TrendView designed to automate data collection for benchmarking

As readers of this blog know, I think it's important for companies to regularly baseline their Finance organization to understand how effectively they're delivering services and how much it costs to deliver those services.  The challenge is that collecting the necessary data is typically time consuming and fraught with errors and estimates as personnel manually collect the data.

An application highlighted at CFO.com aims to solve those problems.  TrendView, from 3cInsight,  is a Software-as-a-Service solution that captures data from an organization's transactional systems to automate the data collection process.  (Full disclosure: 3cInsight's Director of Operations, Kelly Noto, and I worked together at The Hackett Group).  There are approximately 300 pre-defined metrics that a company can use to evaluate it's performance.

That's the baseline side of the equation.  It's the intention of 3cInsight to aggregate the data from its customers into meaningful benchmark data so that the companies will have access to the data without having to commission a formal benchmark every few years.  As of now 3CInsight has around 20 customers, which isn't necessarily large enough to smooth out outlying data points.  However, as the company grows its customer base this problem will be eliminated.

It sounds like a great idea and I wish 3cInsight the best.

Here's the link to the full story: 

CFO.com article on TrendView application

Baselining the Finance cost structure

You would be amazed at the number of companies I go into who have little to no idea what they're spending on the Finance function.  There are several reasons for it but there really is no excuse.  Without understanding what is currently being spent to deliver Finance services across the organization, companies have no idea where they stand relative to high-performing companies or which areas they should focus on first to gain efficiencies and reduce cost.

Some of the reasons for this include:

1. Absence of a mandate to cut inefficiencies out of the Finance organization.  In an era when CFOs are being asked to do more with less, this seems like an unlikely proposition.  And with the poor economy it's even less so.  However, there are still Finance organizations that don't have an ongoing mandate to continuously cut their costs.  Without a mandate, there is little incentive to understand the existing cost structure.  Even if the CFO wants to cut costs, and who doesn't, it won't happen until it becomes a highly visible initiative.  Very few managers want to voluntarily cut costs in their organizations, so it won't happen unless they are pushed.
2. Vague definition of what constitutes a Finance process.  In some organizations the Finance organization is fragmented, with many resources residing in the Business Units.  Even within Corporate, some Finance resources can reside in areas directly outside the control of the CFO. Yes, I know this seems incredible but I have personally witnessed it.  Some organizations consider customer invoicing to be in Operations; most consider it a Finance function.  Is manufacturing costing part of the manufacturing process, or is it part of Finance?  If a company intends to use the cost data it captures for the purpose of benchmarking, and it should, then the company will need to understand which processes are typically captured in Finance benchmark data.
3. Existence of a "shadow" organization.  When collecting cost data on the Finance function, it's not always easy to track every FTE, or partial FTE, that has a role in the Finance function.  Many times people in the Business Units wear multiple hats, and even the most determined effort may miss people who are contributing to Finance.  They often have titles that would indicate they are part of a different organization outside of Finance.  A common example are personnel in the Business Units that actually perform some type of financial analysis but have a non-Finance title.
4. Inaccurate definitions of what constitutes a cost of Finance.  When collecting the cost to deliver Finance services, it isn't enough to look at salaries and benefits.  There are always support costs that should be incorporated into the cost calculation.  If they're not doing so already, CFOs need to think about their operations as an independent business.  If it were truly a separate business, what are all the costs that would go into running it?
5. Political resistance.  Sometimes people don't want you to know what Finance resources exist in their operations (see "shadow" organization above).  Many managers know that the baseline costs you collect can be used to make decisions that impact them.  For instance, the decision to outsource an entire function will be based in part on what you're spending today on that process.  Since not every manager will be completely forthcoming about their staff and expenses, it's important for the individuals collecting the data to review it with a skeptical eye.  Does the data make sense?  If not, it's important to go back to the source and push harder for explanations.

Baselining the cost of Finance should be an on-going process as part of a continuous improvement effort.  Only when costs are accurately tracked can a Finance organization begin its journey to high performance.  In a subsequent post, I'll discuss the costs that should be tracked as part of this effort.