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What's your IT score?

It isn't uncommon for CFOs to spend as much as a quarter of their time on information technology-related tasks. But that brings up an important question: Just how extensively involved should the CFO be in information systems? How much do you need to know about technology to be an effective financial executive?

As an executive recruiting firm, we hear this question both from firms looking to fill CFO positions and from executives seeking to fill them. The issue is complicated by several factors: the traditional link between the CFO and corporate information processing, the growth of information as a significant budget item, the evolving role of information in decision-making and the CFO's expanding job description.

In the past, the gulf between the large numbers of people who wanted to use the technology and the relatively small number who understood it reinforced the notion of information technology as a distinct field of expertise. At the same time, more and more enterprises found information technology taking a central role in improving business operations, even creating competitive advantage. That's how the chief information officer won his own place at the senior management table. Today, roughly 40 percent of the CIOs of major firms now report to either the chief executive or the chief operating officer.


So it's not surprising that the CFO/CIO relationship is in flux: As the CFO emerges as the point person in the strategic marshaling of the firm's resources, it's natural for him or her to also have some oversight on what information is gathered, what it costs and to what use it's put. At the same time, however, it's clearly not the best use of executive skills for the CFO to take on the CIO's job. The challenge, then, is to strike a balance. Here's where we think the boundaries should be drawn:

* The CFO first needs to understand the role that information plays in the company's strategic decision-making, and to be able to evaluate the suitability of that information. Does the company have the information it needs to grow market share, minimize inventory costs and develop winning new products? In short, how can investment in the right technology improve the bottom line?

* The CFO should then be able to measure those information needs against the technical tools available. As with other capital expenditure decisions, he or she should know enough to judge the likely return on investment - not only in the present, but in the future, as the needs of the firm change.

* CFOs don't need to know about specific technical issues relating to hardware, software, telecommunications and so forth. The pros and cons of 56K frame relay vs. a fractional T1 line, or peer-to-peer departmental networks vs. dedicated client servers, are clearly questions that fall within the bailiwick of the CIO and his staff. So too are the development and implementation of company-wide technology standards.

* The extent of the CFO's technology involvement will vary by industry. Financial services, for example, is highly information intensive. The billions of dollars that are at risk mean a technologically savvy CFO is at a premium. In other sectors, such as retail or chemicals, IT has important business implications with respect to competitiveness and optimization, but it's not yet mission-critical.

* The CFO should act as a check on IT spending on technology infrastructure expenses. He or she must focus on operational needs rather than perceived or symbolic ones, especially as CIOs begin establishing company-wide IT standards. One recent study found that only about 15 percent of large U.S. companies are making the best use of their IT capabilities. While the cost may not be a sizable share of the line budget, it's grown enough in recent years to warrant heightened and long overdue scrutiny. Ironically, given the IT battle cry of more efficiency and productivity, many companies find they're home to a tangled web of legacy systems, minimally compatible platforms and redundant applications. In fact, the frenzied push for upgrades as a symbol of a firm's "commitment to the future" has only worsened the problem.


* The CFO must know how to work with advanced IT systems, which make continuous decision support possible and bring the CFO/IT connection full-circle. At more and more firms, the CFO is no longer the accountant-in-chief. Instead, he now must oversee the firm's resources - be they financial, material or human - and deploy them for maximum return. In a highly competitive economy, this critical task has made the CFO much more of a strategic player in the executive suite. Indeed, the CFO increasingly takes the lead in mergers, restructurings, divestitures and other defining transactions.

* The CFO also should be able to effectively use sophisticated data analysis that was impossible only a few years ago. Even without a redrawing of CFO responsibilities, information technology is reaching into core CFO concerns, such as asset management. Raised expectations about financial performance are a side effect of the high-flying investment climate of the 1990s. The CFO is expected to skillfully ferret out opportunities in areas ranging from foreign currency to real estate, while minimizing the total cost of money for the company.

Mr. Grand leads Russell Reynolds Associates' global financial officers practice. You can reach him at (212) 351-2000 or via e-mail at Mr. Leon leads the firm's information systems practice. You can reach him at the same phone number or via e-mail at Both are based in New York, N.Y.
COPYRIGHT 1997 Financial Executives International
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1997, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:chief financial officers and information technology
Author:Leon, Jeffrey J.
Publication:Financial Executive
Date:Jul 1, 1997
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