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

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teaming with a capable third-party provider would provide the service and performance guarantees the company needed both to maintain its reputation for service and to reduce costs. “We knew that outsourcing would enable us to create a single administrative focus, with a single set of information systems under the management of experts,” says Carl Dawson, Chief Information Officer, Thomas Cook UK and Ireland. Unlike many companies considering a shared services or outsourcing option, Thomas Cook UK and Ireland was not interested in simply finding a lowercost way of carrying out the same business processes. It was looking, instead, for an investment relationship marked by shared objectives, in which both risks and rewards would also be shared. Specifically, the service provider would help restructure the company and be willing to make new investments while driving out costs from Thomas Cook's existing work processes. Through this model, and many other cost-saving initiatives, the company within 16 months was able to improve operations and reduce its cost base by more than 30 percent, removing nearly US$290 million of overhead expenses from the business. In this way, outsourcing becomes a strategic driver of value creation—a solution for delivering high performance—not simply a tactical tool for controlling costs. Since the initial cost savings and performance improvements, Thomas Cook has embraced global sourcing to realize further cost savings of 30 percent. Thomas Cook has also leveraged its outsourcing model to integrate the back-office functions of MyTravel Group plc following the merger of the two companies in 2007 to form the Thomas Cook Group plc. ERP It's no surprise that enterprise resource planning software systems (ERP) are a critical tool (a staple, in fact) for integrating an enterprise’s operations, for reducing the complexity of a 14 | Accenture Management Consulting and Integrated Markets company’s legacy environment, and for helping organizations get a better handle on costs. The promise of ERP is to enable an enterprise to obtain a single, integrated view of its financial reality, its master data, thereby allowing it to better manage its resources in pursuit of high performance and value creation. Companies are expanding their ERP capabilities and driving value from them like never before. The State of Ohio, which has one of the most comprehensive state government ERP implementations in the US, is an excellent example of how ERP can make a significant difference in an organization’s pursuit of high performance. Ohio’s ERP system includes the state government’s entire general ledger, as well as payroll and human resources, and is soon expected to absorb budget and planning. The state’s finance organization, the Office of Budget Management (OBM), is the biggest user of the system and is leveraging it to drive transformation across all the state’s agencies. The first step in Ohio’s implementation was to get as much of the ERP system up and running as possible, and the second was to use it to eliminate redundant systems across agencies. This was critical in an environment where tax revenues are declining and the government must find ways to reduce the cost of providing services to Ohio’s citizens without negatively affecting the quality of those services. For example, prior to the ERP expansion, a year’s amount of money would be allocated to an agency immediately following budget approval, but the state had no way to track the use of that money over the course of the year; i.e., no cash management. Ohio’s ERP tool now enables the state to manage that cash on a quarterly basis. The result is that the state can now reallocate its finances dynamically in more efficient and value-added ways. In fact, with this quarterly monitoring capability, US$1.2 billion was able to be reallocated to better match resources to areas where citizen needs were most acute. “It’s hard to imagine how truly revolutionary [this system] is for many agencies,” says Pari Sabety, director of Ohio’s OBM. “Using ERP, state government can change the way it measures its business processes so that we’re aggressively managing the enterprise rather than just kind of passively letting it manage itself on auto-pilot.” The Finance Organization's Overall Performance Is Lagging Even though the finance organization is widely viewed as one of the most important functions within a modern enterprise, today, according to the finance executives responding to our survey, few finance organizations in their estimation are performing at a high level. Satisfaction with finance organization performance, according to our survey, is only slightly better than average. Only between 9 percent and 16 percent of finance executives surveyed indicated that they are “very satisfied” with the efficiency of their finance organization, their workforce’s effectiveness, their organization’s management of financial and non-financial risks, its contribution to the financial performance of the enterprise as a whole, and the organization’s track record in driving enterprise-wide change (Figure 3). The lack of satisfaction with the efficiency of the finance organization is not surprising when one considers the fact that only 6 percent of respondents said they have the ability to measure “very accurately” the annual cost of finance (by which we mean the total cost of all people, processes and technologies performing in the finance organization) and related cost drivers. This suggests that not only are finance executives not highly satisfied with their
Figure 3. Percentage “very satisfied” with the performance of their finance organization for the following dimensions Efficiency of the finance organization Finance workforce effectiveness Organization’s track record in driving enterprise-wide change Finance organization’s management of financial and non-financial risks Organization’s contribution to the financial performance of the enterprise organization’s efficiency, they lack the data, and therefore the metrics, that would tell them where and how improvements could be made. In Accenture’s experience, we have found that without regular and accurate benchmarking, it is impossible to define these metrics, and without the metrics that tell an executive where their organization stands, it is impossible either to set an end goal for the organization or to chart a realistic course to get there. In terms of finance's workforce effectiveness, risk management, contribution to enterprise performance and contribution to driving enterprise change, finance executives reported slightly higher, but still generally average, levels of satisfaction. And only a small percentage of respondents were very satisfied with their performance management capabilities and processes. Survey respondents identified numerous shortcomings in the finance organization that negatively affected their ability to drive enterprise 9% 9% 10% 12% Completely believe they have access to information needed to manage performance and create value Completely understand information needed to manage performance and create value 16% Executive Team value. According to the survey, most executives do not have a full and complete picture of how their finance organization performs relative to others. This lack of benchmarking, not surprisingly, causes just 4 percent of respondents to say that they know their standing in relation to the finance organizations of comparable enterprises “extremely well,” while only 25 percent say they know where they stand “very well”. (For more on benchmarking, see page 23.) While half of the respondents said they “mostly” have the capabilities to support enterprise risk management requirements, just 7 percent said they have such capabilities “completely.” Critical management information, according to our survey, is not widely accessible to participating company managers and executives, nor is it widely understood. Only 17 percent of respondents say they believe their enterprise’s executive team “completely” understands and can articulate the specific type of Figure 4. Access and understanding of critical management information 7% 7% 12% 17% Business Unit/Functional Managers information they need to manage performance and create value. And that percentage drops to 7 percent when respondents address the understanding of their enterprise’s business unit or functional managers. Approximately the same percentage of respondents—12 percent and 7 percent, respectively—say they believe their enterprise’s executive team and business unit or functional managers even have access to such information (Figure 4). Finance executives also say that they are spending too much of their time dealing with operational details and not enough on strategic pursuits. On average, respondents say they spend more than one-third of their time (34 percent) managing finance and accounting operations, but just 18 percent of their time managing the performance of the larger enterprise, and only 16 percent of their time planning and developing strategies to enhance enterprise and shareholder value. Most finance executives would like to see those numbers change; they would like to spend less time managing Accenture High Performance Finance Study 2008 | 15
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Page 4 and 5: Foreword By Dan London For companie
Page 6 and 7: The most intriguing characteristic
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Page 10 and 11: 3 COLUMNS WIDE Figure 1. Opportunit
Page 12 and 13: Shared services Most often, the bus
Page 16 and 17: Figure 5. How finance leadership sp
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Page 26 and 27: Leading companies view finance tale
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Page 34 and 35: Figure 18. Masters are more likely
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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

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