CFO Challenges

FIGURE 1: Tactics to reduce costs and increase efficiencies in finance

As business models evolve, chief financial officers battle constantly against a host of internal and external challenges. Cost pressures require greater efficiency, yet outside business partners demand better service and more value. Improving the cost structure, the quality and accuracy of information, and doing it all quickly requires a critical look at the function and its transformation opportunities. But where does the journey begin?

“Well begun is half done,” as the adage says. Successful transformations address several elements—clear vision, processes, people, systems, policies and operating model—that combine for a strong strategy (see figure 1).

While most transformations begin with reducing costs, the best finance transformations align cost-cutting with organizational structure, capabilities and future strategy. Building long-term capabilities is as important as reducing costs.

Transforming Finance

FIGURE 2: The finance roadmap

We have identified a range of actions that not only lead to lower costs but also increase finance efficiency and effectiveness. These include aligning cost structures to organizational strategy and business models through span of control and consolidation, establishing flexible structures through outsourcing and offshoring, applying lean principles including demand management and process redesign, and making targeted technology investments. As figure 2 demonstrates, the largest savings—30 to 40 percent of total savings—come from redesigning processes, but these changes take the longest to implement. Alternatively, reducing redundancy and improving span of control yields only up to 10 percent of total savings, but these tactics can be performed quickly.

FIGURE 3: Creating a strategic finance function

There are three major areas for capturing value in finance:

• Consolidating transactional activities to create shared centers of expertise and knowledge
• Creating a single governance scorecard—including a chart of accounts—to standardize policies and procedures and improve processes more broadly
• Deploying self-service tools for managers and improving analytical forecasting tools

In addition, finance teams can increase the efficiency of their transactional activities by:

• Expanding the scope of shared services, both regionally and into a greater number of back-office and customerfacing activities
• Improving processes and technology through automation, self-service, document management and webbased workflow
• Increasing the role of outsourcing and offshoring, and exploring newer alternatives such as virtual shared services

Finally, a world-class strategic finance function requires a through review of the four areas shown in figure 3:

• Performance-reporting structures and processes
• Planning and forecasting processes
• Operating model
• Technology infrastructure and data

How We Can Help You Get It Done

A.T. Kearney uses a diagnostic to assess performance quickly, articulate the organization and its process vision, identify improvement areas, and build a transformation roadmap that incorporates existing initiatives while also outlining the benefits to the organization.

The roadmap prioritizes objectives and links them to the company’s strategic vision, helping to streamline implementation. More specifically, it provides a framework based on best practices and benchmarks that clearly articulate the current state of operations. This transformation roadmap is a catalyst for change—creating firmwide awareness of the project and the momentum for moving forward to capture savings.

A detailed, multi-year blueprint guides design and implementation efforts, mobilizes the organization and enables stakeholders to rally around a unified vision.

The Benefits of Transformation

There are many advantages to transforming the finance function:
Reduced costs. Many of our clients have reduced costs by up to 30 percent. These companies are in a wide range of industries, including manufacturing, agribusiness, retailing, insurance, oil and gas and consumer products.

Improved service. Transformation leads to more satisfied customers, better customer retention, reduced work, improved information quality and speed, better-used resources, flexibility to deal with changing market conditions, improved management and brand support, strengthened cooperation across functions and improved employee morale.

Shared workloads. As finance becomes more effective, it can help the business analyze results, anticipate necessary changes and take advantage of opportunities that may arise.

Less complexity. A more efficient model can lead to lower IT support costs, greater room for growth— organically or through acquisitions—and more confidence in reporting and compliance.

Standardized processes. Simplifying processes can reduce unnecessary resources and eliminate duplication. It also facilitates cross-channel strategy discussions and better resource allocation, helping to drive profitable growth.

Improved planning. Better planning leads to smarter decisions. For example, with multi-dimensional planning, executives can figure out exactly where to focus attention to improve profitability across channels and categories.

Case Studies

Working closely with our clients, we can quickly generate savings while laying the foundation for a broader, longerterm transformation. The following highlights our work for three companies.

Global consumer products company. We helped this company develop a transformation roadmap, starting with a strategy and vision for finance, followed by a new operating model and leading to a detailed plan to link all dimensions to the overall effort. Working closely with the client, we consolidated transactional processes into a shared-services organization, including captive and outsourced centers. We redesigned planning and forecasting processes, created a new management reporting structure and simplified planning and forecasting processes. As a result, the number of budgetary line items went from more than 3,000 to roughly 300, and the company established a strong, focused reporting structure.

Large global conglomerate. We simplified the company’s operating model and decreased the number of reporting entities. After developing a comprehensive roadmap based on workshops with employees, we uncovered significant improvements in the decision-making process, identified more than $300 million in savings, designed new reporting tools, closing processes and annual planning, and designed and implemented a new organizational structure.

European postal service. We helped the postal service align its finance function more closely with the rest of the organization by focusing investments, redesigning planning and budgeting processes, establishing a profitbased reporting model, and optimizing the organizational structure. The result: happier customers, more accountability and efficient processes, and performance measurements tied to the company’s strategic objectives.

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