K04046 Building a Best-in-Class Finance Function (Best Practices Report) 20121112.pdf

Building a Best-in-Class Finance Function

Contents Project Personnel and Copyright ………………………………………………… 2 Partner Organizations ………………………………………………....…………. 4 Introduction ……………………………………………………………...……… 5 Chapter 1: The Strategic Purpose of the Finance Function …....………...…….… 13 Chapter 2: Talent and Organizational Structure ………………………………… 21 Chapter 3: Continuous Improvement Initiatives ….…………………………….. 29 Chapter 4: Tools and Techniques for Improvement ……………....…………….. 33 Chapter 5: Measure, Monitor, and Communicate ……………………………….. 37 Case Study: Company A ……………………………………………….…...…… 41 Case Study: Cintas Corp. ……………………………………………....………... 47 Case Study: Discovery Communications Inc. ………………………………...…. 57 Case Study: Intel Corp. ………………………………………………...……..… 66 Case Study: ManpowerGroup ………………………………………………...… 73 Case Study: Company B ………………....…………………………………...…. 83 Case Study: The Office of the Comptroller of the Currency, U.S. Department of the Treasury ……………………………………………..… 93 About this Research ………………………………………………………….... 104

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Project Personnel PROJECT TEAM Rachele Williams, SPHR, senior project manager, APQC Janis Mecklenburg, senior advisor, APQC Sarah Hewson, consultant, APQC Irene Ngan, knowledge specialist, APQC SUBJECT MATTER EXPER T Mary Driscoll, senior research director, APQC EDITORS Paige Mowbray Irene Ngan

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MEMBERSHIP INFORMATI ON For information about how to become a member of APQC and to receive publications and other benefits, call 800-776-9676 or +1-713-681-4020 or visit our Web site at www.apqc.org. COPYRIGHT ©2012 APQC, 123 North Post Oak Lane, Third Floor, Houston, Texas 77024-7797 USA. This report cannot be reproduced or transmitted in any form or by any means electronic or mechanical, including photocopying, faxing, recording, or information storage and retrieval. Additional copies of the report may be purchased from APQC by calling 800-7769676 (U.S.) or +1-713-681-4020 or online at www.apqc.org. Quantity discounts are available. ISBN-13: 978-1-60197-182-1 STATEMENT OF PURPOSE The purpose of publishing this report is to provide a reference point for an insight into the processes and practices associated with certain issues. It should be used as an educational learning tool and is not a “recipe” or step-by-step procedure to be copied or duplicated in any way. This report may not represent current organizational processes, policies, or practices because changes may have occurred since the completion of this study.

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Partner Organizations Company A Cintas Corp. Discovery Communications Inc. Intel Corp. ManpowerGroup Company B The Office of the Comptroller of the Currency, U.S. Department of the Treasury

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Introduction The role of the CFO is analogous to the governor, an electronic device in automobiles installed to limit top driving speed. Current law in the United States holds CFOs of public companies personally responsible for what is analogous to not exceeding the speeding limit in a car—that is, vouching for the reliability of the firm’s accounting processes and financial reports. But the comparison ends there. A number of forces—from the dynamics of globalization to economic pressures in the United States and Europe—have converged to underscore the intense need for financial acumen in business decision-making. In many industrialized countries, the CFO’s role has evolved well beyond traditional stewardship duties. CFOs are now expected to play a central role in crafting strategy and creating value for investors and other key stakeholders. The CFO, and the professionals under his or her wing, do this by serving as strategic business partners. And that involves collaborating with operating leaders throughout the organization to identify, quantify, and compare opportunities and risks. A key point of this collaboration is to navigate safely toward performance destinations with constant mid-course corrections that reflect fast-moving marketplace dynamics. The work is predictive and fact-based—and it’s enabled by advanced information technology tools and analytical techniques that are now the norm among large, complex organizations determined to compete effectively. But what does it take to get from A to B—to evolve the finance function at a large, complex organization into an effective business partner? It is neither intuitive nor easy, and it’s fair to argue that the majority of large organizations have more work to do. Although the topic of finance transformation has been around for more than a decade, APQC Open Standards Research still shows that there are significant gaps in cost-efficiency among finance organizations (Figure 1). The typical company, at the median, is spending almost 50 percent more on its finance function than the top performers.

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Total Cost of the Finance Function as a Percentage of Revenue 2.5% 2.15% 2.0% 1.5% 1.17% 1.0% 0.62% 0.5% 0.0% Top Performers

Median

Bottom Performers N = 519

Figure 1 Given that approximately 60 percent of the cost of finance can be traced to labor cost, the argument can be made that what’s holding finance back is the overallocation of talent to low-value adding tasks such as manual data entry in core transaction processes such as procure-to-pay; order-to-cash; plan-to-re-plan; and close-to-disclose. That’s the efficiency side of the equation. When it comes to effectiveness— providing strong analytical support to decision makers—APQC research conducted in July 2012 shows that most finance organizations realize they need to invest in appropriate training programs.1

CFOs Now Investing in Robust Process Improvements In April 2012, as a precursor to case study research, APQC conducted a survey that drew 145 responses from mostly large U.S. and European corporations.2 The main

1

APQC. “A New CFO Priority: Talent Development with a Focus on Soft Skills.” APQC Knowledge Base, August

2012. 2 Driscoll, Mary. “Finance Improvement Programs Now Aim at Both Value and Cost.” APQC Knowledge Base, March 2012.

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finding was startling: eight out of ten organizations are now pursuing major financial management change programs. APQC defines a major program as one involving at least two of the following elements:  IT applications to strengthen the business analyses generated by finance,  process streamlining to boost labor productivity in a core transaction-based process,  process automation to speed cycle times and/or reduce cost,  an enterprise-wide effort to standardize accounting/reporting,  changes in organizational structure, e.g., a new or different type of shared services environment, or  concerted efforts to develop finance talent or leverage competencies to support decision makers. The fact that eight out of ten organizations are now pursuing major process improvements is significant for three reasons. First, prior to the global financial crisis, CFOs by and large were mainly interested in incremental process improvements to save money. The slogan “do more with less” summed up the general attitude. But now we have strong evidence that CFOs want to deliver effectiveness—analysis that will help the organization meet financial performance targets when top-line growth is hard to come by. The overwhelming majority of survey respondents indicated they are now pursuing both higher levels of efficiency and effectiveness (Figure 2). Most Important Goal for a Major Process Improvement Initiative 11.03%

0.69% Both efficiency and effectiveness

15.86% Efficiency (improve finance cost/productivity profile, accelerate cycle speed, reduce error rates) Effectiveness (deliver more effective analytical support to the business) 72.41% Don’t know N = 145

Figure 2

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Second, due to the current patterns of consumer demand and competition, decisionmakers realize they have to plan and reforecast at a very detailed level. They must know with certainty which customers, products, or regions deliver the highest net value. They must analyze the drivers of growth and profitability and devote more effort to modeling performance risks. Finally, the business side, which needs to allocate resources precisely, is asking finance to step up and provide faster, fresher, and more granular analyses of vast amounts of data. The quality standard for business analyses has clearly been raised. Departing from the past, when the primary goal was cost-efficiency, finance improvement programs today will be judged successful based on the extent to which they help make the business an analytical competitor.

The Road to Financial Management Excellence The best-practice organizations featured in this study are all committed to excellence in financial management. Some of the stories told in this study involve major finance transformation efforts that span a number of financial management processes. Others provide a close look at the maturity curve for a specific process such as procure-to-pay. Taken together, the case studies suggest that the journey to financial management excellence involves two dimensions: foundations and aspirations (Figure 3).

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Foundations and Aspirations for Financial Management Excellence3

Figure 3 The foundations are conditions that must exist to ensure that (a) targets for financial management process efficiency and quality are always met and (b) process owners are able to pursue productivity gains each and every year. Organizations that have successfully moved up the financial management process maturity curve have organizational structures aligned to their internal customers’ needs for both transaction services and decision support. They tend to have designated process owners who drive for continuous improvement using reliable problem-solving and change-management methodologies. When it comes to enabling technology, these leading organizations have a good sense of what tools and platforms they have today and will need in the future.

3

Source: APQC.

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The aspirational dimensions of the journey to excellence are characterized by clarity and commitment. The finance vision statement (some call it charter) is a powerful motivating force among the case studies presented. Employees know what their stakeholders expect from them, and their leaders provide them with the skills and knowledge needed to excel. There is clarity about what an effective partner does to provide analytical support to decision makers. And there is a deep and sustained commitment to talent development, knowledge sharing, and continuous learning. Clearly, it takes fortitude to drive an organization to pursue and sustain functional excellence. But the cases at the core of this research report prove that the challenge did not stop the leaders involved.

The Best Practices The APQC project team analyzed the data collected and generated the following 14 best practices for building a successful best-in-class finance function: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14.

Create a clear, visionary statement that finance can live by. Embed finance into the business. Earn a seat at the strategy table. Make an unwavering commitment to talent development and offer innovative opportunities for learning. Regularly assess talent development progress. Clearly define the organizational structure within the finance function. Leverage shared service centers for finance functions. Streamline back-office processes. Maintain strong governance structures. Invest in technology and automation. Use quality and process improvement methodologies to measure and track performance. Measure key performance indicators frequently. Benchmark internal and external performance. Communicate regularly and clearly with internal business partners.

Standing individually, the identified best practices might seem like global platitudes. But it is the cohesive execution of sound strategies and tactics that is the difference between average and best-in-class. Invariably, the best-in-class have a clear focus on what matters most to business managers and leaders as they strive to generate value for key stakeholders. It’s not about improving finance for finance’s sake. Read in the following chapters how each of the selected best-practice organizations exemplifies this ideal.

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The Best-Practice Organizations Below are brief overviews of the seven best-practice organizations. More details on each organization and its respective finance function can be found in the case studies at the end of this report. COMPANY A A large biotech company, Company A reported approximately $15 billion in revenue during 2011. Its products are sold across the world. This case study focuses on Company A’s approach to managing disbursements. CINTAS CORP. Cintas Corp. is a large company in the uniform rental industry. Acquisitions since 2000 have enabled Cintas to diversify into other businesses such as first aid and safety service/supplies, fire protection and inspection, and document management and shredding services. Cintas has also expanded into the facility services business by providing mats, restroom cleaning/supplies, and floor care. Cintas reported $4.1 billion in revenue in 2012 and has 30,000 employees. Through operations in North America, Latin America, Europe, and Asia, Cintas serves 900,000 customers in 430 locations. DISCOVERY COMMUNICAT IONS INC. Discovery Communications Inc. is an international broadcasting organization based in Silver Spring, Md. Reaching 1.8 billion cumulative subscribers in 209 countries and territories, Discovery broadcasts nonfiction media in 45 languages through 149 networks. The company is well-known for its flagship offering Discovery Channel, which was launched in 1985; the parent became a publicly traded organization on the NASDAQ stock exchange in September 2008. Before this, when leadership decided that Discovery Communications should become a public organization, the financial reporting function was tasked with building the capabilities needed to generate the financial reporting required by the U.S. Securities and Exchange Commission (SEC). INTEL CORP. Intel is the world’s largest semiconductor chip maker based on annual revenue ($54 billion in 2011). Based in Santa Clara, Calif., Intel is a multinational technology corporation. Combining advanced chip design and manufacturing capabilities, Intel's platforms are used in a wide range of applications, such as personal computers, data centers, tablets, smartphones, automobiles, automated factory systems, and medical devices. Intel employs over 100,000 people worldwide with over 50 percent of those located in the United States.

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MANPOWERGROUP Based in Milwaukee, ManpowerGroup is a global organization that provides innovative workforce solutions, connecting human potential to the ambition of business. ManpowerGroup serves large and small organizations across all industry sectors through four main brands and offerings: Manpower, Experis, Right Management, and ManpowerGroup Solutions. A $22 billion company, ManpowerGroup operates a worldwide network of 3,900 offices in 80 countries and territories, with 80 percent of revenue generated outside the United States. COMPANY B Company B provides products, services, and integrated solutions in aerospace, electronics, and information services to government and commercial customers worldwide. Company B acts as a prime contractor, principal subcontractor, partner, or preferred supplier for technology programs. THE OFFICE OF THE CO MPTROLLER OF THE CUR RENCY, U.S. DEPARTMENT OF THE TR EASURY Established in 1863 as an independent bureau of the U.S. Department of the Treasury, the Office of the Comptroller of the Currency (OCC) charters, regulates, and supervises all national banks and federal savings associations. Headquartered in Washington, D.C., the OCC has four district offices in addition to an office in London that supervises the international activities of national banks. Federal branches and agencies of foreign banks also fall within the OCC’s supervisory authority and mission. The OCC is funded primarily through assessments on national banks and federal savings associations. National banks and federal thrifts pay for their examinations. The OCC also receives revenue from its investment income, primarily from U.S. Treasury securities.

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Chapter 1: The Strategic Purpose of the Finance Function Each organization in this study has created a best-in-class finance function that has a strong and clear charter for finance that is inevitably linked to the overall mission of the enterprise. The strategic purpose of finance is well-defined and is supported throughout all ranks of the finance function, from new hires to the CFO. Rather than existing as just an afterthought, the charter for finance for each of the studied organizations is pursued on a daily basis by each finance employee.

Create a Clear, Visionary Statement that Finance Can Live By In addition to having a clear charter for finance, the best-practice organizations from this study make the goals a part of the daily lives of the finance professional. Employees genuinely try to live the core values of the finance function every day. Not only does living and demonstrating the core values act as a constant reminder of the strategic role the finance function plays in the enterprise, but the values keep each finance employee aligned to the rest of the enterprise. ALIGN THE FINANCE FU NCTION’S STRAT EGY WI TH THE ENTERPRISE

Regardless of business unit or geographic location, the best-practice organizations in this study have a clear finance function strategy that is closely aligned with the enterprise. Although widely differing in business scope and industry, Intel, ManpowerGroup, and the OCC are similar in aligning their finance function strategy with the goals of the enterprise. For example, the charter for the finance function at Intel is made clear through five strategic goals. 1. Keep Intel legal worldwide and maintain the highest standard of integrity. 2. Maximize and grow profits by exercising business expertise, independence, influence and leadership. 3. Provide efficient world-class services. 4. Protect shareholder value through effective risk management and control. 5. Develop world-class finance professionals.

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These five goals integrate the purpose of Intel’s finance function to three separate audiences: the external, regulatory environment; the internal, enterprise-wide stakeholders; and business unit operations. In fact, all five purpose-statement goals are aligned to Intel’s overall business strategy. Its focus on governance and shareholder value through financial analysis delivers enterprise-wide services through excellent financial execution. The strategic role the finance function at ManpowerGroup plays is a result of a multi-year finance transformation effort. In 2007, ManpowerGroup realized that its finance function did not closely align to the business strategy. After identifying the areas in which finance fell short of business needs and expectations, ManpowerGroup formed six “Breakthrough Teams” focused on: 1. 2. 3. 4. 5. 6.

strategy and execution, performance and decisions, risk and capital, transaction processing, performance and metrics, and talent and people.

Governed using specific value drivers and enablers, these teams were held to defined process improvement objectives and deadlines. A year later, ManpowerGroup formed a finance executive team that could capture and spread the successes and lessons learned. The mission, vision, and core values of the finance function of the OCC are not only aligned to the organization as a whole, but they drive improvement initiatives (Figure 4).

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Alignment of Mission, Vision, and Core Values

Figure 4 Finance’s strategic focus involves decreasing the administrative burden on customers and core-mission staff of the OCC. The three critical factors that the finance function relies on for success are customer satisfaction, highly engaged staff, and continuous improvement. SET SHORT-TERM AND LONG-TERM ACTIONABLE GOAL S Many organizations do have a business-purpose statement for their finance function; however, best-practice organization from this study have taken this a step further by defining specific, actionable goals that help finance live its purpose statement. Facing a large, seemingly abstract goal can be intimidating. Breaking down an overarching purpose statement into concrete, short- and long-term goals provides digestible, bite-sized guidance to finance professionals. Cintas, for example, sets out a four-step process that translates the organization’s vision for its finance function into employee actions (Figure 5).

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The Leadership Process at Cintas4

Figure 5 The first step in the Cintas process states its purpose of connecting all partners to a common vision. The second step provides a road map that defines short-term goals that will help achieve the vision. Employees with ideas of how to achieve the second step in a better way are encouraged to submit their thoughts in the third step of the leadership cycle. Improvement initiatives are formed through presentations of new ideas, and the fact that every employee is encouraged to submit ideas demonstrates how individuals can directly impact the vision. The fourth step in Cintas’s process recognizes employees’ efforts in achieving the vision through semi-annual luncheons and individual development plans—which are instrumental in determining pay raises and promotions—for employees involved in completed projects. Similarly, ManpowerGroup developed an organization-wide strategic execution framework that its finance function uses to organize specific functional activities (Figure 6). Each category—revenue, efficiency, innovation, thought leadership, and organization and culture—helps the finance function achieve its strategic goals.

4

Peter Brewer and Paul Carmichael. “Financial Leadership at Cintas.” Strategic Finance, Institute of

Management Accountants, August 2009: www.imanet.org.

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ManpowerGroup Strategic Execution Framework Extract

Figure 6 ManpowerGroup defines both short- and long-term goals within each category with activities such as identifying talent needs and gaps, establishing partnerships, and growing profitable revenues by x percent. Because aligning the finance function’s goals with the rest of the organization’s strategy is so important, short- and longterm goals are reviewed and updated on an annual basis.

Beginning in 2007, the finance function at ManpowerGroup achieved close alignment by defining measurable objectives and strict deadlines surrounding six value drivers and four enablers. By comparing current performance levels with performance goals, the finance function at ManpowerGroup could easily identify gaps and establish concrete remedies. By 2008, finance was producing solid, measurable results by:  establishing best practices for days sales outstanding (DSO) improvement;  creating a standard investment framework and business case template;

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 rolling out an extensive dashboard to countries with local key performance indicators;  defining standard order-to-cash, purchase-to-pay, and plan-to-report processes;  developing a finance competency and capability model;  defining a succession planning model and process; and  identifying key people to retain in the organization. In 2009, ManpowerGroup’s global finance function set out strategic goals focused on efficiency, productivity, and culture change. This was executed by ensuring the right people were placed in the right roles, designing and implementing standard business processes, and leveraging standard technology. The finance function at ManpowerGroup currently measures and reports monthly dashboard metrics for pre-determined benchmarking key performance indicators to keep business units accountable for their performance.

Embed Finance into the Business Since the 2008 recession, finance organizations have become increasingly important to the overall business because of the value finance can bring to the strategy table. As a result, it is crucial that finance organizations truly understand how operations function. Best-practice organizations from this study have answered this call to action by embedding finance professionals into business units so that they can understand how the business operates and uncover the need for value-added analysis that can help business managers meet their performance targets. For example, the finance functions at Intel and ManpowerGroup embed finance professionals into various business units globally. FINANCE MUST LEAR N BUSINESS PARTNERING

The ultimate goal for embedding finance employees into operations at Intel is to have finance serve as a full partner in business decisions. Embedding Intel finance professionals into operations optimizes shareholder value (the second strategic charter for finance). In order to help finance professionals build business partnerships, Intel provides training programs, rotations to strengthen business knowledge, courses to expand management experience, and other developmental. As a result of its rotational program for its finance function, business units at Intel regularly work with different finance employees. It is therefore crucial for finance professionals to know how to efficiently and effectively

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build strong business partnerships. In fact, the finance function at Intel has defined a stair-step model in which successful business partnering follows.5 At Intel, as the finance professional becomes more involved in operations, the more of an impact he or she can have on the business. Upon first starting within a business unit, the finance professional must earn the trust of the business unit. As the finance professional begins to provide valuable data that can solve operational problems, business unit employees begin to place more trust in the individual. The finance professional must begin to provide valuable analysis that causes decision makers within operations to take notice. The third level of business partnership is accomplished when the finance person is proactively included in decision-making conversations because his or her insights are viewed as vital. Business partnerships come to fruition when the finance professional is empowered to act with authority to lead certain business unit initiatives. ManpowerGroup balances global resources with local expertise. The organization’s finance function successfully aligns itself to that strategy by embedding finance professionals into operations at a local level. Although ManpowerGroup gives finance professionals the flexibility to provide services according to local demands, they are still expected to adhere to certain standardized processes.

Earn a Seat at the Strategy Table Although many finance executives have gained a stronger voice at the strategy table, the finance function still needs to prove its value by providing useful analysis and recommendations that lead to better decision making.

Finance functions at the best-practice organizations from this study earn their seat at the table. The finance function earns its seat by providing valuable decision-making recommendations based on reliable financial data and analysis. At Intel, for example, the finance function does not own the decision. However, finance acts as though the responsibility of making a decision—however major or minor—falls on its shoulders. Because of its comprehensive understanding of both financial and operational data, the finance function at Intel is in a unique position to analyze and interpret that data to provide insightful decision-making support.

5

See each of the seven case studies for more in-depth information.

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Conclusion Taking time to define a clear charter for finance is critical for becoming a best-inclass finance function. Aligning the finance function’s strategy with the overall business enables a clear vision employees can understand. Breaking down mission statements into measurable short- and long-term performance objectives help employees understand an oftentimes abstract goal. Best-practice organizations also ensure organizational alignment by embedding finance professionals into operations. Through business partnering, finance professionals not only learn the business from the operations point of view, but they also develop soft skills—such as communication and presentation skills. This handson soft-skills training is increasingly important as finance becomes more relevant in decision-making conversations. Creating a clear charter for finance and communicating it throughout the finance function not only aligns finance to the rest of the enterprise, but best-practice organizations have leveraged the opportunity to increase the finance function’s role at the strategy table. The remaining chapters of the report provide more detail on how the organizations in this study created a best-in-class finance function.

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Chapter 2: Talent and Organizational Structure The best-practice organizations in this study invest significant time and capital in developing and maintaining talent development programs that address both the needs of their finance professionals and the needs of the organization. These programs are so well integrated into the finance organization that, at times, it is hard to differentiate between functional performance and hands-on training and experience. The talent development programs studied here tend to include traditional offerings such as course work and online lectures. However, finance talent development opportunities beyond the classroom are also crucial for recruiting and retaining bestin-class finance professionals. Rotational programs—between business units and between functional finance areas—and flexible career paths are both best practices widely used among the organizations in this study.

Make an Unwavering Commitment to Talent Development and Offer Innovative Opportunities for Learning Best-practice organizations from this study invest a significant amount of time and capital in ensuring their talent development programs address the needs of their finance talent. Because each organization is unique and each finance professional is different, it is important that talent development opportunities are offered through a variety of media. OFFER TRADITIONAL DEVELOPM ENTAL PROGRAMS WITH FRESH CURRICULUM S Several best-practice organizations from this study have developed effective and comprehensive developmental programs that are traditionally used for teaching. What sets these programs apart from average training programs is that the curriculum and material are kept relevant and up-to-date. Finance professionals are interested in learning more about what interests them and how to use that knowledge to advance their careers. Best-practice organizations ensure their development programs maintain relevant focus. Classroom and Online Lectures In the most traditional of settings, best-practice organizations turn to classroom and online lectures to teach both fundamental finance and accounting skills and organizational change and culture management. At Cintas, for example, finance

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professionals are trained in Six Sigma. In addition to functional-based training, all senior management attends an emotional intelligence course. Cintas assists individuals to advance in their career. Reimbursement for independent studies for relevant course work is a well-known best practice. Discovery Communications hosts quarterly professional development courses designed specifically for finance professionals. Through these courses, finance staff can stay up-to-date on accounting certifications (e.g., CPA). Course curriculums are set according to employee feedback on desired topics and training. During monthly lunchtime learning sessions, an expert within the finance function at Discovery presents his or her area over the course of one hour. An average of 25 percent of all finance employees at Discovery takes advantage of these learning opportunities. Intel University is an internal program that offers career training courses and learning opportunities, both in-person and online. However, this best-practice organization makes sure that finance-specific curricula such as ROI seminars and Monte Carlo simulation courses are kept up-to-date. In fact, the finance function is responsible for developing and refreshing its own finance-specific courses. Finance talent at the OCC has the opportunity to obtain education and training in a variety of areas, including CPA and project management professional (PMP). The organization also provides additional educational opportunities on management, leadership, customer service, personal development, and technical topics through classes, book clubs, and lunch discussions. On-the-Job Training Another traditionally used method for training finance talent is teaching through mentorships and internships. Several best-practice organizations in this study utilize different forms of both to retain strong finance talent. For example, college-level new hires at Cintas are assigned a senior finance employee who helps mentor them to achieve personal success during their first years at the organization. Mentors, likewise, are chosen from a pool of management-track employees. Through the same program, mentors are able to develop essential soft skills needed for senior management. Instead of mentoring person-to-person, Company B has a mentorship program between business units and between finance and business managers. For example, finance professionals from one business unit had perfected a sub-process within the area of payables management. The finance people were keen to share what they had achieved with their business counterparts upstream. The point was to educate the business people on what happens when their actions introduce errors or bottlenecks into the work-stream—and how that impacts the ability of the accounts payable (AP) people to serve the needs of important suppliers. This kind of knowledge sharing helps to illustrate how the finance function is taking responsibility for the success of the business as a whole.

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The OCC has a voluntary program that allows finance talent to use a professional coach to facilitate personal and professional development. In addition, the OCC has an established internship program that introduces college students to the daily activities of a finance professional. As interns are exposed to financial management duties, the OCC is able to identify high potential performers who can be selected for recruitment after graduation. DEVELOP EFFECTIVE ROTATION AL PROGRAMS Best-practice organizations are increasingly integrating rotational programs into their finance training experience. Best-practice organizations from this study find that when finance talent rotates between business units and functional areas, both the individual and the organization greatly benefit. Individuals are able to better understand the operations side of the business, build strong business partnerships, and increase their expertise in different finance functional areas. The organization benefits because the finance function is able to provide more relevant value-added analysis to the business while reducing the risk of finance talent flight. Between Business Units Rotational programs for finance professionals traditionally involved spending from one to two years embedded in a single operational business unit. This is normally enough time for finance professionals to learn the operations of that business unit, provide relevant, value-added analysis, build a strong business partnership, and remain passionate about their contribution to the business through finance. Cintas, for example, has developed a regional-based model that connects finance with operation partners in the field. Finance professionals teach the operations side of the business the value finance can bring to the business with analysis, building strong relationships across regional business units. This structure enables finance at Cintas to be true business partners. Discovery has a rotational program designed to encourage finance employees to move around within the organization. With finance professionals holding their functional position for an average of four years, the rotational program at Discovery has employees shift through key roles every two years. Discovery stresses that not every move needs to be considered a “step up,” but that lateral moves can build personal breadth. The finance function at Intel is a pillar for finance talent development. Embedding finance professionals within operations is a major technique Intel uses to teach finance talent how to build strong business partnerships through relevant, value-

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added financial analysis. Finance rotates among different business units every eighteen months to two years at the lower levels and at slightly longer intervals at the higher levels. Intel has found that, in general, rotational programs result in a diverse array of experiences and input, which bring in new ideas for the challenges of different business units within Intel. Between Functional Areas Rotating between functional areas in finance is also a technique best-practice organizations in this study encourage. Prior to transformation, finance professionals at Cintas felt they were constrained to perform routine transactions, becoming less motivated about building a best-in-class finance function. With not enough time to provide value-added analysis and support, finance professionals do not feel they had the power to become an “upwardly mobile financial leader.” Therefore, Cintas implemented a functional rotational program that encourages its employees to learn and take on a broad range of finance tasks. Within a specific region, finance professionals are responsible for a wide range of finance functions, from financial planning and analysis (FP&A) and evaluating capital investment decisions to preparing financial statements and auditing. In addition to its rotational program within business units, Intel also allows finance professionals to rotate in and out of different finance functions. This gives people opportunities to gain expertise and to explore different aspects of finance. ALLOW FOR FLEXIBLE C AREER PATHS Instead of forcing individual finance professionals down a pre-determined, traditional career path, best-practice organizations from this study encourage their employees to develop their own unique career paths. The finance organization at Cintas encourages finance professionals to explore difference functional areas within finance. In fact, it is not uncommon for finance professionals to experience working in FP&A, AP, general accounting and reporting, and internal controls during their career at Cintas. At Intel, the Unlock Your Potential program mentors finance professionals on how to develop the skills critical to excelling. Such skills include business partnership; action orientation; goal setting; and analytics, management, and leadership. Feedback from this program helps spark professional development discussions. Finance professionals can use this feedback to assess in which areas within finance they did well and what they would like to see more of to develop a future career at Intel.

Regularly Assess Talent Development Progress A crucial aspect to a successful finance talent training and development program is making sure that regular and frank assessments are made, and improvement

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initiatives that result from these assessments are properly implemented. All the bestpractice organizations in this study have a regularly scheduled process or dedicated team in place to assess their finance talent development programs. Finance professionals at Cintas meet with their leadership at least twice a year to discuss individual career goals, current skill sets, and an action plan to close skill gaps through training and experience. Leaders are involved in a formalized succession planning process that reviews an employee’s background, skills, and performance to determine individual career advancement. In addition to assessing personal development, Cintas also focuses on designing training programs that will build a strong pipeline for the next generation of senior finance leaders.

Intel has a dedicated people development management review committee. This people development management review committee is made up of finance leaders who are responsible for understanding how the finance function is evolving, what issues exist, and how to respond to changing needs. The committee uses internal and external data and analysis related to people development to keep the organization efficient, evolving, and relevant. The OCC places a great deal of importance on its assessments of its talent development programs. Because strong finance talent is necessary for creating a best-in-class finance function, the OCC strives to create an environment conducive to employee engagement. For example, the OCC conducts an annual assessment of employee engagement and satisfaction using Gallup’s “Q12 Meta-Analysis.”6 This assessment examines factors that beneficially contribute to work and learning environments. This, in turn, enables finance professionals to identify and leverage unique individual talents. In addition, the management team at the OCC hosts a regular meeting to assess its own talent pipeline, discussing potential internal promotions.

Clearly Define the Organizational Structure Within Finance Organizational structure is clearly defined and communicated in the best-practice organizations from this study. Finance professionals who understand the finance organization’s management structure can understand how the finance function fits into the enterprise-wide strategy and can better plan their own career development

6

Gallup Inc., “Q12 Meta-Analysis: The Relationship between Engagement at Work and Organizational

Outcomes.” August 2009.

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and goals. Company A, for example, made a conscious decision to create two roles within its AP department; one team is dedicated to processing while the other focuses on customer support. The customer support professionals drive disbursement performance, including reducing invoice-dispute times. By defining different roles within its AP department, Company A is able to provide better customer support to the business, thus establishing a stronger partnership with various business units at Company A. The finance function at Discovery is built on three main aspects of control: financial control, operational control, and strategic control. Instead of an employee trying to learn all three disciplines, Discovery has separated finance roles to focus in one of the three areas. Employees focused on financial control are dedicated purely to the accounting and compliance aspects of finance (e.g., journal entries, account reconciliations, general ledger transactions, etc.). Finance professionals working in the operational control environment are responsible for a combination of backoffice processes and business support (e.g., affiliate revenue). Finance professionals who work in strategic control focus on organization-wide FP&A. These professionals partner with the business to offer strategic advice on topics such as capital allocation, contract terms, and negotiation. Company B has a very mature shared services function, delivering financial services—including payroll, general ledger, billing, credit management, fixed asset accounting, and travel and entertainment processing—to 85 percent of the organization. Company B’s model for shared services is considered a hybrid shared services center because it also provides services beyond traditional finance operations, including an employee call center and HR. Dubbed enterprise shared services, Company B’s finance and accounting shared services center has evolved into its own business unit. The shared services organizational structure is seen in Figure 7.

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Company B Enterprise Shared Services: Service Lines

Figure 7 Company B saw the benefits in cost savings through efficiency and effectiveness using a shared services model. The finance function at the OCC is a bureau under the U.S. Department of the Treasury. The OCC’s finance function reports to the OCC Office of Management under the direction of the senior deputy comptroller for management and the CFO. Within the four functional finance departments (budget, policy and internal accounting controls, accounting, and acquisition management), finance professionals are clear on the reporting relationships (Figure 8).

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Finance Organizational Structure at the OCC

Figure 8 Even though the finance function’s organizational structure is clearly defined as shown in Figure 8, the culture at the OCC empowers finance professionals to continue to cross-collaborate and work across traditional functional silos.

Conclusion By offering a variety of talent development opportunities, best-practice organizations in this study empower their finance professionals to take control of their careers without feeling the need to leave the organization. These same organizations are diligent in keeping learning opportunities and curriculums refreshed and up-to-date. This not only helps develop and retain finance talent, but it is also an increasingly important factor in recruiting strong new hires. A clearly communicated definition of the finance organization’s structure and management is highly valued. Finance employees appreciate a transparent view of the finance organization and how they fit into the overall strategy of the enterprise, using that information to plan their own career goals.

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Chapter 3: Continuous Improvement Initiatives In July 2012, APQC conducted a study to better understand trends in finance. The study found a staggering gap between the potential value of the finance organization and its actual value. Only five percent of survey respondents believed that their finance organization was delivering game-changing value while a staggering 42 percent believed that finance has the potential to deliver game-changing value.7 The best-practice organizations in this study have used a variety of continuous improvement initiatives to ensure they are delivering superior value. A number of improvement initiatives across the showcased organizations led to increased productivity and cost-efficiency, higher quality of information and analysis, and stronger risk management and internal controls, among other advantages.

Leverage Shared Service Centers for Finance Functions Many of the best-practice organizations highlighted in this study invested in Shared services centers. APQC research has shown that shared services centers contribute to improvements in profitability and productivity and allow finance more time for higher-level analysis and reporting. Shared services centers provide a centralized point for financial transaction processing, process standardization, increased processing speed, and accurate and timely closings. Discovery Communications has a shared services center in each of its regions—the Americas, Europe, and Asia—that uses a centralized model for transactional processing for AP, accounts receivable (AR), and payroll. Current improvement initiatives for its Shared services centers include benchmarking performance and reviewing location suitability. Moving almost all of the finance function’s transactional processes to a shared services center was a large improvement initiative at Intel. The move was such a success that Intel is now considering transferring higher-order finance functions to shared services centers, such as aspects of FP&A. The move will take the least-liked aspects of the FP&A role off finance professionals’ plate and increase. In order to support its dynamic organizational structure and decrease operating costs for standard practices and systems, Company B created a centralized shared services center in the 1990s. With 95 employees, Company B’s shared services

7

APQC. “What Is One Thing You Would Change? - Trends in Finance.” APQC Knowledge Base, September

2012.

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center initially serviced the $2.5 billion integrated systems sector, which represented between 15 percent and 20 percent of total sales. Today, Company B’s shared services function is a separate business unit named enterprise shared services. This business unit employs 3,000 professionals to perform material accounting, cost accounting, and labor accounting. Enterprise shared services currently provides about 90 percent of the financial services to Company B. Enterprise shared services adheres to five value areas for performance improvement including decreasing delivery cost, optimizing services, aggregating sourcing and buying, improving quality, and fostering teamwork and collaboration (Figure 9). Under the continuous improvement mind-set, finance professionals are always searching for opportunities to improve existing processes and best practices. Shared Services Value Areas to Improve Performance

Figure 9

Streamline Back-Office Processes The best-practice organizations in this study undertook initiatives to streamline cumbersome and time-consuming back-office processes. These process improvement initiatives contributed to their ability to be value-added business partners.

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The best-practice organizations conduct a “post-mortem” analysis on all improvement initiatives to identify strengths and weaknesses, and they continuously evaluate current processes to find areas for improvement. Using IT enhancements and outsourcing, Company A automated its vendor approval process and tackled low match rates (the level at which invoices and purchase orders are matched error free the first time). Company A hopes to continue this trend by upgrading its payroll system to standardize the process. Company B has embraced paperless transactions, with 75 percent of invoices processed without human intervention. Company B uses an approach commonly known as evaluated receipt settlement. Receipts are electronically received, and after a two-way match, the system automatically creates a payment. Invoices are not required for any transactions within the evaluated receipt settlement system. Vendors must meet strict qualifications to participate in the evaluated receipt settlement system.

Maintain Strong Governance Structures Best-practice organizations govern process improvement initiatives by clearly defining roles and responsibilities, typically set by a steering committee or a formalized project management office. These governance structures guide new improvement initiatives from conception through implementation and ensure process improvement initiatives align with the organization’s strategic goals.

Sound governance models for process improvement and clearly defined roles and responsibilities ensure that finance professionals know exactly how they contribute to the broader, enterprise-wide goals. Many of the best-practice organizations in this study use tools such as Six Sigma and change management. Cintas has one of the most formalized governance structures to support process improvement initiatives. Its Kaizen action teams are responsible for soliciting ideas for process improvement projects across the finance function and reviewing proposals to determine whether they support its vision. With large projects often use Six Sigma, employees are encouraged to enroll in Six Sigma training.

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The OCC employs a full-time change management specialist to help successfully guide and implement process improvement initiatives. The change management position plays a major role in helping the finance function with project support and daily operations. The role provides change management to support employee development, customer satisfaction, communications, branding, and other initiatives.

“Adding the change management position was a game changer for us.” - Gary Crane, deputy CFO of the OCC Most of the best-practice partners in this study use change management methodologies in their finance organizations. Although product and process are important, change management ensures that results are embraced by various stakeholders.

Conclusion All best-practice organizations from this study keep a sharp focus on improvement initiatives. Continuous improvement is core to their corporate culture, and being best-in-class is an enterprise-wide goal. Best-practice organizations have strong governance structures to make sure improvement initiatives align with the enterprise’s strategic aims—projects are supported to ensure successful implementation.

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Chapter 4: Tools and Techniques for Improvement When investing in IT tools, this study’s best-practice organizations focus on people, processes, and technology—in that order. IT tools must seamlessly fit into employees’ routines. IT implementation was, in many cases, augmented with change management strategies to ensure buy-in from finance. Technology must integrate well with existing finance tools.

Invest in Technology and Automation Best-practice organizations report that IT investments have allowed them to reach process improvement goals, including high rates of paperless transactions. Technology and automation liberates finance’s time to provide more value-added analysis to the enterprise. INVEST IN BACK-OFFICE TECHNOLOGY AN D IT SOLUTIONS Best-practice organizations from this study credit investments in back-office technology with driving success in reporting and process improvement. Investments in technology centralize data collection, decrease risk, and reduce cycle times. Bestpractice organizations often make a smaller initial investment in an IT solution before evaluating the system over time. Only when the results are favorable do bestpractice organizations invest in additional modules.

Many best-practice organizations value a single enterprise resource planning (ERP) platform or performance management tool globally. The finance function at Cintas has been able to reduce cycle times for key processes using IT solutions. The solutions integrate accounting processes in the flow of work and eliminate most manual reconciliation processes. The finance function at Cintas created a data warehouse that gives easy access to operational and financial data. Accountants use these reporting tools to quickly report trends, benchmarks, and key performance indicators to the field. Accountants now spend less time finding and consolidating data from a variety of disparate systems and data files to obtain financial data.

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A data warehouse provides data governance capabilities that are helpful in ensuring the integrity of the accounting function. In 2012, the finance function at ManpowerGroup developed a global chart of accounts and standard back-office processes, including time collection, customer invoicing, collection support, AR, AP, and general accounting. The finance function at ManpowerGroup has a standardized global back-office system that each regional office is obligated to adopt when it needs new back-office technology. Unless there is a highly compelling reason that dictates otherwise, countries must use this standard system for back-office processing. The implementation of this back-office technology is done by an established governing body. Although the independent governing body at ManpowerGroup reviews special situations in which an exception to implementing the global technology makes more sense (e.g. local regulations dictate the use of other technology), local business units must use a standard system. Previously, the OCC used a customized mainframe application that was cumbersome and decentralized to process expense reports. The finance function chose to focus on increasing customer satisfaction through claims and reimbursement improvement. Representatives from all stakeholder groups who were impacted—policy, legal, records, customers, and management—were involved in designing a solution. Using this change management technique of stakeholder involvement from the beginning made the final solution easier to implement. The finance function enhanced the existing functionality of the core financial system by adding the needed features and functions. The system included built-in calculations and many other built-in controls, resulting in a reduction of the error rate from 50 to 60 percent to below 15 percent. WORK TOWARDS ACHIEVI NG PAPERLESS TRANSAC TIONS The best-practice organizations in this study are striving to increase their percentages of paperless transactions. Paperless processing reduces cycle times and the number of full-time equivalent employees (FTEs) needed to perform the process. One best-practice organization estimates saving more than 24,000 hours per year by reducing paper-based transactions. The finance function at Company A began using a single global instance of its software system. The workflow module electronically captures all of Company A’s roughly 600,000 annual invoices. Once an invoice enters the workflow, it moves through a series of steps governed by preset rules. Assuming all the rules are met and the invoice has a matching purchase order, the system automatically pushes the

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transaction to the general ledger. Once there, the vendor can be paid. Between 50 percent and 60 percent of Company A’s invoices pass through the automated invoicing process without incident. If there is an issue with an invoice, the automated workflow will send a message to an AP employee. Finance is able to see when an invoice has reached the general ledger through automated notification, very helpful information for the accrual process. Company B has embraced process automation with enthusiasm. For example, 75 percent of invoices are processed in a touch-less fashion. As described earlier, Company B uses an approach called evaluated receipt settlement. NCG also uses procurement cards to make payments, an approach that adds further process efficiency (disbursements are not bogged down by paper checks).

Use Quality and Process Improvement Methodologies to Measure and Track Performance Many best-practice organizations highlighted in this study use Lean, Six Sigma, and Kaizen to evaluate financial processes. Finance employees are often encouraged to enroll in Six Sigma courses. Two best-practice organizations have permanent governance structures that evaluate process improvement initiatives using Six Sigma and Kaizen action teams. Company A’s AP function uses Six Sigma principles to identify root causes of failed matches. As a result, Company A’s AP function works with suppliers to eliminate the root causes of document error and to increase first-time matches. The AP department trains its employees in Six Sigma and utilizes the internal enterprise-wide Six Sigma team. Using Lean management tools, Intel eliminates many extraneous aspects of the FP&A process, producing better forecasts. For example, instead of preparing all aspects of the financial forecast for review, the FP&A function realized it was more efficient to prepare only the material needed for each upcoming review (since there was never enough time to cover all details of the forecast in any given review). Detailing what was needed at specific times and removing superfluous information from the messages presented to the CEO resulted in increased clarity and drove better decisions. The OCC has three Lean Six Sigma programs: Business Process Improvement, Quick Wins, and Personal Productivity Improvement. Together, these three programs aim for $600,000 in annual savings.

The OCC reinvests its cost savings to cover the cost of Lean Six Sigma training.

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As a result of reinvesting its cost savings into Lean Six Sigma training, the finance function at the OCC has 15 employees with varying levels of Six Sigma certification. The OCC manages projects through a centralized intranet site that is accessible to all finance employees. Employees are responsible for identifying and submitting ideas for process improvement in areas such as financial reporting, AP, and acquisitions.

Conclusion There are a number of tools and techniques an organization can use to become a strong partner to the business. The organizations highlighted this study use a variety of techniques and tools to achieve excellence; most notably, investment in backoffice technology and IT solutions, paperless transactions, and Lean and Six Sigma methodologies in order to measure and track performance. A common theme among best-practice organizations is a continuous focus on evaluating business processes and, when new tools and techniques are proposed, fitting them into existing systems and processes.

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Chapter 5: Measure, Monitor, and Communicate The best-practice organizations in this study realize the importance of maintaining strong lines of communication with business units. These organizations use a variety of tools to communicate financial information with business units, among of which involves embedding finance employees into operations.

Measure Key Performance Indicators Frequently Best-practice organizations know the importance to conduct a lessons learned session to assess the success or failure of a program, project, or process. Bestpractice organization use both traditional (e.g. balanced scorecards) and nontraditional tools to display data within dashboards. Measured and reported monthly, dashboard metrics—sourced from both internally and externally benchmarked key performance indicators—help the finance executive team at ManpowerGroup hold different countries and business units accountable. The executive dashboard, presented per country or region, includes local key performance indicators for order-to-cash, purchase-to-pay, and close-to-disclose processes. Company A’s AP function uses audit trails within its software system to instantly view metrics that identify high-performing professionals and employees who need additional training. Company A also uses the data to gauge the size of AP backlogs and to ensure internal customer needs are met. Every quarter, Company A uses a balanced scorecard to review major functional metrics. key performance indicators on the balanced scorecard include financial controls, voice of internal customer, operational measurements (e.g., cost per FTE, cost per invoice, and error rates), and people and projects (e.g., how much training has staff received, where is AP against project milestones). Cintas routinely measures selected key performance indicators across locations. The finance function uses data from its software solution to create a group of standard analytical reports. Initially called the profitability toolbox, these reports are accessible to other accountants on a shared drive. Displaying trends, analyzing sales and costs, and benchmarking performance across business units, these reports identify underlying trends and business drivers. With these standard analytical report, operation managers are equipped to make strategic business decisions. Company B uses comprehensive dashboards to monitor current status and goals. Dashboards track individual’s and the finance function’s performance. Dashboards

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for quality goals are posted in visible locations, facilitating employee conversations about recent progress and future goals (Figure 10). Company B Enterprise Shared Services Scorecard Quality Dashboard

Figure 10

Benchmark Internal and External Performance Using available IT resources, several of this study’s best-practice organizations benchmark their performance against their own performance from previous years and against external organizations. Company B conducts most process productivity benchmarking under the supervision of a corporate executive board’s shared services roundtable. Benchmarking supports Company B’s goal to continue to reduce costs, and data obtained through benchmarking motivates managers and employees to improve processes that reduce those costs. The OCC uses benchmarks as part of its balanced scorecard strategy. The organization has annually benchmarked itself since 2006. The OCC also performs peer-to-peer benchmarking with finance functions at other federal agencies, such as the U.S. Immigration and Customs Enforcement.8

8

See Building a Best-in-Class Finance Function: The Office of the Comptroller of the Currency, U.S. Department

of the Treasury Case Study for more details on the measures used.

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Communicate Regularly and Clearly with Internal Business Partners Best-practice organizations highlighted in this study hold regular meetings and use knowledge sharing strategies to maintain robust lines of communication with business units. As a result, these best-practice organizations have a seat at the table in strategic business decisions. The finance function at Cintas communicates with its operating managers through a variety of channels in an effort to remain a strong business partner. The finance function holds regular meetings with general managers from operations to discuss financial performance and to highlight key trends. Controllers are also involved in presenting financial information to vice presidents in operations. Accountants attend operation field meetings to gain a deeper understanding of the business. The finance executive team at ManpowerGroup meets monthly to define and modify how the finance function communicates internally and externally. The team reviews ideas and best practices that will advance the function’s strategic execution framework. For example, the finance executive team discusses how billing occurs in the United Kingdom because the same best practices can be applied to billing in the United States, Mexico, and Israel.

A communication and knowledge-sharing structure helps to align the finance function with the organization’s goals and promotes efficiency and productivity. Company B places a large emphasis on sharing best practices internally. Company B finds further value by streamlining processes using an end-to-end view. For example, through a partnership with procurement and AP, the financial service center has achieved a success rate of 90 percent of invoices paid on time compared to previous performance of 70 percent.

Conclusion Best-practice organizations leverage IT infrastructure to generate metrics and to track performance so that internal and external customers can be better served. Dashboard key performance indicators measure and communicate current performance levels. In addition, best-practice organizations benchmark performance both internally and externally. These organizations use benchmarks to motivate managers and employees to reduce costs and improve processes. With the wealth of information that the finance function collects, strong communication with business

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units is crucial for properly analyzing the data. Finally, best-practice organizations frequently communicate using a variety of different types of meetings.

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Case Study: Company A Company A is a large biotech company with reported $15 billion in revenue for 2011. Company A sells its products across the world. This case study focuses on this organization’s approach to managing disbursements.

The Strategic Purpose of the Accounts Payable Function Company A realizes its AP function is a key contributor to the success of the CFO and the enterprise, it reported to APQC. The AP function oversees all transactions related to dispensing money in North America. This includes AP, travel and expense, procurement cards, corporate credit cards, and payroll. For some smaller, newly penetrated markets, until the market is better established, Company A uses a contractor for the AP function. The AP function currently processes 600,000 invoices annually and pays 15,000 employees across the globe. Over the past few years, Company A’s AP function has moved from a decentralized, multiregional model to a shared services center model. The organization’s two Shared services centers are highly automated and handle all of Company A’s global disbursements. Company A reported the following benefits for its new model:      

lower processing costs, movement of staff from low-value to high-value roles, reduced cycle times, fewer manual data entries, more early payment discounts, and a better transaction audit trail.

In fact, AP costs were reduced by approximately 50 percent from 2008 to 2012. Company A reported it was able to achieve this large return while becoming a bestin-class AP function.

Talent and Organizational Structure Company A’s AP function maintains tight control over its cost structure and pushes for continued productivity gains. The function has found a way to reduce work force costs while increasing productivity and strategic presence of its staff.

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CREATION OF A CUSTOM ER SUPPORT MANAGER T EAM As part of centralization efforts, Company A created two teams within AP: a processing team and a customer support management team. The customer support management team is staffed by dedicated customer support managers who serve as points of contact for disbursement-related issues, concerns, and improvements. “Devoting resources to internal customer advocacy is often overlooked by finance functions, yet it’s an integral driver of process excellence,” a company representative said. Customer support managers are hired from within the organization and through external recruiting efforts. Customer support managers are organized by region with the exception of the Americas where they are assigned to technical groups. When a line of business has a disbursement-related issue or need for improvement, it goes directly to a customer support manager to drive change. Customer support managers also reduce the number of invoice and payment disputes—and reduce dispute resolution time—by acting as an advocate. Thus, dedicated customer support managers create a strong partnership with business units. MONITORING AND MOTIV ATING AP STAFF Senior leadership within the AP function monitors employee activities closely through audit trails in its software system. Senior managers have instant access metrics that identify high-performing employees. They are also able to identify employees who may need additional training. Despite this high level of oversight, Company A does not use these metrics to admonish staff. Instead, Company A uses metrics to motivate staff through recognition and rewards. Leadership emphasizes team statistics and stresses that increased productivity from individuals can yield impressive results for the team. “Collaboration, teamwork, and knowledge sharing are integral to Company A’s culture, and all employees take being best-in-class seriously,” the company representative said. This corporate culture is supported by 360-degree assessments for all employees.

Improvement Initiatives The culture at Company A emphasizes continuous improvement and change. The AP function has exemplified continuous improvement through initiatives such as automating the vendor approval process, outsourcing transaction-oriented work, and tackling a low match rate (the level at which invoices and purchase orders are matched error free the first time). In order to standardize its global payroll processing, the AP function has made significant progress automating and standardizing processes and plans to upgrade its payroll system.

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AUTOMATING THE VENDO R APPROVAL PROCESS One of the first tasks to be automated as a result of the 2007 transformation was the vendor approval process, a previously time-consuming task. Company A operates in a highly regulated industry, so there are a number of vendors that cannot qualified. In the past, the approval process was conducted manually using a number of databases. Company A automated the process; a single system queries all databases and alerts the employee if a vendor’s name appears in any of them. After automating the vendor screening process, Company A reduced the time required to screen a vendor and decreased the risk of human error. OUTSOURCING TRANSACT IONAL WORK TO CUT CO STS Company A exposes hidden costs in AP by measuring the cost a full-time equivalent employee (FTE) needs to complete a process. “Organizations frequently miss hidden costs because they allocate costs according to function—not process,” a company representative said. “For example, a portion of the cost to mail paper checks may reside in the budget of the mail facility; however, this cost should be considered part of the AP process.” Once Company A identified and moved highcost processes to its two shared services center locations, the organization outsourced certain transaction-processing tasks to low-cost labor markets. APQC’s research reveals that personnel cost is the largest contributor to the overall cost of financial operations.9 Company A continues to study the viability of outsourcing more activity to an external service provider. Candidates for outsourcing include data entry to support the vendor master, issue resolution, and accounting for AP. THE BENEFITS OF BOOS TING MATCH RATES As a result of its outsourcing efforts, the AP function uses its talented staff to perform high-impact analytical tasks. Although Company A has invested in an ERP system, process digitization, and work flow automation, “technology is only as good as the quality of the information going into it,” the company representative said. The digitalization of paper invoices is currently outsourced, but invoice dispute resolution is not. If the IT system cannot match an incoming invoice with a purchase order, then that invoice needs to be resolved via manual intervention. This translates to higher labor costs and an increased risk of error. Company A has developed a road map for outsourcing issue resolution. AP leaders are determining how to increase the rate of first-time-through matches. This would help control labor expenses and avoid mistakes, such as duplicate manual payments. “Although outsourcing issue resolution will reduce the budget for internal labor expense, fixing 9

APQC. “Shining Services in Accounts Payable Shared Services Centers: Lower Costs, Faster Processing, and

Fewer People.” APQC Knowledge Base, September 2012.

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the root cause of failed matches will have a profound impact on FTE productivity and therefore overall AP efficiency and effectiveness,” a Company A representative said. Company A’s AP function uses Six Sigma principles to identify root causes of failed matches. The AP function has a number of trained employees in Six Sigma. The function also relies on an enterprise-wide Six Sigma team. Quality control is a concern because the AP function depends on suppliers to generate accurate and complete invoices, and many suppliers have immature finance functions. Company A’s AP function reaches out to suppliers to eliminate document errors and to drive up first time match rates. Moreover, Company A encourages suppliers to develop electronic invoicing capabilities and/or deploy other billing and cash collection methods that address the root cause of errors. However, the AP function has more work to do to boost match rates, and team leaders are continuously evaluating new ways to work with suppliers.

Tools and Techniques The director of disbursements views technology and automation as best practices. The director said, as a result of our automated processes, the organization is in a better position to take advantage of pre-set terms for early-pay discounts and to maintain targets for days payable outstanding. This supports the CFO’s strategy and objectives for working capital management.” PAPERLESS PROCESSING The AP function aims to fully automate AP processing. Company A uses an external service provider to scan and digitize paper invoices. Suppliers that generate a high volume of invoices must submit invoices (either paper or digital) through a portal created by Ariba and OB10, two invoice processing software solution providers. Smaller suppliers usually e-mail invoices to a Company A portal. “Overall, Company A is relentless in its drive to eliminate paper processing, which is a primary source of high costs, slow cycle times, high error rates, and lackluster FTE productivity,” a company representative said. SINGLE GLOBAL INSTAN CE OF SAP In 2008, Company A’s finance function began using a single instance of SAP, combining all software modules into a single server and database. The SAP work flow module captures all of Company A’s 600,000 annual invoices. Once an invoice enters the workflow, it moves through a series of rules. Assuming all the rules are met and the invoice can be matched to a purchase order, the system will automatically record the transaction to the general ledger. Between 50 and 60 percent of Company A’s invoices are automatically matched without a problem. If

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there is an issue with an invoice, then the workflow will send a message to the appropriate employee. The system gives Company A the ability to know when an invoice has been recorded, which is helpful in the accrual process.

Measure, Monitor, and Communicate Company A’s AP function tracks a variety of metrics at both high and detailed levels. The AP function benchmarks against industry peers. Annual all-team meetings, quarterly all-hands meetings, and smaller team meetings are held to share recent wins and best practices. RELEVANT KEY PERFORM ANCE INDICAT ORS AP’s software system tracks a variety of metrics, including work completed by each employee. These metrics allow the AP function to identify opportunities for training and to balance workload among employees. Company A measures key performance indicators in order to hold employee accountable; these key performance indicators are used during performance reviews. The AP function can also use metric data to gauge the size of any backlog and to track activity to maintain internal customer satisfaction. The management team meets every week to review key performance indicators and to intervene when necessary. Every quarter, the management team uses a balanced scorecard to review larger functional measures. key performance indicators cover areas such as financial controls, voice of internal customers, operational measurements (e.g., cost per FTE, cost per invoice, and error rates), and people and projects (e.g., the amount of training staff has received and AP project milestones).

Conclusion Company A encourages an enterprise-wide best-practice strategy that is embedded in all functions. The AP function is no exception and has been enthusiastically working to achieve best-in-class performance. Its process improvement initiatives are making dramatic payoffs thus far, with overall costs reduced by approximately 50 percent in four years. Company A has found that moving to a single global instance of SAP, outsourcing highly transactional work, embracing process and work flow automation, and making continuous process improvements has:  reduced the use of paper, resulting in reduced cost and cycle time to process an invoice for payment (improves the ability to capture early-payment discounts),  liberated talent to work on value-added tasks,  provided clear audit trails that illustrate how individual steps, tasks, and signoffs take place, and

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 strengthened relationships between AP staff and other Company A business units and external customers. APQC research shows that high-performing finance functions across all industries exhibit many of the same traits as Company A’s AP function. Resolving root cause issues for invoice processing and eliminating payment errors through automating routing transactions are a few common traits. The challenge for this AP function is to apply as smoothly and quickly as possible these best practices to newly acquired organizations.

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Case Study: Cintas Corp. This case study focuses on Cintas’ centralized accounting and finance function. The accounting and finance function has several accounting groups that support each of the major lines of business. The accounting and finance function also includes treasury, tax, audit, and computer applications. Controllers are responsible for the accounting groups that support the lines of business, and certain controllers report to one of two senior controllers. The finance/cash management group reports to the treasurer. All accounting and finance partners eventually report to the CFO.

The Strategic Purpose of the Accounting and Finance Function Cintas’ accounting and finance function provides value-added services to operations, in addition to traditional accounting functions. According to Senior Controller Paul Carmichael, Cintas strongly believes that its accounting and finance function staff is more than a back-office resource. Through collaboration with the operations side of the business, the finance function’s partners are involved in strategic, value-added decisions that drive business performance. Accountants are considered business partners to the operations that they support. REGION-BASED MODEL Cintas’ accounting and finance function provides a broad range of tasks in each accountant’s scope of responsibility. Unlike many accounting and finance functions, which have moved to a function-based organization model, Carmichael said, Cintas accountants perform a wide range of responsibilities for a specific region. A single accountant is likely to work on preparing financial statements, analyzing capital investment decisions, auditing, forecasting and planning, and providing analysis to general managers on the operations side of the business. Carmichael said that Cintas may be sacrificing cost savings that could come from centralization, but the current structure offers benefits of its own. Hiring and retaining strong accounting and finance partners is much easier when the work is more broad based and provides exposure to different accounting/finance activities. In addition to a broader scope of responsibility for accountants, the region-based model allows for greater connectivity between the finance function and operational partners in the field. Accounting partners have the opportunity to demonstrate the value in the analysis they provide to operations and to build relationships across teams. Accountants work closely with general managers in the field to help them understand the financials and trends affecting their operations. In addition, accountants support operation managers with financial analysis of capital equipment purchases or new facilities, due diligence on acquisitions, forecasting, and planning, and training on internal controls. This structure is integral to the finance function’s

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vision; that is, it enables the Cintas finance staff to be true business partners, said Carmichael. HIRING, RETENTION, A ND EMPLOYEE DEVELOPM ENT At Cintas, all employees are considered partners. The company’s culture emphasizes ethics, positive discontent, professionalism, and competitive urgency. Partners own shares, hold a stake in the company, and strive to improve shareholder value. Cintas accounting and finance functions’ emphasis on partners has been an integral component in reaching their vision and establishing a culture of continuous improvement. The function has implemented a partner development process to ensure partners have the tools they need for success. Partners meet with their leadership at least twice per year to discuss career aspirations, current skill sets, and skill gaps. They create an action plan to further develop a partner’s skills.

Accountants want to make a difference! They want to be respected as value-added business partners who help drive the organization’s success rather than being viewed as back-office resources. - Paul Carmichael Senior controller, Cintas Corp. Managers and controllers are included in a formalized succession planning process where senior management review a partner’s background, skills, and performance to determine the next steps in his/her career. In addition to a strong performance evaluation and succession planning process, Cintas partners complete training courses designed to build the next generation of accounting leaders. This includes corporate culture training that stresses the importance of ethical decision making and corporate legacy. Accounting and finance partners are also trained in Six Sigma in order to emphasize the continuous improvement mindset key to Cintas’ accounting and finance vision. In addition to functional training, all senior accountants, accounting managers, and controllers attend leadership training courses such as emotional intelligence, skillsbased leadership, and coaching, as well as other internally developed courses. Cintas hires at all levels of the organization. A senior accountant acts as a mentor to help recent college graduates navigate the broad responsibilities of the job and succeed in their first few years. Senior accountants are typically on a management track, and the mentor experience helps them develop essential leadership skills.

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The Partner Development Plan is used to measure partner development and close skill gaps (Figure 11). Partners who contribute to change efforts and embrace the accounting and finance function vision become key performers and are often wellpositioned when promotional opportunities arise. Cintas Partner Development Plan Form

Figure 11

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BUSINESS CASE FOR TR ANSFORMATION Cintas has made a number of acquisitions since 1980 and in 2002 finalized its largest acquisition, Omni Services. Each acquired company brought new customers and more transactions. Cintas leadership had a vision to create a finance function that would go beyond accounting, auditing, tax, and regulatory reporting requirements. However, with Cintas’ large volume of customers and sales, accountants managed a large volume of low-dollar transactions running through the accounting system. However, due to the robust growth, accountants and finance staff were becoming constrained by routine transactions. Cycle times for key processes were long, and accountants didn’t have time to spend on valuable financial analysis and support. Senior leadership realized that accountants, like all partners at Cintas, wanted to make a difference and to be upwardly mobile financial leaders, Carmichael said. For accountants to truly become valued business partners, a transformation was necessary. Key business processes needed to be streamlined, and partners needed to be trained on how best to deliver value added services. In addition, it was important to address accountants' skills and career goals in order to unleash their desire to add value to the firm beyond transactional activities. CREATING A VISION The vision for the Cintas accounting and finance function is to become a worldclass finance department and a valued business partner. The function follows a fourstep leadership process to translate its vision into employee actions. Figure 12 shows Cintas’ finance vision as it flows through each step of the leadership process.

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The Leadership Process at Cintas10

Figure 12 Step 1, creating the vision, ensures that all partners in the finance function operate under a common purpose and prioritize their activities in a consistent manner. Step 2, creating the road map, establishes actions that will realize the vision. In addition to providing a map for success, the road map can provide a filter for activities that don’t align with the function’s vision. Step 3, the vision check, incorporates change management processes to reaffirm partners’ commitment to and understanding of the vision and road map. “Partners need to understand their role; they need to know how they contribute to achieving the vision,” said Carmichael. Financial leadership regularly communicates, restates, and re-emphasizes the vision. Leadership encourages partners to identify and submit new ideas to reduce the cycle time of routine transactions and to add value to field operations. Accounting groups meet frequently to review status updates on all projects in progress or recently completed. Although the structure of the meetings varies among accounting groups, partners periodically give a presentation on one or two of the larger process improvement initiatives currently underway. These more

10

Peter Brewer and Paul Carmichael.

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formal presentations show the team how an individual’s contribution can change the process. It also ensures that everyone understands the change and creates a good opportunity for partners to develop presentation skills. Many of the larger initiatives may use Six Sigma to streamline a particular process. Step 4 is recognizing success. The finance function recognizes partners’ efforts to achieve the vision by hosting semiannual luncheons to thank partners involved in completed projects. Additionally, a partner’s ability to work toward achieving the vision is part of his/her partner development plan. STREAMLINING BACK -OFFICE PROCESSES In an effort to free up time for accountants to be business partners, Cintas reduced the cycle time of routine transactions. A key aspect of reducing cycle time is automating and streamlining routine reporting requirements and financial transactions. In the case of the process improvement initiative for the rental finance department within the finance function, monthly small group meetings were held to discuss activities performed by the accounting staff. They examined which activities took the longest, caused the most trouble, and why. The average time it took to complete each activity was tracked. It was clear that a handful of activities took the majority of the accountants’ time across every region. Time-consuming activities included monthly forecasts, auditing, the monthly close process, and balance sheet reviews. These activities became the focus of the first process improvement initiatives. Although IT system implementation was involved in streamlining back-office processes, Carmichael reported a number of non-IT process improvement initiatives that contributed to better cycle times. The cost of process improvement initiatives requiring little-to-no IT component is typically low. And Kaizen action teams were founded to vet and encourage partner-led process improvement initiatives. As of 2012, quarterly meetings serve as forums for sharing status updates and best practices. Cintas’ accounting and finance function benchmarks its process cycle times against industry peers.

Tools and Techniques One of the most integral pieces of Cintas’ success is their ability to collect and apply lessons learned. Cintas has provided a list of key lessons learned resulting from their most recent transformation.  Empower partners to take ownership of the vision and make it their own by allowing them to contribute to the change process.

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 Use natural leaders throughout the change process. These partners are wellrespected by the group and can have tremendous influence with others.  Continue to articulate the vision on a regular basis. Partners need to know the role they play in the change process.  Protect the vision from pet projects or initiatives that will take the function off course.  Allow partners to present projects in order to allow them peer recognition and experience in presenting to larger groups.  Stay focused on the big picture; many problems that appear complex may not require a complex solution.  The leader must stay optimistic and confident in the team’s ability to achieve large-scale change efforts, because partners will look to them for affirmation when they encounter obstacles.  Stay focused on the vision when setting priorities for the department. If the goal is to be a strong business partner to operations, then projects focused on making this happen need to be a priority.  Develop partners continually. They need to be given updated skills for the transformed function, and they need to understand their career path and take ownership of their development. KAIZEN ACTION TEAM “The Kaizen action team is a true game changer at Cintas,” said Carmichael. The team is responsible for soliciting ideas for process improvement projects from partners across all of the Cintas accounting groups and to review proposals to determine if they support the function’s vision. The proposals that align with the vision are approved to move forward. The name Kaizen action came from Kaizen action sheets, which are worksheets that partners fill out to capture process improvement ideas. The Kaizen action sheet includes a brief description of the problem or opportunity, the specific process to be improved, the proposed action required, and the expected benefits. “At first partners needed to be encouraged to complete the Kaizen action sheets. But after several quarterly meetings and vision checks, participation grew rapidly,” said Carmichael. Eventually, the Kaizen action team was formed to handle the large number of initiatives. Leadership and partners on the team rotate out approximately every six months to ensure more partners have the opportunity to participate in the process. The team publishes monthly meeting minutes and holds quarterly luncheons to celebrate successes. “What’s most incredible about the Kaizen action team is that it has become engrained in the culture of the Cintas finance function, said Carmichael. “This

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ongoing, self-sustaining, bottom-up improvement process is unique when compared to accounting/finance departments in other companies.” Instead of needing to create governance structure around each individual process improvement initiative, the project is brought into the permanent governance structure of the Kaizen action team. Projects approved by the team receive leadership support and the necessary resources. “Kaizen action teams are seen as a key reason why Cintas’ cost per $1 billion in revenues is so impressive compared to benchmarking data,” said Carmichael. TECHNOLOGY In addition to partner-led process improvement initiatives, Cintas’ finance function implemented IT solutions to reduce cycle times for key processes. “SAP implementation proved successful,” said Carmichael. To date, the function has implemented SAP Business Planning and Consolidation, a BusinessObjects Excelbased reporting tool, and Visual Composer for dashboards. The software integrates accounting processes and eliminates many of the manual reconciliation processes that had been previously necessary. Carmichael said that perhaps the greatest benefit of SAP is the information that can be pulled for analysis and reporting. A data warehouse was created to allow easy access to operational and financial data. Accountants can use these reporting tools to quickly report trends, benchmarks, and key performance indicators to the field. The existence of the data warehouse means that accountants have to spend less time searching for financial data located in a variety of disparate systems and data files. Better still, the data warehouse provides data governance capabilities that are helpful in ensuring the integrity of the accounting function. When asked what’s next for the function’s IT and software implementation, Carmichael said that Cintas is using SAP benchmarking data to determine where to focus optimization efforts. There are SAP tools that haven’t been turned on that could add value, if implemented. Cintas is developing an SAP center of excellence to prioritize optimization efforts and IT spending. The SAP process is guided by a governance committee, and there are weekly updates to a subcommittee on the progress of the implementation efforts across the business.

Measure, Monitor, and Communicate Cintas has created an intranet portal that allows field users to access key financial and operational reports. Included in this portal are standard and , custom reports and a dashboard. Accountants supplement reports on the portal with other ad hoc reports that they individually create for operational analysis for their field general managers. Initially called the profitability toolbox, these reports are accessible to other accountants on a shared server. They display trends, analyze sales and costs, and benchmark performance across business units. By identifying underlying trends

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and business drivers, operations managers are better equipped to make strategic business decisions. PERFORMANCE REPORTIN G Cintas routinely measures against a number of key performance indicators across locations. Figure 13 shows how finance partners can quickly access a variety of benchmarking measures using Cintas’ software solution. Key Performance Indicator Benchmarking Dashboard Using SAP

Figure 13

EXECUTIVE COMMUNICAT ION In addition to the profitability toolbox, the intranet portal, and dashboard, the finance function uses a number of avenues to communicate with operating managers. Many groups within the finance function hold monthly conference calls with general managers from operations to discuss financial performance and to highlight key trends. Accountants frequently attend field meetings to gain a deeper perspective on operations. Controllers are involved in presenting financial information to operating vice presidents. These presentations are designed to highlight areas for improvement, to develop strategy, and to keep business leaders focused on goals.

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Improvement Initiatives: Results Using the leadership process, partners transformed the rental division’s finance department. The rental finance department saw a 30 percent improvement in productivity based on the number of locations handled per accountant. They have continued to improve since major change efforts were implemented. When new acquisitions are made, Cintas’ rental finance department is often able to absorb the work with the existing staff. Most importantly, accountants have more time than previously to support operations managers and vice presidents in capacity planning, financial analysis, and acquisition support, helping operations save millions of dollars. Many accountants have been promoted to operating positions over the years, some rising to the highest levels within the organization. The transformation made in the rental finance department has been the model for other accounting groups at Cintas. As the finance vision continues to spread across the enterprise, senior managers continue to use the leadership process to engage partners, to empower them to drive the vision, and to become value-added business partners.

Conclusion Cintas’ accounting and finance function works hard to achieve the vision of being a value-added business partner. The function has recognized the value in developing employee soft skills. As a result, this creates a culture where finance professionals can grow, develop, and never feel trapped in a single role. The region-based model gives accountants a broader scope of responsibility and greater connectivity between the finance function and operations partners in the field. “Cintas partners are not satisfied after a single successful process improvement initiative,” said Carmichael. The importance of continuous process improvement is ingrained in the corporate culture through Kaizen action teams and frequent communications. In return, the function has reaped the benefits through reduced cycle times, increased efficiency, and a competitive cost per full-time equivalent when benchmarked against peers. Carmichael said, “there are a few key landmarks in the Cintas finance road map are that are pivotal to achieving the function’s vision through continuous improvement: talent and organizational structure, standardization and automation of processes, and measurement and benchmarking techniques.”

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Case Study: Discovery Communications Inc. With the launch of the Discovery Channel in 1985, Discovery Communications Inc. has since grown to become a publicly traded organization on the NASDAQ stock exchange. Prior to becoming a public organization in September 2008, Discovery tasked its financial reporting function with building capabilities needed to generate the financial reporting required by the U.S. Securities and Exchange Commission (SEC). APQC spoke with Simon Robinson, executive vice president of corporate financial planning and analysis & CFO of US Networks, to discuss the finance transformation made in conjunction with going public at Discovery.

The Strategic Purpose of the Finance Function Discovery expects its finance professionals to follow a few simple, core values focused on integrity. “Doing the right thing is a prerequisite for success in our finance team,” said Robinson. And finance at Discovery has a clearly defined role as a service function that helps the business achieve its goals. As a result, the finance function’s goals tightly align with the business, which in turn aligns with the customers and clients of the business. Discovery’s decision to become a publicly traded organization sparked an initiative to consolidate and optimize its finance reporting processes. Using the SEC financial reporting requirements as the catalyst for standardizing and consolidating data across various business units, finance was charged with ensuring that all general ledgers and financial statements across the enterprise were properly brought together into a single chart of accounts that could be used for reporting to the SEC, as well as support the analytical needs of operational management. In order to prepare the enterprise for a public offering, the work flow was initially organized to achieve two initial goals. 1. Improve management of the general ledger and optimize the financial reporting process. 2. Enable the processes and documentation needed to become Sarbanes-Oxley (SOX) compliant. Although Discovery engaged a CPA firm to assist with SOX compliance, the consolidation and optimization of its financial reporting was handled in-house. As the organization began streamlining its financial reporting process, Discovery realized that separating the FP&A activity from accounting would help the organization be more forward-looking. “Structured around organizational performance, the FP&A function now has more time to analyze data and to build robust, forward-looking models that bring value to the enterprise,” said Robinson.

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Even though the initiative to consolidate and streamline the financial reporting processes at Discovery was difficult and time-consuming, Robinson strongly believes that if it had moved any faster with its finance transformation, it would have made more mistakes and not achieved the balance of opinions the organization wanted. The finance transformation initiative substantially completed in 2010 significantly contributed to Discovery’s path to building a best-in-class finance function.

Talent and Organizational Structure When Discovery restructured its finance function, some employees became specialists instead of generalists. In order to consolidate financial processes and eliminate non value-added tasks,, finance needed to shift roles and responsibilities within divisions and business units. Reassigned employees began working with people more deeply experienced in their field, which created a dynamic environment for fostering fresh ideas and diverse experiences. TALENT DEVELOPMENT “As an enterprise, Discovery invests a great deal in recruiting, developing, and retaining its employees,” said Robinson. The average tenured finance employee spends 10 years at Discovery. This long tenure reflects not only fair compensation practices, but also a commitment to talent development programs. Discovery’s learning and development team within HR, in partnership with the finance leadership team, has created a wide range of learning opportunities through classroom and online courses. Quarterly Continuing Professional Development (CPD) Courses For the finance function specifically, Discovery hosts quarterly continuing professional development (CPD) courses for finance employees to maintain their certifications. CPD courses, designed based on employee feedback, oftentimes bring in outside speakers or training professionals across a wide range of topics. Discovery also encourages finance professionals to seek out and attend relevant conferences on their own. Monthly Lunchtime Learning Sessions Lunchtime learning sessions, offered monthly, involve an expert within the finance function at Discovery presenting on his or her functional area. Over the course of one hour, the presenter shares expertise during three lunchtime sessions open to everyone (i.e., one early in the morning for Europe, one at noon for North America, and one in the late evening for Asia). An average of 25 percent of all of finance employees takes advantage of these sessions. Ongoing Talent Development and Retention Initiative Finance has a three-phase plan for developing careers at Discovery.

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1. Clearly communicate to employees the finance development model. 2. Support job rotations to increase and widen personal expertise. 3. Use organizational change to develop talent and to document lessons learned. The first phase, already executed, involved introducing a matrix for each functional area in finance (Figure 14). The rows of the matrix represent the level of responsibility, from analyst to manager to director to vice president. The columns of the matrix measure level of expertise, such as technical know-how, business capability, and soft skills. Each intersection on the matrix contains a definition of the skills an employee in that position should demonstrate. Talent Development Matrix for Finance Professionals

Figure 14 This not only sets the global standard for what is expected from employees holding positions at different levels of responsibility within different functional areas but also clearly defines for finance professionals aspiring to reach a new level on the matrix what experience and technical skills are expected. This framework has become a fundamental part of an employee’s annual development review. And with

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required skills and experience defined for each role, posting and applying for internal openings has become a much simpler process for both applicants and managers. The second phase for finance talent development at Discovery involves implementing job rotations. With finance professionals holding their functional position for an average of four years, finance is developing a rotational program to get finance employees to move around more within the organization. The finance function is developing a plan that will encourage professionals to rotate through key roles every two years. “Not every move has to be a step up,” said Robinson. “Lateral moves can be very valuable to a career as well. You build breadth to your personal offering to the business.” The third phase is to document lessons learned during organizational transformation. Robinson said: “In hindsight, we missed development opportunities during our major finance transformation. We did not take the opportunity to talk to people and take lessons learned away from the experience. However, we are now far more thoughtful on how projects are staffed and documenting the lessons learned.” ORGANIZATIONAL STRUC TURE A cornerstone of the restructuring and rebuilding of Discovery’s finance function was how analysts in FP&A and other kinds of accounting positions were organized. The finance function at Discovery is built on three pillars of control: 1. Financial control 2. Operational control 3. Strategic control Although coming from individual disciplines, the three pillars are connected and form a control environment for finance professionals. Previously, a finance professional would be expected to learn and work in all three areas (e.g., perform transaction processing while also assisting management with decisions on capital allocation). Although there were a few individuals who were able to excel in all three areas, the majority of the finance function could not efficiently split its focus in that way. Since the restructuring in 2009-2010, the roles break down into the three areas. Financial Control Discovery employs professionals dedicated purely to accounting and compliance. These professionals are responsible for making accurate journal entries, performing account reconciliations, and in general, doing everything involving the general ledger. A large portion of this control discipline is made up of certified public accountants (CPA) and professionals training for their CPA certification. This also includes tax and treasury specialists.

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Operational Control Finance professionals working in the operational control environment may perform a combination of back-office processes and business support; they are close to the business and are responsible for the operational side of finance. For example, affiliate revenue comes from built-in fees consumers pay to large cable television providers to watch Discovery programming. On a monthly basis, finance needs to post journal entries related to that revenue. The amount of revenue that is owed each month depends on the number of affiliates that broadcast the programming, the number of subscribers, the contractual rate the affiliates agreed to pay out, and the type of operations personnel Discovery uses to support that business. Operational finance professionals are responsible for calculating and processing this type of transaction. Each area of specialization—whether it’s in advertisement sales, affiliate revenue, content management, or distribution—has specific finance professionals who align with operations to handle the transactions of that business in order to ensure dayto-day work runs smoothly. These finance professionals work between the financial control environment and the FP&A analysts. This group is populated by a mix of CPAs and MBA graduates. Strategic Control Finance employees within this area of control focus on financial forecasting and planning for the organization—in other words, they are FP&A professionals. These professionals are responsible for partnering with the business and helping management make capital allocation decisions. They ensure that Discovery makes efficient operating decisions by negotiating favorable contracts. Finance employees within strategic control analyze recent historical business performance and build models to help set goals for the future, whether that is the next three months or 5 years. “These professionals, embedded in every business unit, are forward-looking and they tend to be MBA graduates instead of CPA or accounting people,” said Robinson. Finance professionals in the strategic control environment align with a particular business, while the roles in the other two areas tend to be enterprise-wide in nature. Finance talent at Discovery has a responsibility for the global success of the business, whether that is booking transactions, handling affiliate revenue processing, or preparing models to support senior strategic decisions.

Current Improvement Imperatives Discovery’s finance transformation was a massive change initiative. Although most major reorganization and transformation projects have since been completed, the finance function understands the need for continuous improvement in order to maintain finance excellence.

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PROJECT MANAGEMENT A ND PROCESS MAPPING For the finance function to efficiently and effectively manage the many projects underway during reorganization, it was important that there was a central team coordinating the transformation. This team ensured that deliverable deadlines were being met, actions of one team did not negatively affect another team, and overall goals and actions aligned to a single strategy. “Having a dedicated team with project management skills was vitally important,” said Robinson. “Under-resourcing a project management team that communicates and keeps track of what’s happening, when it should be happening, and why it’s not happening—that is probably the biggest risk you can take because it can easily lead to inefficiency and failure.” The project management team was also in charge of mapping key processes: defining the purpose of a process and determining who is responsible, to what standard it should be completed, and how success can be measured. The team challenged the finance function about its way of doing things in order to ensure the best approach was leveraged. As a result, the finance transformation projects progressed more efficiently. New and existing finance professionals alike use process maps, which were introduced by the project management professionals, to learn why a process occurs in a certain way. Continuous governance through process mapping was an important deliverable that came out of Discovery’s finance transformation—process standardization facilitates consistent and efficient measurement. CONTINUOUS IMPROVEME NT Although its major reorganization and transformation is over, the finance function at Discovery has not stopped its improvement initiatives. The finance function is still fine-tuning its structure and the tools it uses to leverage best practices. For example, Discovery has developed financial modeling tools and has implemented SAP modules at its U.S. and Latin American business units. These tools manage content costs, tracking expenditures against budgets, and projected spends into future years. Because these tools facilitate a process that is performed globally, the plan is to introduce it to Discovery’s European and Asian business units. Robinson said: “There are pockets of best practices, and we look to leverage and enhance them. So where we got a tool up quickly to do one task, we put a database in place and built analytics around it. We then took it to the next level of sophistication by increasing the level of analysis. And so if we began running something a year ago, and the model is based on five drivers, today, we may have made it more sophisticated and broken one of those drivers into two or three more drivers.”

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Management reporting is another area that is regularly refined. With the massive amount of data Discovery receives on a nightly, monthly, quarterly, and annual basis, it was important to break the data down into key points. With a strong structure in place, the finance function was able to fine-tune its reporting processes. By putting the right summaries in front of the appropriate audiences, the finance function made the data more intuitive to use. “We now break down six-inch thick binders worth of data into 25 vital pages for management,” said Robinson. “From there, we decide which six pages we need to show to the board every month.” PLANNING FOR THE SHO RT- AND LONG-TERM Discovery is focused on balancing the short-term budget horizon with the longterm strategic view of operations. Finance at Discovery combines a current and detailed monthly annual forecast with a five-year plan focused on maximizing longterm shareholder value. In order to shift from a detailed and granular forecast for the near term to a longer horizon, finance considers more external variables such as the market economy and industry trends that affect Discovery’s overall position and share in the marketplace.

Tools and Techniques for Improvement As a result of its finance As a result of its finance transformation, Discovery uses several tools and techniques to improve its management and reporting processes. Before the organization could proceed with its finance improvement, however, Discovery needed to establish common data definitions across its global operations. For example, separate business units within the organization could not agree on the definition of a “subscriber.” Because consensus on this term, as well as many other crucial terms widely used in its enterprise-wide lexicon, was crucial to financial transformation success, common definitions were established before aligning operational systems with financial reporting requirements. SINGLE INST ANCE O F A N IT PLATFORM Discovery uses the same version of its ERP platform globally. And the finance function has expanded the use of its management and reporting tool to include budgeting and planning. Because the tools run on a common platform, it is easy for the systems to automatically grab data that finance can use to develop forwardlooking models. STRATEGIC USE OF SHA RED SERVICES CENTERS Discovery also uses Shared services centers. With one shared services center for each region—the Americas, Europe, and Asia—Discovery uses the centralized centers for the bulk of transactional processing for AP, AR, and payroll. Current

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improvement initiatives for its Shared services centers include benchmarking performance and reviewing location suitability. CLOSE-TO-DISCLO SE PROCESS DON E IN-HOUSE The close-to-disclose process at Discovery is efficient and well-governed. The finance function is able to file its results within the first week of the second month after each quarter end. The well-mapped process handles problems as they arise, without waiting for the closing process to surface issues. In order to reduce cycle time by about two days, Discovery performs its own XBRL tagging instead of turning to a third party.11 In order to efficiently and accurately handle its own close process, Discovery invested in a well-staffed, dedicated team with specific skills in the functional area. Each team member was well-versed in areas such as Sarbanes-Oxley (SOX) compliance and XBRL tagging. With a strong control environment, Discovery’s close-to-disclose process is efficient and accurate.

Measure, Monitor, and Communicate One of the major external challenges Discovery—like its counterparts in the television industry—is currently facing is the impact of changes in consumer behavior (i.e., people viewing television programming on non-traditional screens such as computers and mobile devices). And with the introduction of on-demand playback, audiences may no longer watch as many premieres or reruns; instead, they record shows and watch when they want. With such uncertainties in the industry, Discovery continues to invest thoughtfully in compelling content and closely monitors the performance of its content. TIGHTLY MONITORED DAT A AND FORECASTS Because the television broadcast industry is currently undergoing major transformations with the increasing popularity of digital and mobile media, Discovery closely monitors its audience to predict potential threats to its revenue stream and does a lot of predictive modeling of various scenarios based on historical data and current facts. More importantly, though, there is a significant amount of communication with management about what the market drivers are, where the drivers are headed, and

11

XBRL refers to eXtensible Business Reporting Language, a computer language that embeds existing financial

data into coded language according to taxonomies specified by regulatory bodies and other government jurisdictions. XBRL-tagged data can be read by any software that includes an XBRL processor and thus can be easily transferred between computers.

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what the various outcomes could be. Through discussion and debate, a consensus on strategy is built. Protecting Revenue Streams Discovery reviews its revenue forecast on a monthly basis. Its two main revenue streams are inherently different in nature. Affiliate revenue is contracted over long cycles, traditionally over five years in the United States and over three years internationally. The primary drivers for this revenue stream are the contracted rates and subscriber volumes. The first is relatively predictable, but the second—the subscriber base—changes more frequently. Data regarding subscriber growth is analyzed in detail on a monthly basis, helping Discovery understand its revenuestream risks and opportunities. Revenue from advertisers is more sensitive to economic conditions, marketplace pricing, and content ratings. Because revenue generated by advertisement sales depends on how successful a show is, data is collected nightly. This kind of visibility allows the finance function to better plan for expected revenue resulting from upcoming programs, whether that is a three-week, three-month, or half-year projection. “We update the advertisement revenue forecast on a weekly basis,” said Robinson. “We discuss the data early in the week with the advertisement sales team. We talk about how the previous week went—what’s happening in the marketplace, what risks they saw, what ratings we’re achieving—and we make decisions around inventory allocation. That data is analyzed, and later in the week, we come back together to discuss the results of those conversations. The updated data is reviewed by senior management on Friday mornings.” Discovery leverages rolling forecasting, planning from the current quarter to the next 12 months. And because the advertisement sales market is more volatile and sensitive to changes in ratings and the economy, more resources are required to ensure the integrity, quality, and sophistication of the near- and long-term forecasts.

Conclusion Although Robinson admits there is no secret recipe for creating a unique culture at Discovery, he does point out that its finance function is made up of professionals who continuously strive for finance excellence. In order to achieve this, finance employees communicate often and with a degree of professional respect. Building a best-in-class function requires strong buy-in from the top, a curious and capable finance team, clear organizational structure, integrated tools and technology, and clear communication to surface best practices and lessons learned. The transition to this this type of environment requires the support of an efficient and effective project management team that monitors progress, facilitates communication, resolves roadblocks, and measures success.

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Case Study: Intel Corp. With a clear finance charter, strong development and recognition programs, and multiple improvement initiatives underway, Intel Corp. has consistently found itself among the top performers in finance.

Finance is good at having an efficient organization at the right level of cost with strong strategic capabilities. — Kevin Heffernan Technical assistant to the vice president and director of finance, Intel Corp. Employing roughly 2,500 professionals, Finance at Intel reports directly to the CFO. The primary departments within finance include Corporate Finance and Accounting, Treasury, Tax and Trade, Internal Audit, Investor Relations, and Operations Finance.

The Strategic Purpose of the Finance Function The vision of finance at Intel is that finance is a full business partner in business decisions to maximize shareholder value. The charter for the finance function at Intel is clearly stated through five core principles. 1. Keep Intel legal worldwide and maintain the highest standard of integrity. 2. Maximize and grow profits by exercising business expertise, independence, influence and leadership. 3. Provide efficient world-class services. 4. Protect shareholder value through effective risk management and control. 5. Develop world-class finance professionals. The primary reason why the finance function at Intel exists is to ensure the enterprise complies with the laws and regulations in the countries it operates in. The finance function focuses on controls that govern business processes and execution. Where finance at Intel really differentiates itself is the way it defines and practices business partnering. Finance professionals who work in Operations Finance provide analytical support that is the glue of effective partnering. Intel finance considers itself successful to the extent that every finance person who is embedded in operations comes to serve as a full partner in business decisions that maximize shareholder value. And that is not left to chance. The progression by which one

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becomes a full business partner is enabled by an impressive array of training programs, rotations to strengthen business knowledge, course-work to deepen financial management expertise, and other development programs. How does finance participate in decision-making? “We don’t own the decision, but we act as though we do,” said Heffernan. “Any major—or minor—decision the enterprise has made, finance has been a part of those discussions.” For example, the finance function is always a major player in decisions involving acquisitions and pricing strategy because it brings to the table a comprehensive understanding of both financial and operational data and the ability to analyze and interpret that data for business managers.

Finance Talent Development and Retention Intel develops its finance professionals through several well-developed internal programs. Finance professionals not only continuously receive both classroom and practical training in a wide breadth of areas but also learn management and leadership skills necessary for developing strong business partnerships. INTEL UNIVERSITY Intel University is an internal program that provides employees with career training courses and online learning opportunities. Finance professionals receive financespecific curriculums (e.g., ROI courses and Monte Carlo simulation courses). Although a separate group within Intel owns and develops the core curriculum for all new hires, the finance function is responsible for developing and refreshing finance-specific courses. “From first-line managers to senior-level executives, management and leadership training is an important part of the finance curriculum,” said Amanda Hashfield, senior controller of FP&A. “Intel managers are taught the difference between a good manager and a good leader so that they can successfully make that transition.” ROTATIONAL PROGRAM Intel has a finance rotational program within Operations Finance. Finance professionals rotate among different business units every eighteen months to two years at the lower levels and at slightly longer intervals at the higher levels. Although less frequent, finance professionals can rotate between different finance functions— tax, treasury, accounting, etc.—which gives people opportunities to expand their breadth of expertise. “As a result of the rotational program, employees bring diverse experiences and new ideas to the challenges of different business units within Intel,” said Hashfield.

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PEOPLE DEVELOPMENT M ANAGEMENT REVIEW COM MITTEE The people development management review committee is a group of finance leaders in charge of understanding how the finance function is evolving, what its issues are, and how to continue to evolve the finance employees. Using internal data, external data, and analysis, the committee looks at all aspects of people development to keep the organization efficient, evolving, and relevant. UNLOCK YOUR POTENTIA L The Unlock Your Potential program helps provide expectations and development on the skills critical to excelling as Intel finance professionals, including businesspartnership; action orientation; goal setting; and analytics, management, and leadership skills. Regardless of region or language, Intel believes that these skills are crucial in creating a strong finance employee. Skills taught in the program translate into the language used in performance reviews. For example, managers include feedback from the operations on how their employees are performing, including areas such as business acumen and partnership. Throughout the year, business units’ general managers contribute their thoughts on what the finance professional did well and what they would like to see more of. Having this feedback as part of formal performance reviews also helps spark professional development discussions.

Improvement Initiatives For sustainable process improvement, Intel regularly defines and develops process improvement initiatives within its finance function. Examples of how Intel identified, standardized, and implemented process improvement include updating its cost system technology, optimizing its forecasting process, and increasing its use of Shared services centers. COST SYSTEM Intel has made a large investment in its cost system with similar investments planned for its FP&A function. With an aging system, the finance function did not have the proper tools to function efficiently. The old system was used for over 15 years and was struggling to adjust to the speed and complexity of the new workflow. Intel’s new cost system will be able to give the finance function a level of detail that was previously unavailable. This increased visibility shows “what’s happening in our factories and how our products are flowing through inventory into sales. We are better suited to evolve when we have changes in our manufacturing process” said Heffernan.

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FORECASTING PROCESS The central FP&A function held a Kaizen event to identify key aspects of its forecasting process. Using Lean management tools, it was able to eliminate many extraneous aspects of the process and produce better results. Instead of preparing all aspects of the financial forecast for every review, the FP&A function realized it was more efficient to prepare only the material needed for each upcoming review, since there was never enough time to cover all details of the forecast in any given review. Detailing what was needed at specific times and removing extraneous information from the messages presented to the CEO resulted in increased clarity and drove better decisions. ”The impact was seen both in the improved quality of results and on the stronger morale of the team,” said Hashfield. INCREASED USE OF SHA RED SERVICES Moving many of the finance function’s transactional processes to a shared services center was a large improvement initiative at Intel. The finance function is exploring options to transfer some additional higher-order finance functions into this environment as well. For example, the enterprise is considering ways to move some aspects of its FP&A function to a shared services model. Because much of the enterprise’s budgeting and planning requires an understanding of the business unit, the FP&A function must work to separate out the processes that do not have a strong connection with operations. Once the processes that can be moved are transferred, Shared services centers can quickly pull routine FP&A reports and populate them in an easy-tounderstand format. Many companies experience some uneasiness and resistance from employees when certain finance functions are moved to a shared service model. However, with the pilot of the FP&A movement, Intel has experienced only positive feedback thus far. “It’s moving the work that can be separated from the operations that frees up more time for the FP&A role to focus on adding value to the business operations,” said Hashfield.

Tools and Techniques Intel uses a variety of tools and techniques to measure and improve the finance function’s overall performance. Metrics and technology alike highlight specific areas that have opportunities for process improvement. EFFICIENCY STRATEGIE S Intel places a large focus on efficiency. In order to measure and track efficiency performance, the finance function uses Six Sigma and Lean strategies. Designing and managing business processes around its performance results has enabled Intel

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to consistently do things faster and more efficiently than other organizations’ finance functions. BENCHMARKS Intel regularly benchmarks itself across a variety of performance indicators. The transactional side of finance has embraced Six Sigma and maintains a scorecard. The entire finance function at Intel uses benchmarking as a way to measure itself against both external finance functions and its own performance from previous years. The office of the Director of Finance partnering with HR Finance is primarily responsible for benchmarking at a macro organizational level. Individual finance groups also perform select performance benchmarking. KNOWLEDGE MANAGEMENT SYSTEM Finance created an online knowledge management system that is a tool for acumen research and networking across Intel Finance, enabling improved finance influence and business results. It includes sources for external and internal information, training, models, and a social networking system in which finance employees can get information about specific topic areas, company initiatives, and groups. Utilizing Expert Finder and Communities of Practice, the system enables finance to easily connect with colleagues and subject matter experts. “For example, if you need to know about tax accounting, you can easily find someone who has listed themselves as an expert in tax accounting and consult with him or her directly,” said Hashfield.

Measure and Communicate Intel takes certain measures to maintain a top-performing finance function. Finance professionals must combine functional knowledge with operational understanding to build a strong partnership with business units. Intel clearly and regularly communicates goals, expectations, and process changes and improvement plans, which keeps the entire organization aligned and in synch. Individuals who make significant contributions towards business results are recognized by both peers and senior management with meaningful awards. MEASURE AND RECO GNIZE WITH FINANCE AWARDS Intel has many recognition and awards within its finance function that measure its influence on the enterprise. Submitted, reviewed, and usually approved at the vice president level, finance awards measure how impactful or innovative an individual or team was in impacting Intel’s business. Covering many departments including operations finance, accounting, tax and trade, treasury, and audit, many awards are structured with a quantitative set of criteria. A few examples of finance awards at Intel follow.

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 Cash savings award—Awarded on a quarterly basis, the cash savings award recognizes finance professionals that play an influential role in driving change that had a positive impact on Intel’s cash, such as influencing operations to a decision that resulted in substantial cash savings.  Time-saving award—Focused on improving efficiency, the time-saving award is given to a finance professional who improves a process by removing low-value or non-value-added work.  General finance awards—Intel provides quarterly spontaneous recognition awards, divisional recognition awards, and finance achievement awards. “We strive to make our people feel rewarded and recognized for all of the things they do that are beneficial to the enterprise,” said Hashfield. BUILD A BUSINESS PAR TNERSHIP Operations Finance professionals are embedded within Intel’s business units and rotate throughout different business units. In order for these finance professionals to have an impact on the business decisions during their rotation, it is important for finance professionals to know how to build strong business partnerships in a short period of time. Explained to finance professionals through a stair-step model, Intel uses business-unit partnerships that progress through various stages of maturity. As a finance professional becomes more involved in the business unit’s operations, he or she has more potential to positively impact change. Because it is up to the individual to drive finance’s impact within that business unit, moving up the business partnership curve is critical. Upon first starting within a business unit, the finance professional needs to build their credibility to be able to influence the operations. The finance employee should view each interaction with operations as an opportunity to build a relationship and show their value to their business partner. Business partnership moves up the maturity curve when operations is open to the recommendations from finance based on the trust that finance individual has built and the value brought so far. The third level of business partnership is achieved when the business unit proactively includes the finance professional in business decision-making precisely because insights from the finance professional are viewed as vital before a decision can be made. At the fourth-highest competency level, the business unit begins to view the finance professional as valuable enough to lead certain initiatives outside of finance within the business unit. In essence, the finance person is empowered to act with authority on the business unit’s behalf.

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COMMUNICATE CHANGE Intel uses early communication, be it a road show or newsletter, during a change process to let people know what’s coming. A common worry, especially when changing expectations for finance professionals or improving processes within a finance function, is the impact it will have on the individual and how his or her role will evolve. However, keeping an open channel for communication with management reassures employees that they will be given time to learn and grow into more interesting and impactful roles that meet the new expectations. “Explaining what the gap is, the vision of where we want to go, what are some first steps to be able to get there, and the long-term road map helps enlist the employees in the change. Then continuing this kind of communication is essential,” said Hashfield.

Conclusion The finance function at Intel demonstrates a strong embrace of the principles of continuous process improvement. What is perhaps most instructive is how senior management makes it clear to every team member that success is evidenced in the form of driving better results for Intel and its shareholders. The mission of finance at Intel is directly tied to the success of the enterprise as a whole.

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Case Study: ManpowerGroup With its global network and local expertise, ManpowerGroup partners with clients to accelerate their businesses by providing the people and services that contribute to the quality, productivity and efficiency of their total workforce, including recruitment and assessment, training and development, workforce consulting, outsourcing, and career management. “Our core values are people, knowledge, and innovation,” said Patricia Puccinelli, vice president of global finance operations at ManpowerGroup. “At ManpowerGroup, people really do live these core values. This is the glue that holds the entire company together, which enables us to have a finance function that is a true business partner.”

The Strategic Purpose of the Finance Function At all levels at ManpowerGroup—by country, by region, and at the corporate level—the finance function is highly regarded for bringing value to the business, according to Puccinelli. ManpowerGroup’s company-wide strategic execution framework, which also applies to its finance function, is five-fold (Figure 15). In alignment with this framework, a finance executive team, which is made up of the CFO, the corporate finance vice-presidents, and the regional finance directors, defines goals, sets short-term targets (one-year projections), and establishes longterm objectives (one- to three-year projections) for the finance function.

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ManpowerGroup Strategic Execution Framework Extract

Figure 15 Each year, the finance executive team documents its new goals and aligns them with ManpowerGroup's strategic execution framework and long-term objectives. However, ManpowerGroup’s best-in-class finance function did not develop overnight. ManpowerGroup has spent the previous five years—beginning in 2007— defining and tweaking its finance function to best serve its organization’s strategic goals. ManpowerGroup realized in its early stages of a multi-year finance transformation effort in 2007 that its finance function was not as aligned to its business strategy as it could be. As a result, the finance team surveyed its business partners—business unit and regional managing directors—to determine in what ways the finance function fell short of business needs and expectations. The survey found that these areas needed improvement: strategic focus, decision support, profitability assessment, management reporting, resource allocation, and market guidance. As a result, ManpowerGroup formed six “Breakthrough Teams,” each headed by a single process owner who would focus on closing the gaps between performance and expectations. The focus areas included: 1. performance and decisions, 2. risk and capital, 3. transaction processing,

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4. performance and metrics, and 5. talent and people. To ensure the structure and rigor of ManpowerGroup's finance transformation program, the corporate finance team used a finance function model composed of six value drivers and four enablers to assess the finance function’s performance (Figure 16). ManpowerGroup Finance Function Model

Figure 16 Defining objectives and their deadlines, this chart is composed of six value drivers and four enablers to assess the finance function's performance. The level of importance to the business is indicated in blue while effectiveness is marked in black. Red indicates the performance level the finance function would like to achieve. This chart analyzes performance from two perspectives: 1. How important is this activity to the business? 2. How effective is the organization at performing this activity?

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The gaps between current performance levels (in blue and black) and performance goals (in red) are shown in a clear illustration. By assessing itself in this manner, the finance organization was able to prioritize its transformation steps. And by 2008, the teams were producing solid results by:  establishing best practices for days sales outstanding (DSO) improvement;  creating a standard investment framework and business case template;  rolling out an executive dashboard to countries with local key performance indicators;  defining standard order-to-cash, purchase-to-pay, and record-to-report processes;  developing a finance competency and capability model;  defining a succession planning model and process; and  identifying key people to retain in the organization. It was at this point in ManpowerGroup's finance transformation path that the finance executive team was formed to discuss successes and lessons learned. The team is responsible for identifying finance best practices that can be applied across all regions. Measured and reported monthly, dashboard metrics—sourced from both internally and externally benchmarked key performance indicators—help the finance executive team hold different countries and business units accountable. The executive dashboard presented per country or region includes local key performance indicators for order-to-cash, purchase-to-pay, and close-to-disclose processes. Steadily moving along its finance transformation path, ManpowerGroup CFO Mike Van Handel created a global finance operations department in 2009 to push the finance function further. This department works with the finance executive team to enhance its global marketplace strength by focusing on efficiency, productivity, and culture change. With an organizational structure that includes Shared services centers and outsourced services, the department facilitates finance transformation through a three-pronged approach: ensuring the right people are in the right roles, designing and implementing standard business processes, and leveraging global standard technology (Figure 17).

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ManpowerGroup Finance Transformation Approach

Figure 17

Talent and Organizational Structure “Despite a global presence, ManpowerGroup has highly localized operations that suit its entrepreneurial culture,” said Puccinelli. Consequently, it does not prescribe a standard talent recruitment and development program. The global finance function is united through its drive for finance excellence, said Puccinelli; each member of the finance leadership team—made up of the top 50 finance leaders within ManpowerGroup either hires or grooms high-caliber finance professionals. This organizational approach occurs not only at the corporate level but also at the regional and country levels. “Because we operate in so many different countries and cultures, we don’t have a one-size-fits-all training or grooming program,” said Puccinelli. “Instead, our top finance people set the tone and focus to make sure we are moving in the right direction. They are the stewards of our business’ assets and shareholder value.”

Improvement Initiatives Using a five-year outlook on return on investment (ROI), the finance function at ManpowerGroup applies standard business frameworks to localized situations.

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From investments in technology to prioritizing productivity and efficiency programs, such as standardizing transaction processing, various improvement initiatives underway globally are at different stages of implementation. SHARED SERVICES CENT ERS AND EFFICIENCY B Y REGION ManpowerGroup thrives on its highly localized expertise. However, the organization realized the need to centralize certain aspects of its finance function. Congruent with the organization’s history of organic growth, ManpowerGroup began an internal shared services center for the Nordic region—serving Norway, Sweden, Denmark, and Finland—to perform standard back-office processes before implementing the program more broadly. As a result of the region’s success, the program slowly expanded to northern and southern Europe. The United States, Canada, Central America, and Mexico also currently operate in shared services environments. In Asia-Pacific and in the Middle East, the finance function is striving to create a world-class finance organization through top and bottom line improvement initiatives, productivity measures, days sales outstanding improvement, activitybased costing and ongoing cost-reduction projects, standardized processes and IT solutions, and continuous process improvements. STANDARDIZED BACK -OFFICE PROCESSING One goal within the organization’s overall strategic execution framework is to standardize back-office processes and then to leverage global technology appropriately. In 2012, the finance function at ManpowerGroup developed a global chart of accounts and standard back-office processes including associate time collection, customer invoicing, collection support, AR, AP, and general accounting. “We have a client-first focus,” said Puccinelli. “So the simpler we make back-office operations, the easier it is for our clients to do business with us. There are fewer errors, so that enhances the customer experience.” Although back-office systems differ from country to country, the key performance indicators measure throughput and quality of core transaction-oriented processes such as AP. This consistent perspective across all regions allows the finance function to see which countries are doing well. This also forces smaller countries to seriously consider consolidating operations so that they can achieve the benefits of scale larger countries enjoy. BACK-OFFICE TECHNOLOGY The finance function at ManpowerGroup does not currently operate under a process ownership model, mainly because the business is so global and highly localized. However, the finance function has a standardized global back-office

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system that a country is obligated to adopt when it needs new back-office technology. Unless there is a highly compelling reason that dictates otherwise, countries have to use this standard system for back-office processing. A separate governing body monitoring process and system change is able to govern this backoffice technology implementation. Because ManpowerGroup locations are so spread out, there are a few instances where making an exception makes more sense (e.g. local regulations dictate the use of other technology). The independent governing body reviews these special situations and determines which commonalities still apply and whether it is appropriate to standardize. ANALYSES OF KEY PERFORMANCE INDIC ATORS TO IMPROVE OPERATION PROFIT ManpowerGroup has defined an operating profit improvement program that lists over 250 specific actions that will help the organization enhance its go-to-market strategy, reduce direct costs, and improve processing. Because the improvement project is being tested in only 18 countries, the finance function can identify and fine-tune consistent, driver-based key performance indicators across the organization. All 250-plus actions roll up into a country summary, a regional summary, and then finally into an executive dashboard. The executive dashboard shows how each country and region measure up in terms of operating unit profit goals. In order to ensure that key performance indicators remain relevant, the finance executive team approves and modifies the key performance indicators annually. The key performance indicators focus on both throughput and quality. Divided into top, median, and bottom performers, the key performance indicator metrics are published quarterly, which encourages healthy inter-country competitiveness within the organization. In addition, the finance function continues to work with regional finance directors to identify additional opportunities to increase productivity by eliminating cost through root-cause analysis of key performance indicators.

Tools and Techniques Through embedding finance in the operations at a local level, country and regional businesses depend on the corporate finance function for important decisions such as sophisticated contract pricing. RISK MANAGEMENT SOLU TION ManpowerGroup uses an innovative work force solution framework that helps its finance function understand and price its complex client contracts. This solution helps prevent certain risks from transferring from the client to the organization,

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thus protecting the business. The framework provides guidance for the type of workforce solutions that require approval from regional and global legal, financial, and client subject matter experts. This increased scrutiny ensures that the risks the organization will have to assume with the proposed solution are fully understood. Throughout the sales process and before a client contract is signed, the framework, which includes standard criteria and thresholds, comes under additional scrutiny from functional experts. Oftentimes, an innovative workforce solution is led by one country (the demand country), but requires services from another country and/or multiple countries (the supply country). ORGANIZATIONAL DESIG N “An important part of ManpowerGroup’s successful finance transformation framework is its focus on organizational design,” said Puccinelli. Organizational design of the finance function must align with the organization’s strategy. By eliminating redundant structures, adopting Shared services centers and centers of excellence, and appropriately outsourcing, the finance function is able to leverage the other resources (i.e., people, processes, and technology). For example, the Nordic countries began outsourcing processes—associate time collection, customer invoicing, collection support, AP, AR, general accounting, and financial reporting—to two locations in mid-2008. The outsourcing location in India serves as an English-language delivery center while the location in Poland serves countries needing other language support. The United Kingdom, Belgium, Germany, Spain, and Italy began outsourcing to India and Poland from mid-2010 to mid-2011.

Measure, Monitor, and Communicate Although it is difficult to define standardized metrics across highly localized business units in 82 countries and territories, in October 2009 ManpowerGroup began collecting certain throughput and quality data to measure the impact of their finance initiatives (Figure 18).

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ManpowerGroup Back-Office Key Performance Indicators

Figure 18 Targets were established based on internal and external benchmarks; these common key performance indicators are distributed to all countries and regions quarterly. The finance function leverages opportunities that emerge from this data to improve and expand the business. GROWING THE BUSINESS Because the finance function is critical in pricing client contracts, it is involved in securing client relationships from the beginning. As contracts and client solutions become more complex, the finance function has a responsibility to protect the organization from accepting unnecessary risk from clients. The finance function at ManpowerGroup is actively involved at the front end of business development and in understanding the ramifications of that business development on ManpowerGroup as a whole. EXECUTIVE COMMUNICAT ION Because it is so important to communicate performance goals clearly, the finance executive team meets monthly to define and modify how the finance function should work internally as well as with external business partners. The team reviews ideas and best practices that will advance the organization’s strategic execution framework from a finance perspective.

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For example, the finance leadership discusses how the billing that occurs in the United Kingdom can apply in the same way in the United States, Mexico, and Israel. This communication and knowledge-sharing structure helps to align the finance function with the organization’s goals and promotes efficiency and productivity.

Conclusion ManpowerGroup leverages its global reach and expertise while remaining highly localized. Leveraging standardized processes, systems, a common chart of accounts, along with a disciplined approach to driving continuous improvement and a clear articulation of goals and progress-to-date, the finance function offers the benefits of a global scale to localized business units.

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Case Study: Company B Company B has expanded primarily through acquisitions. Company B is currently organized into four sectors: aerospace systems, electronic systems, information systems, and technical services.

The Strategic Purpose of the Finance Function In order to support its organizational structure and decrease operating costs for standard practices and systems, Company B created a centralized shared services function in the 1990s. Company B’s shared services function was initially was initially formed to respond to the rapid rate and high volume of acquisitions of new companies. With 95 employees, the newly formed business unit served 17,000 employees and had $2.5 billion in sales, representing between 15 percent and 20 percent of Company B’s total sales. As of 2012, the shared services organization— known as enterprise shared services—employs 3,000 professionals and is a separate business unit within the organization. Enterprise shared services is the single provider of finance operations for the organization. Its purpose is to continually identify ways to reduce costs for business units. Company B acquires and sells business units and realigns contracts, programs, and businesses according to customers, expertise, and capabilities. Internal realignments are designed to fully leverage existing capabilities and to enhance the development and delivery of products and services. The financial services center, a service line within enterprise shared services, is the most mature of the various enterprise shared services and provides about 85 percent of financial services to Company B. The financial services center has grown to include business unit–specific functions such as material accounting, cost accounting, and labor accounting. However, financial reporting and budgeting occurs at the business unit level. With the theme, “Building a Shared Future,” the financial services center uses common systems and processes. To support enterprise shared services, the financial services center uses a continuous improvement methodology to ensure high-quality processes and services across the organization. Figure 19 shows the five focus areas for performance improvement.

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Areas to Improve Performance

Figure 19 As the financial services center evolves to a broad, multifunction shared services model, it is possible to leverage opportunities between different organizations and to streamline processes using continuous improvement methodologies. The financial services center delivers the following services: AP, cash management, payroll, general ledger, billing, fixed asset accounting, labor and material accounting, timekeeping, and travel and expense processing.

Talent and Organizational Structure Professionals working for the financial services center are encouraged to think beyond providing transactional processing and to search for opportunities to drive the business forward. And with enterprise shared services known as a hybrid shared services center—it performs operations beyond traditional financial services, including an employee call center and HR processes—finance professionals at Company B are able to gain a broad view of the enterprise as a whole. EMPLOYEE ENGAGEMENT AND DEVEL OPMENT Many process improvement projects originate from employee suggestions. The director of disbursement services explained that “having management listening to employees’ suggestions has been instrumental in having a high level of employee engagement.”

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Company B frequently hosts meetings to introduce enterprise shared services employees to the manufacturing side of the business. This helps employees understand how their work supports the company’s mission and vision “to be the most trusted provider of systems and technologies that ensure the security and freedom of our nation and its allies.” Vice presidents from business units discuss how each of their business units fits into the enterprise. Through videos, current information about contracts and projects, and question/answer sessions, these meetings “provide an opportunity for employees to connect to the business,” said a company representative. The financial services center also provides business sector education. For example, billing professionals train other business units on how a feeder system impacts work downstream and how the quality of the work they provide ultimately impacts the customer invoicing. This training helps illustrate the big picture for employees. ORGANIZATIONAL STRUC TURE A separate business unit, enterprise shared services performs financial operations for the organization’s corporate, business unit, and newly acquired businesses. Enterprise shared services has an organizational structure with an appointed president who sits on the organization’s policy council (Figure 20). Enterprise Shared Services: Service Lines

Figure 20

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The financial services center was formed in 1999. Other service lines began providing shared services in the mid-2000s. HARMONIZING BUSINESS UNITS Company B adopted and expanded its single-function financial shared services center into a multifunction shared services organization. Having all business units on board during this transition period was key. Once business units embraced the idea, Company B began to see cost savings from increased efficiency and effectiveness. Previously, even though material, cost, and labor accounting were brought into the financial services center in 2008, many processes were still site- or unit-specific. In 2012, business units embraced standardization. However, standardizing processes within enterprise shared services took time (Figure 21). Financial Services Center: Organizational Progress

Figure 21

Current Improvement Initiatives In 2012, Company B focused on leveraging mature capabilities that exist within internal functions (e.g., the HR services center, the financial services center, and procurement shared services), and streamlining processes using an end-to-end process view, and sharing these processes across the enterprise. Best practice analysis reveals specific processes that can be adapted.

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Through best-practice sharing, organizational partnerships are naturally formed. For example, the financial services center uses the HR services center call center model, which fields employee inquiries. The financial services center uses the model to adopt a more efficient way to handle AP transactional inquires. As well, the financial services center partners with procurement to focus on paying invoices in a controlled manner. “We pay based on pre-set terms specified in purchase orders and not according to some target for days payable outstanding,” said a company representative. “We meet regularly with the people on the procurement team regarding aged invoices. When this collaboration started, the performance data showed 70 percent of invoices were paid on time. However, working with the procurement team to develop an end-toend view of the procure-to-pay process, the disbursement team was able to identify the root causes of process snags. One enhancement involved driving more precision in the process of updating the vendor master data file. This an example of providing indirect value to internal customers, the organization’s sectors, through refining processes.” Currently, 90 percent of invoices are paid on time. In a final example, AP monitors different types of suspense situations. A suspense situation occurs when a cost owner associated with an invoice line item has yet to be identified. Company B cannot generate a proper invoice until a cost owner has been identified. “One of the first things that must be identified is the final cost objective,” said a project manager for the financial services center. “With the improvement program that examined end-to-end processes, the suspense rate has been reduced by 95 percent.”

Tools and Techniques Company B uses a variety of tools and techniques to continuously improve its processes. Automation, facilitating paperless transactions, and a supplier portal are just a few of the tools used to achieve best-in-class performance. PAPERLESS TRANSACTIO NS Embracing process automation, Company B processes 75 percent of its invoices electronically. A company representative said, “We use an approach known as evaluated receipt settlement. When a receipt arrives, it is entered into our ERP system. If the invoice matches a purchase order (PO) line item with the corresponding dollar amount, our system will automatically create a payment. We don’t require invoices for anything we can do via evaluated receipt settlement.” A company representative emphasized, though, that a vendor must meet strict qualifications to be accepted as an evaluated receipt settlement vendor. Company B uses a vendor scorecard to measure regularly how proficient a vendor is in terms of, for example, logistics efficiency and order fulfillment. Company B also uses

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procurement cards for payments, increasing process efficiency and reducing paper checks. Company B also uses transactional content management capabilities, along with automated workflow. This enables highly efficient and accurate routing of invoices for approval before disbursements can be made. The management of recurring payments is another area where the disbursement services group within the financial services center shines. Any time there is a purchase order with a fixed dollar amount and a fixed allocation (e.g., lease payments), there’s a module within the SAP system to make an automatic payment. No invoices are required. In instances where the financial services center must process invoices manually— approximately 48 percent of invoices arrive through email—Company B automatically extracts and reads invoice information using intelligent data capture technology. This technology is fully integrated with the ERP system. When the PO number is identified, the system validates various data and matches the invoice line items and dollar amount to the PO. Once an invoice is matched, the system automatically routes the item to the appropriate person for approval. Even though the financial services center doesn’t touch emailed invoices, Company B still considers these cases as manual because they require an AP analyst to post them. If an invoice does not match, it stops in AP for an analyst to complete the matching. SUPPLIER PORTAL Company B relies on a network of contractors and sub-contractors, and the financial services center pays for so-called purchased labor using a highly automated approach that is enabled by a home-grown IT solution. For example, a contractor enters purchased labor invoice data directly into the company system via a supplier portal. Travel cost reimbursement is also handled this way. Although travel and expense receipts are delivered via email for validation, labor cost processing is fully automated.

Measure, Monitor, and Communicate The financial services center has tracked process performance and service excellence across a number of dimensions since the 1990s. A project manager said, “the core principles of business process management are truly ingrained in the company’s culture. In fact, employees and managers speak about purposeful process-based leadership.” For example, the financial services center AP function links its objectives and strategies with organizational goals (Figure 22).

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AP Function: Objectives and Strategies Linked with Organizational Goals

Figure 22

METRICS, MEASURES, A ND DASHBOARDS A company representative APQC spoke to has extensive experience in Six Sigma and serves as a de facto process owner for the financial services center. He brings various teams together and facilitates the use of a structured methodology for planning and executing improvement initiatives. The representative said, “the financial services center is considered the leader among enterprise shared services regarding its use of process improvement tools and techniques. There is a renewed focus every year on improving productivity. By visibly sharing goals, metrics, and dashboards with employees, we are able to have the ‘are we driving the business forward?’ conversation. Everyone has a good understanding of how the organization is doing and how their role makes a difference.” Comprehensive dashboards monitor the current status of individual and department performance and the achievement of goals. The quality goal dashboards are posted in visible locations within the department, and employees discuss current progress (Figure 23).

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Enterprise Shared Services Scorecard Quality Dashboard

Figure 23 Dashboards focus on process health and monitor processes for continuous improvement. These are monitored at the management and employee level so that everyone can see how his or her contributions help achieve organizational, enterprise shared services, and financial services center goals. Example dashboards include:  Organizational—Suspense balance key performance indicators,  Central financial services center—key performance indicators trend dashboard,  Central financial services center—shared key performance indicators trend dashboard,  General procurement and major subcontracts—performance dashboard,  ADR and inquiry team—performance dashboard,  System and audit team—performance dashboard, and  Scanning, PLSC, and performance-based payments—performance dashboard. Figures 24 and 25 show an example of the list and dashboard, respectively, of the health metrics used for the financial services center.

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Financial Services Center Health Metrics SUSPENSE BALANCE KPI DASHBOARD Suspense: Debit Balances  Intercompany unbilled >30 days-net  Miscellaneous suspense  Unsettled cost  Labor suspense  Debit memos  Total debits, current month Suspense: Credit Balances  Miscellaneous suspense  Unsettled cost  Labor suspense  Total credits, current month

KPI TRENDS DASHBOARD Operations  Annual cost per employee paid  Cost per expense report  Cost per invoice  Employees supported per payroll FTE  Expense reports processed per travel FTE (annualized)

 Invoices processed per AP FTE (annualized)

    

SOX deficiencies Un-reconciled accounts (DR/CR) Payroll checks reissued EFT expense reimbursements Employees suppressing paper pay stubs

Suspense: Credit Balances  ESS customer satisfaction survey Figure 24 Financial Services Center Health Metric Dashboard

Figure 25

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BENCHMARKING AND KNO WLEDGE SHARING Most process productivity benchmarking is done using external benchmark data providers. A company representative said, “We are constantly trying to figure out how to continually reduce our sector cost. That is a constant driver. And as managers, we always make sure this perspective exists all the way to the individual employee level. We work hard to ensure each person has a clear understanding of what they contribute by, for example, improving their personal productivity. We also make this very visible on their performance evaluations.” Providing knowledge expertise is another focus. Managers are urged to partner with the customers they serve in operating units. Finance professionals share benchmarking results with customers to improve process performance. Moreover, benchmarking results involving all areas of the financial services center are shared with senior management in the sectors.

Conclusion Company B is a good example of a mature financial shared services model. Team leaders and managers make it a priority to engage employees in the pursuit of service excellence. This results in high levels of process efficiency and effectiveness. Company B impressively uses financial management systems to measure progress across a number of dimensions over time. What distinguishes Company B as a bestin-class finance function is the financial services center’s dedication to continuous improvement and supporting managerial techniques. Once accomplished, improvement goals are moved higher. This is the essence of process-based leadership.

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Case Study: The Office of the Comptroller of the Currency, U.S. Department of the Treasury Through the fulfillment of its mission, the OCC ensures that banks and federal savings associations operate in a safe and sound manner and in compliance with laws requiring fair treatment of their customers and fair access to credit and financial products. The OCC's nationwide staff of bank examiners conducts on-site reviews of national banks and federal savings associations (or federal thrifts) and provides sustained supervision of these institutions’ operations. Included in each examiner’s review is an evaluation of internal controls, risk management, internal and external audits, and legal compliance. The president of the United States, with the advice and consent of the U.S. Senate, appoints the comptroller to head the OCC for a five-year term. The comptroller also is a director of the Federal Deposit Insurance Corp. and NeighborWorks® America. The OCC has the power to examine the national banks and federal thrifts; approve or deny applications for new charters, branches, capital, and other changes in corporate or banking structure; take supervisory actions against national banks and federal thrifts that do not comply with laws and regulations or that otherwise engage in unsound practices; remove officers and directors, negotiate agreements to change banking practices, and issue cease and desist orders as well as civil money penalties; and issue rules and regulations, legal interpretations, and corporate decisions governing investments, lending, and other practices.

The Strategic Purpose of the Finance Function The finance function within the OCC supports the core-mission staff by providing administrative support, including accounting, financial reporting, monitoring internal controls, processing vendor and employee payments, planning and budgeting, providing acquisition services and travel support, and administering the OCC records management program. The work of the financial function has evolved from transactional to more project-based. The organization has been able to break down silos and to enable staff to work together to produce results that support the mission. Gary Crane, deputy CFO, described the financial function’s success as the result of transforming to a “soft skills organization that operates more horizontally than vertically to unlock the potential of the organization.”

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MISSION AND VISIO N As a support unit, the finance function safeguards the reputation of the office of management through stewardship and reduces the administrative burden of organizations it serves. The core values of stewardship and service are fundamental guides for planning and decision making in the organization. The mission, vision, and core values of the finance function at the OCC align with the mission and vision of the OCC. Alignment guides how the strategic goals and continuous improvement initiatives are created (Figure 26). Alignment of Mission, Vision, and Core Values

Figure 26 FINANCIAL MANAGEMENT STRATEGIC GOALS In order to support its mission, vision, and core values, the finance function has five strategic goals that correspond with its annual action plan. 1. 2. 3. 4. 5.

Embrace accountability for the success of the business strategy. Anticipate customer needs through a better understanding of the business. Ensure processes are operationally excellent. Be recognized as leaders in effective program and project management. Optimize costs in delivering products and services.

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FINANCIAL MANAGEMENT S TRATEGIC FOCUS The finance function focuses on decreasing the administrative burden of its customers—the core-mission staff of the OCC. The finance function relies on three critical success factors as cornerstones for strategy: customer satisfaction, highly engaged staff, and continuous improvement (Figure 27). These three success factors, along with the core values of stewardship, service, and a business model of operational excellence, help the finance function focus on the framework for the successful results. Finance Strategic Focus

Figure 27

Talent and Organizational Structure The finance function reports to the OCC Office of Management under the direction of the senior deputy comptroller for management and CFO. The four finance units—budget, policy and internal accounting controls, accounting, and acquisition management—manage a range of services including:    

annual financial audit of the OCC, planning and budgeting, accounting policy, acquisition management,

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     

records management, compliance (Office of Management and Budget Circular A-123), travel operations, financial reporting, Lean Six Sigma process improvement, and financial risk management.

Although the finance function shows the reporting relationships in a static chart, organizational c ulture enables cross collaboration and empowers professionals to work across functional silos (Figure 28). Finance Function Organizational Structure

Figure 28 Described by Crane as a game-changing role, the change management position helps the finance function with project and daily operational support. More specifically, the role introduces change management approaches and services, improving employee development, customer satisfaction, communications, branding, and other initiatives that support the mission. The change manager also provides a new level of quality control. Vicki Parkhurst, budget officer, said, “Although product and process improvement is important, communication and change management ensures that various stakeholders embrace the results.”

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STAFFING PERSPECTIVE S Responding to employee-satisfaction feedback, organizational structure has evolved over time to provide career growth opportunities. Previously, high-level employees were performing low-level work. Beginning in 2006, the management team evaluated the staffing requirements for specific tasks and services delivered. As a part of the cultural transformation, work requirements were matched with specific skill sets. As a result, the finance function is able to staff the appropriate number of full-time equivalent (FTE) employees to deliver its services and to create more challenging roles which empower employees. In Figure 29, the changes in FTE assignments are shown for the fiscal years 2006, 2009, and 2011. The Finance Function Staffing: 2006, 2009, and 2011

Figure 29 The number of FTEs in bands II through VI was adjusted to reflect the volume of tasks appropriate to the skills and experience required. Notice that there was an increase in part-time staffing. ENSURING TOP TALENT Crane explained that “the work provided by the finance function is always a target for outsourcing; therefore, the finance function must be the best.” The finance function uses the following best practices empower and engage a high-performance work force: 1. Employee engagement—The finance function uses Gallup’s Q12® MetaAnalysis to conduct annual assessments of employee engagement and

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2.

3.

4. 5.

6.

satisfaction.12 Based on research stretching back to the 1950s, this assessment examines 12 factors that contribute positively to work and learning environments—factors that enable people to capitalize on their unique talents. Each year, every unit within the finance function develops a plan for improvement based on the assessment’s results. Leadership pipeline—The management team meets regularly to discuss how to promote from within, to identify the requirements of the organization, and to examine the available skill sets. The team identifies skill gaps and evaluates how the finance function can either grow talent from within or recruit externally. Talent development—Developing employee talent is seen as a win-win situation for both the organization and the employee. Investing in financial staff has increased retention. Employees are offered educational and training opportunities in a variety of topics. For example, employees are encouraged to obtain CPA, PMP, and other certifications. Additional training on various management, leadership, customer service, personal development, and technical topics is available through classes, book clubs, and lunch discussions. Coaching program—A voluntary program provides employees with a professional coach to facilitate personal and professional development. Rotations—The finance function identifies potential candidates for internal openings through job rotations. Entry-level programs allow finance professionals to rotate in and out of various disciplines within the finance function. A typical rotation, lasting between six to 12 months, allows employees to develop professional networks and to obtain a broader perspective of how various sub-functions contribute to the enterprise. Internship program—An internship program involves college students with the day-to-day activities of the finance function. Interns perform financial management duties, allowing the finance function to identify high performers for future recruitment.

Current Improvement Initiatives The finance function uses research, findings, and best practices from James Collin’s Good to Great to guide improvement initiatives.13 “Its hedgehog concept helps the 12

Gallup. “Q12® Meta-Analysis: The Relationship Between Engagement at Work and Organizational

Outcomes.” Gallup, August 2009: http://www.gallup.com/strategicconsulting/126806/Q12-MetaAnalysis.aspx. 13 James Collins. Good to Great: Why Some Companies Make the Leap and Others Don’t. HarperBusiness, 2001.

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finance function define a narrowly focused objective and field of competency, concentrating resources in areas of internal strength,” said Crane. 14 Because the mission, vision, and core values are aligned with the rest of the organization, the finance function has improved business processes and performance. It has identified decreasing administrative burden as its hedgehog. LEAN SIX SIGMA The finance function, with an annual goal of $600,000 in process improvement savings, has 15 employees with varying levels of Six Sigma certification. A team manages process improvement initiatives, reviews submissions bi-weekly, selects projects, assigns personnel to projects, and identifies mentors. Projects are managed through a centralized intranet site that all finance employees can access. The finance function expects employees to identify opportunities and submit ideas for process improvement. Projects address the need for change in areas such as financial reporting, AP, and acquisitions. Process improvement occurs within the following programs within the Lean Six Sigma program:  Business process improvement program—A less formal improvement program, the business process improvement program empowers employees to apply solutions to problems, as long as all the proper buy-in from managers and stakeholders has been obtained and proper internal controls are maintained.  Quick wins program—Similar to an employee suggestion program, staff members—either individually or in a group—come forward with an idea to eliminate waste (e.g., wait time, over-processing, defects, motion, overproduction, inventory, and transportation). If approved, employees can implement the improvement. Employees must implement the process improvement in three days or less to receive a financial reward.  Personal productivity improvement program—Similar to the quick wins program, the personal productivity improvement program give employees authority to improve productivity on an individual basis. If an employee is able to improve his/her personal productivity without changing the actual business process, employees can submit success stories to a centralized intranet site to receive rewards. 14

The author frames the “hedgehog concept” using a parable of a hedgehog and a fox. The fox knows many

things but the hedgehog knows one big thing. In the research, great companies that were typically built by hedgehogs tend to focus on one important thing to make great companies.

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SYSTEMS AND OTHER IM PROVEMENTS The OCC uses customer satisfaction and other audit data to identify improvement opportunities. Three areas that have a significant impact are online expense reports, a paperless system with electronic signatures, and operating mechanisms that manage internal department functions. 1. Online expense reports—Crane said that “the OCC previously used a homegrown mainframe application to process expense reports that were cumbersome, decentralized, and susceptible to fraud and risk.” The customer satisfaction survey showed various opportunities for improvement. Focusing on claims and reimbursement improvement, the finance function discovered that the error rate for vouchers was between 50 percent and 60 percent. All stakeholders that would be impacted—policy, legal, records, customers, and management—were involved in designing the solution. Stakeholder involvement from the beginning made the final decision easier to sell. The finance function enhanced the existing functionality of the core financial system by adding the needed features and functions. The system currently includes built-in calculations and controls, resulting in a reduction of error to less than 15 percent. 2. Paperless system with electronic signatures—Between 38,000 and 60,000 vouchers are processed each year. By implementing the electronic signature and paperless system, the finance function saves the OCC staff close to 24,000 hours per year. 3. Operating mechanisms—The finance function developed tools to manage its environment and to complete work. Project plans lay out tasks, completion dates, and project owners for each project. This helps create project accountability. For example, the master acquisition plan forecasts the year’s acquisitions. Employees can then plan which acquisitions can be accomplished using specific socio-economic vendors that meet U.S. Treasury and Small Business Administration acquisition goals. “These tools are embedded in the culture of the finance function at the OCC,” said Crane. RECRUITING Previously, the acquisition management function was “like a revolving door for employees,” said Crane. As a result, the finance function began providing support to HR by creating an acquisition recruiting team whose responsibility involved attending conferences and networking with professional organizations. These efforts increased the candidate pool from 30 candidates per available position to between 500 to 700 candidates per available position. Previously, it took between six to 12

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months to fill a position; now it only takes, on average, a few months. HR receives crucial training from the finance function on techniques and procedures for recruitment. In order to ensure high-quality recruits, the finance function completes a thorough reference check before extending an offer. CUSTOMER SATISFACTIO N THROUGH CONTINUOUS IMPROVEMENT The finance function’s continuous improvement initiatives, in combination with individual efforts to actively seek improvement opportunities, have resulted in increased customer satisfaction. Customer service satisfaction and the OCC’s core values of stewardship and service—thus reducing the administrative burden on customers—is connected. The strong OCC’s organizational culture for continuous improvement is significant.

Tools and Techniques for Improvement Of the many tools and techniques used by the finance function, the following have yielded significant improvement. 1. Program and project management—One of the strategic goals for the finance function is to be recognized as leaders in program and project management. Because transaction processing is automated, the finance function can work on projects that provide strategic services. For example, the treasury department of the Office of Thrift Supervision recently merged with the OCC. Since federal government agencies do not normally merge, there was no blueprint in place. Therefore, the finance function created a project plan to support the merger. 2. Shared services centers support—The finance function uses other government agencies’ Shared services centers providing the best value. The finance function employs Shared services centers when using the contract writing system, PRISM, and when support for simple acquisitions—contracts for less than $150,000—is needed. Both shared services center needs are offered by the Bureau of Public Debt. “These services are cost effective and offer quality solutions for the OCC,” said Crane. 3. Systems—Over previous years, the finance function has made enhancements and modifications to its ERP system. For example, the finance function’s travel and expense reimbursements feature a modified automated workflow. Some enhancements were simple additions, such as draft, save, and automated alerts. The finance function has built in a step to allow someone to review policy compliance prior to final approval. Also, a submitted ticket that is

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selected for an audit automatically generates an email that gets sent to the originator. Another notice is sent to the originator when payment occurs, explaining which bank account will be used. The OCC issues travel charge cards to traveling employees. The ERP system automatically reimburses the charge cards—issued to traveling employees; a manual override is needed in order to alter the reimbursed account. The notice feature allows the ticket originator to quickly manage reimbursements. 4. Risk management reviews—The finance function conducts regular internal reviews of its programs. For example, internal controls and acquisition teams review contract management on a monthly basis. This collaboration has substantially improved accuracy. In addition, a risk management committee discusses internal and external financial risks, developing and implementing risk mitigation plans. 5. Leadership 360-degree review—The finance function has adapted the diagnostic template from Good to Great to create a verbal 360-degree feedback for leadership positions.15 The diagnostic template helps the finance function develop an honest culture focused not on a single person, but on behavioral actions tied to organizational results. “This has resulted in useful feedback that has influenced many changes within the finance function, said Crane.”

Measure, Monitor, and Communicate The finance function at the OCC benchmarks itself against a variety of measures— by industry, by agency, and by peer performance. The finance function has developed a balanced scorecard that tracks key performance indicators. BENCHMARKING The finance function has benchmarked itself each year since 2006. In order to gain insight in best practices in a variety of industries, the finance function enters its data into a tracking tool that can then be used to track trends, changes, and progress over time. This is the primary empirical data source used for benchmarking the finance function. Anecdotal benchmarking—such as an examination of disclosures, CFO letters, and other information from other organizations—is also conducted. Peer-to-peer benchmarking is conducted with finance peers from other agencies. For example, the finance function at the OCC identified the U.S. Immigration and Customs Enforcement (ICE) agency as a best-practice organization, after the agency

15

James Collins.

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presented at a conference. Finance learned best practices in contract award debriefings, knowledge sharing, and marketing tools to engage customers from ICE. BALANCED SCORECARD The finance function has used a robust balanced scorecard since 2005. Metrics are defined by the Office of Management’s balanced scorecard, regulations, and finance’s leadership council. The organization annually reviews and identifies the metrics that support the mission (Figure 30). The finance leadership council meets monthly to review scorecard results. Occasionally, the council modifies scorecard metrics throughout the year to reflect current needs. Examples of Finance Balanced Scorecard Metrics

Figure 30

Conclusion The finance function at the OCC provides high-quality results for the agency’s mission staff. After a conscious effort to shift focus from transactional to strategic, the finance function better satisfies customer needs—its driving principle. The finance function’s mission, vision, and core values align with those of the OCC. This strategic compass guides the annual goals and operating objectives for the finance function. Successful execution of the goals and objectives is enhanced through project management methods and change management techniques that enable seamless cross collaboration. Outstanding stewardship and service to the finance function’s customers and stakeholders is a result of internal collaboration within financial.

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About this Research APQC follows a proven four-phased methodology for conducting research (Figure 31 below). APQC Benchmarking Methodology

Figure 31

Plan Key elements of the planning phase of the benchmarking study were a literature review, contacting more than 50 organizations generated by the literature review and subject matter expert nomination, screening a subset of those organizations, and data collection tool creation. APQC conducted a secondary literature review in early 2012 to find company examples and best practices for building a best-in-class finance function. Seven organizations were selected by the APQC project team for additional study based on their screening responses.

Collect APQC gathered data for this benchmarking study via a qualitative research methodology. Two data collection tools were created by the consortium for this research: a screening survey tool, and 2) a more in-depth phone interview guide. Seven organizations were selected by the APQC project team for future study; each of the seven was interviewed by APQC, and these interviews were turned into case studies for this report.

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Each of the seven organizations was chosen for the strength and maturity of its financial management practices; the demonstration of positive results and measures; and a willingness to participate and share information.

Analyze APQC analyzed the qualitative information gathered via the phone interviews and structured these into the key themes, or findings for this benchmarking report. The APQC project team wrote a case study for each organization, which were reviewed and approved by the respective subject organization for publication. Case studies are included in the Appendix.

Report/Adapt Finally, the findings from the research are shared in this report as part of APQC’s mission to find and disseminate best-practice information. Each study participant receives a copy of the final results report in return for their participation and in accordance with the APQC Benchmarking Code of Conduct.

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