“They say that data is the new oil,” says Intel’s Kevin McBride. “It’s not that data is everything. It’s the foundation from which decision-useful information is derived.”
McBride, VP of Finance and Corporate Controller at Intel, shared how financial executives are successfully leading their companies through digital transformations at Financial Executives International’s (FEI) recent Technology for Finance Leaders conference.
“When you think about a company born in the digital era, they’ve structured their processes and data, so they have real-time, decision useful data. If you’re a fifty-year-old company with bespoke processes and data that is everywhere, you are at a competitive disadvantage.”
Financial executives can lead from the fore by spearheading efforts to benchmark the organization against their peers and assisting in formulating transformational end goals and roadmaps.
The Importance of Benchmarking
Steven Howarth, VP of Global Finance Operations at Medtronic Plc, commented on his experience with benchmarking, reflecting, “We did an internal evaluation about two years ago, and we asked how we deliver our functions. We think that we’re world class, we have very few internal control failures, we have a seat at the table for every significant decision made in Medtronic, and we’re delivering on strategic plans. But we never looked inward. We never asked, ‘are we leveraging the size and scale of a $30 billion company?’ Two years ago, we looked at how we deliver those services. Tools and technologies have changed the game. While we have been innovative in our organization, have we taken a hard look at how we deliver those services?” From these efforts, Howarth focused on two key insights:
- Size and Scale. “Twenty percent of our service deliver model is through centralized services. Today, world class organizations are in the 50 to 60 percent range.”
- The Cost of Finance. “Our cost of finance is two percentage points away from the world class models. Is that a reason to innovate? It’s a call to action. The innovation opportunity is how we build people and structures and develop – by not only enabling people with tools and technology but also how we drive business partnering.”
“Our cost structure (as a percentage of revenue) was growing, along with our headcount,” says McBride on Intel’s multi-stage digital transformation and the role benchmarking has played reflecting, “So, we took an initiative across our organization to lower cost and headcount. We took a look at finance in particular and found some opportunities to increase the size and scale of our shared service center. At that point, we were a 3,000-person finance team and our cost (as a percent of total revenue) was about 0.8 percent; we were told by our consultancy firm, that this was close to world class, but that our usage of the shared service center was relatively low, so we took the initiative to increase the size and scale of the shared service center.
“Then, in 2017, Intel got a new CFO, who asked us “what’s world class?” We took an even more expansive look. We thought we were world class, but we took this as an opportunity to look across our services and cost structure finance-wide to evaluate time to close, time to forecast, standard usage of data, reporting, and etcetera – up and down the organization. We found that, we were really off the benchmark; we found that, given the size and scale of the company, that we should be at 0.6 percent of revenue. So, we took even more initiatives to continue to lower the cost.”
In this process, McBride and Intel’s finance team came to the realization that the objective of finance is not to minimize costs but to help the organization make strategic decisions and aid in risk analysis. This realization provided Intel’s finance function with the perspectives needed to drive their own transformation.
From Benchmarking to Vision to Reality
Once organizations understand the gaps between their current capabilities and desired end state, they have the information needed to formulate a strategic vision and a roadmap through which the organization must travel.
People are resistant to change, especially as many roles will shift from manual tasks to roles requiring higher-level analysis. Chris Deery, Cargill’s Finance Global Process Owner, explains that organizations can achieve buy-in through focusing on communicating a clear picture of the digital transformation’s end state, rather than focusing solely on articulating the strategy. This will enable employees to see the benefits of change and more readily see how the change will impact their own roles.
McBride likens this communication by analogizing this change to people swinging a rope across a chasm. “You want them to grab the rope and swing across the chasm to the other side, but they are not willing to let go, unless they understand what they’re grabbing on to, so you have to clearly explain that transition to them. You have got to articulate what the future looks like in order to help people let go. You’ve got to enlist them in the transformation in the ultimate goals of the finance organization and make the connections between the role they play, the finance charter, and how the finance charter achieves the company’s strategic objectives. People come into work every day to help the business, not reconcile. In order to get down the road, you have to articulate what you want them to do. You need to explain to employees what you what them to do more of, as well as what you want them to do less of. Then you have to have reward mechanisms to reward the behaviors you are looking for and hold that up to the whole organization.”
Business Partnering – The Finance’s Next Frontier
At the end of this journey, Howarth emphasized finance’s need to become a true business partner within organizations. He comments that finance has always been a key decision-making partner with a seat at the table, but that finance professionals must become increasingly integrated within their organizations, stating, “It’s becoming a more strategic mindset utilizing enablers like technology to take the finance skillset and capabilities up the chain. We are in that change management journey. We are communicating things that define accountabilities and clear ways of success in our financial community. We have talked about what business partners do and don’t do. We know what they don’t do. They don’t do repeatable processes, generate reports, post journal entries, take full accountability for budget numbers, build budget models, and they do not work in silos.”
When considering the role of the finance professional of the future, Howarth expects that they will not merely be a part of the process, they will bring the analysis and information needed to change the mindset within the organization.