Finance has a packed agenda for the coming year, according to the just-in results of The Hackett Group’s 2020 Key Issues Study. The function must deliver on its objectives just as its budget is set to contract by an average of 3.4% vs. last year.
Here are five critical challenges facing finance in the New Year and possible ways to overcome them.
Execute on a double mandate: According to early results from our study, finance is being tasked by management to enhance cost efficiency while also supporting enterprise growth strategies. In 2019, margin improvement was the number-one corporate business objective. This year, companies have reshuffled their priorities to place a greater emphasis on growth. In this fiercely competitive business environment, being a low-cost operator is no longer enough. Organizations must continually invest in product and services innovation.
The challenge for finance is to address both objectives. It can do so by standardizing and automating routine processes using smart automation solutions such as RPA and AI, and redeploying capacity to value-creating work such as insight generation.
Enhance functional agility: Economic uncertainty combined with technological and business model innovation are disrupting the status quo. To survive and thrive in the digital economy, companies must become more agile (i.e., have the capability to sense change, make fast decisions on how to adjust course, and execute them with speed). Agility leaders significantly outperform typical companies across several financial metrics, and the agility of the finance function is essential to management’s ability to be more responsive to changes in market conditions.
The challenge for finance is to augment its own agility aptitude. It can do so by moving more applications to the cloud, migrating more activities to global business services (GBS) organizations, and shortening the information-to-insight cycle.
Overcome transformation hurdles: Finance organizations are in the middle of a massive reinvention effort. Eighty-six percent of finance functions are currently in the middle of a major transformation initiative. But transformations are fraught with risk. Our research indicates that less than 50% of finance transformation initiatives consistently meet or exceed business expectations regarding their most important objectives.
The challenge for finance is to overcome some of the biggest transformation hurdles, including overcommitment. Finance can do this by systematically prioritizing its initiatives, identifying the areas with the biggest gaps between objectives and the function’s ability to address them, and by leveraging agile implementation methodologies to realize quick wins, create a continuous feedback loop and garner broader organizational buy-in.
Accelerate the adoption of digital technologies: Transformations have always had a strong technology component. But our research shows that today’s initiatives are much more technology reliant.
The challenge for finance is to become more digitally savvy and broaden its expectations from technology beyond just cost reduction to include contributing greater value by delivering better insight, fast, to support management decisions. It can do so by accelerating its adoption of smart automation solutions like advanced analytics, AI and machine learning, which can parse through massive amounts of data at great speed and identify meaningful patterns that can predict the future financial impact of operational decisions.
Reskill/upskill talent: The new, digital and agile finance delivery model is reshaping the finance talent profile. Not only do finance staff must become more technology savvy, but they must also learn how to improve their collaboration with business counterparts.
The challenge for finance is to align staff skills with the needs of the future finance operating model. It can do so by launching comprehensive talent-development programs, that are finance led but built and executed in strong partnership with the HR function, to include formal and experiential training and new career-development paths.
This is not the full list of the challenges finance will be facing in the New Year, or the complete set of recommendations on how to successfully overcome them. Stay tuned for the release of the full results of The Hackett Group’s 2020 Key Issues Study in early January to learn more.