Five Ways to Make the CFO Your BFF
1. Know How the Company Makes Money
One of the most important things you can do in leading your IT organization is to make sure everyone understands how the company makes money. You should be able to explain the P&Ls for the main revenue and profit generating segments of the business, and so should your team.
Explain which business spending fits into COGS (cost of goods sold); which product lines have the highest and lowest gross margins; and how things drive gross margin. Explain how the various fixed expenses like product development, marketing, and IT need to fit within the gross margin to leave room for a profit. You may not be able to share your companys actual numbers with everyone, but you can present a realistic example that has the right scale. It is my experience that technical people are vitally interested in this information. Yet, in most cases, no one ever explains it to them.
This knowledge is the best way to motivate the right behaviors and the right kinds of innovations in IT. Projects that just spend money to do something more elegantly are then understood at a grass-roots level to be less important than projects which drive revenue on high margin areas of the business. There is also more personal motivation to be on the lookout for reducing cost in general.
Once your organization has some rules of thumb on financial management you will get lots of ideas to change and improve your conversation with the CFO. Then instead of only having the one thing to talk about: how much money IT spends or gets to spend, you can share ideas about how IT can help improve the profit of the company.
2. Be the Cost Cutter―Before the CFO Brings it Up
Let me go out on a limb here and say that when it comes to IT, you can accurately describe most CFOs as cost cutters and not so much as strategic investors. Just accept that and start helping.
For starters, remember that most of what IT does is about creating efficiency for the company. Talk about how your work is saving the company money. If you have a cost cutter CFO on your hands, make all of your conversations about efficiency, and cost cutting, even if you are talking about strategic initiatives.
If you are developing a highly strategic new architecture that is vitally important to enable your business to scale in the future, dont talk about that with your CFO. Talk about how you will be taking cost out of supply chain management, or increasing efficiency of store operations over time. Remember cutting costs first, reducing risk second, interesting infrastructure investments ... never.
And, actually cut costs. If you normally spend $100, do it with $95, and show how youve taken cost out of the system. Develop a reputation as being aggressive on costs. This will build addition trust with your CFO.
3. Change Your Vocabulary
I have talked about this in many past articles, but this list would be incomplete without it. The CFO does not get IT vocabulary. When you discuss your initiatives or your budget, you will only annoy your CFO with technology talk. Dont try to educate the CFO on IT. It wont work, and you will not gain any advantage.
Put your CFO-translator hat on and always use the CFOs vocabulary. Hint: when talking to the CFO, do not use the words, data center, service oriented architecture, LDAP, or diverse routing.
Heres an example for how to translate to CFO vocabulary. SAP Financials is a business deliverable. It may consume 30% of your data center costs, 20% of your desktop support costs, and 5% of your network costs. Totaling these to a single cost for SAP Financials is using a term the CFO knows and values, and puts you in a much better place than using the internal IT infrastructure labels. (By the way, if you can measure and track IT spend in this way too, you will be way ahead of the game, but that is a big topic for another day.)4. Get a Financial Manager on Your Team
Its really important that you get a very strong financial manager on your staff. This cant be someone on loan from finance. This needs to be your person. You need someone by your side, who is on your side, that can go into the financial organization, find all the torpedoes, and come back to you to help work on them so you never get caught on a back foot.
This person can help you translate all of your IT presentations into the right financial language, and match your IT initiatives up with the right business initiatives. Most importantly, this person can show you how you are really spending your money and help you align your budget with what is actually most important to the business. If you have someone on your team doing this analysis and exposing all the stupid places you are spending money privately, you can fix it and be a hero by presenting cost reductions proactively.
This person can make sure you are equipped at your CFO meetings with plans and numbers that the CFO can relate to and support. Attempting this on your own without financial support is putting you at a huge disadvantage, and certainly not helping you win over the CFO.
5. Build the Relationship
It will really help to have lunch with your CFO once in awhile. There is a natural adversarial relationship between the CIO and the CFO. This wont go away, but if you make it a point to get to know each other as people, it makes a big difference. You will still get pressure, but it will be appropriate business pressure, with respect and consideration. If you dont make it a point to build the relationship, you will be seen only as the leader of a cost center, with less credibility and respect. You will get more hassle and less money.
I have found that even if you dont like your CFO; if you spend some time with him or her the ongoing business and budget discussions that result will be much more productive.
Patty Azzarello became the youngest general manager ever at HP at the age of 33. She ran HP's $1B OpenView software business at the age of 35, and was the CEO of an IT software company, Euclid Software at the age of 38. Today, Patty is the CEO of Azzarello Group a unique services organization that helps companies develop and motivate their top performers, execute their strategies, and grow their business, through talent management programs, leadership workshops, online products & public speaking.