The Changing Role of the Finance Organization in a Multi-Polar World

More documents

Recommendations

Info

Shared services Most often, the business case for shared services (the model in which an internal organization, like finance, becomes an internal service provider of largely non-core functions to multiple business organizations within the enterprise) focuses on cost savings and cost avoidance, with the potential value add of increased internal customer satisfaction. While these are important tactical goals, Accenture believes the shared services model—properly planned and deployed—can become a key strategic driver of high performance in the global business environment. From an operational standpoint, success on a global scale requires being both highly global and highly local. The winners will be those enterprises that have strong global operations—highly standardized to reap economies of scale—as well as strong local capabilities to serve and compete for customers. Shared services can be a powerful tool for achieving that balance between being simple on the inside, with highly standardized processes, and differentiated on the outside, with a strong customer focus and high levels of service. A key success factor in shared services is finding a balance between focusing on customer needs and delivering service at a competitive cost. A buyer has to perceive value in a service at the price quoted. That, in turn, forces the shared services organization to get very specific about its value proposition. Learning to balance cost and value keeps the company focused on the customer. And standardization controls costs. In our research and experience, organizations that drive toward a higher level of simplification on the inside through more standardized processes (one executive we’ve worked with on a shared services implementation spoke of being “ruthless” about driving standardization) achieve reliably higher levels of business performance. Many organizations are finding that shared services organizations provide an engine to drive growth, especially 12 | Accenture Management Consulting and Integrated Markets through mergers and acquisitions, where they act as a powerful tool to attain full value from the expected synergies that inspired the acquisition or merger in the first place. Along with growth, the shared services model allows companies to increase their agility. Accenture has found that they help companies convert rapidly from dispersed operations based on geographic considerations or business unit convenience to centralized operations based on a globally consistent approach—thereby making it easier for finance executives to create the levels of enterprise-wide governance and internal controls that 58 percent of our respondents identify as being critical to success when entering new and emergent markets. Not only that, but the governance model needed for successful shared services operations—including servicelevel agreements (SLAs) and joint review boards—can be extended to support efforts to drive change across the entire enterprise. By developing experience creating and using joint management teams, companies can bring business units together in pursuit of common enterprise goals. SAP is one company that has seen how shared services can support a global enterprise. The software giant has used shared services to create a standardized platform that enables the company to respond quickly to shifts in the marketplace (for instance, by developing new offerings, such as Business ByDesign on-demand enterprise applications that target customers in the small-to-mid-market space and in emerging economies, and by acquiring new companies) and support the kind of consistency in reporting, business processes and governance that’s critical to global growth. “Companies cannot survive anymore in today’s global and quick-changing environment unless they have stability and consistency within their finance processes,” says Peter Rasper, Head of Global Finance Infrastructure, at SAP. “We have to be able to react quickly to market needs and customer changes, and to do that you need the same processes, standards and master data globally. [Because of the shared services organization], finance has been able to help make such changes happen very quickly.” And because the shared services organization has made routine finance transaction-oriented activities more efficient, SAP’s finance organization has been able to shift its focus to more strategic, valuecreating pursuits, such as facilitating partnerships with other companies. Another company that has experienced the benefits of shared services in an increasingly global market is an international crude oil company. This company wanted to establish a foundation for further growth through the integration of new businesses coming from merger activities. The company implemented a multifunctional shared services center focused on finance, human resources, IT and facility management and procurement. The objective was to build standard processes across these five functional areas, enabled by an ERP system. As a result of implementing this shared services center, the company has reported improvement of service quality, compliance and control through simplification and standardization of work processes, which in turn helped advance common corporate values by uniting the company through common work processes and systems. The company also reported US$50 million in annual improvements within the function areas. Complexity is another challenge addressed by the shared services model. In an interview with a finance executive of one global services company, Accenture learned that as the company expanded its operations into new markets and diversified its service offerings, its deal structures with its clients became more complex, its workforce became more heterogeneous, and the number of its price points multiplied. Increased
merger and acquisition activity added further complexity through the various challenges of integrating people, processes and systems. To address the growing complexity of its business while maintaining cost efficiency and high performance, the company began a major restructuring of its business model that had as one of its anchors the creation of a shared services delivery center for finance. The focus of the transformation effort was to develop reusable and repeatable processes and work streams, and standard tools and approaches, so that the company’s finance organization did not have to reinvent the wheel on a daily basis. “We did this because we felt that we needed to develop a finance structure that would allow us to respond to the changes we make every day,” says the company’s finance executive. “We wanted to support the business model without an increase in finance costs or a decrease in service. In fact, we wanted to continue to drive down finance costs. This model allows us to have a more stable foundation to make changes as we grow and restructure.” The company’s finance shared services center supports both transactional and analytical functions, and is freeing up the finance team to be more clientcentric, both with internal as well as external clients. The company expects to staff this shared services center with 1,000 people by the end of fiscal year 2008 and all indications are that despite the investment in creating the center, the cost of finance for this organization is going down. According to a finance executive at a large pharmaceutical company, their challenge was to be highly local while pursuing the company’s growth objectives. The risk was in increasing the cost of finance, which was already high at more than 3 percent of revenue. Previously, the company had focused on internal control and compliance. Now its strategy includes a redesign of the finance organization intended to enable it to respond to the complexity resulting from increased globalization while delivering the best possible customer service. The redesign involves a restructuring to embed small finance teams within business units around the globe. These teams will act as liaison between the business units and the shared services and transaction delivery centers. The enterprise expects this strategy to result in process standardization through the use of global process owners who will measure efficiencies and drive continuous improvement. It is also expected that this model will better support the company’s growth objectives because it will provide finance with the local information it needs to advise the company on what markets and products in which to invest, as well as making it easier to share best practices across widely dispersed locations. At the same time, it’s expected that this will allow the company to control costs, as previously finance simply responded to each business request as best it could (driving up costs), lacking the rigor, standardization and good management practices to be able to take a holistic, portfolio view of business demand. Outsourcing As companies extend their operations globally, their success increasingly will be predicated on their ability, as stated above, to be both highly global and highly local. Outsourcing is another form of shared services, but with a different ownership and governance structure. Many organizations have used outsourcing as a strategic move to leapfrog the competition by enhancing and magnifying the value it derives from its own shared services delivery capability. The challenge with either shared services or outsourcing always is to deliver better service at a lower cost. Shared services operations that are focused on service excellence can leverage the opportunities provided by outsourcing to move their high-transaction activities to lower-cost locations, while at the same time moving their frontoffice, competitively differentiating and customer-facing activities much closer to their customers. In fact, one executive we interviewed aired the idea of reinventing a multicenter global shared services model to consolidate all transactional activity into only three centers serving the whole world, and then outsourcing those centers to a partner. The higherorder finance activities that require geographic proximity to the customer then would be split into multiple front offices with very small staffs to provide the high customer touch that may have been missing in legacy shared services solutions. This new in-sourced/ outsourced model combines the best of shared services philosophies with outsourced/off-shored economies to provide a multi-tier services delivery model that operates efficiently and generates value for both the shareholder and the customer regardless of the center’s physical location. At another company we see a similar practice. In 2001, Thomas Cook UK and Ireland found itself managing backoffice functions across its three business units—sales, tour operations and the Thomas Cook airline—out of 22 separate locations. In the face of competition from new airlines and new Internetbased travel service providers with much lower cost structures than Thomas Cook’s, the inefficiency of supporting 22 offices performing much the same functions was threatening the future viability of the company. With a keen ability to discern the important drivers of present and future value, the Thomas Cook UK and Ireland management team responded to this challenge by enacting a far-reaching transformation program to cut costs, improve margins and integrate operations. Although Thomas Cook UK and Ireland has long possessed a sterling reputation for exceptional service, as well as a strong, well-recognized brand, it still needed to transform its internal processes and organizational structure. A major component of its business transformation plan was reducing the high cost associated with its dispersed and fragmented back-office functions by creating a single shared services center. The company decided that Accenture High Performance Finance Study 2008 | 13
Page 1: Management Consulting and Integrate
Page 4 and 5: Foreword By Dan London For companie
Page 6 and 7: The most intriguing characteristic
Page 8 and 9: Key Findings As the centers of econ
Page 10 and 11: 3 COLUMNS WIDE Figure 1. Opportunit
Page 14 and 15: teaming with a capable third-party
Page 16 and 17: Figure 5. How finance leadership sp
Page 18 and 19: Figure 8. Critical factors to achie
Page 20 and 21: Figure 10. Greatest challenges for
Page 22 and 23: Finance strategy is about drawing t
Page 24 and 25: the company’s CFO called it “ex
Page 26 and 27: Leading companies view finance tale
Page 28 and 29: Figure 13. Companies with advanced
Page 30 and 31: decisions going forward. Also, for
Page 32 and 33: Figure 16: Finance masters were mor
Page 34 and 35: Figure 18. Masters are more likely
Page 36 and 37: Figure 20. Masters are more likely
Page 38 and 39: Achieving high performance is diffi
Page 40 and 41: Industry of Participating Organizat
Page 42: While one can only make educated gu

The Changing Role of the Finance Organization in a Multi-Polar World

Create successful ePaper yourself

Delete template?

Save as template?