By Nilly Essaides, Tom Willman, and Gilles Bonelli, The Hackett Group

According to The Hackett Group’s Finance Key Issues research for 2021, the finance agenda for this year includes aggressive goals that will require a holistic transformation of the function so it can emerge stronger and better in the next normal. The number one objective is to improve finance’s role as a strategic advisor to the business, to support management in making smart choices on steering the business through an unknowable period of uncertainty. Cost is a big issue because the pandemic has hit some companies’ revenue very hard. The third most important item on the agenda is improving analytics and modelling capabilities, so the function can provide faster and more forward-looking insight (Fig. 1).

Overcoming Transformation Obstacles

However, finance is facing considerable hurdles in executing on its transformation agenda. The Hackett Group’s  2021 Key Issues Study revealed that the biggest obstacle to transformation success is process and technology complexity, which impedes the achievement of almost every item on the function’s top-10 objectives list

Chief financial officers (CFOs) and their teams must simplify finance’s IT architecture and standardize processes as much as possible. We see evidence of this in finance’s 2021 list of transformation initiatives. More than half of organisations intend to expand end-to-end process ownership and standardize processes on the back end, while providing stakeholders with friendly front-end interfaces. Finance executive also project aggressive year-on-year growth in the adoption of technologies like cloud-based ERPs. 

The second biggest impediment for finance in executing its transformation strategy is lack of skills and talent. This is an area of great concern because finance has a history of overlooking the importance of people to successful transformation. It is encouraging that executives identify talent as a major issue; 41% plan to launch a talent development program in 2021. Upskilling is also integral to reducing organisational resistance to change, as staff becomes more comfortable with new ways of doing work.

Organisational resistance to change comes in at the third position. Much of that change is triggered by the adoption of new technologies, which often result in new ways of doing work. 

Effectiveness of digital technology adoption is a factor that can increase the likelihood of achieving both business and functional goals. Analysis of our extensive finance benchmarks database consistently shows that finance organizations that are more digitally enabled, or digital leaders, significantly outperform digital laggards. 

Finance alignment with enterprise priorities

While finance has its specific list of functional objectives, the ultimate mission is to support the enterprise in realizing its broader set of goals. This year will bring the most dramatic shift in enterprise priorities since the inception of The Hackett Group’s annual Key Issues Study. Enterprise digital transformation rose five spots to become the top enterprise issue. 

After going through an accelerated digital learning curve during the crisis, companies plan to capitalise on the lessons learned. This focus is reflected in the list of management “asks” of finance for 2021. The number one area leadership wants finance to support is enabling digital transformation. In practical terms, this means finance is getting very involved in providing insight to management on selecting and prioritizing digital solutions by calculating the expected return on investment (ROI), both quantitative and qualitative, and estimating time-to-benefit.

 

The call to digital action

Regardless of finance’s plans and priorities for the coming year, CFOs will ultimately be judged on what they accomplish. Digital acceleration will be a key enabler of realizing the function’s critical objectives, so here is our perspective on the five steps finance must take to fast-track digital transformation and, thus, its ability to deliver on functional and enterprise expectations. 

1. Don’t wait. Many organisations have been stymied by the notion that they must take a linear approach to digitization. But this mindset can perpetually delay the implementation of new technologies. Most finance functions have found that a single-source, single-system nirvana is unattainable. With the help of cloud-based technologies and modern data management solutions, finance can overcome these hurdles and lead its own efforts (with IT as a partner), while simultaneously working on digitizing and cleaning up data

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1. Start small and scale up. Going digital across the function at the same time can be counterproductive. Best practice is to start with a few pilots and then leverage the knowledge and data generated through these pilots to scale up, to get the most out of the investment and speed up the propagation of digital tools across finance and other G&A functions. 

1. Take a cross-functional approach. Digital success cannot be achieved solely within the finance function; it should be a cross-functional effort involving all G&A functions. Organisations at the forefront of digital transformation see this cross-functional digital capability as a mechanism for creating value by infusing technology-powered change across the back office to generate greater value, faster. 

1. Establish a dedicated transformation capability. Digital transformation cannot be a part-time assignment. It requires specific skills and formal project management. Best practice is to establish a team with dedicated skills, for example, in a centre of excellence or global business services (GBS) organisation. Such a permanent digital transformation capability will allow finance to coordinate different aspects of the process, for example, generating and capturing innovation ideas through agile implementation and value realization. 

1. Utilize a rigorous, value-based methodology to prioritize projects. Companies are under pressure to reduce cost while making improvements to their operating model of the future. Management’s demand for robust use cases before allocating digital dollars means that digital initiatives must be understood in terms of the planned or realized value delivered within a defined time frame.