August 27, 2015

World-Class Finance Orgs Drive Higher Value, Greater Agility Than Peers While Spending More than 40 Percent Less

MIAMI & LONDON, August 27, 2015 - World-class finance organizations are far more responsive to business needs than their peers, driving greater value and agility while also spending more than 40 percent less and running with about half the staff, according to new research from The Hackett Group, Inc. (NASDAQ: HCKT).

Overall, finance organizations continue to focus on redeploying resources away from transactional work towards higher-value activities to support innovation, growth, and greater agility, the research found. According to The Hackett Group's research, world-class finance organizations are relying on three strategies to achieve operational excellence, drive higher value and improve agility: strengthening the foundations to enable agile service delivery; unleashing enterprise performance management (EPM) decision-making excellence; and building an adaptive finance organization.

A public version of this research, entitled "The World-Class Performance Advantage: Three Imperatives for Greater Finance Agility," is available, with registration, at this link: http://bit.ly/1FBa1on.

"In today's business world, finance needs to dramatically improve its agility, so that it can respond quickly to changes in the business environment and deliver greater value to the enterprise," said The Hackett Group Global Finance Advisory Program Practice Leader Jim O'Connor. "This is a significant challenge, and requires changes that don't always come naturally to finance executives.

"At the same time, cost-cutting remains a primary focus for most finance organizations," said Mr. O'Connor. "At typical companies, there's still significant room for opportunity here. Transformation efforts will have to be self-funded, and that means improving efficiency, largely by reducing costs in transactional areas."

According to The Hackett Group Principal and Finance Transformation Practice Leader Richard Cardillo, "We're seeing many clients moving beyond thinking in terms of discrete projects, towards a continuous transformation mode that is both permanent and sustainable. One key to this is transformation management offices, which are in place at 80 percent of top performers. Typical companies rarely use these, and when they do they are far less robust. All top performers are also committing senior-level resources in transformation leadership roles. Finally, top performers see change management activities as vital to the success of their transformation, and rate their activities as far more effective than peers."

According to The Hackett Group's research, world-class finance organizations now operate at 42 percent lower cost than typical companies, while achieving greater effectiveness. They also require 48 percent fewer full-time employees per billion dollars of revenue. By excelling at cost reduction, they achieve greater efficiency and deliver up to $44 million in savings annually (for a company with $10 billion in revenue). World-class finance organizations are those that achieve top-quartile performance in both efficiency and effectiveness, based on an array of weighted metrics in The Hackett Group's finance benchmark.

The largest cost gaps between world-class and typical finance organizations are in transactional areas, including customer billing (85 percent gap), travel and expense (70 percent gap) and accounts payable (68 percent gap). Both world-class and typical finance organizations have cut costs by about 18 percent over the past decade. But world-class finance organizations appear to have found it difficult to maintain this level of cost reduction, and experienced a drop of only three percent over the past five years.

The Hackett Group's research identified three key elements of finance strategy that world-class finance organizations rely on to drive higher value and greater agility.

Strengthen Foundations

The business expects finance to excel in foundation areas such as transaction processing, risk and control accountability, and reporting. To achieve this, finance organizations can pursue improvements in processes, technology, process sourcing, service placement, and talent and organization, The Hackett Group's research found. They can lower costs while improving value by carefully prioritizing areas with the most impact, then focusing aggressively on process improvement, resource realignment, and enhanced use of technology.

Another critical step is to examine technologies and processes already in place to see where earlier change initiatives have come up short. Top performers adopt productivity-enhancing technology at twice the rate of typical companies, and high levels of automation have been proven to drive benefits such as over 40 percent fewer transactional errors in T&E and 50 percent faster cash application.

Finance organizations can also look beyond direct cost savings for benefits, such as improving billing to reduce error rates or enhancing invoicing quality to reduce disputes and rework. Finance can assist other areas of the business to reduce and rationalize cost.

Improve Decision-Making by Unleashing EPM Excellence

Improving information management and delivery, along with the capabilities required to generate effective insight for decision-making, is a second key imperative relied upon by world-class finance to drive higher value, according to The Hackett Group's research. EPM plays an important role in achieving this goal. Management confidence in analysis for strategic, financial, and operational decisions is significantly higher at world-class finance organizations, particularly in key areas such as profitability analysis (70 percent greater confidence) and deal analysis (45 percent greater confidence).

Finance organizations can begin by finding ways to transfer the skills they have developed in reporting and analyzing financial information to other business and functional areas within their company. Finance organizations also need to develop or obtain the skills required to harness the power of information, such as problem solving, data analysis, and predictive modeling, in order to effectively build a comprehensive EPM capability. It is critical that finance extend its ability to make the most of technology across the EPM cycle of consolidations, budgeting, forecasting, and management reporting, to enable it to deliver information efficiently, the research found.

Build an Adaptive Finance Organization

Finance professionals are perhaps best known for being thoughtful and respectful of rules, and are not generally known for being flexible and creative. The Hackett Group's research recommends that finance build a more adaptive organization, by establishing the right operating model, assembling the best mix of talent, and increasing transformation capability.

To enhance the operating model, finance organizations need to establish an appropriate balance of corporate, global business services (GBS), and local or business-based resources. World-class finance organizations now rely on GBS for nearly 60 percent of their operations, versus just over 40 percent for typical companies. Finance must also make itself transformation-ready, by clearly defining individual accountability and the vision for finance, making sure staff understand the connection between the finance service delivery model and achieving enterprise goals, and developing a customer-centric culture where staff are willing to try new things.

The Hackett Group's World-Class Finance Performance Advantage Research is based on an analysis of results from recent benchmarks, performance studies, and advisory and transformation engagements at hundreds of large global companies.


About The Hackett Group, Inc.

The Hackett Group (NASDAQ: HCKT) is an intellectual property-based strategic consultancy and leading enterprise benchmarking and best practices implementation firm to global companies. Services include business transformation, enterprise performance management, working capital management, and global business services. The Hackett Group also provides dedicated expertise in business strategy, operations, finance, human capital management, strategic sourcing, procurement, and information technology, including its award-winning Oracle EPM and SAP practices.

The Hackett Group has completed more than 11,000 benchmarking studies with major corporations and government agencies, including 93% of the Dow Jones Industrials, 86% of the Fortune 100, 87% of the DAX 30 and 52% of the FTSE 100. These studies drive its Best Practice Intelligence Center™ which includes the firm's benchmarking metrics, best practices repository, and best practice configuration guides and process flows, which enable The Hackett Group's clients and partners to achieve world-class performance.