Transforming finance to support growth companies
August 16, 2021
All companies seek to adapt and evolve their corporate functions as they grow and mature. High-growth companies, however, face their own set of challenges. We hear the same question all the time from companies coming out of rapid growth cycles: How do we get our finance function to catch up with the growth of the business?
It’s an important ask, because a finance function that only delivers the “minimum viable processes” put in place for an initial public offering can be a drag on overall corporate performance. For example, manual processes may persist due to the lack of a coherent technology architecture for finance; in many cases, finance teams have no opportunity to step back and look at foundational issues. Similarly, under-investment by finance in data may hinder the organization in its efforts to become data-driven or data-centric, critical in our digital world.
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Many high-growth companies are decentralized, which theoretically empowers more people to act. In reality, there are few true owners to drive enterprise change. Consensus-based cultures and siloed decision-making often result in duplicate capabilities and excess costs, as multiple groups pursue the same initiatives. Successful projects started at the grass-roots level are difficult to scale. And talent development gets bogged down, with many layers of middle management, limited career paths and an inability to deal with capacity challenges as they appear.
Ironically, since many high-growth organizations place such emphasis on agility and speed to outcome, they associate governance with red tape and delay. In such an environment, finance struggles to keep up with the pace of change and can’t always identify and act upon value-creating initiatives.
Bringing Finance into High-Growth Mode
Successful organizations need responsive world-class finance support. By taking a few key steps, high-growth organizations can help their finance functions overcome these growing pains and support the business and its ambitions.
These include:
1. Operating model transformation. High-growth companies are familiar with the decision to build (through internal development), borrow (through alliances and partnerships) or buy (through acquisition) capabilities when it comes to rapidly evolving their business models. They often operate within an ecosystem or network of providers to serve customers and choose to direct their investments to areas that can drive growth and value creation. Back-office functions such as finance benefit tremendously by mirroring this strategy. They should focus on value creation while leveraging an alliance or partner network to accelerate the development of needed capabilities.
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Consider a transportation network company that needed to quickly scale its finance function to support the rapid growth of innovative new service offerings. The company transitioned a set of global finance processes to an alliance organization to meet immediate capacity needs and drive accelerated process enhancement through automation. This opened opportunities that could lead to the reduction of manual journal entries, the reduction of the month-end close process by approximately four days and important annual cost savings. It’s worth noting, however, that for high-growth companies, the focus on operating model transformation should be on facilitating capabilities more quickly and reinvesting in the business for growth.
2. Platform ‘optimization’. End-to-end digitization and harmonization of core finance processes and data are critical. Thanks to the cloud, finance organizations can now modernize their technology with the pace and flexibility needed to thrive in a rapidly changing business environment.
One global technology company, for example, is using the SAP S/4 HANA® platform to enhance its data visibility, derive better insights, automate business processes and break down silos. It is already seeing improved collaboration and better business decision support across different units.
3. Data as an asset. Finance can serve as the first mover for enterprise data governance to establish data ownership and set priorities for addressing data issues at the source. Facing increased competition and declining margins, the CFO of a global payments company transformed its entire financial planning and analysis (FP&A) function, reducing finance’s costs to serve while improving its ability to partner with the business and deliver forward-looking insights.
Transformation involved establishing a central reporting and decision support team equipped with standard metric definitions, clearly defined owners, and a suite of self-service dashboards and analytics-powered forecasting models. Instead of being a downstream consumer of data (with attendant quality challenges), finance became an enterprise data leader.
These examples demonstrate the multiple levers finance can pull to alleviate process complexity, elevate its role as a business partner and step up as a transformation leader as the company matures.
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To be successful, finance leaders need to keep the broader organization in mind. Establishing end-to-end process ownership can help finance connect the process and data dots across functions and identify key dependencies while planning out the journey. In addition, transformation may require a cultural and/or mindset shift. Talent, communication, and change management should be priorities from day one. Lastly, finance should embrace high-growth ways of working in its transformation approach. Employing agile techniques such as pod teams and an iterative, sprint-based plan can help the team deliver quick, tangible outcomes and promote buy-in across the organization.
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Shifting from startup mode to a mature yet high-growth business poses challenges for every part of an organization. A finance function outpaced by business growth can create risks and hinder innovation, but a finance team with the right technology, processes and people can be an invaluable growth partner, not only in delivering efficiency and service but in identifying new prospects for sustainable value creation.
See more finance insights here. To learn more about how finance can support a high-growth organization please contact me or my colleagues Emily Stovicek or Trevor Cockerham.
