Accenture Report Reveals Gap Between Finance 'Masters,' Others

MBA (6/5/2008 ) Palaparty, Vijay
A report from Accenture, New York, reveals a large degree of disparity in financial institution performance, showing a wide gap between finance "masters" and lower-performing institutions.

The report, High Performance Finance Study 2008: The Changing Role of the Finance Organization in a Multi-Polar World, differentiated leading corporate finance organizations and their ability to perform at a high level. It also illustrates a lack of focus among organizations in developing capabilities to address operational and strategic challenges.

Accenture defines as finance “masters"as companies that reported advanced capabilities in a combination of areas: finance function management, enterprise performance management, finance and accounting operations, enterprise risk management and corporate finance.
“Few executives today believe their finance organization is performing at the highest possible level,” said Dan London, managing director at Accenture’s finance and performance management practice. “Many believe they lack the processes, data, tools, organizational structures, governance and skilled workforces they need to capitalize on the new markets, resources and opportunities for value creation the global economy offers.”

Finance masters deliver value to corporations with a laser focus on strategy, aligning their organization, capability development and selection of departmental initiatives with overall corporate business objectives, the report said.

Finance masters reported taking a different approach than non-masters to the way they perform the finance function—63 percent of masters versus 37 percent of non-masters said they accurately measure the annual cost of finance and its related cost drivers.

“This lack of insight and data and the concomitant lack of actionable metrics to measure performance makes it very difficult, if not impossible, to identify where and how improvements could be made and what investments and what levels of investment make the most sense both in terms of competing successfully and enhancing shareholder value,” London said.

The report also revealed that masters were more than twice as likely as non-masters to have implemented advanced, integrated risk management processes and technologies—42 percent versus 20 percent. They also were nearly twice as likely as non-masters to have implemented advanced enterprise performance management capabilities such as predictive or advanced analytic tools or executive dashboards that help them monitor corporate performance against management metrics—31 percent of masters versus 17 percent of non-masters.

“The challenges underscore the need for finance professionals to examine the performance of finance masters to get new ideas about how they might improve their teams’ performance,” London said. “Finance masters recognize that they do not have to excel in everything, but they organize themselves and develop capabilities in areas that are of the greatest strategic importance to the company to drive value for their shareholders and the enterprise itself.”

The report noted masters spent 20 percent of their time planning and developing enterprise strategy, while non-masters spent 15 percent of their time on strategy—masters spending more time on strategic matters and less time on operational details than non-masters did. Conversely, non-masters said they spent about 47 percent of their time managing finance and accounting operations on average while masters said they allocated an about 25 percent of their time to those activities.

The report also noted that globalization adds to complexities and challenges faced by finance executives. Fifty-eight percent of respondents said the greatest challenge they will encounter as their companies enter emerging markets will involve building and sustaining the governance levels and internal controls that will enable them to comply with additional regulatory, tax and compliance demands and to account for revenues in different currencies. Nearly half ( 48 percent) of respondents said that to meet such challenges and position their finance organizations for success, they will need a standardized operating environment across geographies and business units.

“Globalization is increasing the pace of change and the level of risk finance executives confront as they strive to help their companies grow and deliver value to shareholders,” said Steve Culp, managing director of corporate finance within Accenture’s finance and performance management practice.“Shared services, enterprise resource planning software systems and outsourcing will become even more critical tools for helping finance organizations and their enterprises address the complexities and manage the cost-control challenges of globalization.”

“As finance executives continue to grapple with how to most effectively support their enterprises while maintaining sufficient control on costs—all the while dealing with the increased speed, complexity, competition and risk inherent in a multi-polar world—they should keep in mind that strategy matters a lot,” London said. “Without it, there is no way to know which finance capabilities are most relevant and which consume scarce resources unnecessarily."

London also said finance organizations that can keep pace with the speed of change and effectively deal with complexity can drive substantial bottom-line results. “The status quo won’t work. The role of the CFO today is broader and more complex than ever and consequently requires finance executives to develop new approaches to managing their function and interacting with the business at large or risk being left behind,” he said.