CFOs Seek To Transform Finance Function But Legacy IT, Staffing and Costs Are Major Roadblocks; Cap Gemini Ernst & Young Survey Profiles Thinking in Scandal-Plagued Business Climate.Business Editors NEW YORK--(BUSINESS WIRE)--Aug. 12, 2002 In a major in-depth survey released today by Cap Gemini Ernst & Young, most CFOs of 265 large U.S.-based corporations indicate that, while accounting scandals Accounting scandals, or corporate accounting scandals are political and business scandals which arise with the disclosure of misdeeds by trusted executives of large public corporations. and the recession are driving the transformation of finance departments, their departments may not be able to meet the challenge. Inadequate processes, legacy information technology (IT), insufficient skills sets, and the need to build senior management support are the key issues that need to be addressed. While 81 percent of CFOs agreed that accurate revenue and earnings forecasting is either a "high or the highest priority" in the present business climate, and 93 percent believe they are complying with all external reporting requirements, 63 percent indicated they are saddled with inadequate budgeting, forecasting and decision support IT systems. "Today's CFO See Chief Financial Officer. needs to provide senior executives with insightful financial and operational information - the tools that can help them make effective decisions and defy de·fy tr.v. de·fied, de·fy·ing, de·fies 1. a. To oppose or resist with boldness and assurance: defied the blockade by sailing straight through it. b. current economic volatility," said Rich de Moll, vice president in the Finance and Employee Transformation practice at Cap Gemini Ernst & Young, one of the world's largest management and IT consulting organizations. "CFOs also need to build CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. and board support for a transformation blueprint that will enable finance to adapt to immediate and future demands." Cap Gemini Ernst & Young collaborated with CFO Research Services to conduct the survey in May 2002. Respondents In the context of marketing research, a representative sample drawn from a larger population of people from whom information is collected and used to develop or confirm marketing strategy. included chief financial officers, corporate controllers and other senior financial officers of large companies in various industries, including manufacturing, retail, chemicals, energy, telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. , financial services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. and healthcare. The findings are reported in "CFOs: Driving Finance Transformation for the 21st Century." The report also captures the individual perspectives of 12 senior finance executives from such leading companies such as American Express American Express (NYSE: AXP), sometimes known as "AmEx" or "Amex", is a diversified global financial services company, headquartered in New York City. The company is best known for its credit card, charge card and traveler's cheque businesses. , Intel, Chevron Phillips Chevron Phillips is a chemical producer jointly owned by Chevron Corporation and ConocoPhillips. The company was formed July 1st, 2000 by merging the chemicals operations of both Chevron Corporation and Phillips Petroleum Company. , and Allergan. The Challenges The CFOs cited a number of roadblocks that hamper their efforts to improve the quality of information delivered by finance: near-term pressures such as operating in the weak economy; increased scrutiny of accounting and reporting practices; greater demands for up-to-date information that can be acted on immediately; and demand for almost immediate positive return on investment. Because they are, in essence, being asked to do more with less, respondents cited costs and time commitments, and organizational and cultural barriers, including upgrading staff, as the main challenges to the transformation process. The survey reveals the following: - 84 percent plan to have budgeting and forecasting processes that are partially or fully dynamic and based on operational drivers within three years (vs. 52 percent today) - 64 percent cited a need to develop, change or upgrade the skills of their finance staffs - 59 percent said they need greater support of senior management to transform their departments - 56 percent cited a general need to acquire new technology, especially IT systems - 53 percent said they need to build the perception among their internal business units that finance should be a partner in their business development "Ultimately, I think that the 10 percent or so of the companies in America that have really transformed their finance departments have done it by changing people," said Kent Potter, CFO of Chevron Phillips, the chemicals joint venture between Chevron Texaco and Phillips Petroleum, and one of the 12 who agreed to in-person interviews. Without the appropriate skills, even a "successful" technology or process implementation could be negatively perceived because finance was unable to demonstrate its value-added benefits to the rest of the business. Financial Transformation: Road To Success When asked what tools were needed to fully deploy financial transformation, many respondents cited shared services shared services, n.pl the administrative, clinical, or other service functions that are common to two or more hospitals or their health care facilities and used jointly or cooperatively by them. , outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. and Web enablement. The most common finance activities for shared services included cash management, fixed asset management and payroll; benefits, tax and payroll activities represent those that are mostly outsourced. "CFOs: Driving Finance Transformation for the 21st Century," for example, indicates that one company, American Express, successfully contains much of its costs by consolidating nearly all of its transaction processing Updating the appropriate database records as soon as a transaction (order, payment, etc.) is entered into the computer. It may also imply that confirmations are sent at the same time. Transaction processing systems are the backbone of an organization because they update constantly. into three shared services centers Shared Services Center is the entity responsible for the execution and the handling of specific operational tasks Accounting, human resources, payroll, IT, legal, compliance, purchasing, security. . American Express is also in the process of consolidating its reporting functions. The company's CFO Gary Crittenden Gary Crittenden (born 1953) is the Chief Financial Officer of Citigroup, succeeding Sallie Krawcheck from 12 March 2007.[1] Prior to joining Citigroup, Crittenden was Executive Vice President and CFO of American Express, as well as the head of the company's Global , who agreed to an in-person interview for the report, said, "Let's eliminate time that we spend on repetitive reporting and free up time so we can spend more time focusing on the business and on what the future performance of the company is going to be." IT tools were also seen as key to the success of financial transformation. For example, only 23 percent of companies today have partially- or fully-integrated ERP (Enterprise Resource Planning) An integrated information system that serves all departments within an enterprise. Evolving out of the manufacturing industry, ERP implies the use of packaged software rather than proprietary software written by or for one customer. systems for handling transaction processing. In three years, 77 percent of these companies expect to move toward implementing systems that are partially- or fully-integrated. The CFO's Role in Strategy The survey found that CFOs in general are deeply engaged in driving long-term company growth. Sixty percent of those polled see their role in the development of corporate strategy as a priority. Even though senior financial executives indicate they are personally engaged in strategic activities, only 25 percent believe the rest of the organization views finance as a value-added function to be consulted on key decisions. Further, only 39 percent are very satisfied that finance consistently influences the strategic decisions that drive shareholder value. To succeed at finance function transformation, CFOs believe the active support of the CEO and board is crucial. Gaining their support will require creating business cases with built-in metrics metrics Managed care A popular term for standards by which the quality of a product, service, or outcome of a particular form of Pt management is evaluated. See TQM. to gauge results of the transformation, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. the survey. Although CFO roles have shifted somewhat over time, finance transformation has taken on a new urgency for many companies. Many of the most pressing issues CFOs face - including greater forecasting accuracy and transparency, which 58 percent cite as a top priority - depend on enhancing finance's capabilities, according to the survey respondents. Methodology CFO Research Services conducted a written survey of almost 30 questions (many with subset A group of commands or functions that do not include all the capabilities of the original specification. Software or hardware components designed for the subset will also work with the original. questions) in May 2002 of 265 senior finance executives at U.S. companies with over $500 million in annual revenues. More than 80 percent came from companies with over $1 billion in revenues. Over half the respondents held CFO or senior vice president of finance titles. Others held posts of controllers or vice presidents of finance. In-person interviews with 12 CFOs from leading companies were conducted and provided additional context for the survey data. Fairchild Semiconductor, ING US Financial Services, Hillenbrand Industries Hillenbrand Industries, Inc., is a holding company. It has two subsidiaries. Hill-Rom makes hospital beds, furniture, and other equipment. Batesville Casket Company makes caskets and cremation urns. , and Cinergy were among the companies represented. For more information about this survey or to download a copy of the report, please go www.us.cgey.com/transformfinance. About Cap Gemini Ernst & Young The Cap Gemini Ernst & Young Group is one of the largest management and IT consulting organizations in the world. The company offers management and IT consulting services Noun 1. consulting service - service provided by a professional advisor (e.g., a lawyer or doctor or CPA etc.) service - work done by one person or group that benefits another; "budget separately for goods and services" , systems integration, and technology development, design and outsourcing capabilities on a global scale to help businesses continue to implement growth strategies and leverage technology. The organization employs around 56,500 people worldwide and reported 2001 global revenues of more than 8.4 billion euros. More information about individual service lines, offices and research is available at www.cgey.com About CFO Research Services Original research and thoughtful analysis are the cornerstones of CFO Research Services, the sponsored research unit of CFO Publishing Corporation, which publishes CFO magazine. This team of research professionals dissects emerging trends in business strategy and financial management using mailed surveys and personal, on-the-record interviews with respected chief financial officers and other senior financial executives. Published white papers and research reports often provide a backdrop to conferences and seminars produced by CFO's Executive Programs group. For more information, please go to www.cfo-research.com. |
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