Survey results also show room for improvement in several core finance functions
New York — May 27, 2004 — Acting and thinking strategically are considered to be critical elements of a world-class finance function, yet most executives say that their finance departments are failing to step up to the challenge, according to results of a study released today by Accenture.
The goal of the study, which was based on a global survey of more than 180 executives across a wide variety of industries, was to identify the attributes of a world-class finance function and determine how companies rate the performance of their own finance departments.
When asked to identify how important certain finance functions were in terms of contributing to the overall success of the business, more than two-thirds (69 percent) of respondents — the greatest number — selected "enable senior management to make the best business decisions" as being most important. However, only about one-third (37 percent) of respondents said that their own finance departments do a good job in this area, while more than half (54 percent) said their finance department's performance in this area is average and 9 percent said it is poor.
In another testament to the importance that executives place on the strategic aspect of the finance function, the overwhelming majority of executives surveyed (79 percent) selected "strategic financial thinking" as one of the top three qualities they would seek in a chief financial officer (CFO). This was more than double the number who selected more-traditional finance qualities, including "champion of financial transparency" (36 percent); "zero tolerance toward accounting errors and fraud" (34 percent); and "operational experience running parts of the business" (30 percent).
In addition, when asked to identify the three most important attributes of a high-performing finance culture, more than half selected "a strong capacity for strategic analysis" and "a clear link to overall company strategy" (55 percent and 53 percent, respectively), exceeded only by "a service-oriented culture" (59 percent).
"The study confirms that the role of the CFO is rapidly evolving," said Stewart Clements, president of Accenture Finance Solutions. "They are being increasingly challenged to create shareholder value and build competitive advantage."
Traditional Finance Functions: Room for Improvement
The survey results also highlight the gap between executives' expectations of their organizations' finance capabilities and their view of the actual performance of their finance departments. For instance, while more than two-thirds (68 percent) of the executives surveyed cited managing cash flow efficiently as one of the most important roles that their finance department performs, fewer than half (45 percent) of respondents rated their organization's ability to manage cash flow as good.
In addition, fewer than one-fifth (19 percent) of respondents said their finance departments did a good job of managing risk, despite the fact that the plurality of respondents, 43 percent, said that the CFO — rather than the chief risk officer, chief executive officer or board of directors — should take the lead in running their organization's enterprise risk management.
And while nearly half (48 percent) of executives surveyed said that maintaining accurate financial forecasts was one of the most important roles that their finance departments perform, only about one-fifth (21 percent) said that their departments did a good job of maintaining accurate financial forecasts, while one-fourth (25 percent) said their departments did a poor job in this area.
For instance, more than one-quarter (28 percent) of respondents said they do not have performance metrics for their finance departments. Further, more than half (51 percent) of respondents said that the lack of metrics to measure improved performance of their organization's finance function was or had been a primary barrier to improving the finance function's performance.
The Accenture study was based on a global online survey conducted in March 2004 by the Economist Intelligence Unit (EIU) on behalf of Accenture. The EIU surveyed 182 executives in companies across a wide variety of industries with revenues ranging from less than $500 million to more than $8 billion. Respondents hold a variety of different management positions, including CEO, department manager, vice-president, line executive, regional manager, chairman and CFO.