The digital transformation disrupts existing roles and relationships within the organization. Niki conducted a thesis research in collaboration with IT Finance Consulting on the shifting relationships between C-suite members for her Master’s degree in Strategic Management.
- Strategic alignment of the CIO and CFO contributes to sustained competitive advantage through increased organizational flexibility
- An effective relationship of the CFO and CIO contributes to strategic alignment
- An increase in IT knowledge and skills of the CFO will benefit the effective relationship
The current digital era causes the roles and relationships between C-suite members to change. One of these changes is that digitalization is becoming a central element of the role of the CFO. This increases the need for collaboration between the CFO and CIO. To adapt to this change, CFOs and CIOs need to work on an effective relationship that facilitates a successful digital transformation.
"IT and Finance have become inseparable. Thus, an increase in the collaboration of the CIO and CFO has become inevitable".
Working on an effective relationship
An effective relationship contributes to strategic alignment of the CFO and CIO. Strategic alignment is important for the organization as it contributes to a sustained competitive advantage through increased organizational flexibility. In order to collaborate more effectively, CFOs and CIOs can focus on three elements of their relationship. The first central element of an effective relationship is trust. Trust is the expectation that the other will act with integrity, is benevolent, and has the ability to perform his or her task. The second central element of an effective relationship is positive influence. In an effective relationship, influence is characterized by soft tactics such as rational persuasion or personal appeal instead of hard tactics such as pressure. The third central element of an effective relationship is shared understanding. Shared understanding in a relationship implies that both C-suite members have a profound knowledge and understanding of the other’s area of expertise. Developing these three elements of the relationship will increase relational effectiveness and thus contribute to strategic alignment.
An exploratory research was performed to generate real-life insights into the antecedents of an effective CFO-CIO relationship. A literature study was conducted that was complemented by a series of 12 in-depth interviews with Dutch CFOs and CIOs. <Request the full report here>
What do CFOs and CIOs say?
In-depth interviews revealed insights into existing CFO-CIO relationships. In line with the background study, CFOs and CIOs signaled the importance of trust and positive influence (in the form of informal relationships and informal communication) for their relationship. However, when implicitly asked about the importance of shared understanding for the relationship, CFOs and CIOs were not on the same page. CIOs said that extensive shared understanding would be beneficial for the relationship. CIOs said that they benefited from extensive financial knowledge because of the importance of finance within the organization. Likewise, CIOs said that, because IT is becoming such a central element of the organization and the role of the CFO, the CFO should have extensive knowledge of IT. On the contrary, CFOs said that basic levels of shared understanding were sufficient.
“Historically, more people tended to have generic knowledge of finance than of IT. However, now that IT is becoming a more central element of the organization and the role of the CFO, I think it is important for the CFO to know more about IT.”
Towards the future
The increasing importance of IT causes a shift in roles and relationships. Trust, positive influence and shared understanding contribute to an effective relationship. The interviews illustrated that the shared understanding element of an effective CFO-CIO relationship can be further developed. Now that IT is becoming a more central part of the role of the CFO, the CFO needs to develop IT knowledge and skills. This will increase strategic alignment of the CIO and CFO, leading to sustained competitive advantage through increased organizational flexibility.