Their seeming lack of progress, however, is not a sign that past initiatives have fallen short. Rather it’s the result of the pace at which technology moves, continually redefining the meaning of progress. While closing the books within a few days might have been a stretch goal 10 years ago, today many companies want to close their books in 24 hours, enabling them to spend more time on analysis. How much more can the process possibly speed up? Paul Huck, CFO of Air Products and Chemicals, envisions closing the books continuously throughout the month, so that managers can identify problems and opportunities as they develop, not a month after the close.
Finance executives are engaged in an unending, and exhausting, race to catch up with new technologies. “I don’t know if it ever gets done,” says Daniel Knutson, CFO of Land O’ Lakes, a farmer-owned food and agricultural cooperative. “There’s always something new.”
Managing the challenge effectively — investing in new information technology where it will yield the greatest return — served as the focus of a study conducted by CFO Research, in collaboration with KPMG, the giant professional services firm. Surveying 358 senior finance executives at companies with annual revenues of more than $1 billion, the study sought to learn how large-company CFOs are planning to use technology to further their strategic initiatives over the next two years. (Download a summary of the research, “Intelligent Finance Organizations: Research Summary.”)
The survey found that CFOs view technology as an enabler of better financial planning, information reporting, and analysis. Yet they are aware that in many cases their companies have not fully leveraged technology’s capabilities. In fact, nearly 40 percent reported that their existing information systems could not support analysis of financial and performance information well. Further, they admitted that the financial and performance information that management uses for decision making is not as accurate as it could be.
And it’s not just budget constraints holding them back. CFOs are clearly aware that their companies are not as effective as they could be in terms of evaluating and assimilating new technologies. Almost 60 percent of respondents, for example, said that their company often has difficulty “translating business needs into technology solutions.” Nearly as many, 54 percent, said that their company has “too many competing technology initiatives.” (See “The Trouble with Technology,” above.) Given the rapid rate of technological change, a management team that dithers when it comes to justifying an investment decision may find that, in the meantime, an even newer technology has emerged.
Stuck in the evaluation phase, the decision-making process can turn into a never-ending loop — a finance executive’s version of Groundhog Day.
Making Value Visible
It’s not just the rapid rate of change that makes technology investments hard to assess. Given that these are often mission-critical decisions, involving large sums of money, a simple cost-benefit analysis is hardly sufficient. The technology’s impact on the organization may not be fully visible until additional investments — in training, for instance — are made. In the case of some error-reducing technologies, it’s challenging to quantify the reduced risk.
Two-thirds of survey respondents said that they try to demonstrate that a given technology investment will yield a sufficient return. “What is going to add value? Certainly, that is the challenge,” says Phillip Widman, CFO of Terex, a diversified manufacturer. “In some cases, the objectives you come up with can be aspirational.” Aside from identifying the appropriate technology, CFOs have to convince top management to purchase and implement it.
And before deploying a new technology, executives need to provide a framework for it, motivating workers by giving them a clear understanding of the anticipated benefits. Support for any new system increases once employees understand what’s in it for them, as well as how it will benefit the wider organization.
Helping employees accept, even embrace, a new technology is a substantial challenge. Jeff Richard, CFO of Safety-Kleen, a collector and processor of used oil and other liquid wastes, says he gained a fuller appreciation of that when the company implemented a new data warehouse, along with business intelligence software. “It’s such a shock to the work force when all of a sudden they have a bunch of data and a bunch of tools that they really don’t know how to use,” says Richard. “We’ve really had to be careful in rolling these new systems out so there’s a positive impact.”
As far as Richard is concerned, training is key. In fact, he says, “we really went overboard in getting the proper training for our people on these new tools.”
Insight Trumps Efficency
As CFOs’ roles have expanded — in many cases, giving them direct responsibility for IT — they have had to become more educated about technology. The more they know, the tougher it becomes to choose the most urgent IT investment. Which of their near-term priorities, if acted on, will produce realizable benefits while also being most clearly related to the business strategy? Technology tools must fulfill one of two broad mandates: establish sustainable differentiation and drive innovation, or support a cost-effective environment for core business processes.
In the survey, the majority of respondents were interested in technologies that would boost their insight into the company’s performance. Fundamental issues of data quality and consistency, the building blocks of such insight, also ranked highly. Asked about their near-term technology priorities, 60 percent of those surveyed cited improvements to management reporting and analytical systems. Slightly fewer than half (47 percent) mentioned financial reporting, with only 22 percent citing financial governance. (See “On the Agenda,” above.)
Finance chiefs, it seems, are looking at their technology initiatives through a tiered lens, ranking business analysis as a top priority. It makes sense. As organizations confront the ever-expanding challenge of leveraging Big Data into a competitive edge, they can’t afford to lag behind. Although they are often characterized as opponents of change, CFOs are learning to lead the way.