How to get your CFO to buy into a better model for IT funding
However, as most are aware, too much emphasis on upfront design can actually increase risk because oftentimes issues are not uncovered until the team starts development.
However, as most are aware, too much emphasis on upfront design can actually increase risk because oftentimes issues are not uncovered until the team starts development.
To ensure persistent teams stay within budget, and thereby reduce risk, it’s crucial that executives understand the fundamental agile principles related to flexible scope and fixed budget.
Sometimes, management needs to make a change in direction, and persistent teams allow for this. By using data insights from the quarterly business performance report, the CFO is made aware of situations where the organisation is not tracking towards goals. The executive is then empowered to reprioritise, while still focusing on the ‘why’ or outcome to be delivered. They can change persistent teams’ focus by working with them to swap one initiative for another — rather than asking for additional funding. Making trade-offs means they need to prioritise wisely, as there is a fixed budget to work within.
“When there is a change in direction, executives are empowered to make trade-offs to deliver on their needs. It is no longer an ‘ask’ of technology,” says Hubbard, regarding Rest’s use of an agile approach in conjunction with persistent funding.
We set up a persistent pilot team at Rest in 2023 to test out the concept. About three months into the six-month pilot, the team uncovered that one of the initiatives wasn’t technically feasible at this time. The product owner decided to swap the item for the next initiative on the backlog.
This example enabled CFO O’Sullivan to see the ‘swapping’ concept in action — we used the quarterly forum to show how this approach reduced risk by ensuring the team worked within their budget while still aligning to strategy.
How does persistent funding reduce costs?
When collaborating with the CFO on the move to persistent funding, it’s important to discuss how this new operating model reduces costs in three ways:
More permanent staff and fewer contractors. I recommend increasing the ratio of permanent to contract employees to improve focus on the long-term viability of the product and reduce handover when projects are completed.
Persistent teams should be funded by both capital and operating expenditure to ensure that the teams are considering both short-term wins and long-term maintainability of the product. Capex items might include new web portal features, which increase the value of an asset. Whereas Opex items might include an upgrade of the platform behind the web portal.
The reason permanent employees work well on these teams is because they have a vested interest in considering the maintenance of the digital product over the long-term. The long-term viability of the platform is an important focus for the teams to ensure we minimise technical debt.
The CFO may like the idea of reducing cost by hiring permanent employees, but only if there is an understanding that shifting to persistent teams is a commitment to a long-term strategy. Here, implementing a pilot team can give the CFO confidence in transitioning to this approach.
Improved productivity due to reduction in delays. I recommend using Scrum on the persistent teams, which would mean having one full-time product owner responsible for decision-making and a fully cross-functional team with the skills to design, build, and deploy the solution.The goal should be to empower the team to make day-to-day decisions autonomously to speed up the delivery process. This is possible only when business executives have set clear objectives and metrics.
“Each executive needs to make it clear to their product owners what objectives they need to focus on,” Hubbard says. “We tried a few different approaches to benefits measurement until we landed on something that worked for both Finance and Member executives.”
The full-time product owner on a persistent team must be given authority to make product decisions that are in-line with the strategic direction set by the executives. They consider technical feasibility and business priority while making these decisions, which speeds up the process of implementing new ideas.
It’s possible that the concept of Scrum and a ‘product owner’ might be new to the CFO, especially since its application can vary in digital organisations adopting agile methodologies on a larger scale. I highly recommend working closely with all executives to ensure they fully understand the significance of empowering product owners to make decisions.
Improved efficiency due to funding by business area. I recommend moving away from a ‘shared resource’ model and instead ensure that a persistent team is fully dedicated and paid for by a specific business area.
When a specific business area funds a persistent team, it gives them a sense of ownership of the outcomes. It becomes more important for the executive to ensure the teams are clear which SMART objectives they need to focus on.
I’ve seen situations where business areas provide a long list of ideas they would like implemented, but because Technology is funding it, they only have the bandwidth to implement a select few. This can quickly lead to an ‘us versus them’ atmosphere, where the business area doesn’t feel that they are being provided the services they require.
The CFO may find that making the business area responsible for funding the persistent team simplifies things from an accountability perspective. It is easier to track benefits realisation for select major programs to specific business areas.
Getting started
If your organisation is just starting out with persistent funding, it’s important to begin with a focused pilot program. This trial will allow you to evaluate the concept and refine the approach in a controlled manner before scaling it across the organisation.
At Rest, we conducted an assessment with the business stakeholders for the pilot team both at the beginning and end of a six-month pilot. This enabled us to work together with the CFO and other executives to determine how best to communicate the team’s progress in a way that they understood, as well as putting the right level of governance in place.
The purpose of the pilot was to evaluate the effectiveness of empowering the pilot teams’ product owner in making decisions autonomously; to improve team efficiency, transparency, and business stakeholder satisfaction.
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