Finance operating models
Long-term value over near-term efficiency
Many finance organizations across various industries are being asked to provide more insights and proactive decision support while reducing costs. The order of the day seems to be do more with less. In response, many business leaders seek new operating models to tackle the dynamic marketplace.
Transforming the retained organization
Many finance organizations across various industries are being asked to provide more insights and proactive decision support while reducing costs. In response, many business leaders seek new operating models to tackle the dynamic marketplace. These initiatives often take time, investments, and considerable organizational focus to realize the savings. However, this can lead to a myopic lens that keeps Finance leaders from recognizing that there may be significant value left on the table in the organization left behind, the retained organization.
Operating model transformations can create a significant opportunity to enhance the retained organization through analytics and business collaboration. These activities can drive sustainable value for the enterprise for years to come. To help unlock the full value of the retained organization, three key dimensions should be addressed: capacity, capability, and collaboration:
- Capacity: By virtue, centralizing or outsourcing transactional Finance activities expands the local retained organization's capacity. CFOs should determine what to do with that capacity—often realize savings immediately through headcount reductions, reinvest in the organization, or a combination of the two. The amount of reinvestment is finite, which means compromises are made. This function is poised to make that call: Finance is positioned to understand where opportunities in the organization are located based on the fact that it serves as the steward of all financial data. Finance can make an informed decision on where these reinvestments impact the organization's strategic enterprise and operational value drivers the most.
- Capability: Regardless of the amount of reinvestment, the retained Finance function is generally a leaner operation in the new world. However, a chief priority remains the return on investment. Every dollar allocated to resources should pay in dividends in the value realized. Following the transformation, the responsibilities of the retained organization should differ dramatically. Finance leaders need to define expectations of the restructured roles. By aligning the growth and development of talent with a clear path for career progression, an organization can cement its ability to retain top talent and attract in-demand recruits.
- Collaboration: Once it is determined where targeted business interventions will materialize, responsibility often falls square on the shoulders of the retained organization to reach out to various business functions to elevate their roles. It is worth mentioning that every function may not welcome the new partnership since Finance's traditional role is that of a numerical gatekeeper who reports the news around historical performance. Generally, a seat at the table is earned, and in order to help overcome this common stigma, Finance can gain trust by consistently providing proactive, data-based, strategic, and operational insights that help drive value creation.
During these significant transformation efforts to centralize or outsource finance activities, a majority of the time is focused on the activities transitioning out of the organization rather than the retained organization. Paradoxically, the retained organization is where Finance can often drive significant impact.
Investing in the retained organization can promote sustainability and enable a laser focus on unlocking enterprise value. Building capacity to execute value-added activities can catapult Finance beyond the numbers to become a true strategic partner across functions, thereby galvanizing the organization. To be most effective, Finance leadership should balance motivations for near-term efficiency with a deliberate stake in long-term value.