Point of View

Inadequate collaboration between Finance and IT

Over 50% of the 100 large companies 3c spoke with over the past year suffer from a lack of collaboration between Finance and IT. In these cases, IT (the vendor) and Finance (the customer) do not communicate effectively, share the same goals, or achieve success at a project level and in aggregate. The ramifications should not be taken lightly. Costs can be hard to measure but they are significant and can affect worker productivity in both Finance and IT.

The Impact

  1. Frustration: Finance employees who interact with IT are frustrated to the point where they avoid new projects that could be beneficial to the company
  2. Not nimble: Finance is unable to serve its own customers in an effective manner including the CEO and operational management. Changes to the business including reorganizations, acquisitions and other changes in business strategy require Finance to work harder, not smarter
  3. Underleveraged technology investments: the returns on investments in ERP systems, budgeting and forecasting applications and reporting solutions are low or nonexistent
  4. Higher costs: additional manpower is required to get the job done in Finance. Whether its SEC filings, earnings releases, management reports or tax filings, Finance does not have the luxury of postponing due dates

The Causes

  1. Silo thinking: the Finance department and the IT department function in separate silos and are focused on protecting their silo at the expense of the corporation as a whole
  2. Non standardized systems: unnecessarily complex systems translates into excessive effort to respond to changes in the business
  3. Outsourced IT: while the cost of IT will be reduced due to outsourcing, it increases the amount of red tape and creates another silo to manage
  4. Culture and politics: turf wars and individual agendas are usually the biggest cause of dysfunction. This item has a multiplier effect and can be the cause of many other causes listed here
  5. Understaffed IT: too much cost cutting in IT can cause Finance to incur costs that offset and sometime exceed the cuts obtained in IT
  6. Understaffed Finance: too much cost cutting in Finance can cause Finance not to participate sufficiently on IT projects and create delayed decisions, changing or missed requirements, inadequate testing and a sense in IT that failure is ok because the customer is not serious
  7. Finance staff lack of IT experience: a Finance staff that lacks IT experience can create unrealistic customer expectations
  8. Lack of accountability: Finance and IT resources feel there is no material benefit and conversely no material penalty for a project failing or being late
  9. Misaligned incentives and rewards: Finance incentives and rewards are designed completely separately from IT’s incentives and rewards

Recommendations

  1. Executive leadership: changes need to be driven by the CEO, CFO and CIO. Without these three executives committed to measureable goals and objectives, any improvements will be limited at best
  2. Staffing rotations: Finance employees should be encouraged and rewarded for doing a stint in IT and vice versa. This not only increases the experience of the individuals, it also breaks down barriers and increases the respect and appreciation of the complexities of the respective departments
  3. Collaborative goal setting and measurement systems: Finance and IT leadership must set common goals, objectives and measurement systems. The power of a single team is exponentially more effective that two teams working together while protecting their own respective interests
  4. Reduce system complexity: our research shows that the best performing companies have the fewest systems. Decentralized decision-making causes duplicate and redundant systems
  5. Reevaluate the extent of outsourced IT functions: its one thing to outsource email, the datacenter or the network. Its quite another to outsource key roles supporting and enhancing critical business applications. At minimum, ensure that Finance has input into how an IT outsource provider is measured
  6. Reduce the politics: remove the people who drive the wrong behavior, no matter how good they are individually

Conclusions

Companies that get this right have a significant G&A cost advantage and can react faster to business change. They also create an environment that attracts and retains talented people.