Digital World Class® Finance Research

June 16, 2023
Season 4, Episode 23

In this episode of the Business Excelleration® Podcast, finance costs are increasing for the first time in decades, driven by inflation and other uncertainty factors. But top performers continue to spend less and deliver greater value. Those are just some of the findings from our newly released research “Resilience: The Digital World Class Finance Advantage.” With The Hackett Group Principal, Finance Executive Advisory Program, Tom Willman and Senior Director Shawn Fitzgerald.

Welcome to The Hackett Group’s “Business Excelleration Podcast,” where week after week we hear from experts on how to avoid obstacles, manage detours and celebrate milestones on the journey to world-class performance. This episode is hosted by Gary Baker, Communications director from The Hackett Group. Gary is joined by Tom Willman, principal of the Financial Executive Program, and Shawn Fitzgerald, senior research director. In today’s episode, they discuss the findings behind the 2023 research – Resilience: The Digital World Class Finance Advantage – and how finance costs are increasing but top performers continue to spend less and deliver greater value.

To kick things off, they discuss what Digital World Class finance is and how it’s calculated. There are two major categories that the team evaluates, which are the operational excellence of a company (the efficiency and business process) and the business value (the stakeholder experience and how they are enabling it). The organizations labeled as world class have found the right balance between efficiency and value. This is important because through research they have found that financial performance is directly correlated with Digital World Class organizations. Digital World Class organizations usually outperform other peers on shareholder returns, equity, etc. For the first time since the financial crisis in 2008, finance organizations’ costs have gone up 7.5%, but Digital World Class organizations reduce their costs every year.

Digital World Class organizations spend less, but they also spend very differently. Digital World Class organizations invest in technology in better levels of innovation. Digital World Class organizations spent 44% less on labor cost compared to peer companies, 65% less on outsourcing services, 10% less on technology, and 70% less on travel, facilities, etc. Combined altogether, Digital World Class companies are spending 47% less than a typical company. However, they are delivering higher multiples of value. This allows them to invest and deploy resources very differently than other companies. Digital World Class organizations operate with 51% fewer FTEs in management. Overall, Digital World Class organizations have lower cost and multiples of greater value. They also replace labor with technology, have digital transformation objectives and fewer resources.

Next, they discuss how Digital World Class organizations deliver greater value and higher operations of excellence. They have a 47% lower cost base, but Digital World Class companies deliver greater business value. Digital World Class finance is 2.2 times more focused on business analysis than gathering information. Their employees are 44% more likely to be viewed as a valued business partner. The same Digital World Class organizations deliver forecasts with 28% higher reliability than peers, which means they are focused on the right things, excelling in functional operations and having a higher degree of trust. Their operational excellence has a much lower cost, and they deliver 41% quicker than peers and create an annual budget 29% faster.

The six key dimensions of Digital World Class finance companies include technology enablement and automating everything they can; establishing an enterprise data model so they can focus on what’s most important; aggressively modernizing finance application architecture; taking the opportunity to look at the operating model, process design and ownership; and finally, talent management. Not every organization’s journey will look the same with each company starting at different levels and capabilities. If your company is getting started or transforming, he suggests analyzing what capabilities and skill sets do you need. In terms of a financial road map, they suggest looking at how the company is performing today and where the gaps are. They need to focus on the question: What do they do when? They need to decide when they will make changes and evolve the operating model. Then, they need to begin executing against that and within the broader organization. Finally, they state that executing this road map is what really differentiates those companies that are successful at transforming and those that see little improvements.

Time stamps:

  • 1:00 – Welcome to this episode hosted by Gary Baker.
  • 1:51 – What world-class finance is and how it’s calculated.
  • 4:47 – These organizations spend less, but they also spend very differently. 
  • 8:51 – How Digital World Class companies deliver greater value and higher operations of excellence.
  • 11:14 – Six key dimensions of Digital World Class finance companies.
  • 16:24 – What a finance road map looks like for organizations.
  • 17:59 – Closing remarks.