Professional Documents
Culture Documents
Contents
Making Meaningful Change Minding the Information Gaps Finding Technology that Fits Matching People with Purpose Raising Finances Internal Profile Reaching the Right Structural Balance Adapting to Regulatory Change Using External Advisers Wisely Conclusion: The Art of Constructive Change Sponsors Perspective 3 7 8 10 11 12 13 14 15 17
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Wed like to thank the following executives for their time and thoughtful contributions to this research program: Company Amer Sports ATK Arup Autodesk Brady Cigna Mediaset Espaa S.A. HUB International MeadWestvaco Nalco Schneider Electric Rhodia Rottneros Skanska Sumol+Compal Syngenta Tele2 TD Ameritrade Country Finland U.S. UK U.S. U.S. U.S. Spain U.S. U.S. U.S. France France Sweden Sweden Portugal Switzerland Sweden U.S. Name Jussi Siitonen John Shroyer Veronica Tsang Tiziana Figliolia Tom Felmer Mary Hoeltzel Francisco Javier Uria Iglesias Daniel Goldsmith Mark Rajkowski Scott Hinkle Abhishek Jain Pascal Bouchiat Tomas Hedstrm Peter Wallin Antnio Augusto dos Santos Casanova Pinto A. Hariharan Lars Nilsson John Langwith Role CFO CFO Director/CFO, East Asia Director of Finance, Asia Pacific CFO VP, Finance CFO CFO CFO Controller Assoc. GM Corporate M&A CFO CFO CFO CFO Finance Services Head, APAC CFO Managing Director of Analysis, Planning, & Reporting
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To examine what this undertaking means for finance organizations, CFO Research and KPMG International conducted research among senior finance executives at large companies around the world. Our first report based on this research, A New Role for New Times, was published in early 2011 and included data and analysis from a survey of more than 440 senior finance executives. For our second report, From Keeping Score to Adding Value, we conducted a series of in-depth interviews with 18 CFOs and other senior finance executives to examine how companies have already transformed their finance organizations and how they plan to continue doing so in the years ahead. Through the survey, we found that finance functions are playing a larger role than ever in mapping their companies paths to growth. Finance executives aspire to better support the high-value activities that lead to better business performance. They frequently say, for example, that improving support to line-of-business management offers a great opportunity to improve finances contribution to company performance. (See Figure 1). In the words of a director of finance at a US$10 billion media and entertainment company, the new role of finance organizations means to
Figure 1. Finance executives see greatest opportunity to improve support for line-of- business management.
In your opinion, to what extent do the following improvements pose opportunities for your finance organization to increase its contribution to your companys performance over the next two years? Providing greater support to line-of-business management Providing greater support for business growth (organically or through M&A) Standardizing and streamlining core finance processes Reducing the overall cost structure of the company Improving the management of risks to business performance Engaging more closely with external stakeholders (e.g., customers, investors, suppliers, lenders) Reducing the cost of the finance function 0% Great opportunity Moderate opportunity
53% 49% 47% 43% 41% 31% 17% 25% 48% 50% 48%
75%
Little or no opportunity
Dont know
Percentage of respondents Note: Percentages may not total 100%, due to rounding. Source: A New Role for New Times. CFO Publishing and KPMG International. March 2011.
2011 Growing complexity, talent scarcity, and technology deficits are most likely Figure 2. CFO PUBLISHING LLC to put the finance functions effectiveness at risk.
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Figure 1. Finance executives see greatest opportunity to improve support for line-of- business management.
In your opinion, to what extent do the following improvements pose opportunities for your finance organization to increase its contribution to your companys performance over the next two years?
41% 40%
6% 9% 2%
actively participate in decision making, providing high-quality Standardizing and streamlining analysis that is fact-based and objective. Fulfilling this role core finance processes is not without its challenges. By and large, finance is able to play this role, concludes this director of finance, but it Reducing the overall cost structure of the company struggles with catching up with the constantly changing environment. Improving the management of risks
to business performance
Persistent uncertainty and market volatility are placing a Engaging more closely with external stakeholders premium oncustomers, investors, suppliers, lenders)perfor- 31% 48% 20% 2% (e.g., the finance functions analytical and mance-management capabilities. For example, Nalco is To meet these kinds of challenges, the finance function is the worlds largest sustainability-services company. Headreformulating its human-capital mix, adding more capaReducing the cost of the finance function 17% 48% 35% 1% quartered in Naperville, Illinois, the company has expanded bilities in business strategy and sophisticated analytics globally over the past decade and needs to marshal the data and more operational experience, according to execu0% 25% 50% 75% 100% collected by finance to better understand its performance in tives interviewed for this report. It is also improving its Great opportunity Moderate opportunity Little or no opportunity Dont know each of its markets, says controller Scott Hinkle. Our busisystems, processes, and organizational infrastructure: Percentage of respondents nesses need more financial information more quickly with making new investments in data collection and BI tools, Note: Percentages may not total 100%, due to rounding. a lot more detail, so that they dont get surprised by cost imposing uniform reporting standards on business units
increases, notes Hinkle. Its which products are going up in47% how much, and 41% fast? Are12% costs flat-lining cost, how the or do they continue to accelerate? Whats the curvature of acceleration? How much do we buy now in anticipation 44% 13% 43% of further cost increase? You want to negotiate with that customer maybe once versus three or four times. So our 41% analysis needs to be more forward-looking, much 50% 9% 1% price more detailed, and available much more quickly.
Figure 2. Growing complexity, talent scarcity, and technology deficits are most likely to put the finance functions effectiveness at risk.
In your opinion, to what extent do the following items put your finance function at risk of failing to achieve its objectives?
27%
50%
23%
1%
Professional staffing within the finance function (e.g., headcount, ability to attract and retain talent, technical knowledge of finance staff)
22%
56%
22%
1%
Our use of technology and systems for finance Ability to respond to changing requirements from within the company (e.g., increased demand for more-robust management reporting, enhanced risk-management requirements) Ability to respond to changing requirements from outside the company (e.g., demands for enhanced reporting from investors, lenders, and regulators; supplier negotiations; customer credit requests) Relationships between finance and other groups within the company
22%
53%
25%
1%
21%
53%
26%
19%
54%
26%
1%
10%
41%
48%
1%
0% High risk
25%
75%
Moderate risk
Percentage of respondents Note: Percentages may not total 100%, due to rounding. Source: A New Role for New Times. CFO Publishing and KPMG International. March 2011.
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around the globe, and creating shared-services centers that perform certain functions more efficiently and with a higher standard of accuracy than before. They are, it seems, responding to the risks identified in the survey portion of this research program, in which senior finance executives around the world cited organizational complexity, human capital, and the utilization of technology in finance as key sources of risk to finances ability to achieve its objectives. (See Figure 2, previous page.) But the toughest chore finance faces may be in the realm of communication: its finances job to convince skeptical business leaders that a functional area best known for evaluating past financial performance really can help them to be more proactive, more nimble, and ultimately more successful.
Our businesses need more financial information more quickly with a lot more detail, so that they dont get surprised by cost increases.
Finance functions that make this transformation find they become more vital, influential, and pervasive presences in their companies. This helps the entire company to make better strategic investment decisions, allocate resources more efficiently and effectively, and drive value creation. As Mark Rajkowski, CFO at MeadWestvaco (MWV), a consumer-products packager, puts it, Our business leaders really need a partner with a strong financial background [and] good business acumen. But thats not all, Mr. Rajkowski says. To be successful partners to the business, finance executives need to go beyond the numbers to understand the end markets [and] the competitive landscape, and to know enough about the business, the industry, and the competition to provide good advice and decision support on how [the company] deploys capital to profitably grow the business. He concludes, I think successful businesses will have that relationship, where business leaders have that strong business partner alterego, if you will, to help them navigate whats generally a very difficult business climate.
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Enterprise-wide information systems cut the cost of data collection, enabling companies to pinpointand address existing inefficiencies and redundancies.
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Great opportunity
Moderate opportunity
Little or no opportunity
Dont know
Percentage of respondents Note: Percentages may not total 100%, due to rounding.
Figure 2. Growing complexity, talent scarcity, and technology deficits are most likely to put the finance functions effectiveness at risk.
In your opinion, to what extent do the following items put your finance function at risk of failing to achieve its objectives?
Developing a tighter23% bond between finance and IT can 50% 1% help: executives say that the finance function can play a pivotal role in ensuring the success of efforts to improve IT capabilities by bridging the gap between IT and line56% 22% 1% of-business management in complex systems projects.
There is no one way25% link 1% to finance with IT, and methods 53% range from full integration to designating a go-between. At Autodesk, the IT function sits within the CFOs office. At one large global bank, a specialized IT team is located 53% 26% within finance to tackle two particular problems: getting an assortment of legacy systems to run at adequate speed, and upgrading those systems to keep up with new data 54% 26% 1% requirements created by a plethora of recent regulatory changes. MWV assigns responsibility for finance-related IT strategy to the vice president for financial planning and 41% 48% 1% analysis. He heads a team that develops and executes strategy for IT that is specifically related to the finance Technological inadequacies can create a high0% barrier to25% function. In most cases, however, companies choose 50% 75% 100% achieving this single version of theHigh risk Indeed, finance truth. to keep no risk and IT separate, but with teams or indiModerate risk Little or finance Dont know executives responding to our survey most often cite out- Percentage ofseconded from one to the other to ensure close viduals respondents Note: Percentages communication. At TD rounding. may not total 100%, due to Ameritrade, for instance, Langwith of-date technology (along with the perennial problem of resource scarcity) as one of the greatest obstacles to oversees a team that acts as a liaison or translation improving finance effectiveness. (See Figure 3.) engine between IT and the business analysts.
Figure 3. Out-of-date technology and limited resources hold companies back from improving their use of IT.
In your opinion, what are the greatest barriers to improving the effectiveness of your companys finance function? IT systems that are out of date, inflexible, or unable to support new requirements Shortage of time and attention within finance to improve capabilities Difficulty in finding and retaining high-performance employees in finance Lack of clear direction on the strategy, agenda, and mandate for the finance organization Perception of finance function and its ability to make a high-value contribution within the organization Uncertainty about business benefits from improved finance-function capabilities Other 0% 7% 20% 40% 60% 24% 31% 31% 30% 40%
48%
Source: A New Role for New Times. CFO Publishing and KPMG International. March 2011.
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At Nalco, the arrangement between finance and IT works in both directions. The finance function has a team of business partners embedded in ITthey will take a finance person, marketer, or even a salesperson and give them some IT training so they can liaise between the end user and the IT team, Hinkle explainsand a group of finance-IT staff within finance to provide systems support. As a result, says Hinkle, Theres less miscommunication, less misunderstanding of whats required, Speed of information access depends not only on the robustness and flexibility of financial reporting and data warehouse systems, but also on the equipment and software used to deliver it. Still, senior finance officers caution against plunging headlong into new technology. Rollouts of new data warehouses and business-intelligence systems are complex and can take many months to complete. Meanwhile, IT can be slow to address smaller issues, such as basic reporting and communication tools that finance may need solved quickly, says Jussi Siitonen, CFO of Amer Sports Corp., a Finnish sportinggoods company. You always like to see more automation, and we have a few items at the top of our lists where it is required, says A. Hariharan, finance services head, APAC at Syngenta. But Im willing to bet we can cope with only so much [change] before we need to wait a while.
Finance executives most often cite out-of-date technology as one of the greatest obstacles to improving finance effectiveness.
Looking ahead, some finance officials suggest that it may be possible for companies to go too far in the direction of imposing uniform reporting standards on all business units and subsidiaries, including those operating in far-flung and sometimes culturally distinct economies. My freedom to operate in the country has gone down, says one senior finance executive. Im now far more constrained because of the standard process we follow, by the requirements of business process outsourcing, and everything I do now is even more visible than it used to be. As somebody who is the country head of finance, there certainly is the feeling of, Am I really the CFO or not?
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One global bank now expects finance recruits to be more fully conversant in risk management terminology and concepts as well. Another large financial firm, TD Ameritrade, expects its recruits to have enough technical background to be able to quickly start using its data warehouse. In the past it might have been sufficient for somebody to have a good grounding in financial concepts and basic financial calculations, says Langwith, managing director of analysis, planning, and reporting at the firm. Now you also need to have the ability to mine complex data. Because the degree of detail and the degree of sophistication were now bringing to our business analysis is very different than it was even three years ago.
The division of finance into two distinct groups of activitiesroutine functions versus high-value analytic and strategic partnershas disrupted the traditional career path in finance functions around the world.
Perhaps more so than ever before, senior finance executives consider experience outside the finance function to be crucial in developing high-quality finance professionals. At TD Ameritrade, finance often recruits new people from investor servicesthe group that interacts daily with traders and investors over the phone. The finance function values their experience working with clients. Says Langwith, Id much rather have someone who has a strong grounding in the business, and we can teach them the way that we want to do the finance and accounting work than someone who has a ton of finance and accounting experience but doesnt understand our business. Other global companies make a point of rotating their early career finance professionals through positions both in finance and the business unitsa practice Amer Sportss Siitonen calls grass rooting. For the benefit of its financial professionals, defense contractor ATK publishes career path analyses that suggest what combinations of jobs will help these individuals attain certain positions. One such analysis, mapping the path to a vice president of finance position, shuttles between corporate-headquarters functions such as international accountant, tax manager, and planning and reporting manager, and positions in the business linesfor example, serving as a price analyst, director of finance, and group controller in ATKs Mission Systems group.
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At TD Ameritrade, investment in analytics and hiring has spurred interest in finance data. Weve reached a level of analytical rigor where we can look not only at how the business is performing today, but how certain changes we might make in our product lineup or our service offerings might change some of those trajectories, says Langwith. Thats created a real demand within the company for detailed analytical work. Finance is also combining demographic, market, and other data with its conventional planning and financial reporting capabilities to offer strategic and directional advice including advice on the priority and sequence of forays into new geographies. This strategic counsel is based on clearer diagnostic analysis and a more powerful interpretation of the companys business model and competitive position. The result: lines of business are treating finance differently. They are starting to see the value, and they are coming to us with problems and requests for early advice, says Arup Groups Tsang. Most of the senior finance executives we interviewed reported strong support from top management for finances more expansive role, and especially for the drive to standardize reporting from all businesses and geographic units. These standardization efforts, in turn, raise the stakes on organizational alignment, because they require business units to work more closely with finance on a common projectand, increasingly, on other projects as well. At Nalco, for instance, a broader approach to research allows finance to position itself as an essential partner in the exploration of new markets, says Hinkle, the companys controller. Finance can help business units understand the resources required to introduce a new product in a market where the company has a fully integrated operation, such as Germany, and one where it has no manufacturing presence, such as Poland. Nalcos business units might seek out finance for help in understanding why a new product penetrated only certain geographic sectors. At other companies, finance is becoming more involved in developing targets systematically for each business line. Amer Sports assigns key financial performance indicators to each business unit. Finance is responsible for building the dashboard reporting those KPIs, which, in turn, feeds into a budgeting process that designs an action plan for each unitbringing the finance functions analytical acumen together with operational execution to improve performance.
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With data collection and analysis concentrated in shared-services centers, corporate-level finance staff are being shifted from transaction-oriented work to strategic responsibilities.
For some companies, technological innovation has made outsourcing some finance operations a preferred route. HUB International, a Chicago-based insurance brokerage, recently revamped its customer-relationshipmanagement system, choosing an externally hosted option rather than buyingand reconfiguringan application on its own. CFO Daniel Goldsmith says that we didnt want to invest in creating something that Microsoft is always going to be better at. Before translating the information-at-hand into useful forecasting and advice, finance must develop a detailed understanding of each business unit and its key performance drivers, notes Langwith at TD Ameritrade. One essential step, according to many senior finance officers, is for finance to break down its own interior walls so that information about, say, risk management can be integrated with other financial data, thereby giving managers a more complete picture of the risks and opportunities confronting them. In place of functional silos, some companies are creating centers of excellence within finance that pull together best practices for all the areas in which finance interacts with individual business units. At MWV, finances centers of excellence bring together individuals with expertise in treasury, tax, controllership, and financial planning and analysis. The objective is to provide very insightful informationnot just numbers, not just data, but enriched informationto our business leaders on a timely basis, says CFO Rajkowski. Rapid growth, bringing with it newly acquired units, legacy systems, and multiple reporting standards, has in some cases pushed companies to rationalize their finance organizations. Schneider Electric, for example, found itself with a collection of separate M&A functions located in different business units and geographies. Given that the company saved more than 1 billion euros in a restructuring that it carried out during the recessionand in light of the inorganic growth opportunities it is identifying M&A is now a high priority at Schneider Electric. The company has centralized its M&A function within finance at the corporate level. From an M&A perspective, there is a big opportunity available for us, says Abhishek Jain, associate general manager of corporate M&A. The focus now is making finance a more strategic partner in this growth.
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Other countries are tightening their regulatory regimes as well. India, for example, recently strengthened its regulations covering mergers and acquisitions, raising share ownership thresholds that require notification of the authorities, says Jain at Schneider Electric. The new rules will apply to most M&A deals, adding further to the finance functions responsibilities. Large global companies, and particularly those based in the United States, are preparing themselves for a deluge of new accounting rules as U.S. GAAP converges with International Financial Reporting Standards (IFRS), notes Cignas Mary Hoeltzel. Spain has already made the switch from its own accounting rules to the international standard, forcing some companies, among them Spanish television broadcaster Mediaset Espaa S.A., to go through exercises to make their reporting compatible with IFRS. At U.S.-based Nalco, where an important segment of the business is leasing equipment to customers, finance is watching especially closely for any changes in lease accounting rules.
Since the recession, countries are being more diligent than ever in reviewing tax returns.
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Keys to a Successful Finance Transformation Its easyand perilousfor the finance function to miss a few steps on its climb to new heights. The senior finance executives we interviewed urged their peers not to overlook these crucial moves. Obtain strong commitment from the CEO and, if possible, at the board level. Engage with business partners early and listen to everyone whose cooperation is required before launching any important aspect of the finance transformation. Problems tend to arise when not enough communication takes place. Translate data and analytics into the language of the business that will use them. Define roles and responsibilities when setting up a shared-services center, so as to minimize turf wars. Recognize that there is always competition for IT resources, and finance will not always win. Be prepared to make the case for why finance should get those resources.
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A larger role for finance gives more of a stake for the [finance] department in the growth of the company, says Jain at Schneider Electric.
Thats changing. Today finance is becoming more visible within the organization and garnering more appreciation in the business lines. But alongside providing good service, senior finance executives repeatedly stress the importance of communication, first within the finance function itself and then with the businesses. Skanska, an international project development and construction company based in Sweden, is launching a finance transformation project aimed at fostering greater unity through communication. The biggest obstacle, says CFO Peter Wallin, is getting everyone to look at the growth process from a group perspective, rather than from an isolated business unit perspective. Today we have 20 business units, and within each of them 5 to 10 key businesses. In most cases they are well run and people are taking great responsibility for improving those businesses. But that also creates a big obstacle to change. An obstacle, he might have added, that is hardly insurmountable, but that cant be ignored, either.
Finance groups often have difficult internal decisions to make as they work to match staff skill-sets with an expanded missionincluding whether to retrain present staff, recruit from within the company, or look outside. Many senior finance executives nevertheless welcome a larger role, challenging as some of the demands might be. It gives more of a stake for the [finance] department in the growth of the company, says Jain at Schneider Electric. Its a welcome opportunity for finance professionals. Indeed, for companies only recently embarking on a finance transformation, the task may be getting easier. The tools and the business-intelligence technologies that are available now do allow [the transformation] to move a lot faster than when we got started, notes Langwith at TD Ameritrade. So clearly there are some advantages to getting going right now.
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The Transformers: Syngenta FINDING THE RIGHT MIX OF OUTSOURCING AND AUTOMATION Syngenta, a global agribusiness group based in Switzerland, was formed from the merger of two companies a decade ago, after which it spent the next several years consolidating operations and moving toward a single enterprise resource planning system. Over the past three years, the company has gone further, reorganizing finance into three groupings: corporate finance, which includes functions such as treasury, audit, and corporate-level tax; finance operations and services, embracing transactions-related activities, audit, tax, and compliance; and finance business partners, which provide data and analysis to business units and help them manage new projects. Today, the company is extending a similar structure to other corporate-level functions, including human resources and information technology. The reorganization of the finance function had three key drivers, says A. Hariharan, finance services head, APAC at Syngenta: external challenges faced by a much larger, global company; pressures to improve the companys financial performance, in part by keeping costs in check; and a desire to find ways that finance could support Syngentas businesses more proactively. In response to the need for cost containment, responsibility for daily transactions connected with accounts payable, parts of accounts receivable, and quite some responsibility for the monthly closing of the books were outsourced to a business process outsourcing firm. This has enabled Syngenta to cut costs without any loss of benefit or control, says Hariharan. Actually, it has increased data visibility and enabled some new business insights. It also meant that the existing finance team members could be realigned between either finance services or finance business partnering. So the capability level within the company is changing from transaction processing to more-analytical work and focusing more on controls and compliance. Meanwhile, the finance business partners can do a deep dive into specific areas, such as looking more closely at commercial practices including customer risk management and pricing, as well as engaging in the strategy formation. Syngenta has had to meet a number of challenges along the way. Outsourcing to the BPO was time-consuming, says Hariharan, because it necessitated knowledge transfer to the provider and some locations had difficulty aligning their processes with the providers requirements. Language was another hurdle. Syngenta has over 26,000 employees in more than 90 countries. While the goal of the finance reorganization was in part to create a more standardized data and analytic environment, we have learned that we cant work only with English, says Hariharan. We need to be prepared to go to the local language level for effective training.
Since all of our training materials are in English, sometimes a three-day program needs to be extended to five days, because many times people cant keep up with the fast pace at which most trainers deliver in English. As the finance function has shifted to concentrate more on analytical work, it has also needed to communicate its new goals and expectations to team members, retrain some team members to meet those needs, and hire people with the necessary skills. This amounts to a significant culture shift for the company. For the finance business partners, it is important that closer engagement with the business units not shade over into micromanagement, notes Hariharan: Its a matter of finding the fine line between being a financial adviser and challenging the businesses on key points, and getting involved in every customer credit limit issue or pricing of the tiniest product. That line needs to be drawn carefully. More reporting functions are now becoming automated, which will enable Syngenta to create a dashboard that tracks data from all of its markets down to a much finer level than in the past. This has required a closer collaboration between finance and IT, not to mention further training to make sure finance and business team members are able to use the new tools effectively. The need for good communication has extended from the finance team itself to top management and other sectors of the company, Hariharan says. Providing good, detailed explanation of the changes that are going to come through and making sure these are shared in advance with other functions is critical, because changes in finance affect those functionsand those functions have to play their part correctly if finance is going to be able to deploy the systems and changes it needs to make. Thus far, he says, the reorganization of finance has delivered a tangible return on the effort made to surmount these challenges, in particular from greater automation and the ability of corporate finance and the finance partners to concentrate on more analytic and business-support work rather than routine functions. We have seen benefit from the procurement side, especially for indirect procurement, concludes Hariharan. But there have been clear-cut cost savings everywhere, and now theres a target to look for even more.
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SPONSORS PERSPECTIVE
The days when finance functions could meet their mandate simply by providing accurate and timely information on past financial performance have gone, say executives in this study among senior finance leaders at companies around the world. A powerful mix of factorsincluding greater corporate complexity, a need for more and better information on market conditions, rising concerns about risks and their controls, and a rapidly increasing number of new rules and regulations, set in a background of continuing tough economic conditionshas required finance people to change their game. While each finance team faces its own challenges, the senior executives interviewed for this study seem unanimous in their desire to transform their finance functions into higher value contributors to business performance. We at KPMG International would like to thank all those who took part in the interviews for their candor and willingness to share their experiences for the benefit of their peers. The factors causing the need for change in finance have not appeared all at once. Most of the finance departments that we work with have, for some time, been making continual, incremental changes in the way they do things and the services they offer. But in almost every case there comes a tipping point, when it is no longer enough to make just another small step. A more focused and concerted effort to reach a new level of performance is necessary to meet the combined challenges of todays external markets and internal requirements. As is clear from some of the personal stories and case studies in this report, the finance transformation can be a long, complex, and difficult process.
We looked in detail at how such transformation can be done in Transforming Finance, the KPMG International report which accompanied the first part of this research project and which was published earlier this year. Many of the approaches that we put forward in that paper have been used by executives quoted in the report in front of you, in particular the idea of creating centers of excellence as a way of focusing technical expertise on especially difficult finance areas, the conscious effort to improve communications with all parts of the organization, and the extension of the range of skills required of finance people to improve their abilities to understand their business and provide useful, high-quality analysis. For many companies, the aim has been to better integrate finance into the decision-making processes of all parts of an organization, changing the finance professional from a remote provider of information into a trusted advisor and partner to people at every level and function of the business. Finance needs to move beyond simply observing the impact of decisions; it should be a clear contributor of value, with equal responsibility for strategic decision-making throughout the business. In some ways this is a step back from the customer/ supplier relationship that has developed between many finance functions and the organizations they serve, in favor of a broad team approach in which everyone in the organization is responsible for working together toward a common goal. It is not an easy transition, and finance professionals have to tread carefully and show the value of their advice at every stage if they are to avoid accusations of meddling in decisions that are not in their normal territory. A fundamental part of this process is the transformation of the finance people themselves. There will always be a need for in-depth technical finance specialists, but for many of the tasks a modern finance department has to perform, it is no longer enough just to be technically proficient. The more successful finance departments we have seen are those which are successful in building bridges with the business, for example by sending some of their own people on temporary assignments into other parts of the organization to pick up practical experience of how the business works, and which welcome staff from other departments into the finance function as well.
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SPONSORS PERSPECTIVE
Job rotation has proved particularly successful when the interaction has been with IT departments. Problems with IT have featured large in KPMGs member firms work on this subject, with finance departments complaining that IT rarely gives them what they want, and IT responding that finance departments dont think carefully enough about what they put into their system requests. Putting an IT person into finance in an effort to expose where systems need to be improved, and a finance person into IT to find out why specifications need to be precise and explicit, can be the fastest way to reach a durable solution. The aim is to narrow gaps, to broaden minds, and to step beyond the boundaries of traditional finance job descriptions. This might seem to be a relatively straightforward exercise in improving communication. In fact, it is more than this. It is a step toward developing empathy for and understanding of another departments issues. We have found that efforts to improve communication only work if they include a willingness to change in response to feedback from other groups. Good communication goes both ways and is, ultimately, only a tool to bring about better cooperation, which often means changing the mind-set of finance professionals. It is unfortunate that these softer management skills are rarely taught in the course of a traditional finance training program. Universities with crowded curriculums and even more crowded classrooms cannot realistically be expected to add a thorough grounding in leadership, change management, communication, and general management to the education they already offer. It is increasingly down to the accountancy and consulting firms, and the internal management development programs run by big companies, to provide the additional exposure to business life that is necessary for young finance professionals to develop into business leaders. On the plus side, the new generation of finance professionals that is coming through today seems to be particularly receptive to embracing new technologies, developing a wider range of skills, and working in a looser management framework than their
predecessors. It may be more difficult for management to meet these peoples aspirations for a rich, varied, and fulfilling business career, but if doing so means that they are able to contribute substantially more to the successful running of their organizations, the investment may prove to be hugely valuable. Turning to the question of what makes a successful transformation, CFO Research has identified five key factors (see page 14). To these, we would add three more: Create a strong project management office with the authority to maintain the focus of the transformation activity, to bring-in execution power and ensure that the budget is being used correctly, to report on progress and quality of deliverables, and, ultimately, to declare that the project is complete. Measure the baseline performance of your finance function before you start and at pre-defined intervals along the way, so that you can clearly demonstrate where you have made improvements while delivering some quick wins along the way. Design the transformation project so that you can show some quick successes, to boost morale and maintain support for change in your organization. You really need to be able to show some progress within the first 3-6 months.
There is much discussion on the best way to use external consultants in these projects. KPMGs network of firms has a strong track-record in finance transformations. Our clients value our practical experience in managing complex transformations and our detailed knowledge of the tools and methodologies necessary to run this kind of project smoothly. Our professionals bring spirit, insight, focus, and resources to the table. But although consultants need to be able to test and challenge clients assumptions, transformation of this kind and size will provide lasting benefits only if it is clearly seen as a project which is fully owned and widely supported by the company. As consultants we can facilitate, validate, amend, and help implement a clients plans. The plans that really work and create lasting value are those that are backed with a high level of commitment that can come only from the company itself.
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KPMG Contacts:
Global/ELLP Head of Financial Management Martijn van Wensveen KPMG in the Netherlands Tel. +31 20 6564015 vanwensveen.martijn@kpmg.nl KPMG in Americas region Donald Mailliard Tel. +1 214 840 2848 dmailliard@kpmg.com KPMG in Asia Pacific region Wah Yeow Tan Tel. +65 6411 8338 wahyeowtan@kpmg.com.sg KPMG in CIS region Natalia Podvoyskaya Tel. +7 49 5937 4444 npodvoyskaya@kpmg.ru KPMG in Gulf region Mostafa Elshamashergi Tel. +966 (1) 874 8500 melshamashergi@kpmg.com KPMG in Latin America region Oscar Caipo Ricci Tel. +511 611 3000 oscarcaipo@kpmg.com KPMG in Australia Randy Wong Tel. +61 2 9335 8046 randywong@kpmg.com.au KPMG in Belgium Bart Walterus Tel. +32 2708 3880 bwalterus1@kpmg.com Bart Deckers Tel. +32 2708 4508 bdeckers@kpmg.com KPMG in Brazil Pieter van Dijk Tel. +55 21 3515 9444 pdijk@kpmg.com.br
KPMG in Canada Daniel Zbacnik Tel. +1 416 777 8129 dzbacnik@kpmg.ca KPMG in China Grace Shen Tel. +86 10 8508 5989 grace.p.shen@kpmg.com.cn KPMG in France Guillaume des Rotours Tel. +33 1 55 68 7529 gdesrotours@kpmg.fr Anne Claude Tessier Tel. +33 1 55 68 68 94 anneclaudetessier@kpmg.fr KPMG in Germany Andreas Reimann Tel. +49 211 475 8401 areimann@kpmg.com KPMG in Hungary Mark Bownas Tel. +36 1887 7122 mark.bownas@kpmg.hu KPMG in Ireland Selwyn Hearns Tel. +353 1 410 1958 selwyn.hearns@kpmg.ie KPMG in Italy Andrea Bontempi Tel. +39 51 439 2611 abontempi@kpmg.it KPMG in India Rajiv Gupta Tel. +91 12 4307 4586 rajivgupta@kpmg.com KPMG in Japan Hidehito Nemoto Tel. +81 3 3266 8347 hidehito.nemoto@jp.kpmg.com KPMG in Luxembourg Gilles Poncin Tel. +352 22 51 51 7230 gilles.poncin@kpmg.lu
KPMG in Mexico Fernando Mancilla Tel. +52 55 5246 8300 fmancilla@kpmg.com.mx KPMG in the Netherlands Paul Rothwell Tel. +31 20 6568095 rothwell.paul@kpmg.nl KPMG in Singapore Wah Lee Ho Tel. +65 6411 8008 wahleeho@kpmg.com.sg KPMG in South Africa Kobus Venter Tel. +27 12 431 1340 kobus.venter@kpmg.co.za Therese Cilliers Tel. +27 11 647 6749 therese.cilliers@kpmg.co.za KPMG in Spain Joaquin Yagez Ramos Tel. +34 91 456 3400 jyaguez@kpmg.es KPMG in Switzerland Markus Richter Tel. +41 44 249 22 10 markusrichter@kpmg.com KPMG in the United Kingdom Jacky Ross Tel. +44 20 7896 4224 jacky.ross@kpmg.co.uk KPMG in the United States Donald Mailliard Tel. +1 214 840 2848 dmailliard@kpmg.com
OCTOBER 2011
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From Keeping Score to Adding Value is published by CFO Publishing LLC, 51 Sleeper Street, Boston, MA 02210. Please direct inquiries to Linda Klockner at
KPMG International funded the research and publication of our findings, and we would like to acknowledge Therese Cilliers, Martijn van Wensveen, and Dan Zbacnik for their contributions and support. At CFO Research Services, Sam Knox and Eric Laursen directed the research and wrote the report. John Fischer served as designer. CFO Research Services is the sponsored research group within CFO Publishing LLC, which also includes CFO magazine, CFO Conferences, and CFO.com. October 2011 Copyright 2011 CFO Publishing LLC, which is solely responsible for its content. All rights reserved. No part of this report may be reproduced, stored in a retrieval system, or transmitted in any form, by any means, without written permission. The KPMG name, logo, and cutting through complexity are registered trademarks or trademarks of KPMG International Cooperative (KPMG International). Publication name: From Keeping Score to Adding Value Publication number: 110852 Publication date: 2011