Business and digital transformation are not only a buzzword but are also fast becoming a core function at many companies. Transformations, versus discrete projects, are large-scale programs that change the way a company operates across multiple parts of its business and usually encompass optimization of organization, process, and technology.
How do CFOs know the time is right for a business transformation, particularly in operations and back-office functions? There are usually clear indicators a company is ready for a business transformation and understanding these indicators and the degree to which they are impacting performance at your company will help you to know if the time is right.
4 Signs It's Time for a Transformation
Typically, I have found that most companies have most, if not all, of the following four universal factors indicating they are ready for a transformation. It is interesting to note these factors are not specific to any function, department, or role in the company. Rather, they are symptoms of the need to determine if opportunities exist to optimize company operations.
- Manual and paper-intensive processes. If employees are printing, signing, filling out, or moving paper when they need to complete activities, request help, or submit approvals, there is likely a surplus of manual and paper-intensive processes. Automating and streamlining manual and paper-intensive processes will free time for employees to work on more value-added activities.
- Dated and legacy systems. Many software providers are cutting support and mandating upgrades to cloud or SaaS platforms as they are also optimizing their development and maintenance structure. If employees are complaining about technology, or providers have given a sunset timeframe, then it is time to consider not only a replacement but also optimizing the business processes and organizational structure that surround that application.
- Deficit of timely or meaningful reporting. Many managers complain they lack the reporting they need on a daily, weekly, or monthly basis to run their business. If your leadership team is continually asking for better or more reporting, then it may be time to assess if a transformation is needed.
- Lack of standardization. Inconsistency across an organization may not seem to be problematic if tasks get completed, but lack of standardization may mask larger issues. For instance, inconsistent financial processes and cost coding can provide results that cannot be consolidated and compared without significant effort. Standardizing processes and technology is less confusing for employees, and also ensures external stakeholders have a consistent approach.
The Case for Business Transformation
In addition to these four common factors, there are specific department performance indicators that signal it is time to evaluate the need for a business transformation.
- Low customer support satisfaction. Customer support, both external and internal, is cumbersome and labor-intensive. Reaching customer support may be difficult and time-consuming, and issue resolution takes multiple steps.
- Payables and/or receivables issues. Accounts payable may have late vendor payments due to manual processing which is unable to keep up with invoice volume. Aged receivables may grow due to billing delays, manual receipt and credit processing, and lack of follow-up on past-due payments.
- IT project delays. There may be a large project portfolio without prioritization. Multiple stakeholders complain of waiting for projects or never receiving a finished product or resolution.
- High procurement costs. Spend is not managed either by category or with preferred suppliers. Product substitution or delivery delays are common, resulting in higher item costs and return processing.
- Recruiting and retention issues. Recruiting, onboarding, and retaining talent is becoming more difficult. The recruiting and onboarding process is lengthy and paper-intensive, which can result in lost candidates. Retaining talent, especially younger generations, becomes harder with inefficient business processes
Getting Started On the Transformation Journey
Once a transformation has been identified, a CFO’s next steps are critical. There are four key actions a CFO can take to both determine the feasibility of a transformation and set the stage for a successful transformation journey.
1. Socialize the transformation idea. Transformation is a team effort that almost always spans multiple company functions, and it is rare only one group is experiencing operational issues. A transformation program is only effective and successful if the needed stakeholders are fully participating and engaged, and executives are clearly sponsoring and supporting the program. A CFO needs to understand if their fellow executives and teams are experiencing the same issues and if they are aligned on the imperative and importance of starting a transformation effort.
2. Evaluate other organization change efforts. An organization only has so much bandwidth to absorb change. Change can include organizational change such as a merger and acquisition, market change such as product development and introduction, digital change such as technology implementation, compliance change such as regulatory enforcement, or others.
The executive team must evaluate transformation against other changes across the company, considering factors such as resource commitment, duration, risk, budget, and level of change among others. Or perhaps transformation is required to ensure the success of other enterprise changes. Every company is in a different position and the executive team must be aligned on the importance and extent of transformation to meet the overall company strategy.
3. Perform an assessment and build a roadmap. It is important to understand the current situation and the gap toward meeting the company’s objectives for the transformation. Often there are anecdotal stories and complaints, but a company should have a solid assessment of all the problem areas, pain points, and opportunities for improvement. It is only with information the executive team can properly prioritize and build a transformation roadmap based on the cost/benefit for their organization.
I often recommend using outside or neutral internal expertise to perform an assessment and build a roadmap. These experts do not have any bias when interviewing employees and can find and assess gaps in organization, process, and technology across multiple functions. They will weave their findings into salient recommendations without assigning blame while also building an associated transformation roadmap that considers both best practices and a company’s specific circumstances.
4. Seek implementation assistance. One of the key reasons transformation programs fail to get off the ground or achieve their objectives is the lack of project management or team resources to execute the initiatives. Employees already have full-time jobs and it can be difficult to find additional time to work on transformation. Investing in outside expertise can bring several benefits to the program. Not only does a transformation expert have the needed project management tools and governance techniques, but they also know how to identify and mitigate the repertoire of program risks that often come with transformation programs.
Investing in these four key actions will help any enterprise get off to the right start on its transformation journey. The CFO can be in the driver’s seat to bring significant value to the company by championing and leading this effort.
Marilyn Jentzen is CEO of Innovative Impact Consulting.