How to Transform the Finance Function

One thing's for sure: Your business will undergo change. Chances are that finance will have to change along with it.
Frank FriedmanSeptember 26, 2013

Finance transformation: two words that draw out the skeptics, particularly from finance organizations that consider themselves mature and efficient.

Excuses for not undertaking a finance transformation are plenty: all is working well, so why change things; the organization is experiencing too much change, so now is not the time; transformation is too costly and time consuming; the businesses don’t want/need it; we don’t have the resources, and so on. 

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Some of those may be valid, and a dose of healthy skepticism is good. As any CFO who has undertaken finance transformation knows, it is hard and time-consuming. It requires careful planning and resources, and it can be costly, especially without proper planning. But finance transformation also is critical if finance is to keep up with the changing needs and strategies of the business.

Finance transformations can take many forms, varying from company to company. But all successful programs have one common principle: alignment with, and support of, the organization’s strategic direction over the next five to 10 years. That requires a thorough understanding of what finance talent, processes and technologies a company will need to accomplish the strategic vision.

With CFOs becoming more engaged in corporate strategy, finance transformations are a critical path for them to prepare their organizations for the changes that strategy execution requires. How can organizations enter new markets, offer new products, acquire companies, assess customer behavior, find gaps in supply chains, and take advantage of big data and today’s analytic tools without some form of finance transformation? And what about cyber-security? Are today’s finance systems as prepared as they should be to manage cyber-security risks?

Win Over the Skeptics
It’s the CFO’s job to lay out in a clear and concise manner the business case for why a finance transformation is essential and the value finance will be capable of delivering as a result in order to support the corporate strategy. CFOs need to demonstrate how anything short of a finance transformation would put the corporate strategy at risk, as well as other potential lost opportunities.

Solid relationships with business-unit leaders and gaining their buy-in are critical, especially for a finance transformation that may be more far-reaching or ambitious than others. Business-unit leaders need to understand how the finance transformation will directly help advance their business plans and goals. They also must know how it will provide them the data – and analysis ­– needed to execute their individual responsibilities in achieving the corporate strategy. Be prepared to answer the question, “What’s in it for me?” and do the homework to make a compelling case.

Anything short of that has may not gain the business unit leaders’ confidence and could undermine the transformation’s success.

Build the Right Team
Finance transformations can take months or years, depending on the organization and objectives. Each type of effort requires the right talent to make it happen successfully. Consider today’s football organizations. It can take years to attract the right players, develop existing talent, fill positions and hone players’ skills to position the team for a winning season. The same can be said of building the team to lead and execute a finance transformation .

For large organizations it’s imperative to engage a senior leadership team representing the major business operations to help drive the transformation. From there, communications can roll down to the operating groups and their constituents.

Having the right talent for executing the finance transformation also is essential. If the existing team doesn’t have the necessary skills, there will be some tough decisions to make. With finance being expected to provide more support for data analysis and modeling, any finance transformation today should encompass these sought-after skills. Involve business-unit leadership in planning the new finance organization’s staffing and partner with the talent organization or human resources to identify and recruit needed talent.

IT also must be part of the effort. Any finance transformation, even if it doesn’t appear to have a system or technology component at the outset, should consider changing technology needs. For example, systems may need to be scalable to incorporate new operations from acquisitions, as well as the budgeting and planning around those expansions. New technology also may be needed to bolster finance’s ability to meet increased demands for data, analysis, risk sensing and scenario planning. 

Be sure to include members from corporate development and treasury, as capital planning and allocation are key to strategy execution. For example, I’ve worked with our strategy and treasury teams in overhauling our budget, planning and analysis, so that we are collecting and analyzing data needed for capital strategy decisions.

And, of course, involve those dealing with regulatory changes, as finance is the lynchpin for compliance.

Keep Your Eyes on the End Goal
Making finance transformation happen in mature organizations, with their labyrinth of legacy systems, long-established processes and built-in biases, can be as arduous as starting from your own team’s end zone; the goal line can seem unreachable.  

At Deloitte, we are undergoing a multi-year transformation of our own as we work toward a 2020 vision that includes taking advantage of special opportunities in the marketplace. Have there been challenges? Of course, but it’s my job to create a finance organization, backed by processes and technology, that can help drive toward our strategic vision.

Frank Friedman is U.S. CFO and managing partner of finance and administration for Deloitte LLP.