While most corporate finance organisations say they are highly committed to moving to global standards, more than half are failing to see success in this area, according to new research from The Hackett Group, Inc.
Over the past two years, minimal improvements have occurred at typical companies, and most dramatically underestimate the commitment required to execute on this key finance strategy and achieve true transformation, the research found.
The new findings are drawn from The Hackett Group's 2013 Global Finance Organization Model Study.
In order to affect change, the research recommends that companies more effectively prioritize transformation projects, create teams dedicated to change, and focus on developing the skills required to support a globalized operating model.
"There's no question that finance has many important projects to undertake in order to provide higher value to the business," says The Hackett Group Finance Executive Advisory Program Global Practice Leader Tom Willman. "But their attention is getting divided, and the hoped-for gains in areas such as implementing global standards still haven't materialised to any significant degree."
Willman notes that, today, most companies are once again targeting comprehensive transformation in this area over the next few years. "But it's tough to imagine they'll succeed unless they can change the way they prioritise and resource their transformation efforts."
The Hackett Group's research showed that across seven major dimensions of the finance service delivery model, there is a high level of ambition for change.
"Companies have told us that they hope to more than double their adoption of global standards for KPIs & reporting, technology platforms, master data and process design/build," says The Hackett Group Senior Research Director Lynne Schneider. "The re-emergence of internal finance transformation groups shows that finance executives are making a commitment to transform. Nearly all of the companies that participated in our study have secured finance transformation/business improvement capabilities within the company."
However, the research shows clearly that most companies have failed to meet transformation goals in this area. For example, at the end of 2011, 42 percent of finance functions said they planned to have predominantly global standards for master data over the next two to three years, but more than half said they did not actually achieve that goal by 2013. Companies are hoping to double their use of global standards for master data over the next two to three years, moving from 19 percent today to a target of 38 percent.
Over the next two to three years, the most frequently cited areas for transformation in The Hackett Group's study are: planning and performance management and business analysis; and process improvement and function management.
Within planning and performance management and business analysis companies are largely focused on three areas: driving improvements in the timeliness of the planning and forecasting; accuracy and responsiveness of planning, budgeting and forecasting processes; and the provision of timely, highly relevant management information and analysis to drive better business decisions.
Within process improvement and function management, companies are focused on the transition to a customer-focused finance organization that delivers a comprehensive and consistent service portfolio while implementing the capabilities and resources required to drive transformation and continuous improvement of those services.
Key to Successful Transformation
The research found that for transformation efforts to succeed, companies must address skills gaps and talent issues. The Hackett Group found that companies are planning to make substantial investments in HR management practices within finance over the next two to three years to address several key staffing issues.
Most are focusing on expanding learning and development programs, both to close skills gaps and improve executive development. Many are taking into account the fact that a global HR infrastructure will allow them to acquire staff with the skills they need regardless of their location.
Companies are also seeing the balance of finance hiring changing, as hiring continues to slow in advanced economies, with a greater emphasis on the need for specialist skills.
A related and serious talent-related challenge stems from the disappearance of the traditional development path for finance professionals, the research found.
Today, entry-level positions are predominantly located halfway around the world from corporate headquarters. In addition, some of the most sought-after skills associated with finance transformation are seeing high demand combined with difficulty to attract or retain. Change management and process improvement, high-level tax expertise, and the ability to think and act strategically are all among the skills that fall into this category.
Prioritise, Dedicate Resources, Add Skills
The Hackett Group recommends that in order for finance organisations to make their high ambitions for global standards a reality, they need to effectively prioritise their projects and desired goals in a clearly defined and communicated roadmap, dedicate adequate resources to change, and add or develop the skills it needs to support the increasingly globalising operating model of the business.
Teams of dedicated resources are essential for driving these large transformations, as opposed to individuals who work on these initiatives in addition to their "day jobs," the research found.
Addressing the skill and talent gaps associated with the change will be absolutely critical in ensuring that plans are executed effectively and that the gains from the transformation are achieved and sustained into the future.
The potential payoff for success in this area is significant. The Hackett Group's research shows that world-class finance organisations operate at about half the cost of typical companies, while achieving higher effectiveness.