PDF File: 

cfo3_1_11_wp_accenture_duncan.pdf

Accenture

By positioning finance as a strategic asset, not a mere tactical tool, organizationsgain real efficiencies and improvements to their bottom line.

The term “high performance” in this paper refers to both a definitive destination and a continuous quest for sustainable advantage. Increasingly, organizations from the private and public sector are establishing finance shared services to help them on their journey. Those that are most successful in this endeavor do not focus solely on shared services’ cost-cutting potential. Rather, they think of value in broader terms and, in the process, establish finance shared services programs that help them become high-performance businesses. How do they do it?

The characteristics of high-performance businesses reveal that leaders tend to demonstrate functional mastery in strategic core competencies. One of these competencies is finance.

In the world of finance “mastery,” the best of the best:

• Understand the limits of their current finance functions and continually identify and hone the skills they will need in the future;
• Structure the CFO agenda and accompanying organization model to deliver innovative programs that drive higher levels of performance; and
• Invest in those capabilities and organizational models that best support their enterprise’s strategic objectives and future opportunities.

Increasingly, finance leaders underpin their excellence in finance operations with an organizational model that combines centralized/decentralized elements and alternative sourcing options. With this model, they capture economies of scale and generate greater operational efficiencies. Equally important, they establish finance as a critical enabler of an organization’s strategy.

Accenture has witnessed, firsthand, the value that comes when a company or government agency elevates finance shared services to a strategic level. This value extends far beyond cost savings. It translates into finance superiority. It drives higher levels of finance efficiency and productivity. It influences decision making throughout the organization. And it supports continual growth and competitive advantage.

Shared services will play an increasingly critical role in helping businesses achieve finance mastery and, by extension, high performance.

Toward a Strategic Finance Capability

Finance executives of high-performance businesses and governments think differently about the role of finance personnel – not simply as bookkeepers, cost monitors or guardians of regulatory compliance, but as drivers of a value-centered culture in which financial thinking and value-oriented metrics pervade the organization and influence every strategic decision. Similarly, they view finance functions as strategic enablers that can help satisfy an organization’s immediate objectives, as well as its long-term goals.

At the same time, however, the finance organization must carry out a number of tactical responsibilities – from meeting compliance and reporting requirements to overseeing transaction processing and managing capital. Because they are never satisfied with “status quo” capabilities in their functional areas, finance masters invest time, energy and resources to optimize the effectiveness of their day-to-day tasks.

By focusing on delivering best-of-breed finance services, many finance executives have little time to devote to more strategic activities that influence organizational decision making and help propel the business forward. Moreover, a tactical focus can perpetuate the notion that finance deals solely with back-office matters and does not, therefore, deserve a seat at the strategic table.

Finance shared services help solve this dilemma and contribute to high performance by:

Freeing resources for more strategic activities.By consolidating back-office and day-to-day finance processes, shared services allow finance organizations to dedicate resources that act as true partners to the enterprise and its operating units. These individuals can focus on strategic activities such as helping determine how to allocate scarce resources, make wiser investment decisions and facilitate merger and acquisition activities.

Delivering world-class finance capabilities. In the world of high performance, finance must – at a minimum – provide highly effective and efficient finance and accounting services. Establishing a shared services model is one of the quickest and most cost-effective ways to achieve this goal. And because the shared services model is inherently flexible, any number of finance functions is suitable for inclusion (see Figure 1).

Regardless of the functional areas contained under the shared services umbrella, the model enables finance executives to streamline transaction processes and leverage new technologies that improve efficiencies and productivity and directly impact the bottom line. The model creates an environment in which standardized financial information and data flows enable executive teams to gather — and use — financial data to make wiser decisions that move the organization forward. It also promotes greater accuracy and consistency in data gathering and reporting, which are particularly critical functions when it comes to meeting regulatory requirements set forth by Sarbanes-Oxley, Basel II or other legislative acts. Shared services help deliver best-of-breed finance capabilities and help elevate finance to a strategic role within an organization.

Providing a model for more effective management.Successful businesses are turning to enterprise performance management solutions to better understand their overall performance and gain insights that will help them improve their operations. Many of the tenets of the latest productivity improvement movements have been employed by finance shared services organizations since the late 1980s. Specifically, finance shared services consolidate leading practices and pool activities to produce fewer errors, higher levels of quality control and better service. They identify, gather and monitor key performance indicators and metrics as a way to proactively manage services. They reflect the understanding that service-level agreements and performance reviews can drive ever-higher levels of productivity. And they recognize that a consistent and accurate snapshot of vital information allows them to make smarter decisions. Savvy executives are now seeing that they can draw from the successful management approaches of their finance shared services organizations to jump-start their larger enterprise performance management programs, enhance alignment and collaboration among operating units and guide near- and long-term performance improvements.

In the coming years, shared services will play an even more important role in positioning finance as a strategic enabler of high performance. Having mastered transaction processing, shared services organizations are now becoming true “centers of excellence” that handle enterprisewide functions such as controllership, investor relations, enterprise risk management, and mergers and acquisitions. Finance centers of excellence will soon be more prevalent – heavily involved in strategic decisions and indispensable to organizations wanting to become high-performance businesses.

Building relationships with customers and trading partners. Originally designed to deliver internal client services, finance shared services organizations are now dealing directly with customers and constituents in a variety of areas, from presales inquiries to billing and collections to post-sales or post-service support. They are also, increasingly, interacting with business partners such as suppliers, banking partners, software vendors and outsourcers. By applying their successful service management techniques – such as service-level agreements, key performance indicators and performance reviews – to third-party providers, shared services can improve service and relieve operating units of many administrative tasks. As a result, shared services can act as the backbone of a finance organization – enabling high performance and contributing to the customer or business partner experience, rather than detracting from it.

In all these ways, shared services elevate finance to a position of strategic importance and promote a greater appreciation for the contributions finance makes to an organization’s success. Equally important, shared services organizations position themselves as strategic assets, competitive differentiators and critical enablers of high performance.

Building a High-Performance Shared Services Capability

To drive finance mastery and high performance, finance shared services must be high-performance organizations in their own right. Businesses most successful at building high-performance finance shared services organizations focus simultaneously on their structure, people, processes and technologies.

Structure
A high-performance finance shared services organization acts as a true partner to the business it serves. This may involve deploying shared services personnel to specific operational areas so they can help drive value from the ground up. It may also mean actively involving shared services management in strategic decision making, particularly among businesses dealing with high-stakes mergers or acquisitions. The latter point is overwhelmingly supported by Accenture’s research, which shows that 80 percent of high-performance businesses (versus just 30 percent of non-high-performance businesses) actively involve finance management in decisions that will set the future direction for the company.

People
Shared services organizations are often viewed as “process factories” that generate extraordinary efficiencies at the expense of the people carrying out the necessary activities. Within high-performance finance shared services organizations, however, nothing could be further from the truth. A high-performance finance shared services organization is run like a business. The focus on traditional transaction processing is replaced with a focus on improving the larger organization. A front-office, customer-focused mentality permeates the enterprise as does a relentless drive for continuous improvement. And investments are made to continually build skills related to teaming, creativity, innovation, communications and general process excellence. In this sort of high-performance environment, people matter.

Process
High-performance finance shared services operations are committed to achieving process excellence. This is demonstrated through metrics, process flows and key performance indicators, which are highly visible and understood by all personnel. Performance reports become a regularly communicated barometer of success, as well as indicators of opportunities for improvement. Processes and controls are clearly documented (which eases the burden on the company when it comes to Sarbanes-Oxley compliance) and guide the organization in delivering standardized, streamlined and highly valued services.

Technologies
High-performance finance shared services organizations implement time-saving technologies to improve service, strengthen the controls environment, maximize productivity and minimize the amount of time spent managing exceptions. They also rely on new technologies such as contact management, work flow, e-billing, e-payment and e-reporting to consolidate and manage questions, issues and threshold valuations. In short, leading shared services organizations embrace technologies that can elevate finance’s strategic standing.

Charting a New Course

Shared services provide a proven way for businesses to gain better control of their finance operations and streamline redundant processes and systems. Adopting the shared services model has allowed organizations, including many Fortune 500 companies, to rethink how and where work is accomplished. Shared services can provide a range of organizational solutions that retain responsive customer service without requiring physical proximity to the customer. Global companies are also proving the value of shared services in managing international operations in an integrated fashion.

The resulting value proposition is hard to beat. Indeed, finance shared services can reduce the cost of back-office functions by 20 percent or more.

We have intentionally avoided a focus on the cost-savings value proposition that shared services deliver. This is not because cost reduction is not an admirable goal or one that will not remain high on every finance executive’s agenda; rather, businesses that continue to base their finance shared services vision on cost savings alone will miss other equally significant, value-generating opportunities. Instead, companies should embrace an approach that expands the traditional view of finance shared services and broadens expectations of the value successful programs can deliver.

Leading companies are doing just that. On their journey toward high performance, they are establishing finance shared services programs that generate sustainable value, lead to higher levels of productivity and help drive the entire enterprise forward. Others can – and should – learn from their examples.