Finance often is being asked to play a more important role in helping organizations achieve their growth objectives, according to a new study from The Hackett Group.
Several initiatives are topping the to-do lists of many corporate finance leaders for this year, according to new research from The Hackett Group. These are improving the finance function’s data analysis and reporting capabilities; supporting the larger organization in achieving a competitive cost structure; boosting finance’s analytical and forecasting capabilities; and developing future leaders.
The goals of these efforts are to enable finance to help the overall organization “make better business decisions, to capitalize on opportunities and take action where the business isn’t performing as expected,” explains Tom Willman, finance advisory practice leader with Hackett.
Several substantive changes occurring across most organizations are driving the need for these initiatives. For starters, “companies are growing, but finance and other general and administrative areas continue to be squeezed,” Willman says.
In fact, the two issues organizations most frequently ranked as important or extremely important for 2013 are improving operating margins, which was mentioned by 90% of respondents, and accelerating revenue growth, which was mentioned by 88%. In addition, the areas that showed the largest jump in importance were improving customer satisfaction, now at 88%, and reducing overhead cost, which now is at 83%.
At the same time, just 28% of finance professionals responding to the survey expect their headcounts to increase. However, three-quarters of respondents anticipate an increase in staff learning and development, while 70% will boost their focus on workforce planning and succession management.
Another change that’s behind many initiatives is the fact that finance often is being asked to play a more important role in helping organizations achieve their growth objectives, Willman adds.
With top management and investors expecting growing revenue and profitability, agility and flexibility become increasingly critical attributes, the study found. Indeed, country borders are rendered increasingly meaningless as organizations look for talent, capital and technology wherever they can be found. Similarly, functional borders – say, between finance and HR and IT – also are getting fuzzier, due to processes that cross departments, such as payroll.
To meet the goals set before their departments, many CFOs have ambitious globalization plans for the finance functions. Some expect the degree of globalization of numerous systems, including technology platforms and process design, to double over the next few years.
When it comes to technology projects, rolling out self-service tools tops the list, with 74% naming it a priority. Seventy percent anticipate implementing business intelligence applications, while 65% plan to standardize and cleanse their data.
Technology is key both in removing work from processes through automation, and in helping execs better understand their businesses, Willman notes. At the same time, organizations want to be careful not to move into technology projects before they’ve addressed their underlying processes.
And, even though the operational and transactional work within finance is likely to remain for a while, many finance functions are placing greater emphasis on strategic initiatives. For instance, slightly more than two-thirds of respondents are planning to transform their planning and performance management function, while 51% plan to improve their general accounting and external reporting. More than one-third – 37% – expect to enhance treasury management.
All these changes are prompting finance chiefs to place a greater emphasis on “business-focused and market-savvy” employees who can deliver higher-value services. The talent implications of changes can be easy to overlook, but often are critical, Willman says. He points out that when work changes, companies may end up with a skills mis-match. Training and development are key in helping current employees tackle their new responsibilities effectively.
Similarly, change management and communication are critical when organizations, including finance, transform themselves, Willman notes. Neglecting these functions can “create a lot of angst and firefighting as the changes are rolled out.”