How to approach a financial transformation that adds value.

The keys to financial transformation processes

Andrew Yue unlocks the keys that need to be considered for change in the finance area, based on his extensive experience in mergers, acquisitions and business transformations:

• Leadership

  The CFO is in charge, but they need all levels of the department to be in sync and in tune with their long-term vision. There will be resistance, but there must be a critical mass in favour among those with decision-making powers.

• Appropriate team

  CFOs need a trusted team that shares their goals and approach. They must be respected and have standing among other employees. Here is some practical advice: get people involved in the process of change in the middle of the month, when they are least busy with their reports.

• Always have the goal in mind

  The organisation must be able to clearly understand and accept what the final picture will look like. CFOs should not keep this vision to themselves. In this way, everyone will be focused on the objective and will share the same vision and speak the same language.

• Create a perception that the change is real

  Signs of success of the transformation must be communicated, avoiding getting tied up in months of meetings and announcements of analysis and tests. As Yue says, “early, quick wins are crucial”, because they undermine detractors and sceptics. Change should not be perceived as an intellectual exercise but as a lever to create value.

• Proactive change management

  We must never underestimate the human factor, as, without it, any transformation will fail. Change creates losers. That is why Yue says it is useless to seek consensus. The natural tendency is to resist change. No one wants to leave their comfort zone, unless they are involved in designing and implementing the process. Changing the culture of a company involves changing behaviour. People don't resist change, they resist being changed.

• Clear communication

  These changes involve restructuring and headcount reductions. You have to be open and transparent from the outset, preventing messages from becoming distorted as versions spread through the organisation. What is done is more important than what is said. The CFO and their team must be the first to adopt and apply the changes.

• Eliminate organisational barriers

  For example, silos of business lines or products and residual areas resulting from acquisitions or mergers, which drag their own finance teams with interdependencies. Finance must work as a single team. And be very careful, Yue warns, with old-guard management that is attached to the traditional ways of doing things. The personal factor, so hard to deal with.

• Start slowly

  It is best to choose a pilot project representative of the area, for example by geographical area or line of business. This enables you to uncover problems and unforeseen issues without affecting the entire organisation. However, the people least inclined to change should be left out of the project.

• Robust governance

  All business areas have their priorities, and financial transformation may not be viewed positively from outside due to the high costs involved. The interests of all need to be considered and the company must speak the same language. The rest of the company should be involved in the process and contribute and offer constructive criticism.

Accenture's success story: culture + innovation + technology

Accenture, with annual turnover of 44 billion dollars and half a million employees, undertook a disruptive financial-transformation process several years ago led by its CFO, KC McClure. We tend to think that these changes are related to technology, but the transformation is closely linked to cultural change and commitment to innovation at all levels.

Automation

Automation and digitalisation of processes, driven in the case of Accenture by the implementation of its own global SAP system, enable the organisation's human capital to invest its effort only in areas where it generates value. The CFO assumes leadership of technological change throughout the company, not only the Finance area. This role that gained unusual importance with the pandemic and lockdowns, which have forced comprehensive digitalisation of the economy and society.

The Finance department, which was previously just regarded as the custodian of cash, has now also become the custodian of data. This is not so much about the custody of information as about its ability to unify the governance of data and spread its impact throughout the value chain. Data, as some experts argue, is still in its infancy and we are only now beginning to live with it and understand it.

The role of the CFO in the digitalisation of companies has tripled in just five years, according to a survey by McKinsey. In 2016, only 6% of CFOs received reports on digitalisation, whereas 31% say they are now leading this process in their companies.

As we have said, the pandemic has accelerated these processes. Most companies believe they are now better prepared when it comes to automation, in aspects such as pricing and maintenance. More than 50% have already automated their financial and accounting processes, and use data visualisation, robotics and artificial intelligence in advanced ways.

However, there are also some barriers to digitalisation in the finance area. If we rank them based on the CFOs surveyed by McKinsey, the main ones are:

• The huge investment cost.
• The lack of training of finance personnel.
• The cultural barrier and resistance to change.
• Ignorance of what technology can actually contribute.

And here is where the CFOs believe that technology offers the greatest value in the finance area

• Forecasting of income.
• Forecasting of cash flows.
• Projection of scenarios.

But no one is talking about forgetting the traditional tasks, such as accounting, control and compliance. These will continue to be critical, but will require less and less human involvement.

Training: Ancora imparo

Umberto Eco used to say that, before our digital age, people had completed their training by the age of 25. Now, the Italian genius says that learning in human beings continues until they retire. This is the ancora imparo (“I am still learning”) that Renaissance artists used as a refrain.

Continuous training is one of the keys to success in finance teams. Selecting the best talent is important, but this is like a photo that soon becomes outdated if it isn't refreshed. Training in finance - such as updating knowledge of legal and accounting regulations - is obviously essential. But a recent survey of 3,000 finance managers identified three skills that are considered essential for transformation processes:

• Technological training.
• Data visualisation and communication.
• New methodologies for collaboration and interaction.

As automation advances, employees become involved in activities where they add greater value, such as planning, analysis and advice. Experts think it is a mistake to focus on technology. The important thing is learning to work in the time that technology frees up for us.

In the case of Accenture, automation is the trigger for change but not its end. The end is creation of value by finance personnel. They say it now takes less time to prepare the financial statements: five days at the global level and four days locally, and just six days to deliver the final management reports.

As Andrew Yue argues, training can impart more skills and knowledge, but these changes are short-lived if they are not backed by cultural changes. Once change has started, most people find it positive when they are an integral part of creating the transformation, but resist when it is imposed on them.‎

Innovation and dynamism

In the case of Accenture, we are talking about applying innovative thinking throughout the financial sphere, with three objectives: to advise the company, improve employee commitment and optimise operating performance.

Steve Jobs warned us that innovation did not come from exchanges of emails, or from ad hoc organised processes, but was the result of spontaneous meetings and unscheduled creative discussions and exchanges. This is a reinterpretation by Apple's founder of Picasso's advice that inspiration does not come from thinking in a corner but from working.

Accenture's transformation process delivered results that transcend the financial area:

• A reduction in Accenture's general and administrative costs from 9.8% to 6.4% of revenue since 2005.
• Savings of more than 1.5 billion dollars in 2020.
• Thanks to the use of a financial records system, a single global instance of SAP enables us to operate better, faster and more profitably. For example, we can process 900 million dollars in payment of expenses, 135,000 records and more than 618,000 customer invoices.
• 67% of financial operations are performed in shared services centres.

Accenture's concept of dynamic culture and talent means moving from an approach focusing on accounting and control to one based on learning and supporting the business as strategic advisors. It means changing from being accountants and controllers to becoming key components in decision-making and business strategy.

This is what Accenture has achieved through Finance Reimagined: as the company continues to evolve from traditional finance to smart finance, it is driving greater value and insight and stronger risk management across Accenture as a whole, enabled by new processes and technologies, and a digital workforce.

‎‎Innovation is about people, not disruptive technology and products. Elon Musk, who knows a thing or two about this, has made it clear in his public statements. “Starting and growing a business is as much about the innovation, drive, and determination of the people behind it as the product they sell,” says Tesla's founder.

As Accenture warns us, the transformation of finance involves a multi-stage programme over several years. But if it is driven by innovation and built on robust and lasting foundations, and tailored to the organisation's specific needs, it can not only reimagine the Finance function but also be a driver of value for the business.