Governance: The key to digital transformation in the finance organization


Ray Curbelo

Global Head, Finance Solutions

To enable true digital transformation, CFOs should see themselves as business leaders first and finance heads second.

Enabling transformation means creating and sustaining the holistic, enterprise-level vision necessary to achieve major business objectives, such as improving the employee and customer experience, freeing up fresh cash flow, and getting to market ahead of competitors. It also means creating the structures, widespread buy-in, and governance necessary to keep a big, complex project on track.

Growth-minded finance leaders cast a discerning gaze on how the finance organization is run, how transformation happens both within and beyond the finance group, and, most important of all, how the business at large makes decisions and crafts strategy.

“Truly transformational CFOs are business leaders first and CFOs second,” observes Carla Moradi, senior vice president of go-to-market transformation at Anaplan. “They should be the critical enablers driving transformation strategy.”

Finding the right metrics to judge your operating model

To enable that kind of holistic transformation, consider these questions:

  • How good is your current operating model at advancing the goals you want to achieve?
  • What kind of operating model do you need to put in place to facilitate the future you have in mind?
  • What governance will you need to hold the team accountable for effective delivery of that vision?

Earnings, market share, and other business performance metrics are one traditional way to illustrate how effective your operating model is. Another more qualitative way is to consider employee satisfaction and the customer experience, both in terms of finance’s internal customers and the business’s external customers.

“You want to monitor KPIs and make sure you’re achieving your corporate targets such as growth, efficiency, cash flow, speed to market, market share, and earnings,” says my colleague Sara Baxter-Orr, global head of the CFO practice. “But you also need to ask, are your clients within the business happy with you? Are you doing all you can to serve customers and employees? When those two are being served well is when companies truly lead.”

One important step towards becoming customer and employee-centric is investing in automation and data science to improve their experience. Effective systems improve the customer experience by allowing you to deliver the right product where and when needed. Employee satisfaction comes from facing meaningful, exciting challenges, not from rote tasks required by outdated, manual systems and processes.

Ultimately, the success of your operating model depends in large measure on your investment in more effective, modern systems. And the success of your investments depends on governance.

Strategies and tactics to enhance governance

Transformation is a complex process that requires collaboration across functions backed up by solid governance and a diligent change communication campaign to succeed. To prepare your organization for new ways of doing things look at how decisions get made, how and what kind of performance is rewarded, and how the team is held accountable for progress on transformation objectives.

“You need to make sure that the dependencies are understood between and among all of the different initiatives within a big program so you can make good decisions,” Moradi says.

Changes in how you organize and run the finance organization can pave the way for broader transformation and help avoid pitfalls. Aspects of your operating model can also influence culture and performance, incentivizing the finance organization to think more broadly about their function and the business at large.

Consider these areas:

1) Modernize your decision-making engine with a broad range of perspectives

It might look like making the CFO the sole decision-maker would simplify the process, but simpler isn’t always better. If the CFO is the only decision-maker, transformation teams might optimize their approach, metrics, and updates for what matters to that one person, opening the door to bias or lapses. Even if that sole perspective is wise and unbiased, it’s hard for a single person to know everything about a situation. Without multiple perspectives, additional value or risks may not be uncovered.

Instead, consider a steering committee that is held accountable for driving critical decisions related to your transformation. Regardless of structure, you want to set up frameworks to ensure that the CFO is not the sole decision-maker and that others are incentivized to participate and feel ownership of the outcomes.

2) Create a diverse transformation-initiative steering committee

Digital transformation touches all aspects of the business. Even when a transformation project is centered in finance, having commitment across the finance leadership team or even the C-suite to make decisions together ensures buy-in and builds forward momentum.

The steering committee guides investments, direction, and outcomes of transformation initiatives. A subset of the leadership team, this is the team that will be held accountable for transformation and should be diverse enough across business and finance functions to compel those outcomes.

A day-to-day operational leader should drive the initiative. This group could include the following members to make sure you can build accountability, measure success, and set direction through a diverse set of perspectives and interests:

  • Two to four business unit leaders.
  • The Chief Accounting Officer and the Head of FP&A.
  • The heads of finance technology and IT.

Having a diverse and well-represented group of leaders helps you define the success of the transformation initiative together and share ownership and accountability beyond just the finance team.

3) Finance has a unique opportunity for enterprise-wide leadership

Few roles have the enterprise-wide perspective, business insight, financial acumen, and data literacy of the transformational finance leader. Finance has a unique perspective on business planning, because they bring the numbers together from across the organization to forecast performance for the month or quarter ahead.

Today’s finance leaders are uniquely positioned to guide the business into the future by creating a culture of curiosity and problem-solving, cultivating broad skillsets attuned to the digital age, implementing powerful data insight capabilities, and improving the frameworks and processes that govern business decisions.

There is a great deal at stake. With sophisticated data intelligence capabilities finally within reach, there are new efficiencies to be gained and new opportunities to drive growth and profitability to be discovered. Those who implement transformative technologies will tap into those insights and gain a competitive advantage.

When you bring people, data, and processes together, you expand the realm of the possible and open the door to new ways to deliver a growth agenda guided by finance leadership.

Learn more about spearheading change in the finance organization in our eBook, "The finance leader's playbook for digital transformation."