The Performance Quandary

We've heard about the new model from every consultancy. We've read about the new paradigm in just about every finance magazine. Every finance conference or seminar harps on the same theme. This "finance of the future" vision has been shouted as far and wide as this year's election promises.

Yet the efforts of finance organizations to achieve the desired "end state" have yielded widely varying results. Why is it that only a few organizations have broken through and achieved the "best-in-class" performance levels desired? And, equally important, how can finance organizations continue to improve and sustain performance in today's complex environment? To answer these questions, it's worth first turning back a page or two, to revisit a time in the not-too-distant past.

ERP Wave: Along for the Ride

It's no secret that ERP-led initiatives enabled many of the early transformational gains in the mid-'90s. However, many of the initial ERP programs, while "enterprise" in name, were supply chain-driven due to the huge incremental savings associated with procurement and manufacturing. In fact, many of the business cases used to support initial ERP investments were based solely on the quantitative benefits derived from the supply chain improvements, while the benefits to finance were largely qualitative.

Finance really didn't have "skin" in the game and therefore didn't stretch the possibilities of what could be done. They went along for the ride, but in many cases felt that they were losing a good deal of flexibility, especially in the area of reporting. As time has passed and finance -- as a function -- has become more comfortable with ERP functionality, many organizations have actively sought to reap the benefits enabled by ERP and have focused their collective attention on efficiency gains through various initiatives (organizational centralization, process standardization, and so forth).

To prove the worth of these initiatives, and since finance professionals are, in general, "numbers"-oriented people, benchmarking has been the standard tool for measuring success. The standard high-level benchmark most frequently cited during this time has been the "cost of finance as a percentage of revenue." Finance organizations have worked tirelessly first to identify and then to manage this percentage lower. The good news is that this cost reduction effort has been largely successful, even with a slight spike in costs over the past four years as organizations comply with Sarbanes-Oxley requirements.