As 2020 drew to a close, we spoke to our global finance consulting leaders and clients to get a sense of how CFOs and finance functions have been impacted by COVID-19. The findings provided some clear messages, consistent across industry sectors and geographies, as well as a number of areas of focus for 2021.
First, the good news. With the vast majority of those surveyed operating either fully or partly remotely, more than 80% reported that their finance technology performed better than expected. Most systems and control environments have proved robust in the face of 2020’s extraordinary challenges. Core finance systems have held up well and the greater use of collaborative technologies such as video conferencing and cloud-based software tools have enabled finance teams to respond quickly to increased demands for analytic support around scenario planning, cash flow forecasting and supply chain management.
It’s also clear that many organisations don’t expect to go back to their former ways of working. Future finance functions will be leaner and much less dependent on physical location and proximity to the business than those of the past. The majority of people we spoke to said they were looking to drive greater efficiency and cost savings across their finance teams. More than 50% were looking to reduce headcount through continued automation and more effective ways of working. More than 40% are reappraising their property portfolios. A similar number are redesigning finance roles and restructuring to prepare for an operating model which includes long-term virtual working post pandemic.
Despite remote operations proving resilient, new ways of working are needed if organisations are going to thrive. Anecdotally, it seems that many finance functions have achieved success through the extraordinary efforts of dynamic individuals during the course of 2020. This is not sustainable in the long run and places too high a burden on individuals who should be nurtured by the organisation. Understanding who has made a difference and rewarding them accordingly, while managing up the productivity of the rest, will be key to long-term success. Identifying new operational measures, learning new ways of managing performance and developing new ways of working to drive productivity from the available collaboration tools will all play a part in delivering the full potential of finance if we are to draw any positives from these challenging times.
It’s tempting to conclude that the need to face the challenges of 2020 has been a blessing in disguise for finance. It does seem that the response to the pandemic has accelerated changes which were already underway before the crisis. However, our survey responses indicate that there are significant challenges to be addressed before finance functions can achieve a sustainable high level of performance within a new, more remote model. Difficulty in predicting the path of the pandemic has resulted in tactical responses from many organisations, with one respondent commenting that there has been “little consideration for the future and potentially new opportunities to work differently”. On the flip side the pace of change has been rapid and one respondent commented “we have achieved in three weeks what people had previously said would take three years”.
Finance leaders may have stepped up in a time of need but now their teams are asking them to show clear direction for the future. 60% of our sample reported that they felt the culture of the finance function has suffered. Many commented that the relatively new focus on productivity during the pandemic was here to stay and twice as many reported that productivity had dropped compared to those who felt it had improved. This is as much a leadership and people issue as a process or technology challenge.
As the business environment rapidly changes, finance teams need to help lead the response. We are planning a larger study in March when organisations will have had more time to refine their understanding of this new environment to see how finance teams are adapting.