Finance Benchmark Study-2013

8/12/2019 Finance Benchmark Study-2013

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ContentsIntroduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Overv iew . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Finance supporting the business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Business insight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Human talent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

The key to future nance evolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

The nexus of insight, efciency and human talent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

The model of success . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46


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Case studies & insightsPG&EDriving actionable insights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

BD Business leaders, not just par tners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

F a c i n g a d a p t i v e c h a l l e n g e s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 8

Finding & nurturing talent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Workforce intelligenceStepping stones to improved workforce ROI . . . . . . . . . . . . . .24

British American TobaccoUnlocking time and value . . . . . . . . . . . . . . . . . . . . . . . . . . .26

S k a n d i a S t r e a m l i n i n g t h e s y s t e m . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1

A silver lining for every cloud? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32

Jaguar Land Rover Cashing up the plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34

CorningSuccessfully bringing shared services to China . . . . . . . . . . . . . . . . . . . . . . . .38

Treasury in emerging markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40

Lean into nanceA different way to lead a nance organization . . . . . . . . . . . . . . . . .44


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Median budget reporting times have

improved about 14%in the past year.

80% of nance professionals report that theaccuracy of forecasts is critical to their business.

But only45%believe that their companysforecasts are reliable.

Top companies have automated more

than twice the number of key controls

vs. typical companies.

Only 6%of nance leaders attendinga recent PwC summit report beingcomfortable with the status of their

current nance technology.

Only 1in 3organizations indicate thatemployee development plans are standardized.

The cost of nance at average rms is

more than 60%higher than at topquartile rms.


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Welcome to UnlockingPotential: Financeeffectiveness benchmark

study 2013, PwCs fth

annual benchmark report,which outlines the latestndings of our analysis ofmore than 200 companiesthat have participated inbenchmarking projects. Thereport draws upon detaileddata from theseorganizations, together

with observations of theleading practices that drive

top performing nancefunctions.

The data conrm that theleading nance functionsare different from the rest,and provide more valuedinsight to the business.They manage talent moreeffectively, and have theright people in the right

roles. They spend less timegathering data, and muchmore time understanding

what it means. And theircosts are much lower thanthe average.

Mike BoylePartner(617) 530 5933

[email protected]

Ed ShapiroDirector(678) 419 4513

[email protected]

The challenge for nance has notfundamentally changed over the years.Providing more for less, streamliningand reducing transactional costs,providing an effective control

framework, and helping the businessmake the right decisions to improvebusiness performancewe know allthis. The challenge is in execution. ThePwC benchmark data conrm that theleading nance teams are achievingresults that are very different from thenorm. In this report, we focus onorganizations that are achievingsignicant change and improvement.

The opportunities for nance to assumea more central role in corporatebusiness strategy and planning arealmost limitless, but the barriers to fullpartnership are many. Companies

saddled with outdated technology andpoor data quality still struggle to fullltraditional core nance responsibilitiesin an efcient way, leaving little timefor insight generation. Many also havedifculty dening the skills needed forhigher-value activities, and ndingqualied professionals to step into thesechanging roles (or re-training existingpersonnel) remains a real challenge.

At the same time, the rapid evolution ofdata-gathering and advanced analysispresents the nance professional with

an overwhelming amount of data thatneeds to be rationalized and turned intouseful information for customers, bothinternal and external. This complexityis compounded by the continued

globalization of organizations and newintegration and risk managementchallenges.

This report draws together trends weobserve in the benchmark data, andidenties practices that support top tierperformance. We have also spoken tonance leaders in a number oforganizations to explore what they aredoing that makes a difference, whatthey have been able to achieve, andtheir future plans. We have included anumber of these interviews in this

years study.

Organizations portrayed in this reporthave made real progress in a number ofareas. Their challenges and successesare unique to their situations. There aremany paths to success, but there are

also common themes. The mostsuccessful nance organizations areproviding more effective businesspartnership and business intelligence.They are changing their operatingmodels to be streamlined and efcient.

And they are using technology ininnovative ways to provide better dataand to break down departmental datasilos. Companies are also re-evaluatingtheir strategies in emerging marketsnow valuable business opportunitiesrather than part of the supply chain.

This report looks at how nance isresponding to these challenges anddesigning the nance operatingmodels that are a t for the future.

Introduction

Successful transformation starts with a measured

baseline and assessment of the opportunity, andprioritization of what is important to enable nance

to better support the business strategy.

Andrew McCorkell, PwC EMEA, Director of Benchmarking

6Finance effectiveness benchmark study 2013


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As nance functions seek to keep pacewith mounting business and regulatorydemands, our benchmark analysis can

provide a clear assessment of strengths,weaknesses and areas for improve-menta baseline from which tomeasure progress. The analysiscombines a qualitative assessmentand comparative metrics across thecomplementary dimensions ofbusiness insight, efciency,compliance and control.

Business insightlooks at evaluationssuch as a comparison of time spent onanalysis and data gathering and anassessment of budgeting andforecasting processes and the qualityof their outputs.

Efciency analyzes transactionalprocesses using a range of keydeterminants including the complexityof systems and time to close/report.

How we rate nance functions

Compliance and controlexaminessuch areas as tax compliance, treasury,audit and risk management.

The resulting analysis not onlycompares these ratings against yourpeers, but also seeks to assess whetherthey are operating in equilibrium andare meeting the overall objectives of thebusiness. For example, over-emphasizing cost may, in somecompanies, inhibit the functions abilityto provide insight and value.

Benchmarking is an importantcomponent of PwC projects, andinvolves gathering (in strict condence)a full and accurate baseline of efciency

and effectiveness metrics related to theclients nance function. In each case,

we work with clients on a process-by-process basis to understand how theseresults are achieved. The benchmarkingof nance forms part of PwCs wider

benchmark services covering a range ofintegrated support areas. In addition tonance benchmarking, PwC also

provides benchmarking servicesspecic to:

SG&A

Human Resources

Information Technology

Procurement

Supply Chain

Innovation

If you would like to complete abenchmark assessment or would like todiscuss any of the issues raised in this

report, please contact your local PwCrepresentative.

Unlocking Potential7


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How do you balance the competing demands of insight, efficiency and control?

Control

How do you ensure thatyou have the appropriatebalance of robust controlswithout constraining thebusiness?

Efficiency

What initiatives could youundertake to improve theefficiency andeffectiveness of thefunction processes?

How do you align with the business to

provide an effective pe rformancemanageme nt and challenge mechanism?

Business insight

Do you have theoptimal sourcingstrategy?

How well do you

leverage technology?

Do you have the rightgovernance model topartner with thebusiness?

2013 PricewaterhouseCoopers LLP. All rights reserved

PwCs standard finance processes

Business insight

Strategy & planning Budgeting & forecasting

Business analysis

Performance improvement projects

Transactional efficiency

Accounts payable

Travel and expenses

Accounts receivable

General accounting Financial / external reporting

Management reporting

Compliance and control

Treasury

Internal audit

Process controls & compliance

Tax accounting & compliance

8Finance effectiveness benchmark study 2013 Unlocking Potential8

PwCs nance assessment framework


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Overview

The potential gains to be realized bythe synergy between a fully evolvednance organization and thebusiness at large are compelling.Unlocking this potential is a taskthat requires attention to a numberof critical components. Companiesthat are able to lead this evolution

will likely realize cost efciencies,more timely and accurateforecasting, truly informativemanagement reports, andsignicant operational gainsthrough improved decision makingand a real partnership betweennance and the business units.

Achieving this leading performance

does not necessarily mean thatnance costs need to rise. Financecost as a percentage of revenue hasstabilized this year followingseveral years of growth (seeFigure 1) but still remains asignicant investment forcompanies. Average performers areoperating at 60% higher costs fornance than top quartilecompanies. Organizationalefciencies, such as outsourcing andshared services centers, arecontinuing to drive down the cost of

nance while opening the door foran increased focus on businesspartnership and insight generation.

Gains are also being made in thedrive toward efcient and timelyreporting. Median budget reportingtimes dropped about 14% whilesmall improvements were also seenin the forecasting cycle (seeFigure 2). These gains are largelydue to incremental improvements intechnology and automation. The gapbetween median and top quartile

organizations (which typically havemore advanced technology and ERPsystems) is signicant. Across the

years, companies with top quartileperformance exhibit similarreporting timesthese are stablethresholds or goals for companiesstriving for top-tier performance.

The cost of nance at typical rms is more than 60%higher than at top quartile rms.

Unlocking Potential9Source: PwC nance benchmark data

Figure 2: Budgeting and forecasting cycle (days)

0

20

40

60

80

100

120

140

20121320111220102012132011122010

120

Median

Budget Forecast

Top quartile

94

120

90

103

20

7

19

717

7

90

Source: PwC nance benchmark data

Figure 1: Finance cost as a percentage of revenue

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

2012-132011-1220102009

0.82%

1.02%

0.54% 0.56%0.61% 0.56%

0.93% 0.93%

Median Top quartile


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Finance supporting the business

Finance functions today aregenerally succeeding in theirtraditional role of supporting thebusiness. Finance professionals andthe consumers of their services

within companies view nancedepartments as strong in theirstandard functions of generalaccounting (i.e., reconciling andconsolidating corporate nancialinformation) and external reporting(i.e., preparing consolidatednancial information to meetexternal regulations). Three in fourcompanies also see business andnance strategies sharing the sameobjectives and being closely aligned.

However, nance functions arestruggling in two signicant areasrelated to business insight. Oneplace this is revealed is in PwCbenchmarking engagements, wherenance professionals and theircustomers across the businessare asked to rate the variousservices that nance provides forimportance, and for performance.Management reporting thatinforms decision-making is ratedas one of the most important nancefunctions. But performance in this

area is rated much lower (seeFigure 3).

The second nance area with asignicant importance/performancegap is providing analysis andsupport to business partners.Finance professionals and theirclients consistently rate theimportance of this area to be high,but performance is lower. Internalconsumers of nance see asignicant need for nance to stepup and improve performance in

formulating nancial strategy anddeveloping the organizationsstrategic business plan.

Although gains have been made,particularly among top performingorganizations, the centralization anddistribution of nancial and non-nancial data is still not happening as

effectively and efciently as it might. Inmany organizations, whether due todeciencies in technology or functionalsiloes, information does not ow asfreely or quickly through the businessas it needs to. Further advances in this

area will fuel nances continuingevolution in support of overall businesseffectiveness. Some organizations arealready making real progress intackling these data and technological

challenges, and have a clear vision ofwhere they are headed. Later in thisreport, we will hear rst-hand accountsof how some companies are movingproactively to address these challenges.

Figure 3: Finance professionals importance & performance rankings

Management reporting that informs decision making

Management reporting that informs

decision making is near the top of

financial professionals priority list.

But performance in this area

is ranked much lower.

Performance BETTERWORSE

Importance MORELESS16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1

16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1


The C-suite and business line leaders are increasingly

asking for their nance organization to play a higher

strategic role in the companys overall business plan,

evaluating and recommending changes to business models,and seeking innovative ways to improve protability.

Carol Sawdye, PwC US Vice Chairman & CFO



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Finances evolution fromsupport service tochange agent

Finance has traditionally served as acorporate support function, reacting tothe companys tactical needs, ratherthan acting as the creative force behindinsight and change. However, manycompanies have experienced nancetaking a more active role in drivingbusiness performance and strategy.

About 2 in 5 (42%) companies seenance as a facilitator in the strategicplanning process, rather than merelyplaying a supporting role. Meanwhile,about half (53%) of benchmarking

clients see nance working closely withthe CEO in developing the companysbusiness strategy.

Finance organizations are transitioningfrom a focus on accounting to advancedbudgeting and planning. By successfullymastering the necessary closing tasksand increasing both speed andaccuracy, nance has been invited toaddress broader questions, such aswhat are the best KPIs for measuringsuccess? and how can theorganization match the budgeting andplanning process to client needs?

Additionally, organizations arerealizing that they cannot effectivelymanage the business by nance metricsalone. Many additional pools of data arebecoming available (both internal andexternal to companies). More insightfulnance functions are increasingly usingnon-nancial data (such as customersatisfaction and product information) toidentify areas where companyperformance can be improved or costscan be reduced. The nance team at oneinnovative PwC client forecasts call

center trafc, and utilizes that as one ofthe factors to optimize stafng levels.Other innovative clients track theirconsumer preference rankings, andconduct modeling to identify the factorsthat can improve their rank.



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The nance organizationat Pacic Gas and Electric(PG&E) has evolved from

a transaction-basedreporting organizationto a provider of actionablebusiness insights. JasonWells, Vice President of

Finance, talked with usabout this transformationand about the benets that

PG&E is reaping as a result.

PG&E is one of the largest energy utilitycompanies in the United States.

Approximately 20,000 employees carryout its primary businessthe supply,transmission and delivery of energy. Thecompany provides natural gas andelectric service to approximately 15million people throughout a 70,000square mile service area in northern andcentral California.

PG&E has a leading nance organizationthat has begun to reap the rewards ofmoving past governance and reportingto realize the benets of truly partnering

with the business to drive performance.Jason Wells explains that several yearsago PG&E realized that the nance

organization was spending too muchtime on transactional activities, monthlyreports, annual budgets and forecasts.This got in the way of providingactionable insights to the organization.

Mr. Wells describes how two years agothey began to simplify the planningprocess. PG&E upgraded to a new SAPproduct and then took a step back toredesign the planning process, spendinga year and a half on system performanceand stabilization to make both theprocesses and the technology workfaster, better, and more efciently.Through this transformation, Mr. Wellsexplains, the most signicantimprovements were process-driven,rather than technology driven. PG&Econsidered whatwas being tracked, as

well as how.

For example, the nance organizationfound that they had previously devotedsubstantial time to forecasting a numberof items at a very granular level.However, the granular forecasts werenot very accurate, and really notnecessary for decision-making.

Forecasting at a less granular level wasvery simple, much more accurate, andmore appropriate for decision-making.Mr. Wells listed several processes thatthis granularity issue applied to: itsbetter to budget projects at a planning

order level than at the detailed workorder level, and its better to forecastoverall ancillary employee-related costsand not items such as specic employee-level parking costs. The nance teamchanged the granularity of theirforecasts and spent the saved timedeveloping greater insights into thefactors driving the costs.

Mr. Wells explains that PG&E hascontinued to build on this decision andcentralized its nance personnel tocreate nance center of excellence. Thisreduced costs and improved the sharingof leading practices. Now, the companycontinues to build on that success,rolling out new nance improvements

quickly via this centralized center. Mr.Wells stressed that, while the center iscentralized, nance personnel areencouraged to maintain a strongrelationship with the rest of theorganization through eld visits,ride-alongs, and trips to power plantsand substations. This keeps the nancestaff connected to the rest of thecompany and improves understanding,

which supports nances evolving role asa business partner.

PG&E has also adjusted hiring andtraining practices, as the new drivetoward providing insight demandedemployees with new skill sets. Inaddition to individuals with the corebase of traditional nance, PG&E beganto hire nance employees from differentdisciplines, creating a more diversiedteam. Individuals from operationsresearch and IT backgrounds were hiredto bring a more data-driven focus, as

well as the background to improvesystems and nd more efcientmethods of reporting.

The organization also created a culture

focused on staff development to helpexisting employees fulll their careeraspirations. Corporate-wide training

was offered in areas such as ethics,management and completing employeereviews. In addition, targeted training

PG&EDriving actionable insights



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was also developed and offered intechnical nance skills, as well as skillssuch as communicating vast amounts ofdata concisely and inuencingeffectively. Training was geared foremployees at every level of theorganization, increasing in complexityas individuals moved through theprogram. This was a signicantinvestment for PG&E, but has allowedfor steady improvement of thenance function.

Finance as a strategicpartner

These changes throughout the nanceorganization allowed it to become moreof a strategic partner to the businessunits. Over time, nance is movingmore and more into performancemanagement and away from simplereporting of nancial results. As aresult, PG&E nance is evolving

from a transactional organizationto one focused on generatingactionable insights.

Initially, Mr. Wells explains, the nanceorganization needed to reorient theimage of nance as being a basicgovernance-focused organization tothat of a valuable insight-generatingpartner supporting the business. Financeneeded to help stakeholders understand

what they were trying to achieveoperationally and that nance was

looking at all avenues to help its partnersin all business units. This took time, butnance slowly built credibility. They

achieved this through pilot projects withreceptive business units. Initial successesbuilt upon themselves and helped thebroader organization see nance in anew light.

One early project involved externalbenchmarking to identify areas wherePG&E was not contracting effectively.This allowed the company to negotiatemore favorable terms when contractscame up for renewal. Finance was alsoable to help guide the consolidation ofcontracts for better buying power.Through this effort, PG&E was able todrive $50M in annual costs out ofbusiness. The success of this projectenabled the business units to see nance

as a partner, rather than simply areporter of nancial results.

Other successful projects involvedoptimizing travel time for maintenancecrews, unitizing and optimizing the costsof routine work such as electric pole

replacements, addressing customersatisfaction issues, and gaining a betterunderstanding of non-billable time. Forthis last project, nance noted thatmaintenance crews had about a halfbillion dollars of non-billable time each

year. However, the existing timekeepingsystem only allowed knowledge capturefor about 35% of that time. Over 65%

was bucketed in an other category.Finance assisted the business inestablishing better timekeeping codes.Finance partners spent time in each

division to better understand the optimalbalance of codes to capture activitieswithout overloading employees with

possible codes. They worked withemployees in the eld to help them see

which parts of their non-billable timeacted as roadblocks getting in the wayof them doing their jobs effectively. Thenew codes also resulted in better data.Now the business units and nance arebetter able to track productivity anddetermine what drives productivityproblems, address those problems,and improve efciency.

Risk management has also been asignicant area of focus for the newnance organization. Three years ago,the companys budgeting process wascriticized for being too nanciallyfocused and not taking sufcient

account of operational risks. Financedrove the effort to overhaul its budgetprocess, more formally incorporatingdiscussions of risk and operationalstrategy into the process. Today, there isa formalized budgeting process whichdeliberately examines operational risk

well before the technical budgetdiscussion occurs each year. Quantifyingand reducing risk, and helping to informa risk-based prioritization of resources,have been signicant steps forwardfor PG&E.

Through its efforts in the areas oforganization, automation, and employeedevelopment, PG&E has realized thetransition of nance from a reporter ofnancial results to a provider ofactionable insights. As a result, theorganization has realized signicantgains in operational efciency, strategicprioritization, and revenue. However,Mr. Wells is also quick to point out thatthe nance improvement processcontinues, as the organization appliesthese principles to additional areas.They have come a long way, but there is

still a lot of work to be done.

PG&E nance is evolving from a transactional

organization to one focused on generating

actionable insights.

Unlocking Potential

13


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Business insightTodays CFO must move beyondbudgeting and control and assumethe role of a Chief PerformanceOfcerto take responsibility fordriving company performance and

delivering strategic analyses to keystakeholders, both internal andexternal to the organization.

In a recent PwC publication titledFinance Matters: Finance functionof the future, we noted that nanceleaders need to create the conditionsfor effective navigation, whichmeans that rather than acting as asupport function, leading nancedepartments must actively drive theorganization to its chosendestination, while at the same timeacting as mediatorsto a muchbroader set of stakeholders, with

varied points of view and differingexpectations1.

PwC benchmarking showsmovement towards this ideal, butremaining challenges as well. Asmentioned previously, over 2 in 5nance professionals currently seenance as a facilitator of strategicplanning rather than beingrelegated to a reporting role or onlyperforming the monthly accountingclose. Yet, unrealized opportunities

for increased coordination betweenthe nance function and thebusiness at large clearly remain,

with potential gains in the areas ofhigh-level corporate strategy andleveraging additional efciencies

within the nance function itself.Over 2 in 5 (43%) of nearly 1,500nance professional benchmarkparticipants surveyed believe thatimproving collaboration related tointernal nance processes wouldhelp make the current nanceprocess in their organizations

more efcient.

However, intention is often far aheadof achievement for most companies.The proportion of full-time equivalents(FTEs) focused on business partneringis relatively unchanged over the past5 years (see Figure 4). What is apparentis that some high performing companiesare out ahead of this trend, with topquartile companies allotting 30%-40%more FTEs to business partnering than

the typical company. But theunderstanding of what businesspartnering means is evolving.

Despite recent gains, nance

organizations continue to get boggeddown in standard tasks or crises of themoment, rather than focusing on thelong-term factors that drive businessperformance. Analysts are stillspending (on average) nearly two-thirds of their time gathering data as

1 Finance Matters: Finance function of the future, published by PwC, 2013

opposed to analyzing it (see Figure 5).This gure has not changed much overthe past several years, despite thepromise of lights out processing thathas been an ongoing organizationalgoal. But there are organizations thathave been able to be very efcient,taking positive action to reduce datagathering time to near zero.

Less than 1 in 5 (18%) benchmarkedcompanies report that theirorganization has a PerformanceImprovement Team. And where there

is such a team, it was generally created

for an ad hoc project, not as an ongoingrole. Without specic, focused effortsto oversee and drive continualimprovements in efciency and qualityof analysis, efforts to move forward inthese areas often stagnate.

Despite efforts to increase efciency, in typical rms, nearly

twiceas much time is spent on data gathering,compared to the time spent on analysis.

Figure 4: Percentage of finance FTEs in business partnering

0%

5%

10%

15%

20%

2012-132011-1220102009

Median Top quartile

19% 19% 19%

11%11%

13%13%

18%




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Since 2009, the percentage of timeallocated to insight-focused activitieshas increased almost 40% (seeFigure 6). There is also a widening gapbetween companies that are evolving

toward a mature business partnershipmodel and companies that are stuck intraditional reporting. Top quartilecompanies are currently spendingnearly a third (32%) of their t ime oninsight-related activities.

In Finance Matters: Finance function ofthe future, the hypothesis is that by2030, top tier companies will spend notime on data gathering. Financial dataavailable to all stakeholders in real-timeand from a robust data source.2

2 Finance Matters: Finance function of the future, published by PwC, 2013

Finance teams now devote

25% of their effort toinsight-focused activitiesa

40%increase since 2009.

Figure 5: Percent of time spent on data gathering versus analysis

0%

20%

40%

60%

80%

100%

Top

quartile

MedianTop

quartile

MedianTop

quartile

Median

Data gathering Analysis

36%

64%

48%

52%

40%

60%

50%

50%

36%

64%

47%

53%

2012132011122010


Figure 6: Percentage of finance effort

0% 20% 40% 60% 80% 100% 120%

2009

2010

201112

201213

Efficiency Control

60% 15% 25%

70% 14% 16%

61% 16% 23%

67% 15% 18%

Insight




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BD is a global medical technologycompany that is focused on improvingdrug delivery, enhancing the diagnosisof infectious diseases and cancers, andadvancing drug discovery. BD develops,manufactures and sells medicalsupplies, devices, laboratoryinstruments, antibodies, reagents anddiagnostic products through its threesegments: BD Medical, BD Diagnosticsand BD Biosciences. It serveshealthcare institutions, life sciencesresearchers, clinical laboratories, thepharmaceutical industry and thegeneral public.

In a recent interview with PwC, SuketuUpadhyay described nances

leadership and close partnering withthe business units. Mr. Upadhyayexplained that the nance function atBD is very committed to businesspartnering and approaches theirpartner relationships with the businesson a concierge basis. They do a lot of adhoc reporting for the business units inaddition to standard reporting. Theyalso tailor reporting to meet the needsof BDs six business units and eightglobal regions. Finance at BD has a lotof credibility in the organization, whichhas been built up through their

excellent work across several decades.

Now, Mr. Upadhyay states, nancepersonnel need to be business leaders,not just business partners. They have astake in driving the strategy of thecompany. Their role is not just toprovide insight, but also to formulateopinions and strategy, and help guidethe company based upon theirfundamental understanding ofnancials and how they are linked toinvestor return. With that in mind,

nance personnel at BD have spent thepast year analyzing the factors whichdrive total shareholder return at thebusiness. They observed casual andcorrelational relationships and ranregression analyses in an attempt tolink organizational metrics to overallenterprise value. They wanted to giveBD the ability to focus on the right KPIsto ultimately drive shareholder value.

Previously, while the business wasgrowing rapidly, nances focushad not been on cash management.Now, however, in a slower growthenvironment, nances shareholder

value driver analyses revealed somesurprising results: revenue and

earnings per share growth are lessrelated to shareholder value than cashmetrics such as return on investmentcapital (ROIC) and return on totalassets. Through their analyses, theydiscovered that ROIC is highlycorrelated with overall rm value(R2> 0.90). To take action on this,BDs nance team worked to determinethe levers that drive ROIC. They wantedto know what each business unit coulddo to improve performance. So theydissected the key drivers and partnered

with the business units to determine

actions individual employees could taketo improve those metrics. Financepersonnel then worked to communicatethroughout the company why ROICmatters and that everyone has a partto play in its improvement.

Mr. Upadhyay explains that a year ago,employees would not have heard ofROIC. Today most employees knowabout ROIC, and that cash is related toshareholder value. In fact, he claimsthat most would be able to tell you

The nance function atBecton Dickinson andCompany (BD) has evolved

beyond business partneringto being business leaders

within the organization.Analyses of the drivers ofshareholder value guidetheir focus. Recently,reacting to a slower growthenvironment, they have

focused on cash metrics.Suketu Upadhyay, SeniorVice President, Finance

spoke with us about therole of nance at BD, the

positive impact of theirnance leadership, andreactions from Wall Street.

BDBusiness leaders, not just partners



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the key levers will free up cash forinvestment. BD has developedreporting, increased reportingtransparency, and even incorporatedcash ow metrics into the organizationsemployee incentive system.

Mr. Upadhyay believes that tosuccessfully drive organizational changeon such a large scale, one needsevangelism, creating a clear sense ofpurpose that the initiative is somethingthat the company needs to do, coupled

with clear, widespread communication.You need to give the leadership team

and key employees the data thatsupports your initiative and keepputting the information in front of them.

He states that you need to be able to tellyour story in a meaningful, engagingand entertaining way, and you need totell it every chance you have. You alsoneed surround sound, so that keyemployees are hearing the message frommultiple sources. To this end, Mr.Upadhyay states that you need to havekey members of the management team,the CEO, and the CFO on board early inthe process. Creating the burningplatform for change is a critical rststep. Also, across the organization,

working on change managementengagement is crucial. Without it, there

will be widespread resistance that willultimately decrease the effectiveness,or even the viability of any nancetransformation initiative.

The current ROIC-focused initiative atBD has been quite successful for thecompany so far. Mr. Upadhyay describedhow BD managers have spoken withinvestment analysts about their newROIC-based compensation metrics andWall Street is excited about them. BDstock has appreciated this year, and

while it cannot be directly attributed tothe new focus on ROIC, if BD continuesto out-index its peer group, it will

ultimately translate into marketcapitalization expansion. Additionally,BDs peers and primary competitorshave begun speaking the language ofROIC. There is growing awareness onWall Street about the importance of cashow metrics, and Mr. Upadhyay believesBDs nance initiatives have positionedBD well to excel in this area.

Traditionally, nance professionals are trained to acquireanalytic skills which, along with contextual knowledge

allow them to make key decisions for their organizations.

These organizational challenges, which are solved via the

application of knowledge and analysis of data, are

known as technical challenges.



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Facing adaptive challenges

Mark Dawson, PwC UK Partner, hashighlighted the distinction betweentechnical and adaptive challenges.He points out that as the nancefunction evolves, nanceprofessionals are increasinglypresented with adaptive, rather thantechnical challenges. Traditionally,nance professionals are trained toacquire analytic skills which, along

with contextual knowledge allowthem to make key decisions for theirorganizations. These organizationalchallenges, which are solved via theapplication of knowledge andanalysis of data, are known astechnical challenges.

However, more and more, especiallyamong the higher levels of nanceorganizations, professionals arerequired to make decisions aboutsituations for which the data eitherdoesnt exist, is contradictory, or issimply overwhelming. They mustextrapolate beyond their data,sometimes making large strategicdecisions, relying on theirexperience and intuition to choosean optimal solution among a seriesof possible solutions, some slightlybetter and some worse. They must

learn to face these adaptivechallengesto manage thisuncertainty and nd a comfort levelin decision-making in the absence ofrm data.

The CFO of a global enginemanufacturer spoke recently at a PwCevent, describing an adaptive challengethat he faced more than a decade ago.His challenge was to bid on an enginecontract for the next generation

wide-body jets. There were severalaspects of uncertainty that made thebidding decision a high-stakes adaptivechallenge. First, at the time, airlinemanufacturers were driving a hardbargain on price. They were askingtheir engine partners to agree to pricesthat, using traditional analytictechniques, appeared to leave nopotential for prot. Additionally, theyrequired guarantees that the engines

(which were in the design phase, sothey did not yet exist) would meetcertain performance standards.Further, they knew they would need tonance the airlines ultimate purchases,

which required projections about thenancial markets several decades intothe future.

The adaptive challenge was toincorporate uncertain futuretechnological step changes into the costand risk proles that must underpin thebest offer price. In addition, industrytrends suggested that failure to enter

the wide body market at the start of thetransition to the next generation design

would lock the company out of thefastest growing sector of its marketfor decades.

Despite a general lack of data enablingtraditional analytics, the organizationdecided that this contract had thepotential to be extremely successfuland protable in the long-term. They

went forward with their bid, and wonthe contract. Today, their engines leadthe wide body market and theorganization has realized billions incash ow for investors due to thiscourageous decision.

Mark Dawson conrms that todaysCFOs require different skills to handleadaptive challenges. It is a paradoxthat we have more and better organizeddata than ever, but the nature of bigdecisions requires CFOs to move

beyond using data to provide answers.Of course data is fundamental insupporting judgment, but this judgmentoften seeks to reconcile conicting orincomplete data. The role of the CFO isto have the best-informed huncharound the executive table and to makeexplicit the decision making process ofthe whole team.

Mark Dawsonis a PwC UK consultingPartner who advises boards and CEOsof FTSE 100 rms and global leaders in

nancial services, oil and gas, and retailindustries seeking to align strategy andleadership with supporting businessand HR processes and practices.



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Developing internal talent to meet thechallenges of more sophisticatedanalysis is daunting in itself, but

without a carefully designed roadmap,it is a nearly impossible goal.Organizations need to assess the skillsets required, and look beyond the

traditional model of a nance employee,not for specic accounting skills andbackgrounds, but for individuals whoare good analysts, intellectuallycurious, and good at buildingrelationships.

Some organizations with a particularfocus on continuous improvement.(e.g., The Coca-Cola Company andDiageo) are creating Finance Training

Academies which help those intraditional nance roles developabilities in the areas of businesscollaboration and insight generation.

Another technique for enhancing thebreadth of understanding and abilities

among key nance professionals is thecross-pollination of individuals withinthe rm. For example, at one company,a regional treasurer was rotated into agroup audit and risk function in order toprovide him with a breadth of

experience that would help him tounderstand his function in a greatercontext. Companies that think moreabout the strengths of each employee,and less about their specic role, havethe opportunity to very effectivelyidentify and grow talent internally.

While the development of internaltalent can be a major factor inaddressing stafng issues, manycompanies have found that trying torepurpose accountants to function as

analysts can be challenging andpotentially counterproductive.Organizations are recognizing thatmany traditional CPAs are not naturallygifted as Financial Planning & Analysis(FP&A) analysts, as they are typicallytrained to follow rules and structure,rather than think outside the box, as

would a skilled FP&A resource. SomePwC nance transformationassessments nd that as many as 60%of people in the current nanceorganization are not suited to theevolving roles that nance is being

asked to ll.

This current shortage of nancialprofessionals who match the changingneeds of organizations for greaterinsight generation has left many CFOsdispleased with their current mix ofpeople. They see nance practitioners

who are focused on governance andcompliance versus businessperformance. Their staff has strongtechnical skills, but often lacks insight.The current market requires the

identication and development of acadre of nance professionals who aremore heavily biased toward learnersand doers versus strategists andadvisors. The ideal qualications for aCFO have also shifted radically over thepast several years. Some of the best

CFOs do not have traditional nancebackgrounds.

Figure 8: Consumers of financeimportance & performance rankings

Finance has the right capabilities in place (i.e., critical thinking, technical skills,

managerial skills, organizational discipline, etc.)

Consumers of finance think there

is significant room for finance to

improve its skills and capabilities.

Performance BETTERWORSE

Importance MORELESS

19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1

19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1


Many traditional CPAs are not naturally gifted as

FP&A analysts.



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Meanwhile, the outsourcing of basicnance functions to shared servicesand lower cost offshore environmentscontinues apace, as organizationslook for ways to fund their increasedneed for insight generation andmanagement. The need for loweringcosts has never been more apparent: theaverage cost for a Finance FTE in the

past year was $90,000 and the averagecost for an insight FTE was $140,000(see Figure 9). While a movementtoward shared services has providedsome enhanced efciencies, thisevolution has not addressed the needfor more efcient work ows to freeup resources. In many instances, thelong-term culture of the organization isgetting in the way of this evolution.

Often, shared services and outsourcingcan partially offset the nance talentgap. As time is freed up to focus oninsight, existing staff can be movedinto these roles. Sometimes, lacklusterperformers are just in the wrongpositions, and excel in a new role.That said, the difcult reality for manycompanies today is that a large numberof existing team members are not ableto function in the new nanceenvironment that the company needsto build. Many just do not have thefundamental abilities needed for theirevolving roles.

A few unique and forward thinkingorganizations are applying humancapital analytics to forecast internaltalent needs and identify skill sets notcurrently in the organization. Somesuccessful nance organizations aremaking investments in individuals withbackgrounds in operations research,

data analytics and even traditional IT.These professionals often have greaterprociency in the identication ofhidden opportunities in both nancialspreadsheets and other organizationaldatasets which can lead to true forwardprogress for the business.

Figure 9: Average cost per finance insight FTE ($USD)

$0 $50K $100K $150K $200K

2009

2010

2011-12

2012-13$173K

Top quartileMedian

$140K

$136K

$155K

$125K

$146K

$115K

$171K




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As the nance functionevolves, organizations havecome under increasing

pressure to attract, retain,and motivate top talent.Today, it is not enough for

nance personnel to havestrong accounting andtransactional skills. Theymust be able to gleanactionable insights fromdata, communicate well withbusiness leaders and

partners in the business

units, and engage others tosupport change managementcompany-wide. CFOs mustlearn how to nd the right

people and motivate themfor the demands they willface in the nance functionas it evolves.

Finding & nurturing talent

A 2011 stafng survey found thatpositions in nance and accounting wereamong the top 10 jobs that US employerssay are the hardest to ll. CFOs say one ofthe key challenges is nding candidates

with business knowledge and communi-cation skills. Hiring in nance is mademore challenging by the complexdemands of rapid growth, acquisitions,and changing nance regulations.

Additionally, CFOs teams are boggeddown with the nance essentials oftransaction processing, compliance andcontrol. Theyre often supporting overlycomplex business, management and legalreporting structures that may need to besimplied. Additionally, todays nance

department is expected to spend moreand more time outside of nance, lendingtheir expertise to company-wide strategyand growth.

With talent shortages an ongoing concern,nance teams need to focus on staffdevelopment. Human resources expertsoften refer to a rule of thumb: 70% oflearning transpires in the course ofday-to-day work, 20% through informallearning and coaching, and 10% throughformal classroom-based instruction. Thegood news is that there are a number oflearning approaches that can be tailored

to a CFOs teamand CFOs can delegatesome responsibilities to other teammembers. Practical on-the-job coaching,for instance, can be provided throughteam-based learningsuch as having

junior staff shadow senior managers.

CFOs must also work to nd the righttalent for the roles that need to be lled.Team members are needed who can buildtrust and collegial relationships acrossthe company, according to John R.Percival, a Wharton adjunct nanceprofessor. They need a team that

technically is very good but can thinkbeyond the pure accounting aspects ofthe business, think about the future anddeal with issues like organic growth

versus acquisition.

CFOs also need to meet the needs of adiverse pool of employees. Many hires willcome from the Millennial generation andhave career aspirations, attitudes about

work, and knowledge of new technologiesthat are far different than those of oldergenerations. The nance organizationsthat are the most attractive to thisgeneration are able to provide a new

mix of nancial and non-nancialcompensationincluding exible

working hours, quick career progressionand rotational job assignments, evenoutside nance. Organizations and theiremployees are also becomingincreasingly global, leading to furtherchallenges. Finance chiefs need to rotatetheir human capital resources across theglobe, and embrace international talentas part of their people strategy.

Finally, building a strong nance teamstarts with the CFO. According toPercival, a strong CFO is one who isproactive, seeking to build solidcommunication with other parts of thecompany, from the shop oor right up to

the chief executives ofcein ways thatclearly articulate the businessexpectations of the nance organization.Today, the CFO doesnt wait for the CEOor business unit manager to say, Heresan issue; Id like you to go do someanalysis, says Percival. The CFO needsto decide (on his or her own) what theissues are, and bring them to the tableand say, We havent discussed this, butits an important part of our future and

we need to be talking about it. Heres ananalysis and what some of the potentialsolutions are. CFOs also need to

reinforce a sense of mission throughouttheir nance teams. Successful CFOsprovide a vision that excites people aboutcoming to work. A sense of purpose oftenmotivates people more than money, andthe CFO is responsible for providing that.Wharton management professor AdamGrant has examined what motivates staffin numerous settings over recent yearsand has found that employees who knowthat their work has a meaningful,positive impact on others are not justhappier than those who dontthey are

vastly more productive, too.

Ed Ponagai is a Principal in PwCsFinance Effectiveness practice, where hefocuses on Finance Transformation andhelping CFOs operationalizetransformation priorities. This discussionis based on a previously published paperby PwC and Knowledge@Whartonentitled People Performance: How CFOscan build the bench strength they needtoday . . . and tomorrow.



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meaningful dynamics come into play,such as the ability to lter bydemographic groups, show trends anddrill into detail. Typically, the move toanalytics also requires you to move to asingle version of the truth. Forexample, its not acceptable for variousstakeholders to use individualdenitions for turnover or for nanceand HR to report divergent results forthe same number.

BenchmarkingProvide acomparison of external metrics(comparing you to other companiesresults) or internal metrics (for

example, comparing your hospital in asystem to others in the system). Movingup the analytics maturity curve makesthe benchmarking effort a valuableexperience in understanding your owndata. The comparison with marketstandards frequently exposes the lack ofinternal standards and data qualityissues that might not otherwise surface.

DashboardsProvide a summary-level statement of your results thatallows for a quick assessment andserves as the basis for furtherconversation and inquiry. Typically, thedashboards that a workforceintelligence unit produces are orientedtoward your companys operational andfunctional leadership.

Survey and survey analyticsProvides additional insight into your

workforce survey results beyond thestandard reporting the survey mightgenerate. Many organizations viewengagement, exit, and onboardingsurveys as stand-alone activities, whenin reality, they are critical sources ofanalytical information. By linkingsurvey data to classic metrics, you can

create a far more robust set ofinformation. These more sophisticatedanalytical techniques can deliverinsights such as:

Improving linkages betweenengagement results and businessresults. For example, whats theengagement score for your client-facing teams, and whats the linkagebetween the engagement of theseteams and revenue growth, customersatisfaction, and the like?

Performing statistical analysis ofclusters by segmenting your crucialemployee groups based on mindsetor approach to work. For example,consider what patterns might emergein classifying call center employeesinto rst-job, mid-career, second-income, and post-career groups.

Modeling employee opinions acrossthe lifecycle to determine, forexample, if the discontentment of

your high performers in theemployee engagement surveymatches the reason for separationidentied in the exit survey, orconsidering how engagement might

evolve as tenure increases.Predictive modelingProvides astatistical approach to modeling futureoutcomes based on prior outcomes.Individual models are developed foreach outcome, such as models forpredicting turnover, retirement, safety,health or absences, performance,engagement, and more. The modelscompile hundreds of pieces ofinformation on individuals, often froma variety of sources or are calculatedbased on source data. For example, aight risk model of a nance leadermight evaluate pieces of informationincluding bonus amount, performancerating, manager, commute distance, orsalary against midpoint range.

Various statistical analyses areperformed on your data sets todetermine the impact that each pieceof information historically has on

Workforce intelligence stands poisedto deliver something nance leaders

have all longed fora way tomanage, measure, and demonstratereturn on investment for theirlargest costthe workforce.

In our experience, a successfulworkforce intelligence programrequires building capability througha series of increasingly sophisticatedofferings following a maturity curvemodel (see Figure 10). To create realsustainability of your talentresources you must systematicallystart at the beginning of the curve

and work up towards full workforceintelligence. Most large, complexnance functions face numerouschallenges, including data quality,source systems, standards andgovernance, talent processes, globalavailability, business partnercapability, business case credibility,HR department inertia, operationsexpectations, and more.

Consequently, you are better servedby chipping away at basic issues rstto create simpler workforceintelligence deliverables, and thenusing the muscle developed fromthese exercises to addressincreasingly sophisticated uses of

workforce information.

While you will mature to developadditional capabilities over time, thetypical elements include:

Reporting and analyticsProvides a comprehensive list ofresults on a specic topic (classicturnover and headcount reports)allowing for summary, detail, androot-cause analysis. Reportingevolves into analytics when

Workforce intelligenceStepping stonesto improved workforce ROI

The models compile hundreds of pieces of information

on individuals, often from a variety of sources or are

calculated based on source data.

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Finance effectiveness benchmark study 2013


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Incorporate employee skills andcompetencies into the modelingframework.

This full suite of workforce intelligenceofferings represents a series of steppingstones for your maturity. By takingthese programs one at a time, youcan deliver value to the organization

within an achievable framework andtimeframes.

John Karren is a Principal in PwCsPeople and Change practice, where hefocuses on the human resource

dimensions of Finance Transformationsuch as organization design, talentmanagement and strategic change.

Scott Pollakis a PwC Principaland co-leader of Saratoga, PwCsmeasurement, benchmarking andanalytics practice. He works withclients to help them design workforceintelligence centers of excellence andimplement their programs and tools.

outcomes, such as determining theinuence of commute distance or timesince the last promotion. Once themodel is built, it is applied to the

workforce population to determine thelikelihood of the outcome. Results canbe viewed at an individual or grouplevel. Results from the predictivemodeling can be used in a few ways:

As part of your employee review andcoaching where nance leadersmight identify a list of pertinentissues to discuss with the employee;

Embedded in the workforceplanning process;

To provide insight into the actionplanning your nance leaders shouldtake relative to dashboard orengagement survey analytics.

Workforce planningProvidesan approach and methodology forunderstanding your future workforcerequirements and aligning the

workforce to your business strategy.At its most basic, an operational

workforce plan determines stafngneeds for the coming year and providesa hiring target. The crux of the

workforce plan is an assessment of thenance functions future demand for

workers and the ability of the currentworkforce to supply talent.

Todays nance leaders are looking totake workforce planning to the nextlevel, pushing the planning horizonthree to ve years out. Finance leadersmust consider mid to long-rangebusiness strategies, such as the impactof new technologies, expansions, andshifts in customer preferences. They

should evaluate multiple scenarios inthe modeling, and options foraddressing gaps, includingdevelopment, alternate work structures,alternative sourcing models, etc. As youare looking to extend workforceplanning, it happens in two ways:

Incorporate the nancial impact ofthe plan in terms of labor cost andrevenue impact.

Low HighUtilization of workforce data

Low

High

Measurementmaturity

1

2

3

4

What happened?

What happened and how

do we compare on a

defined set of metrics?

Why did it happen

and how/where

can we improve?

What is likely to happen

and how can we be

better prepared?

Ad hoc metrics

and reports

Descriptive

benchmarking

& dashboards

Linkage models

& advanced

survey analytics

Predictive

solutionsPredictive analytics

Workforce surveys

Metrics/benchmarking

Executive dashboards

Workforce planning

PilotBuild process

and governance

Automate and globalize

Figure 10: The workforce intelligence maturity curve

2013 PricewaterhouseCoopers LLP. All rights reserved

Unlocking Potential

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British American Tobacco is one of theworlds largest international tobaccocompanies, with 13% global marketshare and market leadership in morethan 60 countries. BAT is one of the

worlds most international businesseswith more than 200 brands sold inaround 180 markets, and more than55,000 employees. BAT producescigarettes in 44 factories across 39countries, and buys more than400,000 tons of tobacco leaf per yearfrom more than 100,000 directlycontracted farmers.

Terry McConnell explains that BATs

nance transformation journey beganin 2007 when it sought to increaseefciency across its global operations.The company began with abenchmarking study, which revealedsignicant areas of potentialimprovement. To address theseopportunities, BAT established regionalshared services centers in Romania,South Africa, Malaysia, and Costa Rica,

plus two in-country centers in Braziland Russia. All transactional nanceactivity was subsequently migrated tothe new centers and a solid sharedservices foundation was created.

Since 2011, BAT has been reviewing itstarget operating model, including how

nance would best integrate with andcontribute to the business. The resultingnance model includes the creation ofcenters of excellence for nanceprocesses beyond the originaltransactional focus (i.e., audit, tax,treasury, and group nancial control)and the shared service centers arebeing enabled to take on moreadvanced tasks.

Through the current phase oftransformation, BAT nance aspires tosimultaneously achieve greaterefciency and effectiveness. They areseeking a path of continuousimprovement, creating better businesspartnerships while reducing costs. Theyare planning to do this by workingmore intelligently, employing a highdegree of automation, and building amore effective nance model throughanalysis and various processimprovement techniques.

According to Mr. McConnell, SharedServices ultimate goal is to unleash

time and value for the organization.They want to increase the ease andefciency of nance planning andreporting in order to enable the rest ofthe organization to better focus on

value generating activities. Bymigrating higher value services such asplanning and reporting to the sharedservices centers, nances businesspartnering teams are able to achieve a

sharper focus on supportingproductivity and revenue generation

value drivers, which include a focus onglobal resource allocation, pricing andtax, and analysis and insight on theend-to-end supply chain. Centers ofexcellence focus on driving workingcapital and operating margin

initiatives. The establishment andarticulation of these key value driversenables BAT nance to explain tostakeholders that this is where we planto dedicate our time and focus.

This has also enabled BAT nance toclarify the key business metrics itrequires. In addition, a set of standardreports for use by the business has beendeveloped. And today, BAT nance is

British American Tobacco

(BAT) is undertaking atransformational nancejourney which has seen thecompany establish higher

value-adding sharedservices centers as part of acomplete restructuring ofthe nance organization.The ultimate goal is todeliver value through

service excellence and

unleash time and value forthe business by workingmore efciently andeffectively. Terry

McConnell, Group Head ofFinance Transformationand Shared Services, spoke

with us about this journeyand the key components

which have enabledits success.

British American TobaccoUnlockingtime and value

We passionately believe in delivering value through

service excellenceTerry McConnell, BAT, Group Head of Finance Transformationand Shared Services

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important as the Center is moving upthe value curve, taking on more andmore complex tasks.

By focusing on system enablement earlyin the process many of the tasks formerlycarried out by accountants can now belled through automation. At the sametime, Mr. McConnell explains, it becameclear more capable business analysts

were required. Personnel with an ITbackground who can really understandthe business bring a different skill set,and are invaluable to helping solveproblems as they are identied. Thesepersonnel have become a key part of the

process organization at BAT.

Current status

BAT reports great success with thetransformation it has achieved in theMalaysian pilot and with the valueprovided to the organization throughthe higher value services being providedfrom Shared Services. Shared Servicesis moving from a regional to a globallyintegrated organization and isimplementing a service managementframework of service excellence and

value generation. In addition totransactional nance, aspects of HR andIT have also moved to Shared Services,

with the three areas workingcollaboratively to enhance synergies.

Automation has freed up time, enablingstaff to focus on new opportunities, suchas analyzing procurement strategies andevaluating working capitalopportunities. There has been a hugetransformation within nance frompure reporting to analysis and insight.Mr. McConnell believes that theorientation toward service excellence

will continue to pay off well into thefuture. Five to ten percent improvementin operational savings might beachieved year over year, as theorganization nds new continuousimprovement opportunities to prioritizeBAT appears to have found that sweetspot, where they are approaching highlevels of efciency, and unlocking timefor business analysts to focus onproviding insights and value to theorganization, not just gathering and

working to develop a self-servicecapability, enabling business linestaff who need information to accessit themselves and work with it inthe system.

Automation for the future

Early on, BAT nance realized that a keyenabler to efciency and effectiveness

would be high-level automation ofplanning and reporting. Automationenables value generation, releasingtime to free up the business partneringorganization to focus on key valuedrivers within the business. Mr.

McConnell explains that Malaysia,with both a strong retained commercialnance organization and nearby sharedservices center, was designated as a pilotsite for the new nance organization.Forecasting and consolidation areenabled through the ERP system anda common business planning andforecasting technology. A focus onintegration and automation has enabledBAT to drive forecasting through theERP system with great success.

BAT is ultimately working toward a

Global ERP Template, which will allowfor standardization of data acrossregions. Data is currently fragmentedacross legacy systems, and the GlobalTemplate will allow BAT to collectinformation in a consistent manner andshare it across regions and the businessmore effectively. Key data will ow fromthe single ERP system through the entireorganization so that data may beanalyzed worldwide in order to identifynew areas for gains in efciency.

Mr. McConnell stresses that dataintegrity is absolutely fundamental.

Without it, the whole system falls apart.At BAT, all standard variance analysiswill ultimately be automated.Materiality variances will be builtinto the system on a rolling basis.Throughout each reporting cycle, one

will be able to see what level of materialchange has occurred, and warnings willbe automatically generated if anythingis out of tolerance. Data integrity rolesare embedded in planning & reporting

teams. Checks and balances will all beeither automated or built intoshared services.

The right people with theright skills

BAT Finance understood that in orderto achieve its goal of simultaneousefciency and effectiveness, they wouldneed to focus upon the capabilities oftheir nance personnel. Within SharedServices, BAT started by recruitingpeople with the skills required for theirnew vision of nance and embeddingthem throughout pilot markets. A strongfocus was also placed on the onboardingprocess. Coaching, mentoring andcareer planning were reinforced fornew personnel from the time of hire.Training programs were developed toimprove Shared Services staffs productknowledge. Staff were taken on eld

visits, and they worked alongsidesales representatives to raisebusiness awareness.

The focus on hiring at BAT is now a mixof mid-career professionals and youngerprofessionals who are newly graduated

or have shown strong promise in theirschool careers. Individuals with changemanagement skills are also highlyprized in BATs fast moving andchanging organization. BAT works tond the right recruits and train them inboth the technical and commercialcapabilities needed for success. Allshared services personnel arecontinuously exposed to the concepts ofservice excellence and are encouragedto deliver an extra one percent oneverything they do.

Mr. McConnell described how BAT llscertain key positions strategically bymoving staff across various locations.Some of the best people from their localmarkets are moved to ll some of thekey nance Shared Services roles. Thisallows BAT to bring in the knowledge oflocal market operations to the SharedServices Center, thus enabling staff atthe Center to act as better partners forthe business. This is increasingly

Unlocking Potential

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TechnologyMaximizing efciency can belimited by the tools at hand, andnancial professionals are acutelyaware that their companys progressis bounded in many cases by

investments (or lack thereof) intechnology. When asked tohypothetically partition the use ofimprovement funds across sevenareas, data/systems requests are byfar the largest proportion, with overa third of targeted allocationrequests (see Figure 11).

Despite the existence of manyplatforms designed to enhancereporting efciency andaccessibility, many companies arestill mired in manually generated

spreadsheets. Additionally,organizations nd themselvesstruggling with multiple legacysystems which effectively silocrucial data. These limitationscreate a drag on reporting efciency,sophistication and depth, consigningmuch reporting to traditionalregulatory and managementreports, with limited forecastingability and little opportunityfor insight.

Organizations must work harderto develop dashboards and other

analytic tools to help them turn datainto knowledge in time-efcient,accurate and insightful ways. Themassive growth in availableinformation is forcing nance tomove beyond simple spreadsheetsand rewarding those organizationsthat employ advanced visualization.That said, only 17% of companieshave a self-service reportingapplication, and nearly half arestill loading information intospreadsheets which requiremanual manipulation.

Companies are still struggling tocomplete high-quality reports, oftendue to two signicant barriers. First,organizations are still taking anenormous amount of time just to get thedata right. Hurdles include the

technological challenges of interfacingwith legacy tools and siloedinformation. Nearly two-thirds of

analysts time is spent on the datagathering process, with only a thirdspent on actual analysis. Second,corporate management issues often

hinder the operating and data models.Long-term embedded practices areoften hard to abandon. It is not unusualduring nance transformationassessments, companies nd thatsignicant effort is being put into

generating ongoing reports that no onereads. The justication for the reportmay be because weve always

produced that, or a one-time requestmay have inadvertently become part ofthe standard reporting process.Eliminating unnecessary reporting canlead to signicant cost savings.

For many companies, a crucial rst step in insight

generation is getting data out of departmental silos,where it can be available for larger analyses and strategic

decision making.

Ed Shapiro, PwC Americas, Director of Benchmarking

Figure 11: Preferred allocation of resources

If the company were to focus on making improvements in any of the following areas

and you were given funds for improvements, how would you allocate the funds in

order to realize these improvements?

8%

19%19%

7%

6%

8%

34%

Mindset/Culture

Human assets

Processes

Decision rights between function

and company

Data/Systems

Organizational structure

Performance measures and rewards




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Even as nance technology evolves, theautomation of key controls remains arelatively rare event. Only 11% of keycontrols are automated in a typicalcompany (see Figure 12). However, top

quartile companies more than doublethis percentage, automating 25% of keycontrol functions.

When asked how to create a moreefcient nance process, improvedtechnology was the most frequentlycited suggestion, with nearly sixtypercent (58%) of nance professionalssurveyed indicating this as a need fortheir organizations. In terms of specictechnology gaps, those areas thatreceive the weakest ratings forsupporting nance functions involve

workow automation and systemsintegration (see Figure 13).Additionally, efcient and centralizeddata warehouses still remain anaspirational goal for many companies.

Only 6% of attendees at PwCs 2013Finance Leaders Summit indicate thatthey are comfortable with their currentnance technology, and not looking tomake changes over the next two years.While 39% are actively looking to makemajor changes, 17% are looking atminor changes, and 31% already havethe change process underway.

Fifty-eight percent of the conferenceattendees believe that theirorganizations face substantial or criticalcyber risk, yet only 13% indicate theyactively manage to mitigate risk andhave management intelligence tools tomeasure effectiveness. Fifty-threepercent indicate they have very little orinsufcient data to manage cyber risk

well. Additionally, only 12% of PwCbenchmarking companies indicate thatthey have a formal process for assessingrisk in technology.

This is not to say that there have notbeen any recent improvements intechnology and reporting. There hasindeed been movement away from largeand unwieldy nance reportingtowards widely accessible andunderstandable metrics. Advanceddashboards are increasingly employedas a method of knowledge transfer thatcan improve focus and clarity in

corporate thinking. Companies thateffectively utilize such dashboardsdevelop a common language fordecision makers and other keypersonnel. They are able to not onlytrack and critique performance, butengage in meaningful discussions about

the likely determinants of these critical

metrics. Business intelligence tools aidin the centralization of data and theautomation of reporting. In addition,data visualization tools provide deepand rich capabilities that cancommunicate an immediacy that isoften lacking in traditional nancial

spreadsheet reporting.

In the coming years, some form of SaaS or cloud

technology will play an important role in the nanceorganizations for many companies.

Carol Sawdye, PwC US CFO

Figure 12: Percentage of key controls automated

0% 10% 20% 30% 40%

Median

Top quartile 25%

11%


Figure 13: Technologys support of finance functions

1 2 3 4 5 6 7Integrated systems

Automated workflow

Simple to use

technology tools

User self service

Easily accessible data

Accurate data

Secure and

stable environment 4.91

4.74

3.49

3.44

3.34

3.22

3.14

How well does the technology environment support your needs in finance?

Weak Strong




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Jaguar Land Rover (JLR) hasfocused on moving fromspreadsheet-bound data systems toshared information platforms. Thishas produced a deeper, moregranular understanding of thebusiness that is shared acrossfunctions. With sales in over 200markets, JLR is now able to forecastby base model and variant across all

countries, and has successfullyaddressed difculties withpredictability in volatile markets.One JLR goal is to be able to makedecisions on the allocation of buildslots based on total transparency ofthe cash impact of the model,

variant and market.

Technology in the service

of insight

It is not enough to invest intechnology alone. Technology must

be directed toward insight. In orderto free up resources for insightanalysis, progress needs to be madein the standardization and efciencyof data capture, analysis, andreporting. In our benchmarkingsurvey, technologys ability tosupport the needs of nance wasseen as strong relative to accuracyand security, but weak when itcomes to simplicity, integration, and

workow. As stated earlier, thelabor associated with manual datagathering proves a signicant hurdle

in moving toward more efcientprocesses, with approximatelytwo-thirds of nancial analyststime spent in data gathering

versus analytics.

Centralization and standardizationremain challenges as well. Nearly 3in 5 (57%) companies do not have asingle enterprise database to satisfymanagement reporting require-ments, and 3 in 4 (72%) do not havea single database to satisfy nancialreporting requirements. Data is often

siloed within individual businessunits or different regions of theorganization, making it difcult toreconcile numbers and to produceeven simple company-widenancial reports.

Finance professionals also note that theircurrent nance technology systems are

weakest at creating an automatedworkow and integration. Less than 1 in10 (9%) have a mature BalancedScorecard (BSC) developed. Anadditional 50% indicate a BSC is utilizedbut in need of improvement. Speed andaccuracy of forecasting are alsobecoming increasingly central to success.Moving away from black box

predictions and understanding thespecic drivers of these forecasts hasbecome increasingly important. This isdifcult to achieve without signicantautomation and integration.

Organizations working toward changeencounter difculties implementingnew ERP systems, requiring signicantstaff time and a reconsideration oradjustment of legacy tools within theorganization. Among the primaryhurdles are the existing levels ofcustomized and intricate systems in

place. Only 18% of technology systemsare described as standard while a third(34%) are described as highly complex.Once these challenges are mastered,ERP systems can contributesignicantly to insight generation andadvanced planning. Cloud platforms

also present new opportunities forinformation sharing and efciency as

well as offering new risks that need tobe managed. The movement towardusing cloud technology varies widelyas companies consider how to bestleverage these platforms. But CarolSawdye, PwC US CFO, feels that in thecoming years, some form of SaaS orcloud technology will play an importantrole in the nance organizations for

many companies. While many peopleassume that cloud technologies arealways riskier, Ms Sawdye points outthat too many businesses jump to theconclusion that their data is safer withintheir own walls. As many cyber securitybreaches have shown us, that is notalways true.

Among organizations following betterpractices, advanced technology andanalytics allow for more complexevaluation of potential businessscenarios and their possible impact.

Integrated systems and automatedreporting free up the time and resourcesfor nance professionals to create betterbudgets, more current and accurateforecasts, and offer the opportunity fora real focus on insight-generation.

Technology in Finance:It can be improved

Only 17% of companies have a self-servicereporting application.

Almost 50% have reporting processes that rely

on manual spreadsheet manipulation. 50% have data warehousing in place, but only

11% have applied a standard data taxonomy.

Improving nance technology is the #1 methodthat nance professionals identify for makingnance processes more effective.

Only 6% of nance leaders attending a recentPwC Summit report being comfortable with thestatus of their current nance technology.



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solution. Through these sessions,several key design principles weredeveloped to govern future decision-

making. These principles stated thatprocesses had to be simple, consistentand lean. Also, nancial plans shouldbe calculated using business drivers orassumptions and data integration

would be automated (as far as possible)with all source systems. Workshopswere run to discuss better practices inplanning and budgeting and to denethe key design principles.

Next, a Hyperion planning prototypewas built, following the system designspecication agreed to earlier, and usedto clarify understanding of the business

and educate stakeholders on the tool,including the look and feel of the endresult. Skandia learned that thisapplication would deliver the benetsrequired by the autonomous businessunits, while simplifying integrationand management.

Implementation was overseen by asteering committee and divided into

work streams. The solution architecthad oversight across all work streams,ensuring a consistent approach andresolution of issues. A design authority

group was also created to review thedesign and resolve issues across workstreams. The original design and allchange requests were held to the keydesign principles agreed to during theplanning stage. Weekly team meetingsalso ensured consistency and helpedthe implementation stay on track.

Skandia Finance Senior ProgramManager, Bill Revellese talks about theimprovementsPlanning used to be acollection of linked spreadsheets acrossmany departments. Now theorganization and processes are set up ina way that facilitates connection andcommunication between departments.Changes in the sales plans are easilyimported to the nancial plans with theclick of a button. The nancial plans forthe insurance business are fed real time,enabling business rule-driven MarketConsistent Embedded Value and reserveprojections. In the past, you would haveto wait for days to get something backfrom the actuaries. Today, they have all

the information they need from theincome statement and balance sheetand subsequently run the calculationsto produce their outputs in a fraction ofthe time. Common data structureseliminated the need for hours spentmaintaining spreadsheets andupdating links.

Twelve months later, Skandia isspending 387 fewer person-days each

year on planning and forecastingandsaving over $500K USD annually.Planning is faster overall and people aremuch more condent in the results. For

the rst time, management can forecastbased on where they are todayratherthan where they were a year ago.

Skandia, one of the Nordics leadingindependent providers of solutions forlong-term savings and investments,needed to radically overhaul itsapproach to nancial planning. Thecompany lacked integration in the areasof business planning and forecasting.These processes were extremely timeconsuming, manual, and completelydependent upon spreadsheets.

Additionally, data was being pulled intospreadsheets from multiple sources,leading to questions of data integrity.

Skandia embarked upon a year-longproject to create processes that weremore consistent and efcient, and moredriven by business needs and

assumptions. They also aimed toautomate planning to the extentpossible in order to minimize thenumber of data streams and integrationprocesses necessary for planningand forecasting.

To address these goals, Skandiadesigned and implemented OraclesHyperion Planning and redesigned thenancial planning process using leanprinciples and driver-based calculationlogic. Additionally, Skandia moved tocontinuous planning, integrating anumber of key planning processesacross all business units to create acommon view and simplifying thedata required for reporting.

The project began with a series ofvisioning sessions designed to researchthe problem and agree upon a common

SkandiaStreamlining the system

Unlocking Potential

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Since interactions with cloudapplications and the IT resources arethrough the internet, a primary benetis the ability to access these applicationsfrom any internet-enabled platform.Looking at what organizations haveachieved so far, this new way of hostingnance applications has the potential todeliver immediate, tangible benets. Intalking to cloud application users in a

wide variety of nance areas (includingbudgeting, reporting, businessintelligence, transaction recording,consolidation, disclosure managementand strategic nancial planning) it isthe infrastructure benets that havehad the greatest initial impact. Cloud

computing can deliver speed ofimplementation, cost savings,convenience, and performancebenets to the nance functionin the following ways:

Cloud vendors are able to provideimmediate application platformaccess for their clients. Instead of

waiting to acquire new infrastructureto run the new application, cloud

vendors have the bandwidth, server,and storage infrastructure already inplace, though the client will still needto implement their own instance of

the software. Still, this typicallypermits a faster start-up period forthe application.

Cloud vendors can provide elasticaccess to applications, meaning therecould be 200 concurrent usersaccessing monthly consolidationapplications on working days 4 to 6and only 8 users from working day 7and beyond. Vendors can provide thescalability to meet the demands of 8

users or 200, meaning it is nolonger necessary to scale yourinfrastructure to support peakusage. This can produce signicanthardware cost savings andrepresents a major change fromthe traditional in-house model.

Cloud vendors can have much morescalable licensing models, whichagain, can reduce up-frontinvestment in new nance software.

Additionally, since cloud providerstypically take responsibility forcreating and managing applicationinfrastructure and connectivity, thiscan signicantly reduce the cost ofIT stafng.

Cloud vendors often takeresponsibility for upgrading theapplications and infrastructure,sometimes invisibly to the end user,again reducing complexity, cost anddependency on internal IT resources.

Cloud vendors offer various levelsof resiliency in their infrastructureand will use mirrored solutions,advanced load balancing andadvanced disaster recoverytechniques to assure uninterruptedservice delivery. This resiliency is

often far greater than a companycould implement within its owninfrastructure.

As you can see, these potential benetsare compelling, but most

Documents

Finance Benchmark Study-2013