Even the most high-performing finance teams occasionally slip up – especially when trying to transform the way their department operates. Only 12% of finance leaders responding to a recent survey said their transformation projects achieved all of their intended business outcomes.
Through our research into finance transformation, we’ve identified five common mistakes many CFOs make:
- Focusing too much on cost-per-sales: As a cost center, many finance departments try to keep their unit’s total costs within a fixed percentage of their company’s sales. We’ve found that this one-size-fits-all approach can be overly limiting. Companies have differing strategies and differing approaches to their respective markets, so the finance function’s cost-per-sales percentage should be allowed to fluctuate accordingly.
- Concentrating too much on customer satisfaction: Though it may sound counterintuitive, placing customer satisfaction at the top of your priority list can be a mistake, especially when your customers make contradictory requests or demand things that aren’t deliverable. Customer satisfaction should be one of the tools you use to evaluate Finance’s performance, not the only tool.
- Thinking transformation is a one-time thing : Initially, it might make sense to go about transformation as a single project or initiative, but this approach leads to almost immediate obsolescence. Instead, treat transformation as a continuous, never-ending process.
- Thinking you can’t do transformation by yourself : Though consultants might tell you that you need to bring them in to transform your department, there are significant benefits to doing it in house. It allows you to build up knowledge about your company, you’re more sensitive to your own internal culture, and there’s less of an incentive to drag out the process.
- Creating “shadow” costs: Be mindful of the hidden costs associated with big transformations – for example, a decrease in service quality or quickly eroding cost and efficiency gains.
The Keys to Good (and Bad) Finance Transformation Efforts
After seeing these mistakes, it can be difficult to picture a fully successful finance transformation. We surveyed dozens of companies that undertook these transformation initiatives and have identified some trends about what works and what doesn’t.
All transformation projects—both successful and unsuccessful—share some similarities:
- An emphasis on redesigning roles rather than changing the unit’s reporting structure.
- Examining the benefits of centralizing operations through shared services.
- Involving stakeholders throughout the company to reengineer basic processes.
- Attempting to automate as many functions as possible through IT and to create new data standards or alter old ones.
- Improving Finance’s combined skill set through talent management.
However, we’ve found areas where successful and unsuccessful transformation projects differ widely:
Successful Transformations | Unsuccessful Transformations |
At the outset, project is designed to fit into the company’s larger strategy |
No strategy other than cutting cost |
Targets for transformation are based on how Finance can help boost growth |
Narrowly-defined targets pegged to unit cost as a percentage of revenue |
Low-value services are eliminated to free up resources for high-value services |
More services are added while cutting costs – “Do more with less” |
Resources are directed toward areas with the highest rates of return |
Resources and cuts are spread evenly and indiscriminately |
Business partners’ expectations are managed realistically | Finance unit tries to cater to business partners’ every demand |
By David Schultz, from: http://www.executiveboard.com/blogs/finance-transformation-five-mistakes-to-avoid/?business_line=finance