C-Suite Lifestyle

Top 3 Reasons why Finance transformations fail!

According to Gartner, 85% of finance teams are either planning or executing some form of financial transformation initiative, and of those 70% are going to fail!

This is surprising as Finance is often defined as a function that combines business pragmatism with analysis, but also a low-risk appetite.  Sometimes this aversion to risk leads to total avoidance which can be detrimental over the longer term in a business environment where success is measured by the ability to cope with the increasing pace of change and transformation is needed not only to thrive, but also survive.

This means many organizations have got to bite the bullet, but they will be staring the probability of failure in the face.  Here I want to share with you the top 3 reasons why financial transformations fail and what you can do to avoid them.

The following are my top three reasons for finance transformation failure:

  1. Strategy
    If you are not clear on the goal broken down into clear objectives from the outset, then you are being set up for failure through lack of clarity. If the objectives are not clear, then the team will not understand the intended outcomes the transformation is intending to produce.

    Set ambitious, but realistic targets when deriving the business case for transformation. Trying to assume too much too soon (or boiling the ocean) will set the path for failure due to loss of focus so the ability to prioritize and sequence objectives is key.

    Another source of failure stems from a lack of understanding around the technology being deployed and how exactly it will drive value. If you do not understand how the technology links to the problem, you are going to solve then you might as well not invest your scarce funds in large scale transformation and opt instead for marginal improvements.

    However, that is somewhat shortsighted, if the thinking is only in terms of cost reductions from the finance team this will contribute to a vicious cycle of ever decreasing short term objectives that create further issues for the function. Indiscriminate cost reductions will destroy value over the longer term as finance is constrained in its ability to support the busines from delivering valuable insights timely.

    The lack of agility created by increasing technical debt will ultimately impact finance’s ability to handle the change requirements of a business environment faced with increasing volatility and uncertainty.

  2. Execution
    Ultimately boils down to poor resource management leading to execution failure. The most fundamental being not having the funding to obtain the necessary resources to successfully deliver the transformation to move your finance function forward.

    Assuming the resources are there, they need to be held accountable with clear targets and performance plans to assess progress. The team must be empowered to deliver their objectives with the necessary support in terms of training, guidance, and sponsorship.

    Lack of urgency in driving timely results, poor team cohesion and poor workload distribution. Lack of focus on the right activities will arise from no measurable metrics to manage performance and course correct on a timely basis when needed.

    Poor risk management leads to missed deadlines, quality issues, uncontrolled scope changes and cost overruns due to a lack of timely issue identification, communication and tracking as potential opportunities and risks present themselves.

    Weak or zero benefits realization so there no tangible benefits after the project such as reducing cost or improving the quality of service which creates overall performance improvement of the business.

    Aiming for perfection rather than an acceptable standard, good on time is better than perfect late. Getting to an acceptable standard fast is much better than deferring deployment while constantly tweaking your product, bear in mind the 80:20 rule at the point of diminishing returns.

  3. Leadership
    Where does the buck stop and who is empowered to make the necessary changes at the appropriate levels? Leaders must support the transformation to drive the needed change irrespective of the job title or position. However, it becomes harder if the people who assume responsibility are not empowered. Each member of the transformation team has a role to play and should be held accountable for their part in the success of the transformation, but they must also have the proper guidance and tools to deliver.

    Without the right culture, mindset and commitment through proper leadership, real lasting change becomes near impossible. Leaders need to create a sense of urgency through ensuring the transformation is managed, but also require patience and emotional control when inspiring and leading the team through the various challenges.

    As executive sponsor, the CFO needs to have influence across the business which is built through fostering credibility, goodwill, and respect. Having a poor reputation will lead to excessive resistance to changes where end to end processes need to be implemented across the organization’s value chain. If the Executive sponsor lacks the political support then the transformation will be suboptimal as other functions will either resist or provide minimal support.

    Weak behaviors from the leadership team will destroy a transformation’s chances of success before they start such as inability to make decisions and follow through timely. For example, a friend was interviewed for a role with a brief to lead the transformation of a finance process that was seriously outdated and with significant payback opportunity. However, after 3 interviews over a period of a month followed by two weeks waiting for a decision, they were finally invited for a last interview with the group CFO. By that time, the candidate had already accepted a transformation role for a different organization.

Focus on the growth of the team, have a plan to develop the careers of those talents. You need to consider their personal incentives (“what’s in it for me?”) as it pays having strong team members. This makes a huge difference to your finance transformation efforts as capability will drive your change initiatives forward.

If a lot of this sounds like fundamental change management principles, then you’ve probably either experienced a successful finance transformation or learned from failure!


Written by Dante Healy.

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Dante Healy
Dante Healy is a senior finance leader and financial Transformation Project Specialist, developing and implementing end-to-end financial and business change strategies for dynamic agile businesses to drive growth.

As a certified change project leader, he led a finance transformation program at Ford Credit Europe (FCE) UK to introduce a common, automated finance system, which delivered $5.1m in cost savings p/a for Accounting across Europe.


Dante Healy is an opinion columnist for the CEOWORLD magazine. Follow him on Twitter or connect on LinkedIn.