Michael Allara, Chicago Trading Company's CFO for the past eight years, doesn't pull any punches. He's actively expanding the way CTC uses financial information, but freely admits he doesn't want any part of helping IT defend their judgment calls about new technologies. Read on to hear why he's excited to see CIOs using IT data to define priorities and provide context for decision-making.
Mike, how is the changing pace of business creating challenges for the CFO role? Is your role evolving?
That’s a good question. I’ve been CFO here for eight years, and prior to that, I was in COO-like roles for fifteen years. I joined Chicago Trading Company (CTC) in a leadership role, so I don’t know that I view my role as changing. Providing our user community with sound financial information has been and still is a core component of this position.
Technology is evolving though and it allows us to expand the way we use financial information as a resource. Financial data has become a pathway that takes us in the direction of an answer. It’s not always the answer itself—in fact, in many cases it isn’t. Instead, it’s about providing context to use in evaluations and creating the right level of forward-leaning discussion to arrive at the best answers.
In the macro sense then, the CFO role hasn’t changed.
How does technology factor into your priorities at Chicago Trading Company?
I think the biggest change in the last 20 years for me (as I would assume for anyone else in this role) is that technology is a larger and even more strategic component of a firm’s business. We are trying to gain more knowledge about IT spend to use those dollars in a way that creates more value for the organization. Unlocking that door, if you will, to challenge people to look at that information. That’s a fun new toy we’re working with in this role.
At the core, technology’s role in any organization I have been associated with is about developing really cool apps or processes that the technology organization can use to see their end users’ reaction in real time. It truly is an offensive play in any successful organization, and that includes CTC. Focusing on the cost of that development and delivering value for the organization is the financial evolution of this science.
Applying the mathematics to determine whether IT solutions deliver value for an efficient dollar is the current challenge. That’s where cost transparency has helped us raise the bar to get IT leaders excited about seeing numbers around the applications and processes they are developing.
What is the CFO’s responsibility for helping IT make fiscally sound decisions? How do you get involved in that?
It’s matured a lot in the last five years. The good news for CFOs is that IT leaders are taking more of a lead in terms of how they want to see the data, which is absolutely what I want to see.
A lot of my responsibility these days is making sure that the information going into the analysis is accurate and truly reflects what the organizational costs are. It’s also looking at various methodologies to break that data up and deliver the information and provide macro and strategic views on how we want to try and view our products and services.
I can tell you one role I play for sure is keeping everyone’s appetite realistic in terms of what we can accomplish on a yearly basis. Everyone thinks we can do more than we can. It’s hard to implement as many changes as we would like, but that’s a good problem to have!
In five years, we’ve probably moved from a more detailed view of how we’re trying to run things to more of a macro view of how we’re trying to shape things. Forward-looking IT leaders are making use of new tools and data in terms of the way they look at their own roles.
Candidly, do you have confidence in the value coming from IT at Chicago Trading Company?
Yes. Absolutely. The beauty of a company like ours is that we’re small enough that we are always closer to value.
The continuing challenge is to quantify value and create greater discussion about the results. It’s just one of those evolving processes. You know what’s there and now you’re trying to lay it out in a mathematical way so that people can see it, debate it, and make appropriate changes in terms of the way they go about investing their time and efforts. That’s what you want the IT group to do; that’s not finance’s role.
Finance’s role still has the traditional controller component to it. And it has the leadership component to it, in that you want to make sure people are looking at the data and challenging the data accurately. But, ultimately, you want IT leaders to take the information, utilize it, and make the best decisions and recommendations about how they can deliver value and service to the organization.
And of course, in the IT world, things are changing quickly so they need solid information to support, in many cases, a judgment call. That cannot be a finance job. I don’t want it! We’re really not in a position to provide that service like IT can.
What do you wish you knew about technology spend in the organization that you don’t know today?
For our organization, we’re trying to break apart our spend so that we have more information available for different parts of the organization. Project management is included in this discussion. We can break out our dollar spend in a way that allows us to see run and change spend, change being closely affiliated with growth dollars, and allow the organization to make better decisions about how much we need to invest in our growth.
These break-downs allow us to ask important questions:
- Can we utilize the capacity we have correctly?
- Do we need to add capacity?
- Do we need to communicate properly about what kind of capacity we have as an organization and why certain projects might not be able to be accomplished?
It all adds up to better prioritization and, from my point of view, that is a lot of the focus in the near term. We’re making strides in that direction. I think it empowers the technology group, but it also empowers the organization to have a greater level of understanding of what it is we can do versus what it is we can’t do in any given time frame.
How would you describe your relationship with your CIO and CTO?
We have co‐heads of Technology. Our CIO is Brad Marsh and our CTO is Russ McManus. Brad’s role matches off a little more with my role and we’re very much on the same page regarding finance and technology. We work very closely. The three of us report to the COO of the organization and we are very aligned in terms of trying to come up with the best solution for the organization.
What advice do you have for CIOs seeking better, more productive relationships with their CFOs?
CIOs must understand the firm’s overall financial position and direction. If the firm is trying to reduce costs, how can technology support this goal while being inundated with requests for new and improved systems? By focusing on keeping part of your budget flexible, an organization can easily pull levers to either save or re-allocate resources.
CIOs can also educate their users and management through cost transparency, including where you are allocating resources versus the organization's priorities and how their costs work in relation to the value Tech is delivering. Make sure your firm understands what your standing run rate is and the opportunities you are looking at over the next several years to improve that metric.
It helps if you work with Finance to back up your narrative.