The role of the finance department is evolving from reporting on what happened last quarter to helping advise on strategic decisions for next quarter. Finance offices that understand how the whole organization works — and can quickly collect, verify, and analyze data — will be well-positioned to embrace this new role and dramatically increase their value to their organizations.
How can finance leaders spark this transformation in their departments? Just figuring out where to start can be a challenge. Is it better to invest in new technology first, or develop new processes and see where the technology needs are? And how can you get your team to buy into these changes?
ERPM Insights Founder Peter Chisambara is uniquely equipped to answer these questions. Chisambara began his career as an accountant and is now a finance consultant; he has seen how finance departments deal with change from a leadership and an employee perspective.
In this Q&A, Chisambara explains how to create the cultural shift that will lead your office of finance to a more strategic, more valuable role in your organization.
Based on our survey results, many finance leaders are going with “gut feel” over data-driven decision-making. Do you find that to be true? Why do you think that is?
I think most decision makers base their decisions on gut feel because they trust their own experience. The other issue may be that they do not understand the use of data. So for example, with data, there is the issue of data collection, validation and analysis, and many decision makers see these as very time-consuming tasks. So, instead of waiting around for the data to be analyzed and aggregated, and entered into informed insights, they would rather go with gut feel because they feel there are more important priorities to focus their energy on.
That’s from my experience in working with various organizations and also from where I’ve been employed previously. I would always encounter problems with the decision makers or the business managers, they would always complain that they are time-constrained and they don’t have time to wait for the analysis. They don’t have time to sit down with you, so they would rather use their judgement based on previous experience to make key decisions.
Why is data collection and validation such a time-consuming process for finance?
Just to go back to your survey findings, 51% of the surveyed respondents indicated they are spending more time on data collection and data validation with little time left for analysis. I think it boils down to the office of finance making available adequate tools and processes to aggregate the data. For example, many finance officers rely on manual processes — like Excel — so there’s always a back and forth exchange of spreadsheets. That can take a lot of time.
Do you believe in a single source of data truth for finance that can make these processes less time-consuming?
I actually believe that there can be a single source of truth. But we need systems that can talk to each other. We are in an era where there’s diverse technology used to data mine information from different sources.
For example, we can talk of systems that can mine unstructured data. This data can then be aggregated and built into a master data management system that can bring a single-source repository together for analysis. So for example, cloud based systems are able to process data in real time, and then finance people can write their own queries that can improve the information they input into their planning and analysis model.
How can we get closer to having all the data aggregated into one single source?
We need investment in new technology. For example, I mentioned cloud-based solutions. These cloud-based solutions can assist finance to do real time analysis; they can query information or data points and aggregate those data points into a single data repository, the single source of truth.
In short, we need finance to invest in technology, in new tools. But at the same time, we need processes. We need a different model. We need to accentuate services that many finance officers have implemented, but then we also need a center of excellence focused on financial planning and analysis only.
So in that case, if we’ve got a center of excellence that is focusing solely on financial planning and analysis, then we’ve got employees or finance teams who have their time freed up to work on scenario analysis.
What is keeping finance from achieving this digital transformation?
In my experience, I think the office of finance is not yet ready. I’ve always said that in finance, we’re not pace keepers or pace setters when it comes to adoption of new technologies. But if you look at other functions of the business, like the sales and marketing teams, they are quick to embrace new technology.
So what we need within the walls of finance is a change of mindset. We need to look at the opportunities that are presented by these new technologies. So many times, when there is change that is coming, we always think about the negative, that technology is coming to take over my job. If we can change this mindset, if we can look at the opportunities, if we can demonstrate technology’s worth and how it is going to improve finance, then I think there will be a rapid uptick in terms of evolving the finance office.
Where does this change start: With people, process, or technology?
I believe that people come first. Adoption of technology is all about change. We need to convince people. They need to buy in. You might have state of the art technology, but if the people are not buying into what you want to achieve, then to me, it’s just a waste of money or a waste of resources. So we need people.
Once people have bought into what they want to achieve — that they need to provide real time insight to aid strategic decision — then they will understand that we need the processes, and that we need the right tools. So in my opinion, I’ll say it’s people and processes, and then technology. For example, once people are buying into the idea of increasing financial planning analysis, then it might start with processes that are manual, but as the scale grows, you will need to implement new technologies.
What skills or qualities should finance leaders be looking for when hiring, with an eye toward digital transformation?
People with the right mindset to move things forward. If you look at how the roles in finance have evolved, most of the people in the finance teams are qualified chartered accountants. They are CPAs, or SIMA or ACA. They have got a broad base of technical skills. But now, their role has evolved into one where finance has to be a strategic adviser.
For the more advisory role, you no longer need these technical skills. You need connection acumen, you need business knowledge, you need to understand what the drivers of performance are, what the destroyers of performance are. Also, finance needs to collaborate more. You need the soft skills, leadership skills. These are not skills that many finance people are comfortable with.
If you can improve the skills, then at the same time — because we are talking of aggregating different sources of data — it means we no longer need to fill finance offices with people who are only technically minded, who are qualified through the accounting route. You now need people who are data scientists, who are able to mine the data from different sources. You need people who are behavioral scientists, who can understand what is driving customer behavior, how we can shift our strategy to influence this customer behavior.
What would you consider a high value activity for finance leaders? How can we focus on these high value activities?
In my opinion, a high value activity is an activity that enables an organization to achieve its strategic objectives. So if we are just collecting data and storing up, and we’re trying to validate if that data is correct or is accurate, that does not help in achieving the strategic objectives of the company.
Just collecting data on how customers are shopping or how they are spending money on our products does not help us. When we analyze that data and we try to figure out what insights we’re getting from that data and we try to understand what is driving the behavior of our customers, what is driving the people to buy from us, what is driving the people to leave, then I regard that as a high value activity.
The way finance people have previously been trained is just to balance the books, to justify what has happened, what we have reported. Now we need a mindset shift to becoming proactive. We need to understand business in its entirety. We need to understand how the different units of an organization — operation, sales, supply chain, marketing, etc. — collaborate or integrate for the greater cause of the business or to achieve the main objective of the business.
How can finance leaders help their teams start developing the understanding of the business that leads to better analysis?
lt comes down to: “Do we have the tools in finance to aid that?” It’s one thing to say that we want finance to partner with the business and to provide more value, but it’s another thing to make sure that the finance teams are really empowered to do what we really want them to do. As I’ve mentioned, yes, the people are changing their mindsets, but a culture shift is also important. For finance to be able to perform this scenario analysis, they have to stand up from their desks and start getting involved in operations of the business. They need to go out there and meet the business partners, engage them continuously in dialogue, understanding their concerns, understanding what it is that they want from finance.
As finance engages in business more and more often, it will then start understanding how the business works, how value is created. So it then becomes an easier shift from justifying results, or from being reactive, to being proactive.
Once you’re aware what the main drivers of business are, what the cost drivers are of the cost base, what the drivers of revenue and margins are, then you’ll start looking at different sectors that influence that business’ performance. And then you can start incorporating this information into your analysis model.
For more insights from Peter Chisambara and 14 other FP&A Experts, check out our interactive quiz