Companies today are larger and more complex than at any time in their history, and this has required employees to work in a host of different ways than before.
They must simultaneously make more independent decisions but also rely on more people to accomplish the same task – launch an updated version of a product, say – than they would have done five years ago. One of the most recognizable results of this change has been the type of work that corporate functions have to perform.
In short, functions must move from providing “governance” of established, formal, repeatable processes (ensuring people are hired in accordance with company policy, that they are paid on time, that the company’s accounts are accurate and don’t break the law, and so on) to providing “guidance” on the decisions their colleagues are called on to make (such as a market feasibility study).
Three Things to Focus On
This has understandably made it harder for finance teams to provide a valuable service to their colleagues. But not only are they being asked to do more complex and less predictable work, they are also being asked to get that work done faster.
Working with and talking to thousands of functional executives this year, CEB staff have heard some version of the same refrain again and again: “It seems more difficult to get stuff done; we just feel really slow.” The size and complexity of firms, and the interdependence of so many people’s jobs has slowed important decisions just when they need to speed up.
Functional executives worry that if they want to make faster decisions, they’ll have to accept that they’ll make more wrong decisions. But this isn’t always the case. For CFOs and their teams, there are three areas in particular where they can make quicker decisions and better decisions; where they can be “fast and right.”
Provide more relevant data: The recent fad of big data has led to an information explosion and rising investments in the Financial Planning and Analysis (FP&A) function. FP&A is now represents a big chunk of finance spending with investments in systems, data, people, and new functions— and this spending is unlikely to slow as companies finds more things to do with data. Worse, CEB data show that this spending is producing negative returns in many firms.
This is because, despite their often significant seniority and experience, those making important decisions are prone to misinterpreting financial information, spend considerable time reconciling figures from different sources, and have trouble accessing pertinent data at the right time. FP&A teams should focus their time on providing contextualized financial data that is intuitive for decision-makers to use.
Don’t jump on the outsourcing bandwagon: Every so often, the idea of outsourcing a company’s finance functions comes into fashion and, once again, it’s on the agenda. Typically CFOs enter into these outsourcing engagements with the expectation that it will save money, possibly improve the service, and free up funds and time for them to do more valuable work.
CEB data from more than 200 companies show that, even after several years into an outsourcing contract, companies don’t necessarily see cost savings or an improvement in the quality of the service. In the first few years, finance teams see a clear reduction in costs, making it easy to justify the value of outsourcing. But over time, CFOs and their teams struggle to see the long-term outcomes they were expecting.
Finance teams should carefully consider the short- and long-term implications of outsourcing and whether they can achieve the same benefits by alternative means. It may be far more beneficial later on.
Don’t search for “perfect” employees; build a well rounded team: The need to provide more guidance means finance teams must be able to analyze ever larger amounts of data and provide recommendations to colleagues, sometimes many levels more senior than them.
As demand for financial data grows, CFOs need their teams to have an ever-growing list of analytical skills. But as things stand, only 1% of finance staff at large Fortune 500 organizations demonstrate all of the core analytic competencies.
CFOs need to abandon unrealistic expectations about role descriptions and competency models that they think will lead them to the perfect individual. It’s far better to build well-rounded teams by identifying core strengths of individual employees and aligning them to the right jobs.