Why Do IT Departments Report To The CFO
Organizational structure is something that is hotly debated at businesses around the world, but one of the biggest mysteries is where it makes sense to have the technology teams. IT has both a strategic thread as well as a day-to-day operational focus, making it a solid fit for the office of the CEO or the COO — yet IT often lands with the CFO, especially if there isn’t a CIO in existence. Businesses tend to organize around the functional strengths of their leaders and their business operations. If you are researching where IT makes sense in the structure of your business, see why organizations around the world continue to closely align IT with the finance department.
“We’ve Always Done It That Way”
Historically, IT has been aligned with finance due to the original reason technology was introduced to businesses: to aid in digitizing accounting functions. The highly detailed work that is performed by both finance and technology teams worked in lockstep, as finance executives leaned on IT for financial computing initiatives that would help make the organization more efficient and effective in their financial interactions. Over time, the original need for digitizing accounting morphed — yet the reporting structure still made sense. CFOs needed to have a tight handle on the burgeoning budgets that the technology teams needed to support the needs of the business. Many businesses find themselves locked into this aging structure for one of the worst reasons of all: “We’ve always done it this way”.
Aligning Departments Around Business Functions
At first blush, IT may seem to have more in common with operations than with finance. There are plenty of moving parts in both operations and technology, but that is where the parallels break down. Maintaining the daily execution of tasks is quite operational in nature, but the far-reaching strategic nature of IT is where the power truly lies for the organization. Hiding IT within the office of the COO could reduce the overall effectiveness of IT and may also lead to the team being a target when there is a need for budget cuts. Without a strong seat at the table for technology as it relates to the future of the business, both finance and operations Chiefs may reduce spending without seeing the longer-term impact of their decision.
Shifting Business Strategy
As more CEOs consider IT initiatives as strategic imperatives, the structure of organizations will continue to shift. CIOs — although they are “Chiefs” — have not always had a place reporting directly to the CEO of the organization as other chief officers do. Instead, they are relegated to second-string status by reporting to the CFO or COO, especially if there is a perception that the CIO is not comfortable enough working through complex business problems as well as providing technology solutions. The shifting business strategies that are caused by exceptional levels of innovation and competition in terms of technology make it more likely than ever that CIOs will be raised to the level of the CMO and CFO in terms of organizational structure.
There are no perfect or “right” structures for your organization. As technology leaders continue to expand their knowledge outside the scope of the technical realm, they are less likely to be reporting to the CFO and COO and more likely to be able to earn representation at the highest levels of the organization. This evolution of IT may feel uncomfortable for some organizations, but will ultimately help boost the visibility of technology projects that are often core to the success of the business.