Many executives don’t view finance as a strategic partner in the enterprise—and that’s to their own detriment, says Jim O’Connor, who leads the Global Business Advisory Practice at The Hackett Group, a global management consultancy. Those who engage finance leaders early in the process when developing their most critical strategies have a clear advantage, says O’Connor.
We had the opportunity to interview O’Connor, who has over 20 years’ experience helping companies transform their finance capabilities, following his presentation at the CFO Roundtable session at Workday Rising. Read on to learn more about what O’Connor sees in his practice—and what successful companies are doing right.
The role of finance is changing within organizations. What’s your take on this?
Traditionally, finance focused primarily on cutting costs. Now, in successful organizations, finance is viewed as an active partner that helps achieve growth objectives.
The business shift to customer-centricity has also influenced back-end functions, so finance is more focused on customer engagement and enhancing its response to changing customer demands.
Why are business leaders looking to finance as a partner in supporting critical strategies?
The more their finance teams know, the more they can provide the funding back to the enterprise’s strategic direction. Since finance is at the epicenter of controlling financial resources, now more than ever, enterprise leaders require that finance must have a seat at the table to help formulate and execute strategy.
Senior management is starting to understand that finance has a unique overview of the entire organization, a perspective that allows finance to confidently make decisions about investments and capital allocation to underpin the right strategies.
Consider an acquisition, for example, when finance is not consulted from the start. Then they’re told, “This is what we’re doing, tell us how to execute it.” When finance team members are brought into the conversation earlier, they’re part of driving the strategy forward, rather than just executing on it.
What keeps finance professionals from being viewed as trusted business partners?
Perception is a barrier. When we start working with a company, we conduct a stakeholder survey and ask the leaders—the CEO, the head of HR, and so on—how they view finance. Only about 30 percent of them typically say they perceive finance as a strategic partner. In my 20 years of trying to transform finance, I’ve seen that there are still many managers who exclude finance from the strategic partner bucket.
Results matter—excellent performance and proven success help finance establish partnership more than anything else. When finance runs an inefficient shared services center, or can’t deliver timely forecast reports, other leaders in the business don’t have enough faith to embrace finance as a strategic partner.
Another barrier is the lack of an effective customer-experience program with regular engagement with business operations. Segmenting and knowing what different customers need is essential. Finance must implement a structural plan among business units to deliver on those needs on a monthly and quarterly basis.
How can finance leaders best align finance and business strategy?
First, they need to be honest about who they are and where they are from a cost and capability perspective. To get a top-level view, they can look at how long it takes to close the books, get reports out, create a budget, and develop a forecast.
Once they agree on business priorities, finance organizations can match their capabilities with opportunities for partnership. Initially, I recommend creating a plan with a phased approach that focuses on generating early wins and small-scale successes to build credibility.
Is there hesitation among some finance leaders to move systems to the cloud?
There can be concerns, including privacy, security, and a loss of control of customization. Finance by nature is conservative, so more resistant to change, and a lot of companies, particularly big ones, prefer a “follower” mentality.
A lot of people adopt the cloud for T&E, HR, or payroll, but they’re hesitant to make the investment of moving their entire enterprise suite to the cloud. However, we’re starting to see less resistance. In a recent cloud study, we found that increasingly, big companies are prioritizing the migration of enterprise systems to the cloud. As the maturity is proven out, concerns are slowly being defeated.
Any closing advice for finance leaders who are driving business transformation?
Innovate with a long-term strategy in mind. Baseline yourself and be honest about what your skills are. Look at your team and assess it. Do we want to be business partners and drive analytics? Do we have the data structure we want? Do we have the people, and do they need to be developed?
Begin your planning with a customer-centric mindset by engaging customers to help understand their specific needs. Then craft a clear finance strategy and roadmap to drive value oriented to your stakeholders.