Yes, good and cheap finance is possible!

A finance organization that is top quartile for operating at lowest cost is not necessarily ‘good’—it just means it’s ‘cheap’. As these organizations aggressively cut costs, many are also cutting into muscle or bone—losing capabilities and discarding skills that are critical to the CFO agenda, finance effectiveness and enterprise value creation.

Proof in numbers shows that it is really difficult to deliver that perfect balance between both ‘cheap’ and ‘good’. Accenture benchmarking analysis of more than 300 companies shows that less than three percent of finance organizations reach top quartile for both lowest cost and highest effectiveness. There is a real trade-off between cost and effectiveness that finance leaders have to constantly balance, regardless of whether they aspire to top-quartile performance in either area.

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So, can your finance organization be both ‘cheap’ and ‘good’? The short answer is yes, but only with the right transformation strategy in place. Here are three steps your organization can take to strengthen both efficiency and effectiveness: 

Step 1: Enhance your operating model

Bulk up your operating model by getting to the right work, right size, right structure, right people and right measures. Consider a zero-based approach where you wipe away bias from the past and start with a clean sheet to design for valued outcomes—this approach allows you to go beyond incremental improvements by transforming to leapfrog the benchmarks.   For example, getting to the right work, which can drive significant impact, is often the hardest to meet and requires close partnership with the business. Ask what business decisions would be different, or how customers could be impacted, if you eliminate work or perceived requirements, simplify processes and value chains, or standardize processes.

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Step 2: Adapt a radically different culture and mindset

For even greater benefits, evolve towards an Intelligent Business Services (IBS) model, which combines an enhanced operating model with a radically different culture and mindset—one that focuses on human-centric experience as opposed to siloed functional processes. Instead of focusing on transactional work, this mindset challenges the finance professional to innovate and collaborate in a stimulating cross-disciplinary environment. IBS enhances workforce engagement and helps bring out the best in people’s performance across the enterprise, and this in turn drives greater finance effectiveness along with enterprise growth, customer satisfaction and business value.

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Step 3: Give finance the front seat

Put finance in the front seat to be the driver and facilitator of enterprise value and growth. Standard benchmarking practice compares finance cost as a percentage of revenue—to improve this metric, enhance and build scalability within the finance function to allow the numerator (finance cost) to stay flat, while driving enterprise value to allow the denominator (revenue) to grow. To elevate its position as a value facilitator, finance can broaden its role as the champion for digitization and data analytics across the enterprise, and partner with business unit leadership and the functions to lead the way towards value and growth. For example, finance organizations have been augmenting their talent to include data and analytics and employing advanced data science and scenario modeling to deliver growth-driving insights and support decision making for the enterprise.

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Before embarking on the transformation journey, consider the strategic imperatives of your business strategy and industry to find the right balance for you. Your finance organization may not necessarily need to be both ‘cheap’ and ‘good’.

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