Former CFO, FAO metrics guru, and FAO provider Chris Gattenio has been an advisor for more than 1,000 CFOs. This month, she examines why finance leaders are challenged to analyze information critical to power growth, innovation, and competitiveness.

by Chris Gattenio

Q. Finance is under increasing demand to support strategic growth initiatives, yet finding the time is an escalating challenge. How are other companies addressing this?

A: For finance executives, avoiding the most common pitfalls of transformation initiatives has become a full-time job. At the top of this list is the struggle to sift through the vast amount of data they collect to deliver predictive insight and analysis for strategic opportunity.

With profitable growth residing at the top of the CEO’s agenda, many finance executives have the power to unleash future growth by breaking down complex processes and systems and applying innovative methods to unlock information, provide new fact-based insight, and create significant competitive advantages for their companies. The problem, it seems, is finding the time to efficiently analyze the relevant data necessary to achieve transformation goals.

Recently, IBM released its study of 900 senior finance executives worldwide to reveal that only a third of respondents rate themselves highly effective in supporting the CEO’s efforts to grow the company. The study found that at a huge cost to the future competitiveness of companies, almost 50 percent of executives report finance staff are tied up in transactional activities such as processing accounts and tax transactions, with only a quarter of staff focused on decision support. Furthermore, respondents state nearly 60 percent of finance organizations do not have robust processes and activities in place to support growth.

According to IBM, respondents excel at reporting historical financial results and meeting compliance requirements, but many are then unable to unlock—from the exploding volumes of data—the hidden gems of information that could uncover future business opportunities and foresee trends or costly problems ahead of time.

THE SURVEY HIGHLIGHTS
Finance executives stated that the three most important aspects of their role included delivering performance insight (69 percent); providing insight to grow the company (60 percent); and supplying insight to financial risks (58 percent).

Despite these aspirations, the survey finds only 13 percent of executives rate themselves as highly effective in two or more aspects of the role and, alarmingly, more than half do not rate themselves highly effective at all. The performance gap is directly linked to fragmented business processes and time-
consuming transactional activities, which prevent efficient information integration and analysis of the business. Consider the following:

• Transaction-focused activities for finance executives’ teams fell by only three percent since 2003 to 47 percent in 2005;
• Growth-focused decision support and performance management activities increased only two percent from 2003 to 26 percent in 2005.
• Fact-based insight versus “gut instinct” decision-making is at a premium. Almost 40 percent of companies still have separate manual processes and controls to collect compliance data that deliver backward-looking, after-the-fact reaction to risk events and growth opportunities.
• As a result of fragmented systems, data gathering is difficult, and fact-based insight is hard to come by, leaving decision-making to intuition. About 70 percent of respondents have not yet implemented enterprise-wide process and data standards, pursued process simplification, reduced the number of disparate platforms, rationalized budgeting and forecasting tools, or reduced the number of enterprise resource planning (ERP) systems.
• Nearly two-thirds of the survey respondents indicated that finding and developing people with the appropriate finance and business skills to drive growth is a challenge.

• Over half of the respondents indicated that they struggle to deliver analytics to plan, forecast, and measure business opportunities for profitable revenue growth.

The study also correlates a financial benefit may be linked to the effective analysis of financial information to drive growth activities. Analysis of publicly available financial data from nearly 300 of the study respondents reveals companies with highly effective delivery of performance, risk, and growth information have increased revenue growth and are driving more value creation compared with their industry peers with less effective insight delivery.