Like most business transformations, those originating in finance require a detailed road map that allows executives to successfully organize, monitor, and manage the varied integrated objectives that will ultimately measure the success of the transformation.

Moreover, being correctly positioned to respond to today's market cycles is absolutely critical. Below are some characteristics and approaches that the best road maps today incorporate to help finance executives stay on the path and respond to market cycles.

IMPORTANT KEYS TO DEVELOPING YOUR ROAD MAP

• Identification and classification. As a first step, the entire scope of initiatives should be documented and categorized according to the value they bring to the organization. Some of our clients' most common priorities include projects that maintain the current business model, improve information, augment regulatory compliance, and increase efficiency.
• Business model attributes drive prioritization. The overlay of your individual business model allows you to quantitatively score, rank, and prioritize initiatives based on the needs of the business. This exercise encourages constructive trade-off discussions with the management team and provides the basis for cost-benefit analysis used to derive the target operating model.
• Establish, understand, and manage dependencies. This is traditionally the most critical — and overlooked — component within the process. Team members typically do not understand the dependencies between their own initiatives and with other enterprise-wide projects running concurrently. The dependencies within team-owned initiatives can be rationalized through internal discussions with finance leads, but the dependencies that manifest as a result of other corporate initiatives or organizations often lack the same level of understanding — and these can have tremendous impacts on budgets and planning schedules.

COMMON PITFALLS

The following are examples of the most common mistakes that need to be avoided to successfully manage finance transformation change:

• Leveraging a downsizing model as the main vehicle to take cost out of the business. This approach is dangerous for a number of reasons. Without reengineering processes or systems to offset the personnel reductions, a negative chain of results can follow a reduction in head count. Some common effects include:
  • Job functions require 120 percent or higher levels of time commitments by staff, a model that is unsustainable in the long term;
  • Management personnel are often required to support staff-level assignments, leaving them little time to strategically manage the business;
  • Turnover increases due to increased workload and assignment type;
  • Staff can no longer provide time- and labor-intensive value-added services to clients;
  • Shadow organizations form or grow due to the lack of perceived service provided by corporate teams; and
  • Organizational spend for professional services firms increases for staff augmentation projects.

  Often, these combine to result in a higher cost structure than the organization experienced prior to downsizing.

• Underutilizing the existing management team to identify improvement opportunities. Within each organization, key leaders have great insights into redundant or inefficient processes and systems. Teams need to refresh this information on a periodic basis for input into planning and should also use this as a focal point for change when the firm comes under organizational and financial stress.
• Lack of understanding of the fixed versus variable cost structures within organizations. All organizations must understand the fixed and variable cost components that exist within their cost structure. Firms that operate with an approach of driving costs to cost drivers have taken this a step further by allocating a higher percentage of cost structure to the business that drives the support requirements. This approach supports healthy discussions addressing how the current business model is working and where improvements or cost take-out opportunities can be realized.

SETTING THE COURSE FOR MANAGED CHANGE

Finance initiatives touch all parts of the organization. While there is no “guarantee” of success in managing your finance transformation initiatives, the most successful firms have adopted similar approaches and methodologies while avoiding the common pitfalls discussed above.

Now watch Doug Harvey discuss [1] how to create a successful transformation road map.