Battle Royale: The CIO vs. the CFO
Updated: May 5
November 2, 2021 - As published on LinkedIn https://www.linkedin.com/pulse/battle-royale-cio-vs-cfo-justin-webb/
This time of year, many organizations are working to build and fight for their IT budgets for the coming season. Forget about mandatory increases for licensing – or the thought of adding new staff to fill a deficit – we often see that many IT leaders are working just to defend the existing spend that they had the prior year.
I greatly respect the role of a solid CFO as “gatekeeper” for finances and cost control within organizations, but not every CFO out there is appropriately experienced, manages to a consistent budgeting process, or is even open to feedback. What we have seen in some organizations is that excessive cuts or key financial decisions being made by a single individual can stifle and harm an entire company by choking off necessary spend in critical areas (like IT). In recent years, the long-term effects of these cuts have manifested in the form of increased security breaches, exodus of key personnel recruited with competitive offers, and in a growing disconnect between IT meeting the needs of the core business.
This isn’t to say that it is the fault of an individual CFO when a breakdown of financial planning occurs…this should be a shared responsibility and is a situation that can be improved across the board. What are some of the causes for breakdown, and how can we work to build out appropriate budgets and help to justify the expense for IT?
1. Inadequate Planning and Budgeting – Managing a budget isn’t a core strength for everyone. Some IT leaders or managers either don’t have the bandwidth to appropriately develop a budget or lack the proper skill and experience…they’ve simply never learned how to do accurate forecasting and as such, fail to prepare and present a compelling case to support their departmental needs. Rather, they will rely on previous expenditures and obligations to identify base needs, and occasionally sprinkle in a list of projects that they feel are important or necessary to address an impending issue. Budgets may be short-sighted, lack sufficient evaluation of alternate options, or fall flat in their presentation and how they support the business.
Potential Solution: Coaching and guidance on budget development from Finance or from a 3rd party resource with appropriate experience
2. Poor Communication and Relationships – This is directed at an area where IT can take better ownership…being better engaged with the business and forging stronger relationships with peers and organizational leaders. Often relationships are neglected as a part of managing the “day to day” of IT. However, the longer-term impacts of this are a disconnect between IT and the business as well as a lack of awareness or advocacy for IT initiatives. IT can stand to build a few more allies and in turn, will likely present and plan budget items that are supported by more than just the IT leader.
Potential Solution: IT should reach out and involve other departments in building a budget that supports key business functions, using the process to educate the business on IT costs (and limitations) and begin growing advocates outside of the IT department
3. Failure to Benchmark – IT is often skilled at knowing the costs of hardware and software, and have intimate understanding of how our own IT infrastructure will scale. However, there are few organizations that do any benchmarking of costs based upon the size, revenues and industry of the business they are supporting. This can lead to overinflated budgetary expectations within IT, or the opposite – IT budgets that are inadequate to support the scale and complexity of the organizations they are working to support.
Potential Solution: Utilize 3rd party support and research in developing and justifying IT budgets that align with industry or similar-sized organizations, and work with Finance and company leadership on “right sized” funding for IT
4. Inadequate Education or Awareness of Risk – Decisions around budgets can sometimes be short-sighted and are based upon the information available at the time. In building and advocating for budgets, IT should work to provide clear description and justification for what is being asked…including articulating the risks that the business is mitigating or accepting with their decisions.
Possible Solution: Take a clinical approach in presenting budgetary justifications along with corresponding risks, allowing full consideration of business risk that may be assumed by deferring certain costs
5. Lack of Transparency – There is sometimes mystique that surrounds the budgeting process. In particular, what happens and the decisions that are made in finalizing the budget. This is perhaps the most important area companies can focus on improving.
Potential Solution: Finance can increase transparency for how budgeting decisions are made, communicating the compromises and trade-offs incorporated into finalized budgets
As we have seen, IT budgeting has room for improvement in many organizations and could use refinements like increased communication and transparency for the budgeting process, evaluation of proposed costs against known business risks, and alignment of budgets to a company-wide strategy. These potential solutions won’t solve all problems…but perhaps can help the overall budgeting process evolve from “grudge match” to an “exhibition bout”.
What other steps might we take?