We recently wrote about the growing influence of the CFO in IT decision making, and relayed Gartner Inc. analyst Barbara Gomolski's advice for forging a strong CIO-CFO alliance. How do these partnerships work in practice, however? At the recent Gartner Symposium/ITxpo 2010, SearchCIO.com sat down with Chris Lafond, CFO at Gartner, and Darko Hrelic, CIO at Gartner, to probe how they work together. On the surface, these partners could...
not be more different. Hrelic is circumspect and has a sly sense of humor. Lafond, a man of many words, is passionately articulate. There is little doubt, however, that they operate from a position of mutual trust. Here is a condensed version of our interview.
Darko, you have been CIO for almost four years. Chris has been CFO for seven years. Which of the two of you had to make the bigger accommodation to allow this CIO-CFO alliance to work? Whose job had to change more?
Hrelic: Not mine [laughs]. This is the way I work.
Lafond: I think over time I have developed a much deeper understanding of what it takes for IT to be successful. So, I would say my knowledge has changed dramatically. I am not sure I changed my job or my role so much. I think Darko and the team will tell you that I challenge everything from a cost perspective. I question every dollar we spend.
Darko, you said your job didn't really change, because that is how you do business. Explain.
Hrelic: Basically, I think what makes this work is complete transparency. There is no discussion in the smoky back room on the IT side or the finance side. I understand what Chris is trying to accomplish, and I see it as my job to try to help him with that. So, it's not just about lowering the cost because Chris asked. It's about how can we do our business better and be more efficient. We have come down with cost cuts in areas that Chris never asked for!
I sense and see the same thing coming from the other direction. He doesn't question me about, "Is that the right thing to do?" Yes, we have a discussion logically about it. If he sees that I really feel I need to refresh certain hardware, or certain applications need to be done, he will do everything he can to figure out how to help me do that. So, it is this attitude that we try to make each other successful, and everything else just follows.
Logistics: How often do you meet?
Lafond: I think our entire management team -- and Darko and I work the same way -- do a lot of informal conversations. We are talking constantly about whatever it is in the business that we need to do. We have formal, what we call capital project review meetings once a quarter, where we formally review new requests and existing projects.
Are your offices close together?
Lafond: We're pretty close. We're right down the hall from one another.
So, one doesn't have to walk miles to get to the other?
Hrelic: Sometimes the voice carries.
How integrated is the CIO staff in the financial meetings?
Lafond: A person on Darko's team, Dan, works directly for Darko, but I treat him like a direct report. Every message I send out to my management team, he gets. Every time I have a team meeting, he sits in on it. So, it isn't just pulling him in without context -- "OK, here is a project we're doing." Whenever there is a project, he has got the overall context of my organization, what I have been thinking about, what we are doing; so not only can he put that in context, but IT can also be a lot more proactive. As we are talking about things that we need to do as a business in, say, finance, Dan may be able to say, "Gee, I heard you talking about X, Y and Z. You guys didn't mention anything about technology, but I think there is a technology solution here that would be cool for you guys to think about." And he does it all the time with us.
Hrelic: Where I think it is working really well for me is with the business areas. My direct reports will have their heads down trying to make some hard business project happen, really sweating it through. They go to the staff meeting of my peer, and find out that the [business unit] staff is concerned about this other tweety little thing that is no big deal -- we can do this in two days. We find out that we can make something happen for [the business unit] really quickly, make them really happy, and we become heroes almost instantly without even working hard.
Chris, What happens when there is an IT initiative that Darko thinks is important and that from your perspective shouldn't be done?
Lafond: There are a lot of conflicts around the business all the time, in terms of where we are spending money, how we are prioritizing. Just as a little context, which I think will help you: The decision making process around IT spending. There are two voting members in our company -- me and Darko. We don't have a big, let's get 50 people in the room from every business unit and all vote on things. We have, with our CEO, gotten to a point where it is the two of us who prioritize and ultimately make decisions.
Now, we do it transparently, so we bring that visibility back to the executive team. The whole executive team gets full visibility into "Here's where we stack-ranked the projects, here is where we drew the line, here is what's above the line, here is what is below and here is why. The reason that we are able to do that, is that the business leaders trust that Darko and I understand the business, we understand the priorities, we know the strategy. We also know what his team can accomplish, and I know from a funding perspective what we can afford, so we think with all of that knowledge we are able to do that.
What is the main driving force in your discussions?
Lafond: I think the one thing we do a good job talking about is the risk aspect: If we don't do this, what is going to happen and can we live with that risk?
Hrelic: That's right. Certainly the two of us think this way -- and it's taken a little while to get the business units to think the same way. But pretty much anything that we do, we ought to have a good business reason for why we are doing it. Even, for example, laptops. It used to be like clockwork: After three years you are getting a new laptop. We stepped back and said, "Why?" Maybe in certain jobs -- analysts, for example -- it should be two years. In other cases, if you are a receptionist and your laptop is working but no longer under warranty: "OK, fine, when it breaks, we'll get you a new one." That is maybe when it is three years old, or maybe it is five years. And we talk through the areas where we want to invest.
Lafond: The whole business knows, particularly last year, that there are three questions that I'll ask, and Darko probably asks as well. The first is, "Why now? Tell me what happens if we don't do this right now." The second is, "Help me understand the link to our corporate strategy." We have a very clear corporate strategy with a very small number of objectives. You might articulate the "why now," but if you can't articulate exactly how it ties to one of our corporate initiatives, maybe from our perspective, now is not the right time. And the third question is, "Give me the hard dollars: What is the business case that you're committing to?" So, everybody knows that if they come forward, those three questions will be asked and they will be held accountable to their answers.
For CIOs who don't have good relationship with the CFO, can each of you give a few pointers on what they can do to improve the CIO-CFO alliance? Where do you start?
Lafond: I think the CIO should make an effort to understand the CFO's thinking. Make the CFO take you through the business model. You say, "I'd really like to think about the finances of the business." What I have done with Darko and his team, I have gone through our P & L with them, I've gone through top to bottom and said, "Look, this is why we have $20 million on capital spend." So, there is a reason it is $20 million, not $22 million or $23 million, and let me make sure you get it. Once you paint that picture for them, it helps a lot. The starting point with the CIO should be, "Help me understand how you're thinking about this, so I can be a better partner with you."
I think the CIO should make an effort to understand the CFO's thinking. Make the CFO take you through the business model.
Chris Lafond, CFO, Gartner Inc.
That obviously leads to the CFO saying, "I'd like to understand how you think." This stuff is hard. I think some CFOs are challenged by all the buzzwords: Oh great, cloud computing, pattern-based strategy, what is this going to cost me? But taking the time to step back and understand how these guys think, helps.
No. 2, I think the CIO can go to the CFO and say, "If we can develop a really clear IT demand-governance process together, both of our lives will be better, and you as a CFO will feel much better that we're spending money on the right things. Let's collectively come up with a process that more effectively prioritizes where we are spending IT dollars. In places where the CFO is probably not aligned with the CIO, I bet in most cases that CFO is saying, "I don't know why they spend money on all this crap, and I don't think we're getting good stuff for it." So, if that is his or her problem, the way to solve it is, "Let's you and I come up with a process that will let us both feel better about it."
And third is the leadership thing. Really being joint leaders, where whenever we are making these decisions, Darko and I are both in the room. There is never a time when we are making an IT decision to spend money that I am doing that independently or that Darko is doing that independently. We may be in meetings where we are hearing things, but there is never a decision made without seeing what the other thinks.
Darko, how did you come to your understanding of finance? It's as complex as IT is.
Hrelic: It is very complex. We really rely heavily on Eric, who works for Chris. He helps me muddle through it, helps me understand what I do and don't need to know. There are some things you need to step back and understand in order to be successful. There is no magic to it.
The only thing I would add to Chris's statement is the fact that transparency is extremely important. To me, my No. 1 team is the team of my peers. It is not the team that reports to me. I look to make my peers successful first. And when I first broke it to my team, I got some strange looks: "Well, what do you mean?" And when they sat back and thought about it, they said, "Wait a minute, if we are looking to make the executive team successful, then obviously we will be successful." And if they are not successful, how can we be successful?
Let us know what you think about the story; email Linda Tucci, Senior News Writer.