Is there any way to conquer complexity once and for all? In a recent survey conducted by CFO Research, in collaboration with software giant SAP, finance executives revealed that their most effective weapon against mounting complexity — and the key to maintaining a company’s adaptability and resilience — resides with their well-integrated use of technology. According to the 159 senior finance executives from large and midsize companies who responded to the online survey, businesses need systems that boost agility, improving their ability to share critical information across the enterprise. (The full report, “Future-Proofing the Complex Modern Business,” can be downloaded at cfo.com/research.)
“By having better information, we can promise products to our customers faster than our competitors,” said Darin Holderness, corporate controller at Woodgrain Millwork, a manufacturer and distributor of moldings, doors and other woodwork. “Without that information, we can’t send people out to confidently promise that. The same goes for product costs. If I have somebody who wants a one-time buy at a reduced price, without good information on the availability of the product and its cost, we can’t give that information quickly enough.”
Finance leaders have some rethinking to do as they work to promote a strategic approach to handling information. In order to deploy data as a strategic asset, the finance function needs to lead the way in assuring the production of trustworthy information. That effort might include, for example, establishing standards for data quality or raising existing ones. It may also mean taking a holistic view of key information, ensuring that data is consistent throughout the enterprise.
Integration, as it turns out, is a big step toward establishing data reliability. The survey, in fact, found a strong correlation between enterprise-wide systems integration and the accuracy of financial data from operating units and subsidiaries. (See Figure 1, above.) By reducing the level of manual intervention required to collect and consolidate such financial information, companies are also improving its quality.
The drivers of complexity are both internal (such as expanding product portfolios or frequent changes in strategy) and external (such as new regulations or economic turbulence). In the worst-case scenario both sets of forces converge, leaving a company hobbled by complexity even as its more nimble rivals speed ahead.
Finance chiefs need systems that won’t slow the function down. They must be able to assimilate incoming data, formatting and distributing it in such a way so that key stakeholders can easily glean insights from it. One CFO said that his company would focus on “making [data] available to people in as easy, quick, and concise a format as we can, to allow them to make good decisions in the limited amount of time they have to spend on it.”
Finance executives face a considerable challenge in giving themselves the same latitude in decision making. In answering one of the survey’s open-text questions, the VP of finance at a large health care company described the dilemma in terms that captured the pressures that finance executives face: it’s as if they are positioned at a railroad crossing where they have to figure out how to prioritize each of the many speeding locomotives roaring their way.
“We will be required to improve quality, transparency, and accountability and prepare for fundamental, structural changes in our industry, while simultaneously dealing with stagnant demand and revenue growth that is less than our underlying cost growth,” says the finance VP. “We need to improve efficiency and effectiveness.”
To make the latter improvements, survey-takers said, companies will have to develop tighter links between different units, and between the financial systems that support them. A solid majority of respondents, 79%, said that financial governance and control across all operating units and subsidiaries will need to be strengthened in order to have the most effective operating environment.
What companies need to avoid, said Steve Harry, CFO of Unum UK, a division of the global insurance giant, is the formation of “a spaghetti of legacy systems” that can naturally pile up as organizations expand. Nearly three-quarters of respondents (73%) said that they expected the complexity of their financial systems to grow in the next two years.
The Ultimate Sophistication
In order to obtain the kind of information they need, finance executives need to persuade their peers that the investment in integration is worth it. Participants in the survey said that they aren’t interested taking baby steps.
Indeed, it seems senior finance executives will not be satisfied with anything less than financial systems that are well-integrated across the enterprise. In fact, even at companies with systems that are well-integrated at the corporate level but not at the operating-unit level, few respondents characterize themselves as “very satisfied” with the existing level of integration. (See Figure 2, above.)
The ultimate goal, after all, is blessedly straightforward. Steve Helmbrecht, CFO at Itron, a technology company, put it succinctly when he said that behind the company’s integration effort was “a need to paint a single global picture of all of our financial data, using a single financial system.”
As hard as it may be to achieve, the end-result is valuable. And why shouldn’t it be? “Simplicity is the ultimate sophistication,” as Leonardo da Vinci said — a sentiment that held true centuries later, when an upstart Apple Computer adopted it as a slogan.