Who's the Real Boss of IT? Probably the CFO

Is IT management at the top of the corporate ladder losing its luster? Not completely, but was it ever really there?

Call it business alignment or bottom-line buffering, a good lot of CIOs do not have the direct ears of CEOs. A chunk of technology leaders in enterprise companies report to CFOs (42 percent), according to a joint study on organizational hierarchy from IT research analyst firm Gartner and Financial Executives Research Foundation (FERF). More than one-third (33 percent) of CIOs report to the CEO, in this study.

"In most organizations, the CFO and CIO work together daily to finance IT and provide information that supports financial processes, but there is also an opportunity for them to form a powerful alliance that generates more value for the enterprise," said Bill Sinnett, director of research at FERF in the Gartner statement. "The CFO and CIO are well-positioned to work together at generating superior performance from the enterprise."

When you combine the 16 percent of CIOs who report to COOs and the 42 percent already answering to CFOs, 58 percent of CIOs are reporting to business-centric company leaders. Financial and operational executives influence does not stop there: 53 percent of CFOs who do not already have this organizational hierarchy would like the CIO as a direct report.

"Where the CIO should report is a question as old as the CIO role itself," said John Van Decker, research vice president at Gartner in a statement. "CFO reporting can lead to success if the CFO has a deep understanding of IT's value."

Some of this CFO power grab is explained by the ever-expanding demands and responsibilities being placed on CFOs by the effects of managing stockholder expectations and company risk through a tough economic climate. No longer are CFOs only chief accountants in residence. They are now being asked to be strategically minded, operationally-efficient risk managers. 

"CFOs' responsibilities go well beyond finance into balancing compliance and risk management with business-performance goals," wrote Chris Butler and Karen Quint, financial executive experts at Spencer Stuart in a Bloomberg BusinessWeek article. "They have an important role to play in reading and understanding evolving business drivers and helping their companies seize opportunities. The best CFOs balance accountability to the board and shareholders for maintaining the integrity of the financials and appropriate risk management with loyalty to the CEO."

Some say CIOs have never been at the same level as CFOs and will continue to report in to them as they have been for many years. A similar study from IDG ("2010 State of the CIO") shows a larger percentage of CIOs reporting to CEOs than the Gartner study, and less reporting to the CFO. Yet, a key issue pointed out is that CIOs have never really cracked 50 percent mark in reporting to the CEO. Between 2005 and 2010, CIOs have gone as high as 47 percent in reporting to the CEO, but never higher. 

Why can't the CIO be on the same level as the CFO? A recent discussion on a LinkedIn forum posed that very question. Commenter Ennis Alvarez, COO of Brevia (an IT consultancy), essentially said IT itself was to blame:

"[W]hen the executive team makes the decision to have IT report to the CFO, it is mainly because we (the IT management team) have failed to 'earn the seat' at the top by not clarifying the value that IT is contributing to the organization, nor being clear about where the IT budget is being spent and why that is the best return on that investment."