“CFOs cite a lack of financial literacy skills within IT,” says the latest CIO metrics study by financial software provider Workday. Now, before CIOs and technologists are brought up, I would say that the same accusation can be made throughout the organization. The Workday study is right, but weaknesses in financial literacy need to be addressed organization-wide, in fact, across society.
According to the study, low financial literacy is holding back the digitalization of finance, which looks a bit like a redistribution of responsibility. Finance teams are not known, in any vertical market, for embracing change. The very processes and timing of finance rule out a lot of change. CIOs tell the report that finance teams lack technology and data skills – we quickly hit a dead end, and no one has mentioned Excel yet!
Financial literacy cannot flourish in organizations without a culture that promotes transparency, debate and education. Finance departments are often low on education – a cultural similarity they share with technology. Much like technology, the world of finance is complex, detailed, full of jargon, quickly bogged down in processes, and therefore not that interesting. Just like technology, all of these details have a significant impact on business results – and that’s interesting. In most organizations, a culture of playing cards close to the chest is preferred; some departments claim to have financial skills, sales for example, but finance relates to more than one line on the P&L.
In a decade of writing, I can count on one finger the amount of financial education I have received. Part of the fault lies with me, the role is overwhelming and as with any leadership position you may find yourself focusing on the things you can control. However, it wasn’t until I became self-employed and during my second stint as a sole proprietor that I developed even a modicum of financial literacy. It can’t be sustainable that leaders can spend a decade in a leadership position without improving their financial literacy.
Over the past five years, CIOs and technology departments have invested time and money in educating and communicating with the entire enterprise to demystify digitization and automation. This has helped society to follow an accelerated digital education in recent years. If finance leaders want better financial literacy across the organization – and they are right – they will need to play a role in addressing organizational and societal misunderstanding.
Earlier in 2022, the economic newspaper The FinancialTimes launched the FT Financial Literacy and Inclusion campaign, worried because the pink book was about the impact on society of a lack of business and financial education. It is impossible to argue with this. As a kid in the 1980s, I remember sitting in the family living room while my parents watched the evening news; in every newsletter 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 in the process of acquiring a little training in commerce and finance. Today, that same news program rarely features a business story. As a result, business lost its place in the national consciousness in favor of nothing more than entertainment in the form of shows like The Apprentice. The latter, like news obsessed with politics, is about personalities, not substance. No wonder the workforce lacks financial literacy.
“An important way for organizations to seize this valuable opportunity is simply to bring finance and IT together,” the Workday report says. 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 center, which inhibits the ability to achieve digital transformation. I have little confidence that CFOs would report to CIOs under this proposal. If Workday’s proposal is to come to fruition, then perhaps the CFO and CIO should report to the COO, putting them both on equal footing. However, the career trajectory of the COO would likely influence the strategic focus towards finance or perhaps technology.
Whatever the internal structure of an organization, it is clear that all members of the company must acquire increased financial knowledge, whether they are technologists, salespeople, marketers or involved in the product or service. In today’s digital society, it’s hard to see finance and technology as anything other than equal. Like food and water – both are needed.
Workday is the darling of CFOs and the SaaS provider should be credited with enabling forward-thinking finance departments to finally modernize procurement and digitize their departments, so their hardware has a positive influence on the finance team. Lack of literacy is a concern and challenge for all departments and must be addressed company-wide.