CFOs need to aggressively respond to the current environment and to develop an agile organization and processes

Disruptive macro-level events have impacted the business environment for several years and this continues today. Additionally, inflation risk, supply chain disruptions and shortages of labor capacity are new characteristics of the 2022 business environment. In this context, the digital acceleration that began in 2021 must continue. According to The Hackett Group’s 2022 Finance Key Issues Study, accelerating finance’s digital transformation is finances top priority for 2022. Digital transformation is needed to enhance finance’s role as a strategic business advisor, secure data and systems, align skills and talent with changing business needs, and improve finance’s agility (all cited as key priorities by more than 70% of respondents).

Adoption of cloud-based core finance applications, RPA, data visualization and advanced analytics are all expected to grow in excess of 20% in 2022. More-modest growth is expected in emerging technologies such as chatbots and AI/cognitive. Finance applications in the cloud are expected to grow from 26% to 53% in the next 2-3 years. Only 30% of finance organizations plan to keep a significant portion of their applications on-premises. Disturbingly, fewer than 40% of finance organizations have an explicit cloud strategy.

Finance leaders anticipate major expansion of Centers of Excellence (COE), self-service and GBS organizations, as well as other changes in service delivery. This will lead to profound changes in the overall finance operating model. Finance has capability gaps that must be addressed to ensure it can deliver on these expectations.

CFOs have the vision, and a mandate, but have little capacity to focus on value creation

Critical challenges plaguing CFOs and Finance leaders striving to improve the function’s value proposition include:

• Myopic efficiency focus: a rigid and hierarchical organizational model focused on efficiency vs. new capability development
• Inward-facing mindset: Risk aversion, limited understanding of stakeholders, and emphasis on transactional processes and internal strategy vs. business alignment and business-facing activities
• Self-inflicted complexity: Disparate processes, multiple and nonintegrated systems, and overly complex legal entity and management structure vs. end-to-end value stream orchestration
• Technology starved: Outdated finance technology road maps, insufficient investment in business intelligence and analytics, and inadequate IT support vs. an integrated digital architecture that blends new and old ways of working
• Data overload: Rising volumes of asynchronous data, persistent data silos with poor governance, and no comprehensive data analytics process
• Strained resources: Continual budget contraction, inadequate skills, immature staff development programs, overcommitment (too many initiatives) vs. a deliberate portfolio of initiatives to deliver on anticipated business needs

Finance needs to grow innovation and dynamism and drive strategic decision making

By establishing the right combination of skills, technology, process capabilities and organizational structure, the finance function can become a catalyst for enterprise transformation, growth, and competitive advantage. Here is what we expect:

• Finance roles will be more specialized, leveraging digital technology and data analytics savviness
• Modern, cloud-based applications will perform, in conjunction with Bots, finance transactional and administrative tasks and assume most or all finance operations
• Global Business Services will shift from transaction processing to platform management and higher-value activities such as process analytics and innovation, managing relationships with external service providers and optimizing end-to-end processes
• Centers of Excellence and Innovation will become enterprise capability centers. Enabled by new technologies, they will enhance business performance through a focus on continuous innovation, digital tool incubation, and advanced decision support
• Virtual or physical COE will amplify the skills of a smaller group of high-caliber talent (e.g. data scientists) to elevate the capabilities of the entire organization
• Finance leadership will champion enterprise performance, leveraging the function’s transformed capabilities to establish and execute growth objectives (e.g. strategic M&A, product and services portfolio reinvention, sophisticated market analysis, holistic enterprise risk management)
• Agile teams staffed with multidisciplinary expertise, these team will quickly form to tackle urgent cross-process issues and strategic initiatives, typically in accelerated time frames and will be an important vehicle for experiential learning and staff development

Take action to develop and master new value-adding capabilities

Finance’s role as a strategic advisor and partner to the business needs to continually evolve. Companies must engineer agility into the service delivery model and develop new value-adding capabilities:

• Technology: Speed up the adoption of smart automation solutions and shift from experimentation to at-scale implementations. Upgrade, integrate or decommission legacy applications
• Service design: Consider user experience when planning digital initiatives, as well as how new tools could help finance redesign its services to better align with ever more demanding stakeholder expectations • Analytics and information management: Rethink how to leverage data by deploying self-service analytics tools; ensure that users are seeing the newest, most accurate data when addressing complex business questions
• Organization and governance: Given the difficulty of attracting high-caliber talent, leverage skills wherever they reside in the organization through centers of excellence (COEs). Use the COE to align different digital initiatives across the organization to prevent duplication as well as to select consistent solution providers
• Service partnering: Make an assessment of the digital strategy of external service providers; leverage their use of technologies to plug gaps in internal functionalities
• Human capital: Create finance talent development programs that include formal experiential training to augment the technology and data savviness of staff. Make mastering digital skills an integral part of the performance evaluation framework

Finance professionals must dramatically elevate the function’s relevance to the enterprise – shaping business development, growth initiatives, optimal product and service pricing, business model disruption and innovation, new revenue streams, and new customer strategies.

Written by: Bill Marchionni, Account-to-Report Advisory Global Program Leader, The Hackett Group & Stephen Ferguson, Account-to-Report Advisory, EMEA Program Leader, The Hackett Group