"The finance masters are outperforming their peers in all areas - growth, operating margins, profitability, return to shareholders and return on capital/assets," said Hans Roehm, global managing partner, Manufacturing Industry, Deloitte Touche Tohmatsu. "It is in a downward economy that manufacturers have an opportunity to redefine their overall business model. By initiating a strategy used by finance masters, they can permanently cut costs and implement tactics to operate a global company more efficiently and profitably."
Strong Cost Focus
Not surprisingly, cost reductions and margin improvements are top priorities for manufacturers today. Among companies surveyed by Deloitte, 78 percent are planning to reduce cost of the goods they sell; 59 percent are striving to reduce selling, general and administrative expenses; 46 percent are aiming to optimize their global supply-network structures; and 27 percent are aspiring to improve their global tax management.
Journey to mastering finance and business
"The journey to mastering finance is not easy, but it can be financially rewarding," explained Roehm. "By leveraging finance to help drive strategy and execution at the corporate and business unit level, manufacturers have a real opportunity to impact results." Deloitte's research shows a strong linkage between the maturity of finance capabilities and business performance. It suggests that companies need to go beyond the core finance capabilities of steward and operator to leverage finance capabilities as strategist and catalysts. For example, finance masters are far ahead of their competition in applying financial management to marketing, sales and service. They also made the most headway in supporting innovation and driving supply chain performance. It is clear that the finance function can add strategic value to the success of a company.
Avoiding the barriers
Although replicating the strategy and reaping the benefits of the finance masters sounds like a worthy pursuit, it does come at a cost of added complexity and greater risk, according to the Deloitte study. Three common barriers to business performance include insufficient alignment between strategic and operational decision makers that cause conflicting objectives across the organization, lack of up-to-date information for strategic and operational purposes that hampers the pursuit of business improvements and inadequate process and data standards that inhibit the improvement of business performance. By avoiding these barriers, companies can ensure a smoother transformation for driving business performance.
Pathway to performance
As a result of the data gathered from the finance masters, Deloitte has developed a three-step approach to transforming a business through finance. First, invest in finance from a business perspective. Goals and plans for improving finance capabilities should be decided from the perspective of business strategy and performance management instead of the single pursuit of finance-process efficiency or compliance requirements. Second, lay a finance foundation for enterprise transformation. Without solid reporting and compliance capabilities, finance is unlikely to gain the trust of business managers. Finally, identify and prioritize high-impact areas of the business to improve first. With this insight, companies can strive to become finance masters to sustain and even grow their business in a downward economy.
Striving to become a finance master
Finance masters are enjoying the benefits and reporting significantly higher growth, profitability and shareholder value than other companies benchmarked. Many companies that did not fit the criteria as a finance master did demonstrate significant signs of a solid foundation for mastering finance in business. "By acting now, when change in a company is inevitable due to the current state of the global economy, companies have the opportunity to create a high return on their investment by linking their finance capabilities to business performance. Not only could they differentiate themselves from the competition but create a new business model that could reposition their organization for future success and generate new revenue opportunities," added Roehm.
