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In these uncertain times, CFO responsibilities focus on execution

News CIOs should use from the MIT Sloan CFO Summit: In these uncertain times, CFO responsibilities center on internal execution and scenario planning for constant change.

NEWTON, Mass. -- What is on your CFO's mind these days? If the CFOs at the recent MIT Sloan CFO Summit are any barometer, your CFO is feeling that business is operating in a time of great uncertainty. CFOs, including those at companies that have weathered the recession successfully, believe that the 2011 economic outlook remains dicey. They are unsettled by the government's conflicting stances on issues ranging from trade and health care to taxes, and they expressed little optimism that Washington politicians have it in them to point out a way forward. In the absence of clarity, CFO responsibilities center on profitable growth, resource allocation and internal execution -- make that execution, execution, execution.

"You have to set a plan, believe in it and make sure the folks responsible for those plans are executing," said Michael Angelakis, CFO at Comcast Corp., the Philadelphia-based cable, communications and entertainment operator. Volatility is the new normal, he said. "We can sweat what we can control. We can't control what is happening with an Irish bank."

"Execution cures all ills," said Joseph Euteneuer, executive vice president and CFO at Denver-based Qwest Communications International Inc., responding to a question about how to manage shareholder expectations amid such turmoil. "To the extent that you are executing to your long-term strategy, then the only question is, are you still on track."

Angelakis and Euteneuer were two of four CFOs participating in a summit keynote panel, "Leading the Pack," billed as a discussion of how their respective companies survived the recession and their strategies for long-term growth. They were joined by David Denton, executive vice president and CFO at CVS Caremark Corp.; and Edward Rapp, group vice president and CFO at Caterpillar Inc.

Why CIOs should care about CFO responsibilities

Why does it matter to CIOs what their CFO is sweating these days -- at least more so than in any other year? With U.S. spending on IT having plummeted about 6% in 2009 and projected to rise a modest 3% in 2010, CFO responsibilities are enveloping IT decisions more so today than before, according to Gartner Inc. A recent survey of nearly 500 organizations by Gartner and the Financial Executives Research Foundation showed that 77% of CFOs shaped IT decisions, in either their role on steering committees or their relationship to the CIO, or as a solo player. Roughly 40% of CFOs said they were the main decision maker for IT investments. Today, more IT organizations report to the CFO (42%) than to the CEO or to any other executive. The numbers add up to more CFO influence over IT decisions than at any time in the past decade.

"I think that trend is here to stay," Barbara Gomolski, a Gartner analyst, told CIOs at the consultancy's annual symposium in Orlando, Fla., earlier this year.

A strong CIO-CFO alliance will be critical to executing an IT strategy that supports business goals and gives the CFO the information needed to optimize business and financial performance, Gomolski has argued. In volatile economic conditions, that means providing the CFO with advanced analytics to maximize ROI, and sophisticated tools to model the future. (Find more information on gauging whether a CIO-CFO relationship is strong or weak here.)

With the hiring of a new CIO and the launch of a new project, a new CIO-CFO alliance is underway at Timberland Co.

Stratham, N.H.-based Timberland is "in the middle of launching a business transformation" that includes the implementation of SAP to replace its cumbersome and highly customized legacy systems, said Carrie Teffner, its CFO.

Teffner will be working closely with Timberland's newly appointed CIO Suja Chandrasekaran (who came on board Nov. 2) to architect a "nimble and sustainable value chain" for the ecology-minded manufacturer. The former CTO for North America at PepsiCo, Chandrasekaran comes with extensive SAP and business transformation experience.

"What I am looking for from the IT organization is to help transform our business processes through the use of better tools," Teffner said.

Qwest's Euteneuer told that working with his CIO was critical to "rightsizing" the telecommunication company's short-term IT spending, while not sacrificing the long-term investments necessary to keep a subscription-based business winning customers.

"When you think about being a subscriber-driven business, making sure that you continue to improve those things that are perfecting the customer is all based on your IT systems. So, working critically with our CIO was hugely important. Without having him part of the team, to face the challenges we had, we would not have been successful," Euteneuer said.

'It is hard to place your bets today'

Not all CIOs looking to calibrate their IT strategies to CFO responsibilities will find it an easy road to travel. All four CFOs on the MIT Sloan panel said they have positioned their companies for growth, but the uncertainty of the economy and political landscape makes those plans anything but certain.

Caterpillar is doing business like it's 2008 -- in its growth markets, that is. "For our business, it is back to pre-crisis levels outside North America," Rapp said. The Peoria, Ill.-based construction and mining equipment manufacturer brought back 15,000 full-time and contract employees this year to meet demand. On Nov. 18, Caterpillar announced it plans to build a $300 million large-engine manufacturing plant in China. In the United States, not so.

Investing your capital today in the right way is critical, and will make or break companies.

David Denton, CFO, CVS Caremark Corp.

"At the end of the day, you make decisions based on confidence, "Rapp said. "And when you don't know where taxes are going; when you don't know where FINRA [the Financial Industry Regulatory Authority] is going; when you don't totally understand what health care is going to do to you; and in our business, when you still don't have a highway bill and you still don't have a permanent R&D tax credit -- you have a lot of issues out that cause you to pause and think."

At Woonsocket, R.I.-based CVS Caremark, for example, landmark health care legislation that brings millions of people into the health care system is viewed as "a nice tailwind to our business," CFO David Denton said. The company plans to increase its Caremark pharmacy management revenue by 20% next year and double the number of its 550 MinuteClinic units over the next five years. "Growth is our lifeblood," he said. Even so, "it is hard to place your bets today on where to best drive returns for our shareholders," when so many aspects of the health care bill and health care regulations remain obscure, he emphasized. "We are focusing almost 24/7 on how to capitalize on it," he added, but said that the uncertainty of the markets today is unlike any he's seen. "Investing your capital today in the right way is critical, and will make or break companies."

The Qwest and Comcast CFOs were even more bearish in their 2011 economic outlook. Both were doubtful that unemployment numbers or housing starts would change much in the next two years, given the current political climate in Washington and the pain of the past two years. Qwest, for example, used to spend $500 million a year on new housing starts, CFO Euteneuer said: "This year we spent $50 million." He has focused on "putting our house in order," including taking out $1 billion in "unprofitable revenue" and now is waiting for the "inflection point" for growth. "It isn't there quite yet," he said.

Bottom line for CIOs? As CFOs get their houses in order, they will be relying on CIOs for a heavy assist.

Let us know what you think about the story; email Linda Tucci, Senior News Writer.

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