Finance functions can struggle with modernization. While leaders might be willing to discuss technology initiatives, they might not have an overall strategy beyond one primary solution.
“You need the right mindset — that no one technology, no one process improvement, is a silver bullet,” said Grant Thornton Finance Transformation Principal Thomas White.
“It’s looking at multiple types of technologies — including your existing tech — to support the vision,” White said. Technology and process modernizations should combine to form a dynamic foundation for your modernization.
It’s also important to be proactive. “We deal a lot with burning platforms and triggering events,” said Grant Thornton Managing Director Mike Hennessey. “That’s not the best time to modernize your finance function. At that point, you can’t react in the deliberate and effective way that you could if you did this in advance.”
One of the most important ways to implement a strategic and proactive modernization is to form an independent team that is dedicated to helping your organization move ahead.
The transformation office
“It’s looking at multiple types of technologies — including your existing tech — to support the vision.”
“I think it’s critical that you actually have a team dedicated to transformational efforts, with a full-blown strategy,” White said. “It can’t just be that each group has its own transformation team. You have to start with a central vision from someone that’s a leader for the transformation, like a transformation office.”
There are both strategic and tactical considerations for a transformation office, and the finance function plays an important role in these considerations.
Strategic considerations
“It’s not a transformation office in finance, or in operations, or in technology. It sits outside of, and interacts with, all of those functions.”
The finance function needs to be represented within, but separate from, the transformation office. “A transformation office has to be functionally independent,” Hennessey said. “It’s not a transformation office in finance, or in operations, or in technology. It sits outside of, and interacts with, all of those functions.” This independent structure is important to help the office establish a vision for transformation across the enterprise.
Enterprise vision:
Expanding on what White said about a central vision, functions across the enterprise need to collaborate on one plan for transformation and solutions. Hennessey explained, “If you don’t have that, you’re going to amass a lot more technical debt than you need. Your technical debt is the amount you have invested into your technology platforms and, if it’s done in silos with one-off solutions, it’s going to be more expensive, more inefficient and probably have a lack of controls.”
White added that the transformation office can reduce this technical debt by combining an enterprise vision with a technical understanding. “The office needs to know the different technologies and the different groups involved, how solutions can affect the organization and what’s happening from an organizational strategy perspective — like, if the organization is in acquisition mode.” With this enterprise vision and technical understanding, the office can help all functions take a proactive approach to modernization.
Proactive approach:
Here, the transformation office must look beyond “silver bullet” solutions to proactively plan for long-term needs — and the finance function needs to have a voice. “As you look out three to five years, what does your function need to do, and how do you need to prepare for what’s next for the company?" Hennessey said.
This proactive approach can help each function identify realistic goals and tactical steps to improve over time. “The office needs to have a mindset of continuous improvement, with a focus on ROI,” White explained. However, it’s important that the ROI not only focus on profit and loss, but on the cash flows underpinning the economics of the investment.
Tactical considerations
“You really need representation from, and leadership from, all areas of the organization.”
While a transformation office should be structurally independent, it also needs to be pragmatic. “Your transformation needs to have a focus on cash, with the ability to understand your sources and uses at any given time — and the volatility of them,” Hennessey said. The finance function plays a critical role in helping the office balance this focus, and possible opportunities to reduce expenses, against the proactive perspective of continuous improvement and ROI.
Broad representation:
The finance function brings important value to the transformation office, but so do many other areas. “You really need representation from, and leadership from, all areas of the organization,” White said. “Then, you can get economies of scale in terms of the technologies you are using, or cross-functional processes that are enablers of the data.”
Balance experience and innovation:
Apart from a range of functions, the office should represent a range of experience as well. The finance function needs to be represented by a mix of experienced knowledge and fresh ideas. “You need a good mix of legacy personnel and new blood,” Hennessey said. “I think the structure and the composition are both equally imperative. For experience, you need someone who has experienced most aspects of the finance function — somebody that might have both an FP&A and a controllership background.” New ideas are essential, while it is also important to use and protect institutional knowledge.
Focus on succession:
Modernization needs to call upon institutional knowledge, and it’s important to plan the retention or transition of that knowledge when needed. “Succession planning within finance has become essential,” Hennessey said. “The ability to absorb, or at least steady the ship during, transition is key. And that’s not an HR task. That’s a finance task, because it’s about the skills, training and development.” For finance and other transformation functions, succession planning means disseminating knowledge, clarifying and codifying processes, documenting rationales, and including junior team members in key conversations.
Ultimately, look for improved internal experience. On a day-to-day level, finance modernization should make life easier for the teams that use your systems and services. Are you reducing frustration? Are you minimizing or eliminating low-value tasks?
The right people with the right tools
“It comes down to three things: Put the right people in the right spots to succeed, give them the right tools, and then get out of the way,” Hennessey said. Modernization should look at the work to be done, rather than the roles to be filled. Then, it should look at how it can reduce that work for business value and ROI.
“What a transformation office would do is create capacity and create bandwidth,” Hennessey said. “That can be through processes or through tech. What the company chooses to do with that capacity and bandwidth is up to them.”
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