Finance and Technology: calming turbulence

Introduction

In many ways the relationship between Finance and Technology (or Digital) is one of the most important ones in an organisation.   However, the relationship can be strained and difficult for both parties.   The recent development of FinOps (oh, the joy of developing mini-portmanteau words) has done wonders to codify the bringing together of technology and finance, but we might not have grasped, what is at the heart of the issue…. Do we really understand each other? Or more importantly, do we trust each other?

Who is the CFO?

In my experience, the CFO is often the most ‘covertly’ misunderstood member of the board.  I say covertly because often few people will own up to not understanding finance matters and numbers even if they don’t¹. In addition, the CFO is often the last line of defence on decision making because others are reluctant to make the tough decisions.   Meaning almost everyone will know the project being proposed is unlikely to succeed but they are all relying on the CFO to be the one to say no, on money grounds, making them the perpetual “one to beat” in the organisation. 

There are a number of things that happen to CFOs that really can be painful:

• ‘Up against it’ decisions…. Quite often a lack of basic contract management or planning, means CFOs are faced with a do or die decision.  This is particularly prevalent in Technology and the impact can be pretty devastating. If the license is not paid the software gets cut off.    The old adage of ‘your lack of planning is not my sense of urgency’ should apply, but often the CFO is put in an impossible position.
• Gaming procurement … using various techniques to bring in preferred solutions trying to avoid full procurements.   This can include – splitting the orders up, suggesting it is a pilot, only buying the base product to get below thresholds.   CFOs are smart cookies; they can see right through this.
• Sloppy number work and lack of attention to detail.  This is really hard, I don’t think I have ever managed to get the numbers on a business case spot on first time, and constant back and forth is super annoying for all concerned.  
• Lack of financial acumen of the team members in technology.  Often, they don’t see this as part of the job and lean too heavily on Finance colleagues to pick up the slack.  When that happens, it can look like others are not taking responsibility, further pushing Finance into a police role.    
• Lack of long-term project and financial planning.  CFOs want as much certainty as you can provide, if your team has a planning horizon that is just the next 6 months, then your CFO is going to be blindsided every time.
• Asking for anything without making the financial case.  Everything (and I mean everything) can come down to cost … you just need to do it right.  Unfortunately for finance colleagues the amount of analysis on what is the right cost option is often light or missing.   Picking one company just because you ‘know them’, won’t cut it, but costing out the risk and opportunity of using a well-known partner can². 

The problem with all of these, is that they become ever decreasing circles of distrust and the more they happen the less friendly and supportive Finance are forced to become.  Which in turn continues to drive toxic behaviours across both teams.  The more governance in place to try and catch people behaving badly, the less trust there is and the less responsibility taking happens.

And the CIO/CTO?

For many CIO/CTOs, the relationship with Finance has been tense.  A recent CTO job description hit a WhatsApp group of CIOs where the role was reporting. into the CFO.  Most in the group saw that as a retrograde step.   For a lot of CIO’s and Heads of Technology, they have spent a chunk of their energy getting away from that structure because it always felt wrong or inhibiting.    But I have never believed that reporting lines are really the problem.  For technology, it matters not one jot who you report to, if you don’t have a strong, positive, collaborative relationship with the CFO, your plans will struggle.  But the pain is clearly there and often for a variety of reasons. 

• CFO basing your behaviour on their past experience of other CIO/CTOs.  (We all do this).  The CIO role is maturing, 10 years ago the chances of them having good business acumen was a lower.  We are a very young profession and accountancy has been around since about 1400.  It is improving; CIOs are a lot more astute and aware, but some Finance colleagues have yet to be convinced.   
• The CFO wanting more detail than you will have, particularly on long-term planning.
• Constantly kicking back business cases, looking for more information, creating delay.
• Budget cuts that focus on salami slicing because it is considered fair (it isn’t).  So, lack of strategic planning on budget reduction can be immensely damaging for the IT / Finance relationship, particularly as technology transformation rarely reduces the cost of technology itself but the cost of business processes elsewhere.
• Lack of understanding of technology below the software.   Understanding the need for consistent architecture is very low for almost all executives and the kludge³ that has to be looked after costs money.  Not understanding how the behaviours of others around technology contributes to the kludge, means decisions on what to do next are often flawed or pushed in the wrong direction.
• Prioritising business change for cost reduction promises over maintenance and security.   

As a CIO it is really important that the people working for you have an appropriate level of financial acumen.  For many members of your team their jobs will and should include budgeting and forecasting but equally that will not have been their route to their current roles.    It cannot all reside in you, you can be brilliant but if you have no financial strength beneath you, you are going to be strung out very quickly.  (Mind you size of team is a factor here).

Equally, there is nothing more damaging in the relationship between finance and technology than internal bad-mouthing.  It is not OK to moan about finance, just as it is not ok to moan about HR or Technology.  These are your colleagues and no one (and I mean no one) comes to work to do a bad job.  If you ‘let your petticoats show’ about finance to your team, you make it Ok for them to discount them, and it really is not Ok. 

Why make a change?

There are a number of things you can do to make things better but before we start we need to be clear and believe it is worth it.

In “The Cost of Bad Behaviour” Pearson, Porath 2009, the case was made, on financial terms, on why poor behaviours cost money, real money.   And so it is with bad relationships. Poor relationships between finance and technology result in one of the costliest activities in an organisation: rework⁴.

I have lost count of the number of times corners have been cut on specifications, requests for tender or business cases only to trip people up later.   There can be lots of reasons especially with pressure from other colleagues to ‘do something’.  But planning is doing something, it is not prevaricating, it is putting the effort in now so that the work gets done once and once only.   A simple calculation.

Let’s assume it would take 4 days of effort to research and write a business case (solid).  But to be really well done it needs input from:

Finance – 1 day

Legal – 2 days

Digital – 1 day

HR – 2 days

If you plan this well your duration best could be 6 days from end to end.  But if you don’t and none of those people know they are needed, then when you want them, they are not available.    Duration could move from just over a week to months easily.  And here is the rub, its not their fault and by not including them early the chances are your workload just went up – 8 – 10 days of effort just because you didn’t plan.

If you decide not to include them at all, then your case is going to be kicked back, for sure.  I know we all know this but some of your team don’t and getting this across to them is super important.

Changes you can make.

First of all, lets recognise that finance have been putting up with bad behaviour from colleagues not just technology for over 600 years, they deserve a break. 

But there are some tangible things you can do and continue to do to improve the situation.

• Meet with the CFO regularly.  One of my most disappointed with myself moments was when I lost my connection to the CFO.  It took me a long time to get that back, but it was worth it.   The key here is do you both see each other as equals.  This can be tricky if you are not on the board, but that is where you need to get to. 
• Make sure you know what their pain points are, and when gets their goat.  Make sure you don’t do those things.
• Read the finance manual and regulations.  Know what the rules are and work within the rules.  If a rule is bonkers still follow it, but ask if you can discuss the process and suggest changes to make things better for everyone. 
• Don’t let your team bend the rules, even if they are bonkers.  You are building relationships not giving anyone an excuse to believe you are just like every other Tech Leader they have seen.
• Suggest a joint awayday to discuss strategy or ways of working.  Plan it, dry run it, making it valuable and make it fun, oh and make it value for money.   (Rinse and repeat – this is not a one off exercise)
• In these days of hybrid working, find out when the CFO is in the office get in there too.  Suggest lunch, say hello, ask their opinion, be present.
• I will say it again, ask their opinion.  I had a member of the team who was struggling with finance colleagues and we discussed tactics… rather than sending the paper to them cold and asking for an answer, we spoke to them first to ask their opinion and advice.  It worked, we got helpful advice and we also got buy in. Win/win.
• Have a 10 year rolling plan for spend.  I know, years 3-10 will be purely indicative, but that is absolutely right and Finance know that.  If you do it, it will be your friend and even better you may be able to stop the last minute panic projects a bit, because you have a better view of what needs to be done.  (NB make sure your maintenance planning is not just ‘keeping the lights on’, but is about ‘keeping pace with the market’).
• Take responsibility.  Understand your numbers, get to know your finance reports and maybe even suggest changes.  I instigated a monthly finance meeting to make sure me and my direct reports were on top of the numbers, it worked well in some places and less well in others, but it is worth thinking about.   But the key was transparency, sharing what you are doing and thinking with finance colleagues and looking further ahead is only going to make things better.
• Learn how to cost intangible benefits and the benefit of maintenance projects … like risk.  It is possible to calculate the cost of avoiding a risk but be proportionate, likelihood is a key factor in the calculation.

I hope this helps and don’t get me wrong, not all relationships with Finance and Technology are a car crash but some are and that needs to change. By all means add some more… the relationship with finance is one we all need to foster because when it goes South, everyone loses, and someone has to leave⁵.

About Laura Dawson

After many years of CIO experience in a variety of organisations, the most important tool in everyone’s toolkit is their ability to understand someone else’s perspective; to ‘do politics’.   Laura is an experienced leader of technology teams and a big advocate for ensuring that those teams do not just focus on the technical skills but build out their business skills and their power skills.   Laura now runs Leaderly Consulting and is an Associate of Digital WOW and 100%Open.  

---

Footnotes

[1] New CIO, Aim for Breadth not Depth https://www.linkedin.com/pulse/new-ceo-aim-breadth-depth-laura-dawson

[2] For pities sake – never pick someone you play golf with…. Even if they are the best choice … you are making a hole for yourself not making a hole in one.   Forego the golf.

[3] The loosely connected layers of technology that have been purchased and developed over many years with minimal architecture and multiple ‘coded’ integrations and hard coded old practice, aka legacy. 

[4] I call this one of the four horsemen of the apocalypse (the others are duplicated effort, manual handovers and reconciliation – more on those another time).  

[5] And it won’t be the CFO