During Q3 of 2024, Piccadilly One conducted a survey where we asked for feedback on the reporting lines of CIOs based in the UK. Over the coming weeks our Director, Simon Elkinson dissects the findings. Here is Part 3 of the series where the findings of the Cons of reporting to a CFO are revealed.
Findings
While reporting to a CFO can provide financial and strategic advantages, CIOs also point out several significant drawbacks. These challenges largely stem from differences in priorities, a lack of technical understanding, and a cost-centric approach, which can stifle innovation and strategic IT initiatives.
Cost-Centric Mentality
CFOs tend to prioritise cost control over innovation, often viewing IT as a cost centre rather than a strategic enabler. This focus on reducing expenses can limit IT's potential to drive growth and transformation within the organisation. IT initiatives are often seen as budgetary line items rather than investments in business value, leading to a constrained innovation culture and a reluctance to fund more experimental or long-term technology projects.
Lack of Technical Understanding
Many CFOs lack a deep understanding of technology and its broader strategic importance. This can result in a focus on transactional systems like ERP, while operational efficiency or digital transformation programs may struggle to gain funding or attention. For CIOs, working with a CFO who doesn’t "get it" means more effort is required to justify initiatives, often through rigid business cases and ROI calculations that may not capture the full value of IT investments.
Reduced Strategic Influence
Reporting to a CFO can diminish the CIO’s strategic influence within the organization. CIOs may be seen as a subordinate to the CFO rather than as an equal peer among the C-suite, limiting their ability to impact broader business decisions. This reporting structure can create barriers to visibility and engagement with other executive and board stakeholders, reducing the CIO’s role to a more operational one, rather than as a driver of business transformation.
Micro-Management and Short-Term Focus
CFOs are often focused on short-term financial performance, leading to micro-management of IT budgets and spending. This can paralyze decision-making within IT, especially in larger organisations. Their risk-averse nature often results in delayed or reduced funding for crucial IT initiatives, with a stronger emphasis on immediate ROI rather than long-term innovation. Such short-term focus can hinder the development of strategic digital transformation projects, which often require sustained investment over time.
Stifling of Innovation
The CFO's risk-averse nature can significantly impact technology innovation. The need for certainty in supporting investments may not align with the exploratory nature of IT initiatives, particularly in emerging technologies such as AI or Cloud solutions. As a result, innovation tends to be deprioritised, with the CIO forced to focus on optimisation and cost-saving measures rather than strategic or transformative projects.
Limited Access to Executive Leadership
CFOs, by their nature, often act as gatekeepers to the CEO and board, which can hinder direct access for the CIO. This limitation makes it more challenging for CIOs to present IT strategies and digital transformation initiatives directly to key decision-makers. As a result, IT investments may be filtered through a financial lens that undervalues the strategic potential of technology, further reducing the CIO's ability to influence at the highest level.
Perception of IT as a Support Function
When reporting to a CFO, IT is often relegated to a back-office function rather than being recognised as a business enabler. This perception limits IT's ability to drive company-wide transformation and innovation. It also diminishes the role of the CIO as a strategic leader, often reducing their input to service delivery and operational concerns rather than broader business strategy.
Conflict in Priorities
CFOs and CIOs often have conflicting priorities. While IT's focus is on long-term innovation, growth, and digital transformation, the CFO may be more concerned with short-term financial outcomes and risk mitigation. This misalignment can create friction, with the CFO prioritising financial metrics over IT's broader strategic goals. As a result, opportunities for growth, innovation, and digital transformation may be overlooked or delayed.
Talent Attraction and Retention Challenges
Reporting to a CFO can make the CIO role less attractive to potential talent. High-caliber IT leaders may prefer roles where they report directly to the CEO and have greater strategic influence, as this structure is seen as more conducive to driving business transformation. Additionally, IT teams may feel demotivated if the function is viewed primarily as a cost centre, reducing their potential to innovate and contribute to business growth.
In conclusion, while some CFOs may be strong allies in driving IT initiatives, the overarching focus on cost control, short-term financial performance, and limited technical understanding can lead to a constrained innovation culture. This dynamic often reduces the CIO's strategic influence, diminishes access to executive leadership, and stifles the long-term growth potential of IT within the business.
Piccadilly One helps organisations hire CIOs. We Put People Above Technology placing the number one technology position within an organisation and that person's direct reports.
We get CIOs! To discuss your next CIO hire or, if you're a CIO, your next direct report hire, contact our Director and Founder Simon Elkinson
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