Our systems detected an issue with your IP. If you think this is an error please submit your concerns via our contact form.

Cio icon

Develop Your IT Leadership Team’s Financial Literacy

Start thinking and talking like a business leader.

IT not speaking the language of business isn’t a new problem, but it doesn’t seem to be going away either.

  • The rate of financial literacy is on the decline across all demographics, including the management ranks.
  • Many IT staff don’t feel that financial functions are well executed in their departments.
  • Metrics used to communicate IT’s value to the business are largely grounded in financial terms that IT remains ill equipped to navigate.

Our Advice

Critical Insight

A series of obstacles have served to both drive and exacerbate the historically low levels of financial literacy in IT.

  • IT leaders are not perceived as business leaders.
  • IT and the business aren’t speaking the same language, leading to misalignment and misunderstanding.
  • IT not knowing where it has business knowledge gaps, caused in part by ongoing exclusion from business contexts and conversations.

Impact and Result

Info-Tech has devised a straightforward approach to improving financial literacy across the IT management ranks.

  • First, understand what financial literacy is, why it matters, and how it matters to different IT roles.
  • Next, assess your IT management team’s overall financial literacy and financial confidence, and identify key knowledge gaps.
  • Finally, develop individual and team plans for improving financial literacy in your IT organization and reaping the benefits.

Develop Your IT Leadership Team’s Financial Literacy Research & Tools

1. Develop Your IT Leadership Team’s Financial Literacy Deck – A step-by-step guide for understanding why financial literacy matters and how to draft a plan for a financial literacy development program within IT.

This deck is designed to walk IT leaders through the fundamentals of formalizing financial literacy development within their IT leadership team.

This blueprint includes a six-step process focused on understanding the importance of financial literacy, identifying target development outcomes, assessing current skills, selecting priorities, determining approaches, and finalizing the financial literacy development plan.

2. Financial Literacy Development Program Playbook – A place to document the outputs of the activities involved in creating a financial literacy development program.

This comprehensive Excel workbook offers a place for you to document your analysis and key decisions when putting together your financial literacy development program and to track its progress over the long term.

3. Financial Literacy Quiz – A tool for assessing individual financial knowledge and confidence in that knowledge.

This brief, 20-question quiz will help you assess your IT management team members’ current levels of financial literacy and confidence and identify key skills gaps.

4. Financial Concepts Guide – An enhanced glossary of financial terms and concepts that are foundational to basic financial literacy.

This guide explores a range of financial concepts from building-block terminology through to explanations of more advanced concepts like profit, financial statements, and calculating value. The guide is complemented throughout with tips on how these concepts apply to an IT context.


Member Testimonials

After each Info-Tech experience, we ask our members to quantify the real-time savings, monetary impact, and project improvements our research helped them achieve. See our top member experiences for this blueprint and what our clients have to say.

10.0/10


Overall Impact

Client

Experience

Impact

$ Saved

Days Saved

Nieuport Aviation

Guided Implementation

10/10

N/A

N/A

Jennifer is a gem of wisdom, pulling knowledge from finance, IT and even HR and legal into a cohesive and relatable discussion.


Develop Your IT Leadership Team’s Financial Literacy

Start thinking and talking like a business leader.

Analyst Perspective

Being financially literate helps you see where you fit into the scheme of things.

Jennifer Perrier

“I’m in IT, not accounting.” True enough – you should focus on what you were trained to do and excel at it. However, knowing the financial impact of your decisions and actions and how money flows in and out of your organization are critical capabilities for a leader or manager of any business unit.

Financial literacy is on the decline with leaders and managers in every department and in every industry. This growing gap in knowing how to speak and understand the language of business is a serious impediment for IT effectiveness as well as the career paths of those who hope to join or remain in the management ranks. Luckily, this is a fixable problem.

Developing basic financial literacy involves not only learning some core financial concepts but also recognizing what they mean in the context of your organization and how to apply them in the real world to gain insight, avoid potentially expensive mistakes, and make better decisions overall.

Assess your IT management team’s financial literacy and collectively commit to making improvements to develop your business savvy and fundamentally understand how your organization actually operates.

Jennifer Perrier

Principal Research Director, ITFM Practice
Info-Tech Research Group

Executive Summary

Your Challenge

IT not speaking the language of business isn’t a new problem, but it doesn’t seem to be going away either.

  • The rate of financial literacy is on the decline across all demographics, including the management ranks.
  • Many IT staff don’t feel that financial functions are well executed in their departments.
  • Metrics used to communicate IT’s value to the business are largely grounded in financial terms that IT remains ill equipped to navigate.

Common Obstacles

A series of obstacles have served to both drive and exacerbate the historically low levels of financial literacy in IT.

  • IT leaders are not perceived as business leaders.
  • IT and the business aren’t speaking the same language, leading to misalignment and misunderstanding.
  • IT not knowing where it has business knowledge gaps caused in part by ongoing exclusion from business contexts and conversations.

Info-Tech’s Approach

Info-Tech has devised a straightforward approach to improving financial literacy across IT management.

  • Understand what financial literacy is, why it matters, and how it matters to different IT roles.
  • Assess your IT management team’s overall financial literacy and financial confidence to identify key knowledge gaps.
  • Develop individual and team plans for improving financial literacy in your IT organization and reaping the benefits.

Info-Tech Insight

You can read a book to learn about finance, but real financial wisdom happens when you apply what you’ve learned and experience the impact of your decisions and actions.

Executive Brief

Financial literacy is low everywhere

And IT is no exception.

An Oracle survey of 9,000 consumers and business leaders found that financial literacy is low across every demographic (2021). This is not a new issue, and it appears to be getting worse instead of better.

However, if IT wants to:

  • learn how to speak to the business in a language that it understands,
  • have meaningful conversations,
  • form strong relationships, and
  • collectively make better decisions,

then IT management staff and IT project managers must learn some key financial concepts and how to apply them in their jobs.

“...67% of CIOs say that the creation of new revenue-generating initiatives is among their job responsibilities."

Source: CIO Magazine, 2020

“Asked to take a basic financial-literacy exam – a test that any CEO or junior finance person should easily ace – a representative sample of U.S. managers from C-level executives to supervisors scored an average of only 38%. A majority were unable to distinguish profit from cash. Many didn’t know the difference between an income statement and a balance sheet.”

Source: Harvard Business Review

“...non-finance department heads who manage their own budgets, profits, and costs centers may miss signs that the numbers they’re working with aren’t accurate and make poor decisions based off those bad numbers."

Source: Oracle

Communicating its value to the business is a casualty of IT’s low financial literacy

This may be IT’s biggest current challenge

Info-Tech’s CEO-CIO Alignment Diagnostic reveals some interesting facts. When CXOs and CIOs were asked about the effectiveness of IT performance measurement:

  • 79% of CXOs and 88% of CIOs said there needs to be some or significant improvement in business value metrics.
  • 63% of CXOs and 70% of CIOs said there needs to be some or significant improvement in cost and salary metrics.
  • 74% of CXOs and 85% of CIOs consider business frustration with IT’s perceived failure to deliver value is a point of pain.

All of these metrics rely on one thing: IT’s ability to understand, apply, and communicate financial concepts.

Historically, IT has struggled to demonstrate its contribution to business performance and the value it’s delivering. This can be partly attributed to a lack of knowledge around financial fundamentals.

CIO-CEO Alignment Diagnostics: Some or significant improvement in business metrics, cost and salary metrics, and Business frustration with IT's failure to deliver value is a point of pain.

Source: Info-Tech Research Group, CEO-CIO Alignment Diagnostic, 2021-2022; n=76

IT staff also perceive obstacles when it comes to executing IT financial functions

Info-Tech’s IT Staffing Assessment asks IT staff the degree to which they agree with a range of statements about financial and administrative functions in IT.

Info-Tech's IT Staffing Assessment. Questions are: The processes and procedures I work with enable me to do my job, My team has the right skills to execute effectively, My team is able to execute effectively without organizational or political barriers, My team has the appropriate staffing level to execute effectively, here is an opportunity to run this area more efficiently through eliminating wasteful or low-value activities, There is an opportunity to run this area more effectively by using innovative approaches or solutions.

Source: Info-Tech Research Group, IT Staffing Assessment, 2021-2022; n=114

While most IT staff feel okay about how well financial and administrative functions are being executed in their departments, the results are underwhelming.

What’s interesting is that IT staff are most positive about their financial skills, yet financial literacy is a known gap. There may be a disconnection between perception and reality.

The causes of low financial literacy in IT are rooted in old, persistent problems

The root problems that cause low financial literacy are: Perceptions mean IT is constantly in a defensive position, IT and the business misunderstand each other, and IT doesn't know what it doesn't know.  The root of these problems is that IT leaders struggle to communicate the business value that IT delivers.

Scenario: A CIO looks at cost reductions

Situation…

At a senior management meeting, the CFO is talking about the need to reduce costs in the next budgetary cycle.

She’s describing how their COGS has increased by 15% last quarter and their pretax profit margin is shrinking.

The CIO has been with this manufacturing company for six months. This will be his first full budget cycle with the company.

The low-literacy approach…

  • The CIO assumes that the CFO thinks the company’s operating costs are too high.
  • He immediately looks to cut IT’s budget by 15% by deferring capital projects and finding additional OpEx efficiencies.

The high-literacy approach…

  • The CIO knows that COGS means “cost of goods sold,” which is the total direct costs for producing their products that were actually purchased by customers last quarter, including materials, labor, and manufacturing overhead. Production costs are the main driver of shrinking margins.
  • He asks if the company uses first in, first out (FIFO) or last in, first out (LIFO) for the COGS calculation. They use LIFO, which increases the size of COGS and shrinks net income, the number upon which profitability is calculated. He also asks about their operating profit margin (i.e. profit when production costs are taken out of the equation) to see how it’s performing, and it’s steady. It may not be as bad as it sounds.
  • The CIO determines that the increased COGS is due to pricing increases from their suppliers and not operational or labor costs. The CFO is attempting to mitigate increases in supplier prices that may be permanent and is looking for longer-term cost control measures to offset this.
  • The CIO schedules a meeting with the CFO to review ongoing IT expenditure and areas where long-term efficiencies can be gained, as well as to find out more about other measures being considered, such as increasing the prices of their own products. He also plans time to talk to the head of production about task automation and streamlining projects they can tackle together to bring production costs down.

Scenario: An I&O director has a downtime issue

Situation…

The IT management team is talking about improving the redundancy and failover capability of its data center.

Recently, there was an organization-wide disruption in operations that lasted half a day due to unplanned system downtime.

All data center services are on premises. They’re considering outsourcing elements to gain more dynamic and reliable capacity.

The low-literacy approach…

  • The infrastructure & operations (I&O) director sees this as a strictly technical capacity problem.
  • He suggests upgrading several core servers and using an external managed failover service to deal with peak load times.

The high-literacy approach…

  • The I&O director knows that outsourcing offers more flexibility and redundancy, but also has financial ramifications.
  • By having all data center equipment in house and on premises, it’s classified as capital expenditure, which means they’ll be able to depreciate the costs of any new servers or equipment over several years instead of taking a hit to the bottom line all at once. Using a managed service provider constitutes a subscription-style operating expense, which means they’ll incur monthly service fees and be subject to annual price increases, possibly driving up the total cost of operating affected IT services overall. They need to talk to the CFO about this implication.
  • With outsourcing they’ll gain the ability to dynamically scale, which means they can ramp up capacity as needed, but their monthly bill will also go up. If they pursue this option, they’ll need to put governance mechanisms in place that include affected business unit leaders, finance, and IT engineers to set protocols around thresholds for capacity increases, decision making, and how to downscale again post peak.
  • The I&O director recommends to his colleagues that they create two business cases focused on total cost of ownership (TCO) – one that’s 100% on-premises and another for a hybrid on-prem/managed service provider (MSP) solution – and take them both to the CFO and business unit leaders for a pros-and-cons review.
Develop Your IT Leadership Team’s Financial Literacy preview picture

About Info-Tech

Info-Tech Research Group is the world’s fastest-growing information technology research and advisory company, proudly serving over 30,000 IT professionals.

We produce unbiased and highly relevant research to help CIOs and IT leaders make strategic, timely, and well-informed decisions. We partner closely with IT teams to provide everything they need, from actionable tools to analyst guidance, ensuring they deliver measurable results for their organizations.

MEMBER RATING

10.0/10
Overall Impact

After each Info-Tech experience, we ask our members to quantify the real-time savings, monetary impact, and project improvements our research helped them achieve.

Read what our members are saying

What Is a Blueprint?

A blueprint is designed to be a roadmap, containing a methodology and the tools and templates you need to solve your IT problems.

Each blueprint can be accompanied by a Guided Implementation that provides you access to our world-class analysts to help you get through the project.

Talk to an Analyst

Our analyst calls are focused on helping our members use the research we produce, and our experts will guide you to successful project completion.

Book an Analyst Call on This Topic

You can start as early as tomorrow morning. Our analysts will explain the process during your first call.

Get Advice From a Subject Matter Expert

Each call will focus on explaining the material and helping you to plan your project, interpret and analyze the results of each project step, and set the direction for your next project step.

Unlock Sample Research

Author

Monica Braun

Contributors

  • Gail Curtis, Accounting Manager, Braun Intertec
  • Trisha Goya, Director, IT Governance & Administration, Hawaii Medical Service Association
  • Jeanne Lasheff, Senior Director Enterprise Technology Solutions, Hollister Incorporated
Visit our Exponential IT Research Center
Over 100 analysts waiting to take your call right now: 1-519-432-3550 x2019