The jobless rate in corporate finance is likely to continue in 2012 and beyond, and chief financial officers (CFOs) can expect to operate with smaller budgets and fewer staff, according to research from The Hackett Group.
The study also found that companies are heavily focused on improving accuracy and timeliness of information to enable improved decision-making, and on leveraging global standards, resources and organisational models
The Hackett Group’s new research ‘2012 Finance Agenda: The Lean Years Continue’ finds that CFOs are acknowledging that for 2012, the ‘new normal’ has been largely accepted as the status quo, or the ‘now normal’. For most companies, this means that 2012 will require them to carefully balance the search for new revenue and preserving margins amid continued high volatility.
After several difficult years, The Hackett Group’s study found that CFOs were expressing mild optimism about the prospect for enterprise growth in 2012. But finance departments are going to be expected to manage with smaller budgets and fewer staff. The Hackett Group’s research found that the rate of corporate revenue growth is expected to increase by nearly 50% in 2012 (nearly 8% growth over 2011). But CFOs expect to see corporate finance budget cuts of 1.5% and staff cuts of nearly 1%. So CFOs will be required to do more with less and drive an effective 10% increase in productivity. Combined with increased offshoring and automation, the result is almost certainly a continued jobless recovery for corporate finance.
The Hackett Group’s research showed that increased volatility has clearly become the new business as usual, and finance leaders are expected to be able to respond rapidly and effectively to sudden market reverses. Companies are expecting dramatically higher volatility in the availability of talent than was seen prior to the recent financial crisis, as well as higher volatility in output pricing, exchange rates, demands, and input pricing.
CFOs have also gotten the clear message that the number one strategic priority is supporting the enterprise with a competitive cost structure. Interestingly, most of the other strategic priorities cited by CFOs in 2012 are not about cost, but rather about supporting enterprise growth and driving more value from existing resources. These include:
- Improving finance’s analytic, modelling, and forecasting capability.
- Maximising return on existing technology investment.
- Supporting process management across organisational boundaries.
This is expected to translate into pressure to develop capabilities to support the enterprise in its globalisation efforts and increase the globalisation of many finance activities themselves.
The Hackett Group’s research also recommended that companies be prepared to adapt their business models and priorities in response to economic changes in regional global markets. This will require companies to fully understand the benefit that comes from adopting global standards and organisational models that allow optimal execution by leveraging both skill and scale more broadly. In addition, the increased volatility in demand across global regions has made it more critical than ever for companies to truly understand how each region should operate, while still gaining the advantages that come from a global process operating platform.
The Hackett Group’s research found that the globalisation trend will continue to accelerate in 2012 and beyond, for finance and also for other business service areas. If their current plans are successful, companies will more than triple the level of globalisation in business functions within the next two to three years. The finance areas with the most aggressive plans for globalisation are those which are the least globalised today, such as process design/build (where globalisation is expected to increase by over 70%), indicating that an enormous amount of work needs to be accomplished in a very short time period.
In addition, while most companies with global finance ownership today are working at a functional level, the ambition is to greatly promote global process ownership at a cross-functional level. This will require dramatic changes in the way work is organised and transactions are executed. Companies need to holistically revise their business models to incorporate the capabilities needed to adapt to local or regional economic changes within a global operating framework.
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