These findings are from interviews with 117 top executives
of large, U.S.-based multinational businesses,
for PricewaterhouseCoopers' Management Barometer
NEW YORK, April 17, 2006 (PRIMEZONE) -- Senior executives believe that their company's finance department lags competitively in its effectiveness and performance -- with the leveraging of technology seen as a particular vulnerability. To regain their edge, more than half are going back to basics -- turning to simplification, standardization, and best practices to improve performance and management information for decision-making.
Finance department leaving money on the table. Virtually all senior executives of large, U.S.-based companies (85 percent) report that high-performing finance departments are a strategic weapon in their industry -- including 56 percent saying "definitely," and 29 percent "probably." Only nine percent disagree, with another six percent uncertain.
-- But when asked to rate the effectiveness and performance of their
own company's finance department, only 30 percent say
"outstanding," while 70 percent describe it as "good, but with
room for improvement."
-- And, when asked how their company's businesses unit leaders would
rate the finance department, just 20 percent say "outstanding,"
with 80 percent saying "good, but could be better."
"The great majority of surveyed executives are using faint praise to suggest there's a sizeable gap between what their finance department could be and what it is," said Dave Pittman, U.S. Leader, Finance Effectiveness, for PricewaterhouseCoopers. "The gap appears to widen at the business unit level."
Strengths swamped by vulnerabilities. When top executives look critically at performance of their company's finance department, one-third cite three factors as "outstanding:"
-- "dealing with transparency" (mentioned by 33 percent); -- "quality of people" (32 percent); and -- "integration into the corporate structure" (32 percent)
However, two-thirds or more describe all departmental performance factors as "needing improvement," at best. Particularly low-rated are "effectively leveraging technology" and "helping the company reduce risk:"
"Good, But Room
"Outstanding" for Improvement"
-- Dealing with transparency 33% 67%
-- Quality of its people 32% 68%
-- Well integrated into
the corporate structure 32% 68%
-- Dealing with regulations 29% 71%
-- Dealing with complexity 28% 72%
-- Overall cost effectiveness 26% 74%
-- Providing management
information for
decision making 24% 76%
-- Helping the company
reduce risk 15% 85%
-- Effectively leveraging
technology 9% 91%
"Viewed from the perspective of maximizing finance department effectiveness and performance, many improvements could be made," said Pittman, "starting with optimizing existing systems and technology."
Many near-term improvements needed. Surveyed executives also cite many opportunities for improving effectiveness and performance of their company's finance department in the near term -- over the next 12 to 18 months. Factors most often mentioned as "extremely important" in this regard are "effectively leveraging technology," "integrating finance into the corporate structure," and "simplification/reducing complexity:"
Extremely Moderately
Important Important
-- Effectively leveraging technology 42% 49%
-- Integrating finance into the
corporate structure 34% 45%
-- Simplification/reducing complexity 30% 44%
-- Dealing with regulations 27% 55%
-- Staffing costs & benefits 23% 56%
-- Dealing with transparency 17% 62%
"Recurring mention of finance organizations' inability to effectively leverage technology reaffirms its criticality and hints at the seriousness of this shortcoming," said Pittman. "Our work with clients has shown that too many organizations have depended on the addition of new technology and applications layered on top of their ERP systems to solve their information woes. Few have been successful with this approach unless they've tackled data quality. Standardized data extracted directly from the operational and financial systems ensure 'a single version of the truth' and save money otherwise spent on unnecessary gathering, assembling, and reconciling of data into meaningful information." Pittman noted, "A first step toward better corporate integration and effective use of technology is simplifying and standardizing finance systems, processes, and data."
Simplification: regaining lost advantage. Half (50 percent) of surveyed executives say that simplification has become an agenda driving the important initiatives of their finance organization, with an additional five percent saying it will become one within the next 12-18 months.
Primary objectives of these simplification efforts are improved departmental performance and better management information for decision-making. Lower cost and reduction of risk are seen as important secondary goals:
Primary Objectives of Simplification
-- Improve performance 89%
-- Improve management information for
decision-making 86%
-- Lower cost 69%
-- Reduce risk 64%
The major focus of their simplification efforts is standardization and adoption of best practices:
Major Minor
Focus Focus
-- Standardization of operating practices
and controls 69% 25%
-- Standardizing policies and business rules 66% 27%
-- Adopting best practices 59% 36%
-- Standardizing and integrating finance systems 58% 33%
-- Optimizing the finance organization and its
reporting structure 52% 37%
-- Reducing reliance on spreadsheets 33% 45%
Among their corporate finance activities, key targeted areas for simplification include: financial controls; financial reporting; and planning, budgeting and forecasting:
Major Minor
Focus Focus
-- Financial controls 69% 25%
-- Financial reporting 67% 25%
-- Planning, budgeting and forecasting 63% 31%
-- Working capital and treasury 31% 58%
-- People and organization structure 27% 64%
"Surveyed executives are looking to reclaim high effectiveness and performance of their finance department through leveraging existing technology and simplification and standardization," said Pittman. "Over time, a complex patchwork of technologies, systems and procedures has been layered onto a departmental structure that once worked exceptionally well -- and can again, with a return to the basics."
PricewaterhouseCoopers' Management Barometer is developed and compiled with assistance from the opinion and economic research firm of BSI Global Research, Inc.
Additional information is available from Pete Collins, survey director and publisher, at 646-471-4496, or pete.collins@us.pwc.com.
PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance, tax and advisory services for public and private clients. More than 120,000 people in 139 countries connect their thinking, experience and solutions to build public trust and enhance value for clients and their stakeholders.
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