CIO Column

CIOs and CFOs must increase financial literacy

Finance leaders complain of poor fiduciary knowledge amongst IT teams but must play a role in educating techs and peers.

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"CFOs cite a lack of financial literacy skills within IT," states the latest CIO Indicator Study by finance software provider Workday. Now before the hackles of CIOs and technologists are raised, I would argue the same accusation can be levied right across the organisation. The Workday study has a point, but weaknesses in financial literacy needs to be addressed organisation wide, in fact, across society.

Poor financial literacy is, according to the study, holding back the digitisation of finance, which does sound a bit like passing the buck. Finance teams are not known, in any vertical market, for embracing change. The very processes and calendar of finance preclude a great deal of change. CIOs tell the report that finance teams lack technology and data skills - we have quickly reached an impasse, and no one has even mentioned Excel yet!

Financial literacy cannot flourish in organisations without a culture that promotes transparency, debate and education. Finance departments are often poor at education - a cultural similarity they share with technology. Just like technology, the world of finance is complex, detailed, full of jargon, quickly becomes bogged down in processes and therefore is not that interesting. Just like technology, all of that detail has a significant impact on the business outcome - and that is interesting. In most organisations, a culture of playing your cards close to the chest is preferred; some departments claim to be financially literate, sales for example, but finance is about more than one line on the P&L.

During a decade of Editorship, I can count on one finger the amount of financial education I received. Part of the blame lies with me, the role is all-consuming, and as with any leadership position, you can find yourself concentrating on the elements you can control. However, it was not until I became self-employed and during my second stint at this as a sole trader that I developed even a modicum of financial literacy. It cannot be sustainable that leaders can spend a decade in a leadership position without improving their financial literacy.

In the last five years, CIOs and technology departments have invested time and money into educating and communicating with the wider business in order to demystify digitisation and automation. It has helped that society has been on an accelerated digital education in recent years. If finance leaders want increased financial literacy across the organisation - and they are right to - they will need to play a part in tackling the organisation's and society's poor understanding.

Earlier in 2022 business newspaper the Financial Times launched the FT Financial Literacy and Inclusion Campaign, worried as the pink paper was about the impact on society of a lack of business and finance education. It is impossible to argue with this. As a child of the 1980s, I recall being sat in the family living room as my parents watched the evening news; in every bulletin, there would be an update on the national stock market and most nights there would be a major business story. Business was part of the national vernacular. Without knowing it I was gaining a small education in business and finance. Today that same news programme rarely features a business story. As a result, business has lost its place in the national consciousness to nothing more than entertainment in the form of shows like The Apprentice. The latter, like the politically obsessed news, is all about personalities and not substance.  Little wonder then that the workforce lacks any financial literacy.

"One important way organisations can seize this valuable opportunity is to simply bring finance and IT together," the Workday report states. This will raise concerns for the CIO community. It is well documented that when the CIO reports to the CFO, the role of technology is seen as a cost centre, which inhibits the ability to deliver digital transformation. I have little faith that CFOs would report to CIOs under this proposal. If the Workday proposition is to play out, then perhaps both the CFO and CIO should report to the COO, putting both on an equal footing. However, the career trajectory of the COO would likely sway the strategic emphasis towards finance or perhaps technology. 

Whatever the internal structure of an organisation, it is clear that everyone in the business needs to be given increased financial literacy, whether they are technologists, sales, marketing or involved in the product or service. In today's digital society, it is hard to see finance and technology as anything other than equal. Like food and water - both are necessary.

Workday is a darling of CFOs and the SaaS vendor has to be credited with enabling forward-thinking finance departments to finally modernise procurement and to digitise their departments, so their material has a positive lean towards the finance team. A lack of literacy is a concern and challenge to all departments and needs to be tackled enterprise-wide.