Boards and CFOs Pay Attention to the CIOs Key Role in Strategy

Norman Marks, CRMA, CPA, was a chief audit executive and chief risk officer at major global corporations for more than 20 years. The views expressed in this blog are his personal views and may not represent those of The IIA.

 

Recently, two of the Big Four accounting firms released reports that address the increasing importance of the CIO. PwC published their 5th Annual Digital IQ Survey and Deloitte issued an Audit Committee Brief on the topic of “Understanding the CFO and CIO Dynamic.”

The short discussion by Deloitte provides advice for members of the audit committee. The authors say that “The ability to mine data and drive insight from a company’s numerous systems has highlighted the importance of an effective relationship between the CFO and CIO”. They refer to an earlier Deloitte publication, CFO Signals, which found that “only a little over half of the CFOs said they have the information they need to manage the business effectively, and about one-third expressed a neutral opinion”.

It is understandable that the Deloitte piece focuses on the clear and troubling problem that CFOs and other executives are making decisions without the benefit of the information they need, both on performance and risk. It is also understandable that their advice to the audit committee brings in the issue of financial reporting risks. But, I think there is more that the audit committee and the board as a whole should be concerned with, let alone the CFO, than that the CIO has aligned the activities of the IT organization with the strategies set by top management.

Rather, I think the CFO and the board should be asking whether the CIO is sufficiently involved in helping to set the strategies and vision of the organization.

I found the PwC contribution more useful. Although the paper talks about ‘collaboration’ between the CIO and the top executives, the value is clearly highest when the executive team – with the CEO as active champion – recognizes that “technology is a critical driver of business value”

PwC talks about “Strong Collaborators” and how these companies outperform their rivals. They say “Strong Collaborators are those that said that the CIO has a strong relationship (4.5 out of 5 or better across all relationship pairs) with members across the C-suite: CEO, CFO, CMO, CRO, CSO, CISO, and business unit leaders”.

Here are a couple of key excerpts, but I recommend reading the entire 9-page document:

  • “Naturally, companies with high Digital IQ understand which technologies will provide the greatest business benefits, leveraging the tools and platforms to optimize processes and improve overall performance. Our analysis shows that Strong Collaborators are more likely to aggressively invest in the four key digital technologies—mobility, cloud computing, business analytics and social media—than other companies.”

  • “Our survey found that companies with collaborative C-suites intertwine business strategy and information technology and are often rewarded with stronger company performance. They can also adapt quickly to market changes to maintain an advantage over competitors.”

PwC addresses the need for information to drive decisions. They say “Strong Collaborators are more likely to integrate internal and third-party data to better support decision-making, a critical step to provide senior leaders with the insight to make the right choices.”

But the key for me is that the CIO moves out of a role as the janitor and enters the organization’s executive team to drive the organization forward. PwC captures this with:

“CIOs of Strong Collaborator companies tend to not only ensure that technology initiatives are in step with the business plan but champion innovation across the enterprise.”

I welcome your views and comments. My recommendation is that CFOs and members of the audit committee review the two papers together and consider whether the role and relationship of the CIO within the organization is as effective as it should be.

Posted on Mar 4, 2013 by Norman Marks

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  1. Hi Norman. As always, love your blog. One thing I noticed in this particular one was that you mentioned our firm's recent Digital IQ survey, which is a great resource. But did you know the Center for Board Governance put out an IT book for directors back in October. Here is the link: http://www.pwc.com/us/en/corporate-governance/publications/directors-and-it/index.jhtml.

    Gary Larkin

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