Publication date: March 2008
Title: The Evolution of the Finance Function: Teaming with Business Management to Adapt and Thrive
Sponsor: Microsoft
Research Director: Sam Knox
Companies cited:
- 3M Company
- Accor North America
- Air Products and Chemicals
- Dow Chemical Company
- Fidelity National Financial
- Genzyme Corporation
- Hilton Grand Vacations
- Universal Music
- USDA Food and Nutrition Service
- U.S. Department of Labor
- Valassis Communications, Inc.
- Wal-Mart
Summary:
In February 2008, CFO Research Services (a unit of CFO Publishing Corp.) launched a research program on business innovation. Through a survey and interviews, this study explores how the finance function works with business managers to support new and better ways of making and selling a company's offerings, as well as new and better methods for executing management processes.
Change is everywhere. To address internal needs, companies change their systems and processes, improve how information is gathered, tracked, and delivered, create metrics to collaborate and manage more effectively, and standardize measurements of operational performance. Driven by external pressures from stakeholders, regulators, investment analysts, competitors, and suppliers alike, companies with a global vision have to respond. The distinction increasingly is being made between those who respond as a reaction to problems, and those who proactively foster and cultivate change—the innovators.
As business units envision and create—or refine and rebuild—business models, finance takes an increasingly important role as their partner. Finance teams are looking to expand expectations beyond the traditional accounting and compliance functions they perform. They are eager to apply their expertise to the core of the business—those activities that are most directly tied to the company's success or failure in the marketplace.
Finance sees its greatest impact on change in business model innovation, using its expertise to evaluate and forecast the paths most likely to push their organizations up to the next rung on the ladder of success. Fully a third of the respondents in our survey say that, over the next two years, they expect their companies to allocate resources to effect dramatic—not just incremental—improvement in finance's support for business management. As one executive notes in our interviews, "You cannot get game—changing output from incremental effort."
Being seen as a full partner in collaboration with business managers is one of the most important factors for success in achieving these kinds of dramatic results. To gain an invitation to this "seat at the table," the finance team must work to demonstrate the value that their informational capabilities and analytical acumen has for improving and expanding the business' core products and services. Doing so will help finance to move beyond its traditional reporting and scorekeeping role and into the strategizing function, where it can make a deeper impact on critical business decisions.
This study reveals the value of collaboration by comparing companies that involved end users in evaluating and selecting technology with companies that don't. In virtually every category of effectiveness that we examined, the employees who had substantial input to technology decisions were able to make better use of that technology and derive greater value from it. When companies encourage the collaborative involvement of end users, they find they get better results.
But finance cannot create these kinds of value—added partnerships all on its own—a truly collaborative working relationship needs the help and commitment of others in the organization. Buy—in from top management to support these initiatives, willingness of business unit managers to partner with finance, using the right systems in the right way, and aligning rewards with outcomes all are critical to the successful evolution of the new finance function.
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