Finance leaders are determined to get their budgeting and forecasting processes in good shape this year. And they're ready to shell out actual money for the technology they'll need to get results.
Those are two findings that leaped out at me from a new study by The Hackett Group, a global strategic business advisory, operations consulting, and finance strategy firm. (Titled "The CFO's Agenda: Finance's Top Issues in 2011," the report is available here; requires registration, but it's quick, easy and free.)
Finance's top performance focus area for 2011 is the efficiency and effectiveness of the annual budgeting process, Hackett found, closely followed by forecasting performance (accuracy, cycle time, and efficiency).
The top technology investment priorities: implement business intelligence (BI) and analytics applications; and improve data governance (establish data stewardship, standardize master data, and cleanse data).
The report contains a wealth of insights on finance leaders' post-crisis strategic orientation (including a renewed commitment to revenue growth acceleration). I talked with Tom Willman, practice leader with Hackett's enterprise performance management executive advisory program and co-author of the study, about the implications of the research.
Business Finance: Nice to see some confirmation that companies and CFOs really are planning for growth.
Tom Willman: I would agree. It's the first time in a couple of years that growth even made the list, which is very nice, and to have it as high on the list as we see it this year is very encouraging.
I would say that if you read between the lines a little bit and scan down the results, there's certainly some hedging there, in that organizations are not taking their eye off the ball when it comes to overhead cost management. I think what many of them are saying is, "we need to do what we can to help drive growth, but at the same time we have to keep our finance and G&A budgets in check. We can't let those start to grow at the same time we're driving the business growth."
Business Finance: So that could very well translate into investments in IT?
Willman: We are starting to see that; one of the ways to keep costs in check as you're trying to accelerate growth is to invest in IT, or in productivity improvement with IT playing a pretty key role — further automating transactions, further automating information delivery. Yes, technology is one of the key levers that companies will be pulling to drive some of that productivity improvement.
Outsourcing is absolutely on the table as an option, too. It's continuing to grow as part of the delivery model. It's becoming a more accepted way to go about sourcing finance delivery resources, and offshoring — either in an outsourced environment or in an internal shared services environment — is growing as well. We think companies are moving to a truly worldwide delivery model, where processes are being sourced globally. But you're not going to see, in my opinion, finance going in the direction that IT went, where you're doing wholesale cost shifting of the department. The outsourcing we're seeing in finance is somewhat more targeted than that.
Business Finance: Are you seeing any evidence that companies are getting better at forecasting?
Willman: We're not, unfortunately. Which is not surprising, if you think about the world we're in today, with commodity price volatility, oil price volatility based on the unrest in the Middle East, and most companies still trying to figure out the impact that the earthquake and tsunami in Japan will have on them. The forecasting job has gotten much more difficult, and I don't think that businesses have gotten any better at it.
But you can see from the results of the study that almost universally companies are looking at how to drive improvements in the accuracy of the process, develop better models for calculating the forecast, get more integrated internally, and better integrate the forecasts that finance is producing with what's going on in the operation. The picture that finance paints is very much aligned with the picture that the rest of the business is painting, which hasn't always been the case.
Business Finance: Which tech areas do you think will start to attract more investment?
Willman: Business intelligence and analytics applications have been at the top of the list of priorities for some time, but what's steadily moving up the list is the need to establish more integrity, more stewardship, more governance around the data. What companies are recognizing is that they've thrown lots of money at the applications, but without standardizing and cleansing their data they're still getting information that doesn't make sense. They have businesses that are using different definitions, that are calculating metrics differently, that use different hierarchies.
This whole concept of master data management is absolutely critical for companies to be able to eventually get to the point where they have predictive analytics. I'd say, in most cases, that's still an aspiration as opposed to a reality.
(Hackett's research programs are ongoing; if you'd like to participate in the 2011 Enterprise Performance Management Study, click here. Participants will receive a customized report and presentation, including value grid positioning, capability maturity assessment, and gap and opportunity analysis.)