MIAMI & LONDON--(BUSINESS WIRE)--Finance executives face a delicate balancing act in 2016 as they seek to address multiple and often conflicting priorities. Finance must enhance its ability to support corporate strategies through analytics and information integration in the face of reductions in budgets and staff, according to new Finance Key Issues research from The Hackett Group, Inc. (NASDAQ: HCKT).
The Hackett Group’s research also identified the five most common transformation initiatives finance organizations expect to use to address these priorities in 2016: improving leadership skills; re-engineering processes; improving performance management capabilities; developing a finance technology road map; and rolling out of business intelligence and analytics applications.
“Looking at the top finance strategy priorities for 2016, it’s not hard to see how they are related,” said Jim O’Connor, Principal and Finance Advisory Practice Leader. “The number one priority is to focus on integrating enterprise information in support of better analytics and improved corporate decision-making. Finance is in a unique position within the company, with access to all of its financial and much of its operational data. By better integrating this data through Enterprise Performance Management and business intelligence systems, finance can help companies understand performance, improve forecasts, and take action to close gaps and take advantage of opportunities."
“In order to accomplish this, finance needs to improve its capabilities in business partnering, relationship management, predictive forecasting, and its facility with analytics,” said Mr. O’Connor. “And they need to do this in the context of challenges to revenue growth and an array of increased business risks, which hang like a dark cloud over the business environment in 2016. Companies are focusing on cost reduction across the enterprise, and this is clearly an area where finance can take a leadership role.”
The Hackett Group’s research found that cost reduction remains a priority, with finance budgets projected to shrink by 0.5 percent in 2016. Staffing is projected to fall by 2.7 percent. In the context of expected revenue growth of 3.7 percent, this creates a growing gap in productivity and efficiency that finance must address in tandem with any improvement efforts.
One key element of the focus on finance cost reduction is the implementation and expansion of Global Business Services (GBS) operations. The Hackett Group has found that “Finance leadership look to their GBS organization to take on more activities and deliver both cost savings and productivity gains,” said Martijn Geerling, The Hackett Group Associate Principal and GBS Executive Advisory Practice Leader. “Many companies have now maximized their ability to cut labor costs through offshoring and outsourcing. But the GBS operating model continues to be a way to drive additional value. In addition to enabling companies to realize economies of scale, the GBS model allows companies to deploy digital technologies more effectively and deliver the productivity gains demanded by finance leaders and company leadership. Moreover, it allows companies to implement end-to-end processes more effectively, and find value in collaboration and integration with other functions such as procurement, HR, and IT.”
In all top priority areas – integrating enterprise information, achieving a competitive cost structure, and formulating strategy with the business – The Hackett Group found significant shortfalls between their importance and finance’s capabilities, and recommends that leaders narrow their focus to five specific transformation initiatives in 2016:
Improve Leadership Skills - Finance should improve leadership skills and business acumen, as these are critical enablers for all priority areas. Finance needs to move beyond the long-standing approach of promoting based on technical accounting and technical financial skills, and take a long-term approach to building skills that demonstrate business acumen, including persuasion and motivation, planning and organization, taking initiative, and decision-making.
Reengineer Finance Processes – With no additional funding, finance functions will need to free resources from lower value areas in order to deliver on higher value services, such as enterprise performance management (EPM). The concept of reengineering has been around for decades, but advances in technology are game changers for finance as it looks for ways to revamp processes and be more responsive to customers. Finance should seek to integrate elements of digital business transformation into its processes. Many of these innovations will be cloud-based and will connect suppliers, trading partners, customers, communities, and devices wirelessly and in real time.
Improve Performance Management Capabilities – Improving performance management capability helps finance identify areas of opportunity in strategy, integration, and cost reduction. It also helps finance improve its own as well as enterprise agility. Companies with superior EPM capabilities outperform their peers across an array of financial metrics.
Develop a Finance Digital Transformation Roadmap – After years of trying to wring the most value out of existing finance systems, this year there is more interest in adopting new and innovative technologies. But to achieve true digital transformation, finance organizations must move beyond traditional, linear business improvement frameworks to become agile organizations that are customer value aligned, best practice oriented, and technology- and people-led. A roadmap is vital to navigating the array of technology innovations available, including social media, mobile, analytics, cloud. Finance organizations must clearly detail goals and potential customer benefits, and ensure that decisions are aligned with the direction of the company’s overall IT architecture, business strategy, and the current and future needs of internal customers.
Roll Out BI/Analytics Applications – The principal area of planned investment in new technology within finance involves extending the value of business intelligence and analytics by unlocking the value residing in companies’ vast stores structured and unstructured data, which goes far beyond traditional financial data.
According to Richard Cardillo, The Hackett Group’s Principal and Finance Transformation Practice Leader, “In the current business environment, it’s difficult for finance to take on all of these areas. Part of the key is prioritization, finding the right balance based on the individual needs and strategy of the company, the market in which it operates, and its maturity level.”
The Hackett Group’s 2016 Finance Key Issues research, “The CFO Agenda: Target Five Key Transformation Initiatives to Move Finance Forward” is based on results gathered from executives from nearly 180 large companies in the US and abroad, most with annual revenue of $1 billion or greater.
About The Hackett Group
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.