer to the board of directors. Are there other ways of resolving this problem?

A: There’s a completely different mechanism, a different kettle of fish, that some firms employ. Promising information officers go to finance for a training stint and vice versa. When they come back they have built contacts there, and the standard of communication and understanding of the other side’s needs is much better.

Two such useful and well-tested mechanisms are steering committees. When a systemis implemented, a steering committee is formed with people fromthe finance department, from IT, plus other elements of the firm. It is again a platformmade for one side understanding the other better. The last mechanism is something that could be called a priority-deciding commission. It’s not IT pushing a given project, but a commission in which IT and others sit, deciding once the arguments are laid on the table which project gets the green light.

* Q: As for chief executive officers, do you have any evidence indicating whether they realize there can be a communication breakdown between finance and IT, and whether they are willing to serve as a platform that connects themandmediates communication?

A: Chief executive officers do realize this, of course. I have alreadymentioned the importance of IT and the fact that if communication isn’t perfect the repercussions are felt throughout the firm. Naturally enough, this interests chief executive officers. Our study has clearly shown that if the CIO/CFO relationship is constructive, correct and based on trust, it brings good business results, and this is what interests CEOs. Although we didn’t directly ask chief executive officers, it was shown clearly that every CEO strives to cultivate and support this relationship in some way.

* Q: Is it in the interests of CEOs to understand information technologies in their firm?

A: I don’t think a chief executive officer needs to understand the details of IT, but theymust have enough information to see in what direction IT is heading andwhat the key problems are; so they can take appropriate decisions if need be. They should certainly be interested because most firms won’t be successful without IT because they won’t be able to implement their strategy.

* Q: You havementioned four principal methods for resolving the problem ofmisunderstanding between finance and IT. Can it be completely resolved, though? Can chief financial officers grasp what IT requires and on the other hand, can IT be informed and fully aware of the firm’s strategic objectives?

A: I don’t think it will ever be possible to reconcile the differences or problems. I don’t even think it is desirable. A CFO has his objective and a CIO has his objective, too. The tension, which I should call a natural tension, can be beneficial to a business. I’ll explain how. What does a CFO want? He wants to obtain information he can trust and obtain it in a timely fashion; he wants to know that all of his accounting or whatever transactions are properly processed by the system, and all this at the lowest possible price. He is not interested in the way the IT system does it.

It’s the other way round for a CIO, he is naturally interested in the objective, what it does, but he’s verymuch interested in the procedure, in the system. He mostly demands a perfect, state-of-the-art systemin terms of technologies. He must want to know whether the system is compatible with the rest and whether the system will be supported in five years’ time. He need not be all that interested in the price.

If a constructive dialog is held and a suitable compromise is reached, what is called a third solution can be found. It’s neither mine nor yours, but it is a better solution than yours or mine. It’s not therefore about bringing the two departments into perfect harmony, but about communication being perfectly cultivated.

* Q: The post of chief information officer is still quite a novelty formany firms.
Even for a CEO it can be a problemif he doesn’t know whomto appoint to the post. What sort of person should this be, an IT person,manager or what?

A: Naturally, if somebody puts himself forward as a candidate for the post of CIO, it is a person thatmust know the sector inside out, must have a good grasp, must know the trends. On the other hand, I don’t think he has to be necessarily a specialist in a specific technology. This is not at all necessary because he is likely to have such experts in his team. Apart fromthe required technological skills, it is vital for such a person to be able to communicate.

I would say this used to be a problemfor some IT managers; they couldn’t communicate. If an information officer cannot communicate in the language of the other managers, or the language of business, using performance indicators and using terms employed in the strategy, hemay not be the ideal candidate for the CEO.

* Q: Youmentioned historical problems in firms with ITmanagers. Did they come about because information/computer experts were appointed to these positions?

A: This is doubtless one of the problems at the root of the misunderstanding.