The recent Hackett Report into what a world class finance function looks like is certainly welcome as far as GenCFO is concerned. It backs up the findings from our research, with the addition of some measurement of impact. One of its authors, Nilly Essaides, is appearing at our Generation CFO LIVE event next month.

While the economic fallout from the pandemic has put the focus on reducing spending and preserving cash, finance leaders must also find a way to keep transformation on course, while operating under unprecedented cost and resource pressures.

To achieve this fully, finance functions must be ‘world class’, the report argues. Hackett identifies ‘world-class’ as a moving target, involving continuous improvement. Organisations can unlock world class performance levels with accelerated digital transformation – Hackett refers to this as “digital world-class” => enterprise value creation (they go onto detail their findings on this).

“Finance can no longer rely on incremental improvement initiatives,” it states. “It must take bold, accelerated action on two fronts: adopt digital capabilities, and transform the finance operating model to one that propels the business to the next level and sustains digital world-class performance and agility.”

This often goes beyond finance, illustrating a company-wide mindset for innovation: “World-class finance performance is typically correlated with process and organisational maturity in other functions and parts of the organisation, all contributing to financial outperformance.”

This graphic is a particularly good illustration of this. The point on talent is particularly strong:

Finance cannot rely on acquisition when it comes to the skills it needs in the next normal, the Hackett Report argues. Therefore, companies need learning and development in order to upskill and reskill its workforce. “World-class finance organisations understand and are acting on this through their significantly elevated investments in training.”

We need to accelerate digitalisation

The report states that finance organisations will be highly digitised; enabled for self-service beyond the level of today’s world-class functions.

Finance teams must remember that this is a moving target; that there is a difference between ‘world-class’ and ‘digital world-class’. Finance needs to develop new digital streams and capabilities to drive analysis, business partnering and other needs of both the function and the wider organisation.

“Freeing up the resources to do so, however, will require adopting advanced technologies and updating the landscape architecture to deliver significant new productivity gains and operational efficiencies.”

This aligns closely with what GenCFO advocates as an approach: automate the core processes as far as possible, improving efficiency and productivity. This frees up key staff to do the higher value stuff, such as analysis and business partnering. We do this by embracing technology.

The Hackett report takes this further giving some idea of the FTE and cost impact. This may be useful for CFOs as info to include in a business case. Here are some key points:

  • Digital world-class transformation requires substantial net new investments in technology.
  • Finance must increase technology spend by 51% in order to realise the productivity gain of digital world class.
  • The finance team of the future spends 20% less on labour, 11% less on outsourcing, 65% less on other but 51% more on technology. Overall reduction of 17%.

We can achieve this by following the approach set out in the graph below. Take savings through automation and re-invest in new capabilities and technology. This is an incredibly important point, as it is all too easy to take the saving from automation without re-investing it.

How does being world-class help us during the current crisis?

The two sets of COVID-19 research taken by GenCFO and by Hackett reinforces the importance of analytics, modelling and reporting. World-class organisations already do this. Therefore, they were less disrupted by the crisis.

Where do we go from here?

It is clear that finance needs to accelerate transformational change to a new operating model that is capability-focused, digital-driven, modular, agile and enterprise-leveraged – one that supports and enables future business strategies.

This ties in with the GenCFO Digital Finance Function model; using technology to deliver against business strategy, partnering, asset insight, value and collaboration.

The action plan

The goal posts have moved. The time is now to make a difference; become digital world-class. “The focus should be on accelerating digital transformation and building the next-generation finance operating model that is designed specifically to perform at a digital world-class level.”

Visit the Generation CFO LIVE site for tickets to the event.