Set aside the product coming out of your finance and accounting department for a minute and think about the process: How much time do team members waste chasing down late information? Or double-checking spreadsheets to make sure they sum properly? Or frantically slogging through data to meet a deadline—without a second to spare for deeper analysis?
Some companies are transforming how their finance team works—by slashing waste and maximizing efficiencies. In other words, they’re applying lean principles, an approach that many associate more with the auto industry or manufacturing plants than FP&A. But it turns out that lean has been widely and successfully introduced in non-manufacturing environments for years.
Embracing lean can mean incredible benefits: a 30-40% reduction in cycle times, a 20-30% cost reduction, and 30% improvement in forecasting operational expenses, to name just a few. But the speed of impact is nearly as impressive as the size. In many instances we’ve witnessed here at Adaptive Insights, this has been done in a month.
Ready to get lean—and take your finance team to the next level? Here’s how to better ensure the transition sticks:
Tip #1: Disrupt during stability
Radically reimagining your team’s workflow or introducing a next-gen tool, such as a cloud-based financial reporting platform, can kill inefficiencies holding your team back. But if you don’t time the leap to lean right, you could be courting chaos. You need a certain amount of stability in order to change a process successfully. That doesn’t mean waiting until the business is static, but instead timing the transition to a period when you can carefully consider what you want and need from any processes or tools moving forward.
For example, Cumulus, the nation’s leading provider of country music and lifestyle content, was in a period of incredible growth, with revenues quadrupling. But the company’s established reporting process was cumbersome and clunky, and to continue scaling, the finance department needed a change. Finance execs gave the green light only after they knew exactly how and what they needed from a budgeting, planning, and reporting tool. And by embracing lean during an otherwise stable moment, the department saw swift results: less time wasted on data gathering and Excel consolidation, reporting cycles that shrunk from days to seconds, and improved forecast accuracy.
Tip #2: Scrutinize the status quo
It’s hard to hunt down time-wasters without knowing how work really gets done—and that means pushing past the official process. It can be a surprise to get close and look at what your co-workers are doing—workarounds, hidden details, and inconsistencies may be going unnoticed. To get an accurate picture of the true process at play, you could spend a ton of time with direct observation. But a swifter option is a mapping session, in which team members walk through exactly how, say, the month-end close is accomplished. An accurate—though likely circuitous and surprising—map of the current state can make the benefits of lean even more obvious and may help prevent issues with the transition.
Tip #3: Break down silos
Any finance leader worth his or her salt knows that the budgeting process doesn’t mean much if only the finance team is involved. Business unit leaders and budget managers alike have to participate, to better inform metrics, and to shape realistic plans for delivering against specific strategies. If your finance team operates in a silo, taking a lean approach must include breaking down those walls and fostering greater collaboration.
At the Leukemia & Lymphoma Society, lean thinking meant creating an environment where budget owners could have more meaningful conversations with finance. So finance leaders gave more than 300 users real-time access to their budgets and reports—and helped budget owners in managing their own budgeting and reporting processes. That shift allowed the organization to confidently move to a rolling monthly forecast and to respond more quickly to changes or gaps in performance targets. But lean thinking beyond the finance bubble also meant that chapter strategies were better aligned with corporate strategies—so the organization could maximize the use of every funding dollar.
Tip #4: Put blame to bed
The heart of lean thinking is identifying and eliminating any activities that don’t add value. Sometimes that means replacing an outdated tool with one that’s better capable of scaling with the business or delivering real-time veracity. Sometimes that means rooting out why a particular task is plagued with data inaccuracy or chronic delays or is simply a time burden on the team. But be mindful of the toxic atmosphere of defensiveness that can arise the second you start attributing blame to anyone who may be creating a problem. To keep team members engaged and on board, focus instead on the positives: the sheer value that lean thinking can create. Buy-in is easier to sustain when the team members understand that they’ll be spending less time on busywork and more time on informing business decisions.
Tip #5: Know the limits of lean
The push to eliminate wasted time and non-value activities doesn’t mean cutting the finance team to the bare bones. In fact, that can backfire. Finance leaders at ZAGG, a mobile accessories company, recognized early on that cutting the department’s staff hours as much as possible would mean doing more work without system and process support. That might seem like a win in the short term, but eventually that overly lean approach would actually cost the company. So instead, the department shifted the conversation from simple staff hours to driving efficiencies—and how that could help the team provide more decision-making support to the business. Going lean did save 24 staff days per year, but it also made finance a strategic partner across the company. The team now does collaborative reforecasting with department managers, and in the first year the company saved $10 million simply by fixing freight issues.
Our CFO Indicator Q3 2017 survey explores CFOs’ confidence relative to data and technology, as well as their progress in moving toward a “single source of truth” (single source of financial and operational data). Results reveal that Finance has successfully cleared what we believe to be one of the most significant hurdles—their hesitancy to store data in the cloud. Read our other CFO Indicator reports here.