Up to speed
David Ketchin, Vice President, Finance and Employee Transformation, Capgemini Consulting, looks at how CFOs can learn from major business transformations
1 July 2008
Publication
With the rapid pace of developments in finance, knowing how best to structure and manage change programmes is becoming an essential string to the chief financial officer’s bow. Some recent research points the way to how you can get it right.
Trends in Business Transformation, a global survey conducted by Capgemini Consulting in cooperation with the Economic Intelligence Unit, identifies three key themes underlying successful transformation. Reviewing the results, it becomes clear that the themes are just as relevant to the transformation of a single function as they are to the transformation of an entire business.
There are three key topics to be addressed:
1. Be clear on what you will achieve: articulate the ‘finance promise’
2. Understand where you are starting: assess your current characteristics and capabilities
3. Make a serious commitment to planning an adaptable implementation.
1 - The promise of the finance function to the rest of the organisation
This can be summarised under four, often inter-related, themes:
A) Drive improvements to free cashflow
This goal should be embedded in the mindset of leading commercial organisations;
in a tightening economic environment, this becomes more critical. Cash-optimising
activities (such as identifying and culling loss-making products), and balance
sheet management ensure your organisation is the last to be exposed by fiscal
challenges, and the first to show recovery.
B) Deliver accurate, comparable and timely information
In addition to self-imposed targets for improvement, there are increasing pressures
from external stakeholders for swifter reporting, more comprehensive metrics and
evidence of compliance with regulations.
C) Positively impact on business decisions
When finance business partnering is effectively implemented, the finance function
becomes an integrated part of all key business decisions. The functional role
is to demonstrate the outcome of different scenarios, give a clearer view of the
facts, and facilitate the organisation to the optimum return on investment.
D) Optimise the cost of the finance function
Leading finance organisations spend less than 25% of their time on transaction
processing; this is achieved by implementing integrated systems and shared or
outsourced structures.
Efficient operations release costs that can be re-invested in the first three
elements of the ‘finance promise’ or in any other driver of value.
2 - Characteristics and capabilities that will deliver the ‘finance promise’
A comprehensive assessment of current characteristics and capabilities is a vital
step in the transformation process. Identifying gaps against required levels of
performance creates the business case, and allows rigorous prioritisation across
possible improvements.
Some key elements to consider are listed below.
An effective and efficient finance operating model
The business operating model should be the primary driver for determining the
target operating model for finance; it should answer questions such as:
- where is profit accountability?
- where is the authority to cease an investment and re-allocate the funds?
- will the supply chain be managed regionally, or at market-level?
Answering these questions highlights where greatest finance support is required, and which elements of the model are non-core.
Targeted finance business partnering
Interventions should focus the organisation’s resources into managing profit
and cash in the short-term, and maximising results over the longer-term. This
requires targets aligned to business strategy, reliable analysis, accurate forecasting,
and effective gap management processes. Some 86% of businesses now believe that
transformation has become a central way of working, rather than a one-off exercise;
application of this dynamic skill-set is therefore becoming business-as-usual.
Professional talent management
In a highly competitive market, the capabilities of your people can be a key
differentiator. When talent management is done well it identifies the right people
to engage and train, the roles in which to deploy them, and how to provide them
with challenges and rewards to develop and retain them.
Integrated execution across the disaggregated finance model
Ensuring seamless delivery to customers of finance, through an increasingly disaggregated
model, requires new specialist skills. The capability is more related to managing
a contract than managing a team of people.
3 - How to organise the programme and execute successfully
There are key themes that drive successful transformations.
Be clear on what you will achieve
Transformation of any kind requires a clear articulation of what the programme
is intended to deliver. The two previous sections have outlined the finance promise
and the characteristics and capabilities that will deliver the promise. Your transformation
needs to be tailored very specifically to the drivers of success for your business,
and the targeted contribution that your finance function will make.
Securing the support of your team at all levels requires an explanation of why the transformation is necessary for the business, and a personally valuable result for the individual. Accountabilities, targets and required behaviours need to be clear and cascaded through the personal performance management framework.
Formulate a robust transformation strategy before launching detailed implementation
Too often organisations move directly from corporate strategy (involving conceptual
and options-based thinkers), to transformation implementation (involving robust
execution by hardened implementers). This, however, misses the key step of transformation
strategy.
Transformation strategy critically assesses different options and creates the
business case, people case, technology case and a roadmap for delivery. Clarity
of strategy supports:
- gaining sufficient executive buy-in to specific initiatives, allowing confident delegation of detailed decisions;
- managing the emotional engagement of your people – you cannot announce a transformation and then take six months before a tangible change is achieved.
Measure your performance from the perspectives of cost, service and culture
Defining your starting point and your end-game in relevant metrics allows you
to monitor progress, and should identify when and where extraordinary intervention
may be required.
Metrics for measuring cost and service are well documented in finance transformation. However, if you wish to maximise the return on investment you will need to measure behaviours and culture. This can be undertaken subjectively, but you can secure a more reliable comparison if undertaken within an objective framework such as the organisational cultural inventory.
Rigorously match people’s skills to role prerequisites
It is important to recognise that in certain areas, for example finance business
partnering, it may be more critical to select candidates on the basis of their
behavioural capability rather than purely on technical experience. The ability
to anticipate, influence and coach is a difficult skill-set to acquire, whereas
technical knowledge can often be provided through training or by a separate specialist
team.
Match the pace of implementation to the business cycle
Major elements of the implementation should be avoided during other major business
changes or key cycles. For example, core planning and budget cycles should be
a significant commitment from finance and the wider organisation, and therefore
will limit the ability to progress your programme without significant risk.
Manage transformation through a series of smaller blocks of change
The ability to unbundle the programme and accelerate some initiatives, while
delaying others, provides great flexibility in delivery. It is a reality that
there will be a number of significant changes to the enterprise and external environment
that will drive a re-prioritisation of investment priorities across the business.
An adaptable design enables you to maintain momentum in a costeffective manner,
even when the organisation is focused on other business issues.
Build business unit and senior management support
Delivering the finance promise will often require changes to activities and behaviours
owned outside the finance function. This can range from the strategic to the specifically
operational, (such as enforcing purchase order compliance). Whatever the change
needed by other functions, you will need to explain why the change makes sense
for the business and ensure that support for your goals is shared.
A closing challenge
Our research has shown that consistent commitment of executive management is
the leading factor contributing to successful transformation. Exploring this further,
it becomes clear that this means a constant visible commitment and willingness
to provide direction. As CFO, your challenge is to shape a programme creatively
that allows you to play the right role in securing success.
David Ketchin is vice president, finance and employee transformation, at Capgemini
Consulting
