All great Champions, from Usain Bolt on down, all know that there is no hiding from the stopwatch! If you want to be the best, you must have a plan and a means to measure progress against it. As the greatest Management Theorist of them all Peter Drucker said:
“You can’t Manage what you can’t Measure!”
I believe greatly in this maxim, and I deploy it in every Business Case I deliver for Clients. How do I deploy it? I Benchmark!
An athlete, manager or team who runs away from the challenge of measuring their performance is doomed to failure. I have heard all the excuses for not Benchmarking, we are unique, we are very efficient, we are successful, our process is special, our industry is different, how do we verify the data, you don’t understand us! The list is long and ultimately, it is the list of those who will never be Champions!
As Business Case specialists we know there is no way to set the Target for the Target Operating Model (TOM) if we have no point of comparison. Imagine we Baselined your Finance function at 150 FTE and then said well we think it should operate at 120 FTE, but we can’t really explain why…
The Benchmarking of each Finance process must be an integral part of the Business Case development. All Finance processes from Accounts Payable, Accounts Receivable, through General Ledger to Business Partnering can be measured. A point of reference can be obtained and deployed to determine if we already have an efficient Finance function.
All Finance processes should be measured by Baselining their Headcount, Organisation, Process, Activity Volumes and Drivers as part of the Business Case. Once they are measured their Managers are interviewed to identify the root cause of performance anomalies. The basic metrics of a team performance are the basis of these interviews.
The best approach is not to reveal the Benchmark in these interviews but instead to gather all the facts, explanations, and opinions before presenting the Benchmark performance results to the CFO. Remember, that the object of the exercise is to provide an external, independent view of Finance process efficiency and the opportunity for savings. It is not a performance debate with the Team Manager, it is a target setting mechanism to confirm to the CFO how the Finance function compares to the best of the rest if they aspire to be Champions!
There are many sources of Benchmarks available in the Market and they provide a reputable point of comparison on your Finance process performance either at a generic or industry specific level.
However, based on my proven experience with large corporates at FTSE 100 level the best value for money in a Benchmarking exercise is the Internal Benchmark! Any corporate embarking on a Finance Transformation program will have a minimum of 150 Finance staff with multiple teams performing the same activity from different locations.
If you want to inspire your entire Finance function to improve process efficiency, then you must Benchmark how they compare across their own Company! Nothing inspires improvement faster than knowing your Management Peers are beating you to the Finish Line!
At Finance transformation UK, we measure and we Benchmark so that you can be a Champion!
Author: Michael Ryan
With 25 years' experience Transforming Finance across multiple Sectors as a Consultant and as a Finance Transformation Leader, Michael Ryan is uniquely placed to advise Clients on creating a World Class Finance Team. Call him now on 0203 1466878