Rapid financial transformation: is it right for your company? With the agendas of many CFOs turning from stewardship to strategy-setting, financial transformations are getting new attention. A consultant makes the case for considering a rapid transformation rather than an evolutionary one.

As the era of corporate scandals and mistrust appears to be dissipating, many CFOs are making efforts to shift the role of their finance function from steward to strategist. This involves expanding beyond the traditional financial oversight and accountability activities to play a more active role in determining the company's direction and strategy.

As a result, many CFOs are looking at financial transformation as a means of helping reinvigorate the finance function, but finding that the traditional three- to five-year horizon is too lengthy to meet their goals. That need for speed is driving them to consider rapid financial transformation.

Many of today's finance projects are classified as transformational, but are actually evolutionary programs--programs of gradual change over time. Evolutionary programs generally comprise several operational or tactical projects, while transformational projects tend to differ significantly from traditional projects and are rarely used. Financial transformation is an enterprise-wide, strategic project that is led by the CFO and typically takes three to five years to complete.

A financial transformation has multiple objectives, a broad scope and, if effective, a substantial impact on the company. For example, a financial transformation may involve simultaneously shifting the finance operating model, establishing a shared-services center and replacing several technology systems affecting many, if not all, of the company's business units and financial processes.

A rapid financial transformation differs from a traditional transformation in one primary regard--it is finished in less than three years.

Why the Hurry?

The traditional financial transformation's customary three- to five-year time frame may be unacceptable for many reasons. We are seeing CFO tenure shrinking, so a rapid financial transformation can help a CFO to quickly reorganize the finance function and return to supporting revenue-generating activities.

CFOs may select a rapid transformation to ensure the transformation is completed and does not become evolutionary or forgotten. This is typically seen in instances where the company has a short attention span or has not been effective in executing lengthy projects.

Lastly, opportunities for transformational change often occur only when the company encounters some form of disruption requiring a quick response. During a change in executive leadership, merger or acquisition activity, regulatory change or industry instability, the CFO may only have limited period of time to restructure the finance function and return to normal business activities.

Anatomy of a Financial Transformation

Achieving a rapid financial transformation requires an understanding of the various components of a standard transformation. A standard financial transformation consists of a number of work streams or activities, outlined in Figure 1 on next page.

Visioning and Road Mapping. In the initial phase of the standard financial transformation, the CFO and finance leadership work to develop an understanding of the current role and capabilities of the finance function and establish a common vocabulary for discussion. Only then can the future role and capabilities of the finance function be developed. This should lead to a roadmap for the transformation.

Business Information Strategy. This activity is charged with evaluating information currently used to measure and manage the company, identifying information needed to manage the company after the transformation and determining hierarchies and relationships among all of the information. The end product is a business information model for the company.

Financial Data Management. In this work stream, existing financial information systems are evaluated, as is data movement between information systems. This helps determine what data is available and how it passes through the company. The result of these tasks is a high-level technology architecture for the company's financial information systems.

Business Information Design and Data Governance. The detailed data, rules, metrics and calculations that are required to support the enterprise financial information systems are developed in this activity. In addition, a data governance model and processes are defined to help oversee financial data, resolve data-quality issues and manage metadata.

Financial and Management Reporting. This work stream designs and implements a robust reporting system and related processes to help reduce the amount of manual integration needed to produce financial reports. As part of this process, management reports and flexible reports that help enable "what-if" scenario analysis are created. This work stream may also be responsible for developing industry-specific or regulatory reporting.

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Core Financial Process Development and Implementation. Core financial processes are evaluated, redesigned and enhanced. Also, finance policies and procedures are evaluated and updated.

Other Financial Process Development and Implementation. The finance function may also own other processes and procedures. These activities vary by company, but some examples include risk management, tax and planning and budgeting. This work stream will evaluate and enhance these activities as needed.

Financial Information System Design and Implementation. This activity involves the evaluation, design and implementation of the various applications and technical systems that support the transformed finance function. This may include data movement components, a data warehouse, one or more general ledgers, information delivery or reporting solutions, business intelligence applications and other calculation engines.

Organizational Design and Transition. Here, finance activities are aligned with new service delivery and organizational models and the most effective method for transitioning to those new models is determined. This can include evaluating sourcing models, selecting an operating model and determining how responsibilities will be divided among central, business unit and outsourced finance organizations.

Finance Capability Development and Training. In the capability-development thread, a human resources competency model is developed; this should include behavioral and technical competencies important for finance personnel. This model should be used to help assess and improve talent across the finance function and training finance personnel on new processes and systems.

Change Management and Communications. This activity, which extends throughout the project, focuses on organizational change created by the transformation and the routine communication of changes, activities and status to everyone affected by the transformation.

Project Management. This activity also occurs throughout the project and leads the transformation by overseeing integration among work streams, scope and change requests, issues, risks, quality and status reporting.

The Restrictions of Time, Scope And Resources

One key principle of project management is particularly important when rapid results are required. All projects, regardless of their objective, are governed by three components: time, scope and resources. Time represents the duration; scope is the breadth; and resources encompass both the number of human resources that will participate in the project and other associated costs. There is an important relationship among these attributes: If one changes, at least one of the other two must change, if not both.

This principle is particularly important for rapid financial transformations because the time component is critical.

Based on this principle, if scope is increased, the project must be extended or the resources increased or both, thereby increasing the project's cost.

12 Recommendations for Effective Rapid Financial Transformation

Effectively executing a financial transformation requires significant planning and discipline. However, a dozen other attributes also contribute to its effectiveness or failure. While the first four attributes discussed below are important components of both standard and rapid transformations, they are absolutely critical in rapid financial transformations.

1. The CFO is the executive champion. For a rapid financial transformation to proceed at the required pace, the CFO must lead the charge and help maintain project momentum. Without the CFO firmly behind the effort, the transformation may be unable to overcome organizational resistance and may ultimately fail.

2. A visioning phase is completed at the beginning of the project. Visioning is crucial because it allows all stakeholders to develop a common understanding of the objectives and outcome of the transformation. This prevents future project changes and realignments with different individual visions. Visioning may also help the CFO identify and deal with people who do not support the change.

3. The transformation is continually marketed to the company. For the company to accept the transformation and its associated disruptions, staff and management should continually be reminded of the business need for the transformation and the benefits it can create. This marketing may take the form of presentations, newsletters or other marketing vehicles.

4. Change management and communication are critical components. A financial transformation will likely impact people, processes and technology inside the finance function and across the company. For the transformation to be well received by employees, the amount of change occurring at any given time should be managed carefully, and change should be clearly and appropriately communicated in a timely fashion.

The remaining eight attributes are specific to effective rapid financial transformations:

5. Escalated issues are quickly resolved. During a transformation, issues will be communicated up to project leadership and even the executive leadership team. To help maintain the rapid pace of the project, leaders should resist a "just get it done" mentality and avoid placing blame for issues. Instead, they should strive to fully understand the issues and quickly identify approaches for resolution.

6. Flexibility is built into the project. In a rapid transformation, changes and corrections will likely be made to plans, designs, processes, applications and more throughout the project. The project team should anticipate and plan for these unknowns by taking actions such as deploying extra resources for activities that are not well understood and implementing scalable technology systems.

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7. The company engages outside resources to complement its capabilities. To move quickly, a company should consider bringing in collaborators to help navigate transformation activities. If the company doesn't have a solid track record with large-scale projects, it should consider engaging a consultant who has such a record. If the company doesn't have expertise with a selected technology, it should consider engaging technology or product experts.

8. Consultant experience is leveraged to help expedite decision-making. The company should leverage the consultants' knowledge and experience when making project decisions. This can be accomplished by having consultants help identify leading practices and time-tested strategies and solutions that have been effective in similar situations. Inductively evaluating solutions, rather than spending valuable time to deductively determine the most effective solution, can help to preserve the project's momentum.

9. Activities are completed in parallel whenever possible. Rapid financial transformations require that many activities be completed in parallel (see Figure 2 above). The key to this parallel concept is to determine inter-team dependencies and deliverables during the road-mapping phase of the project and communicate throughout the execution of the project.

10. The relationships among project components and delivery are understood. Beyond executing activities in parallel, participants should also understand how project components are related and how their delivery can be staged to suit the project schedule. For example, one traditional methodology indicates that all systems should be deployed to a business unit at one time. However, it may be possible to deploy a data entry system at the beginning of the month and a reporting system at the end of the month.

11. Existing process and technology standards are used when possible. To focus on making the important changes that are required to transform the company, existing processes and standards should be used whenever they meet the transformed company's business needs.

12. Financial data is understood and controlled. Only a portion of finance data is actually required to measure, monitor and manage a company. During the transformation, it can be tempting to gather data simply because it is available, but excessive data can have a significant impact on project time frames and system performance. The finance function should be vigilant in pursuing only the data required to manage the company and meet regulatory and legal reporting requirements.

As CFOs attempt to modernize and enhance their finance function, some may choose a revolutionary transformation but find they cannot realize their goals as quickly as they would like. In those situations, a rapid financial transformation should be considered, along with the company's commitment to meeting the finance function's goals. Those companies with the desire to make the commitment and the perseverance to use a rapid transformation approach have the opportunity to reap the benefits earlier than those that do not.

Jay Rabinowitz ([e-mail]) is a Manager at Deloitte Consulting LLP in New York.

RELATED ARTICLE: takeaways

* Many CFOs are expanding beyond the traditional financial oversight and accountability activities to play a more active role in determining the company's strategy.

* A financial transformation has multiple objectives, a broad scope and, if effective, a substantial impact on the company. Many of those are evolutionary projects that require three to five years, but a faster time frame can be critical.

* Specific "work streams" and attributes can go a long way to ensuring success. These include ensuring CFO leadership, appropriate communication, flexibility, control of financial data and use of existing technology.