Why efficiency is key to agility

Interview with Chris Gattenio

Chris Gattenio on why efficiency is key to agility

Chris GattenioChris Gattenio is vice president of IBM's Finance and Administration (F&A) and B2B Customer Service practice. An authority on shared services operating models, business transformation, and organizational change programs, Chris leads the strategy, development, innovation and thought-leadership of F&A and B2B Customer Services offerings in IBM's Global Process Services (GPS) business.

We talked to Chris about IBM's latest CFO study, "Pushing the Frontiers" to find out why a subset of CFOs, called Performance Accelerators, have been able to generate 70 percent more revenue and profit over the past three years than other high-performing peers.

What have Performance Accelerators figured out that the rest of us haven't?
One of the interesting findings in the study is that the average CFO still relies on spreadsheets and intuition for 66 percent of their work. That's not because they're in the dark ages. It's often because they lack the right systems, processes and data standards to improve access and leverage the latest analytics. Performance Accelerators, by contrast, are pushing ahead of their peers, having tackled the key enablers of finance efficiency and business insight. As a result, they are more effective at applying predictive modeling to improve decision-making, challenging business partner assumptions, business cases and plans, creating timely, reliable forecasts to steer business performance, and evaluating market trends and competitor actions.

What attributes correlate with high performance?
We have found that by establishing common process and data standards, frameworks and reporting mechanisms first, organizations can peel away complexity and improve their ability to generate insight across the entire business. It's notable that one hundred percent of the Performance Accelerators in our study have standard finance processes, a standard chart of accounts and common finance data definitions and governance. And 85 percent have implemented enterprise-wide information standards. That more than anything else explains why Performance Accelerators have been so effective. With a reliable information backbone, CFOs and their teams go farther, faster in applying Big Data and using predictive and prescripive analytics to generate reliable insights and drive profitable growth.

But process is so boring, takes forever and requires investment.
It can be irresistible to push for better analytics and better insights without defined data standards and systems in place. CFOs and their organizations are under so much pressure to move quickly and drive growth, they are required to use brute force to wrest what data they can and crunch the numbers. While they will get insights, not all of them will be reliable, leading to error, missed opportunities and re-work. Although process improvements and other efficiency measures can seem slow from a distance, we've found that organizations that take the time to get their house in order end up getting to the finish line faster for two reasons. First, some of the cost savings can be redirected to fund the systems and talent needed to monetize Big Data insights. Second, the more efficient an organization is, the more agile it is – less complexity and fewer hand-offs mean less friction, faster change, and greater transparency. That gives organizations a clearer line of sight into what the market needs, what their capabilities are, where they need to go and the most efficient path to achieve it.

But can't standardization get in the way of agility? Don't organizations need to flex standardized solutions to the needs of the front line?
There is no question that front lines need the ability to customize and configure what they do to the needs of their most important segments, customers and markets. But what we find is that if you break back office activities down to their component parts, only about 20 percent of any given process is unique. The remaining 80 percent are steps common to most industries and segments of the business, be they collecting receivables, paying suppliers and employees, or closing their books. In many cases, simplifying and automating that 80 percent makes it much easier for the organization to support unique geographical and statutory requirements because they have standardized processes in place that can be configured to support business requirements.

What's the most common pushback you hear?
Intellectually, business leaders understand the value of business and process transformation. But most feel they don't have time to transform. They have to get through the next quarter, digest the latest acquisition, or tamp down a fire in some part of the business. It can be overwhelming. Those responsibilities are real and have significant impact. But having been through countless transformations, I've learned that you can't wait to have everything done, because that time is never coming. There will always be something urgent vying for your attention and resources. So, the only way to create change is by putting a stake in the ground and finding some savings that you don't take to the bottom line, but instead reinvest to make transformation happen.

With business process transformation comes risk, the risk of cost or scope overruns or that promised benefits won't materialize. How can CFOs de-risk their investment and boost the odds of success?
Change is not going away. Instead, it's accelerating, and new capabilities driven by cloud, analytics, mobile and social are likely to sharpen that curve. The "secret sauce" in my opinion is having a permanent improvement team whose job is driving the ongoing, evolving job of transformation. That is what sets the most successful companies apart. These are usually small teams staffed by full time employees each with specialist knowledge. Some organizations put global process owners on the team, for instance, individuals in charge of specific functions, such as source-to-pay or order-to-cash. Most teams have Six Sigma, Lean management, and industrial engineering knowledge, since it's helpful to be able to pull processes apart to see where resources are spending their time, where they are getting bogged down and how workstreams can be simplified and automated to relieve those pain points. They also include change management specialists that bring the strong communication, training and project management skills needed to push transformation through on time and on budget. For organizations that have them, serving on a transformation team is often a coveted position. They're often used for management rotations to give rising talent the chance to engage actively in designing processes from the ground up, knowledge that will help them as they grow in their careers and take a bigger role in steering the business.

Any last words for those seeking to accelerate their own performance?
Understanding how operating models must evolve to keep pace with new business requirements is critical to sustaining profitable growth. The target operating model should be refreshed every few years to align with changing business requirements. Having acquisition integration strategies in place is also crucial because the minute you acquire a company, you're no longer standard from a process, system, and data point of view. Sustaining process and data standardization requires good governance and continual monitoring. It's also central to building a culture of analytics that can support predictive decision-making and profitable growth.