Slow global economic growth and a number of political and economic risks make it difficult to identify and pursue growth opportunities. While innovation is a key focus for many companies, cost and margin pressures make it challenging to invest in innovation.
This is the finding and subject of a recent Hackett Group survey and report titled “The CFO Agenda: Target Five Key Transformation Initiatives to Move Finance Forward.” The report’s key findings include the following implications for Finance:
- The focus on enterprise cost reduction puts serious pressure on the broader G&A budget, including Finance, which must respond by improving productivity while supporting the enterprise innovation, margin improvement, and transformation agenda.
- Technology will be the linchpin of efficiency improvements. As a result, IT budgets are under less pressure than other G&A areas.
- Across all areas of the business, talent is considered the most critically important factor in helping to navigate the uncertain times ahead.
- Improving agility continues to be a top priority to withstand heightened business risk and volatility.
Finance Priorities to Support the Enterprise
As part of the research behind this report, Hackett Group polled business executives on what type of support is most important from Finance. Here are the top three responses they gave to this question:
- Integrating enterprise information
- Achieving and maintaining a competitive cost structure
- Formulating strategy within the business
The 2016 responses to this question were quite different from prior years, but they align well to some of the key strengths of Finance. For instance, on integrating enterprise information, Finance is often at the intersection of financial and operational results. Why? Finance is in a great position to help the organization better leverage this information – both from a reporting and a planning standpoint. This places increasing importance on the use of enterprise performance management (EPM) and business intelligence (BI) tools within Finance and across the enterprise.
Maintaining costs is a long-standing focus and skill set for Finance, and plays well to this strength. Finance needs to play a consultative role in helping line-of-business managers across the enterprise to plan and control their costs.
Formulating strategy within the business is a relatively new role for Finance, but one that is welcomed. It requires some new skill sets and increased knowledge of sales, marketing, manufacturing, and other operations, but can also leverage the analytical skills of Finance staff applied in new areas.
Five Key Transformation Priorities
In today’s economic environment, Finance needs to be agile in order to effectively address top priorities. And there are certainly gaps between the requirements and current capabilities. So how does Finance get there? What are the key transformation priorities for Finance in 2016?
According to the Hackett Group, here are the five most critical transformation priorities for 2016:
- Improve Finance leadership skills and business acumen. This is certainly critical to adding value across the business and being a better business partner.
- Reengineer Finance processes. With flat to declining Finance budgets, reengineering key Finance processes is a critical path to freeing up Finance resources to focus on more value-added activities.
- Improve Finance performance management capability. If Finance is to effectively add value across the enterprise, it must first demonstrate efficiency and value within its own business processes. Hackett Group has found that companies with superior EPM capabilities are more likely to outperform their industry peers on company financial metrics. Examples include reporting and planning more efficiently and forecasting more accurately.
- Develop a Finance technology roadmap. While many Finance organizations have been trying to transform and modernize their technology systems, there’s always room for improvement. After years of upgrading core systems, Hackett now sees more interest from Finance in new and innovative technologies – such as cloud, mobile, and social. The recommendation here is to develop a roadmap based on the needs of internal customers – both today and in the future.
- Roll out Finance BI/analytics applications. As other surveys have shown, the top areas of planned investment in new technology for Finance involves BI and analytics tools that can help companies better leverage the exploding volumes of “big data.” The key is for Finance to focus these efforts on the information required to support critical business decisions and on looking for opportunities to reduce the amount of time and effort spent analyzing data.
How to Get Started
As I’ve highlighted in other articles, Finance in 2016 needs to play many roles in the organization – from Steward and Operator of key business processes to Strategist and Catalyst for innovation and new business initiatives. In order to nail down the basics, and help the organization become more agile, Hackett recommends the following:
- Assess where the enterprise is going and how Finance can contribute
- Align initiatives with gaps in strategic capabilities and Finance’s current state
- Continuously seek opportunities to create value
- Increase the role of technology
- Reduce risk
To learn more, download a complimentary copy of the Hackett Group’s report.
Want to learn more about how cloud-based EPM solutions can help your Finance organization modernize and increase agility? Check out our free white paper “EPM in the Cloud.”