The Urgent Need for Greater Finance Agility

The rapid spread of Covid-19 is forcing companies to make and execute decisions at record speed. Finance must be as agile as possible to support the C-suite in this unprecedented period of uncertainty. However, our data shows that only 16% of finance organizations meet management expectations regarding their response to disruptive or unforeseen major events (see graph below).

It’s Not a Pretty Picture

This data is based on The Hackett Group’s 2019 Agile Operating Model Performance Study. In the study, we used a series of metrics to determine the agility of business services functions. Using these metrics, we identified a group of agility top performers and then compared their results to the results of a finance-only group of respondents. Here are some examples of agility proxies:

1. Percent of finance services that are offered on a self-service basis.
2. Percent of projects using agile/iterative methodologies.
3. Percent of master data that is standardized and uses automation tools.
4. Use of predictive analytics to support business decisions.
5. Percent of finance staff with the skills to work in a virtual environment.

Based on a comprehensive list of metrics, we found that only 52% of finance functions have adopted smart automation solutions to increase their agility, compared with 78% of top performers. The finance group is also significantly behind in providing self-service capabilities to stakeholders. Meanwhile, 78% of top performers have staff with the skills required to work in a digital environment versus only 26% of the finance-only group.

Agility-Improvement Best Practices

There is no silver bullet for enabling greater agility. Rather, finance must take a multifaceted approach. We asked participants to rank agility-improving practices both in terms of their degree of current adoption and their level of effectiveness. Below are some resulting best practices, sorted by the six elements of The Hackett Group’s Digital Service Delivery Model (SDM), which includes technology, service design, analytics and information management, governance and organization, service partnering and human capital.

Technology: A rigid technology architecture perpetuates data barriers and obstructs efforts to reinvent processes in response to changing demands.

Action items:

• Continue to rationalize the system landscape to reduce complexity and deploy robots to integrate disparate systems and processes.
• Migrate more applications to the cloud and develop strong internal IT expertise in order to own the finance technology transformation agenda.
• Accelerate the deployment of smart automation technologies, which are deemed effective by over 80% of finance respondents but adopted by less than one-third.

Service design: Taking a more customer-centric approach to creating and delivering services can help the function become more responsive to the needs of its stakeholders.

Action items:

• Continue to use proven, broadly adopted practices such as end-to-end process ownership and stakeholder.
• Encourage the adoption of less pervasive but highly effective approaches such as customer journey mapping and consider persona or role-based service delivery capabilities when improving or developing new.

Analytics and information management: Ready access to vetted data from multiple sources is essential for enhancing enterprise agility. Better data produces better analysis, which in turn supports management’s ability to make effective decisions at market speed.

Action items

• Continue to develop agility metrics in order to identify improvement opportunities and measure.
• Build a strong master data management and governance.
• Establish a cross-functional BI/analytics center of excellence (COEs) so finance can take advantage of talent and systems skills that may be scarce company-wide.

Organization and governance: A rigid and hierarchical org structure slows down decision-making and impedes the flow of critical information.

Action items

• Continue to shorten and simplify the decision- making process by moving service delivery teams closer to end users, so the business can get faster answers to ad-hoc.
• Standardize finance transactional processes and migrate a greater share of them to global business services (GBS) organizations to improve process.
• Consider managing demand fluctuations with on- demand resource.

Service partnering: Finance generally outsources only a small share of its activities. However, there are potential agility benefits to be gained from doing so, by leveraging technological and service capabilities of ESPs to scale-up and catch up.

• Accelerate the use of agility-related measures when selecting ESPs and leverage the relationship to quickly access new capabilities.
• Consider the lifecycle of the outsourcing arrangement. For example, is it a temporary solution, to be eventually replaced by in-house capabilities?
• Re-evaluate the insourcing/outsourcing equation for maximum efficiency and scalability.

Human capital: It is important to remember that, even with smart automation tools or a flexible organizational structure, agility still depends on people’s ability to adapt and embrace continuous change and create new ways to resolve business problems.

• Establish comprehensive talent development and career pathing programs to upskill and reskill Replace staff who are resistant to change.
• Make sure new hires have strong digital and interpersonal.
• Align incentives with agility-related practices and offer cross-training and flexible working arrangements.

Conclusion

Finance is in the front-line of companies’ emergency response: it must make fast decisions not only about cash preservations, debt and earnings. It also must help the enterprise to make tough decisions about cost cutting, headcount reductions and triage in-process and planned projects. Therefore, it must take immediate steps to accelerate its ability to make decisions and execute them a record speed.