November 15, 2011
Finance Teams More Focused on Cost Control than on Growth Opportunities,
Accenture Study Finds
Fears raised that finance organizations lack resources to guide enterprises
in today’s age of volatility
NEW YORK; Nov. 15, 2011– Finance organizations are more focused on finance function cost control than on growth opportunities, according to a new study by Accenture (NYSE:ACN), and the majority of finance executives do not believe their finance organizations are using leading practices to deliver value to their enterprises.
The study, “Delivering Value: The Next Battleground for the Finance Organization,” which included surveys of top finance executives and their C-suite colleagues (CXOs), found that only 34 percent of finance executives say their finance functions are identifying growth opportunities. This is despite the fact that 79 percent of them believe that preparing for growth is “important or very important.”
Furthermore, 46 percent of CXOs and 38 percent of finance executives believe the finance organization’s primary focus in the coming year should be on growth-oriented activities, such as market expansion, while 41 percent of finance executives foresaw a mix of cost control and growth activities as compared to 36 percent of CXOs. Other executives participating in the study anticipated an emphasis on cost control.
“Finance organizations sat at the epicenter of the changes and challenges that companies have had to address since 2008 and they played a great defensive game, but now they need to shift focus, prepare for tomorrow and capitalize on the growth opportunities that can be found in select markets and geographies,” said Paul Boulanger, managing director of Accenture Finance & Enterprise Performance consulting practice. “Finance organizations that contribute the most to their company’s future performance will be those that align with the corporate growth agenda and have the right capabilities in place while sustaining the cost management gains of the past couple of years.”
A majority of finance executives do not believe their financial organization is employing leading practices to engage with and deliver higher value to the enterprise, according to the study. For instance, less than half (46 percent) said their chief financial officer is “aggressively leading the finance agenda,” and only 45 percent said finance collaborates with other corporate functions. Recognizing shortcomings, 54 percent said they are working to improve their capabilities.
Nearly a third (32 percent) of CXOs said that one of the greatest challenges facing finance leaders was insufficient funding to enhance their capabilities in an era of ongoing regulatory change and persistent economic volatility.
This may explain why less than half (48 percent) of finance executives said they are proactively responding to regulatory changes even though 78 percent consider addressing regulatory issues to be “important or very important.”
Nevertheless, finance executives are attempting to address regulatory changes and volatility, which they rated as their most pressing challenges. Sixty-five percent said they are assessing their company’s compliance with existing and future regulations; 58 percent are initiating proactive compliance programs and 55 percent are devoting resources for technology and capability development.
To navigate the volatility, finance executives are applying cost management practices (67 percent), risk management (66 percent), and advanced planning and forecasting capabilities (55 percent). However, only 40 percent said they are making use of balance sheet optimization, 30 percent are using advanced modeling techniques and 37 percent are focusing on finance workforce development to deal with the volatility.
Data and Talent Compound Challenges
Managing data and talent shortages are identified by financial executives as additional challenges and these could be hindering their support of enterprises.
Forty percent of the finance executives said increasing data volumes, the lack of consistent data and difficulty making data useful are creating challenges for finance. Consequently, 55 percent of these executives said they need better forecasting capabilities to enhance their performance management; 49 percent cite the need for tighter cash flow controls and 40 percent said they need greater visibility into current business results, including metrics and analytics that can aid timely decision making.
In response to talent shortages, just over a third (36 percent) said they plan to implement new workforce programs to help boost their finance professionals’ capabilities and performance. The practices they use vary, with the most frequently cited solutions including offering competitive salaries and benefits (62 percent) and tying performance rewards to an individual’s success (60 percent). Least frequently mentioned was the delivery of real time critical feedback (42 percent) or creation of global and local finance communities that can share knowledge (44 percent).
“Finance executives rightly identify talent shortages and data issues that complicate their efforts to add value to the enterprise,” said Boulanger. “If CXOs now recognize that funding issues are holding back the finance functions, it’s time for CFOs to fight for funding to help their finance teams develop capabilities to better support the business and orient themselves to address growth, regulation and volatility more effectively.”
Despite the challenges that finance organizations face, 66 percent of the CXOs surveyed expressed satisfaction with how finance integrates with other corporate functions, and 69 percent said their finance organization’s capabilities are either at the top of their peer group or above average. And 75 percent of CXOs indicated that they were satisfied or very satisfied that their finance organization contributes to strategy development and execution for the larger enterprise.
Abou t the Study
To complete the fourth in a series of studies focused on understanding the state of finance in organizations today and how finance masters set themselves apart from their peers, Accenture undertook a three-prong research approach during the first eight months of 2011. That included fielding two online surveys, with 536 chief financial officers representing 14 industries responding to one and 297 of their internal C-suite customers, including CEOs, COOs and CIOs spanning a matching set of industries. The survey data was augmented with information collected in the course of conducting a number of interviews with CFOs and COOs.
Accenture is a global management consulting, technology services and outsourcing company, with approximately 236,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$25.5 billion for the fiscal year ended Aug. 31, 2011. Its home page is www.accenture.com.
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