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CFOs Link Up With CIOs to Move Businesses Forward


Illustration by Michael Austin/ispot

Today’s CFO is a vital member of the C-suite, taking a more active decision-making role in moving the organization forward. CFOs remain in charge of the numbers, but they also are being thrust into an arena where finance has become the unifying principle underlying all business sectors, including IT.

“Finance holds the keys to performance. To do that well, there needs to be a closer relationship between operations and IT to drive the organization’s activities.”
—Carl Nordman, Global Project Executive, IBM Global Process Services

IT often reports directly to the CFO, underscoring the CFO’s broad duties. IT is such a significant investment for any organization that the CFO needs to evaluate and improve those investments in IT whether or not the CIO reports to the CFO. “Finance holds the keys to performance. To do that well, there needs to be a closer relationship between operations and IT to drive the organization’s activities,” says Carl Nordman, Global Project Executive, IBM Global Process Services. Nordman, formerly with IBM’s Institute for Business Value, was the lead researcher and author of the IBM 2010 Global CFO Study that discovered to what degree high-performing CFOs are contributing to an organization’s success (see “The Value Integrator”).
 

Creating Common Standards

With analytics being used to assess company performance, the close relationship between IT and operations is coming to the fore. IT powers analytics used by the organization, but the business itself is responsible for defining the organization’s analytical needs. Analytics are used to understand how to optimize company performance and determine whether an investment or business decision will add to shareholder value.

To achieve that common goal, all parts of the business must be working from a common standard. No longer can each business segment have different definitions and different spreadsheets when it comes to financial matters. CFOs are instrumental in implementing standards for process, data and data definitions.

“Standardizing the chart of accounts and how it’s used across the company is the most important first step a company can take,” Nordman says. Organizations “need to have faith and confidence that the numbers being produced in the financial statement reflect truth about what’s really going on. Companies that don’t operate under a common standard make business decisions based on different versions of the financial truth.” Without standards, company leadership is hard-pressed to optimize enterprise financial and operational performance because the CEO and CFO get one picture about the health of the company, while the business units see another.

After standardizing the chart of accounts and the financial systems, financial performance information must be integrated with operational data. Integrating operational data with financial data provides the analytical context to help explain enterprise financial performance. Standardizing the way financial and operational data is captured, defined and integrated is essential to achieve performance “truth.” When the numbers reflect what’s truly happening in the business, the company and its units are operating under a unifying financial principle, which facilitates optimizing enterprise performance.

Why does it take companies so long to get this? “Theoretically, it makes perfect sense,” Nordman says. “But in reality, the larger and more complex the company, the more difficult it is to execute on that strategy. It’s made the most difficult by getting agreement on the definitions of the data and the relationships between operational and financial performance.” Tension exists between the people and the data because compensation for all executives has historically been based on how the numbers are generated.

“Vested interest causes people to shun change; those doing well under the current performance reporting paradigm have less incentive to change, even if it’s not optimal,” Nordman explains. Change doesn’t usually occur unless an organization achieves some epiphany.

The recent economic crisis jolted organizations, spurring change. Flat revenues put pressure on margins, so CFOs drove frugality across the enterprise to trim costs such as IT, people and capital investments. Organizations that have survived tough times have been able to manage margins effectively, leveraging an enterprisewide “single performance truth” paradigm.

“The CFO is playing a huge role in protecting other assets of the organization, such as data involving new products, customers and market position.”
—Dr. James W. Cortada, IBM Institute for Business Value

Shirley S. Savage is a Maine-based freelance writer. Shirley can be reached at savage.shirley@comcast.net.



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