The productivity gap — a measure of output per worker between countries — is wider now in some nations than it has ever been in the post-industrial era, and this poses a serious risk to economies, holding back wages, growth and competitive performance.
Economic commentators have highlighted a number of areas that are driving this disparity:
- Failure to invest in technology;
- Slow decision making;
- Resistance to change; and,
- Requirement for clear leadership.
What is clear is that improving productivity is not just a matter of making people work harder. It involves training, investment, innovation and using technology to find smarter ways to achieve objectives. And this is where the office of finance and accounting can take the lead and influence.
Failure to invest in technology
At a time when the public purse is tight, encouraging new technology adoption is one of the most effective routes to raising productivity.
While the cost of efficiency-driving technologies like enterprise resource planning (ERP) would have been prohibitive for many organizations in the past, the advent of the cloud and the software-as-a-service (SaaS) model have made ERP and the applications that rest on it accessible to businesses of every size.
As the keepers of business data, finance is the natural hub for managing tools like these, which make employees more productive by reducing the burden of inefficient processes and ensuring the benefits are felt across the business.
Finance is also becoming a strategic business partner with access to information and insights that shape the direction of the entire business. Boards and CEOs are expecting more value from CFOs and finance directors. As a result, they are often the first to recognize a productivity gap.
Corporate performance management (CPM) applications make it easier to capture and communicate employee output numbers across departments and functions, and share data with end users who don’t have to worry about its validity. Issues are flagged sooner and action can be taken to address productivity dips without having to wait for month-end close.
Finance can also help ensure that strategic decisions are based on a single version of the truth – cutting through potential misunderstandings so that different departments are always comparing apples with apples when evaluating results.
Resistance to change
In times of austerity, a certain recalcitrance can seep into organizations, and that affects people’s willingness to embrace new systems, techniques, technologies or methodologies that promise to do things better. In the long recovery post-2008, lack of resources and budget constraints have also trained people to be frugal and squeeze every bit of value out of existing investments.
Then the familiarity everyone has with legacy systems like spreadsheets makes them very difficult to dislodge, even when it’s clear that the size of the business or its growth trajectory make the old tools unfit for purpose.
Because the office of finance touches every department, it’s ideally placed to demonstrate the benefits of more effective processes and become a change agent within the organization.
Requirement for clear leadership
Leaders in top-performing organizations set and communicate the organization’s strategy, inspiring their teams through a culture of progress and innovation. Leadership is also becoming more data-driven, with an expectation that objectives be subject to constant measurement and open to adaptation based on current market conditions.
In this regard, the CFO is fast becoming the CEO’s right-hand advisor: someone who understands how to quantify results in context, and calculate the market opportunity with a perspective that cuts across departments.
With a clear view of the big picture and limited bias toward any one aspect of performance, CFOs are also in a unique position to actualize the board-level vision and strategy. They have the data, information, insights and oversight of tools that put them into action. They develop KPIs and understand performance trends, and are increasingly empowered to implement strategies to improve them.
Productivity is strongly linked to revenue. Investing in technology that makes employees more productive is an investment in future profits. By automating and simplifying formerly labor-intensive processes, employees have more time for the tasks that deliver value and revenue. Using the latest tools and systems can also help with talent acquisition and retention. Ambitious finance pros want to be at the forefront of professional and industry best practice.
The best-performing finance functions are elevating their role by leveraging ERP and CPM. These advances have also allowed finance to be fully integrated with other business functions, from sales operations to HR and supply chain management.
Leadership is key to the mix, and the productivity challenge means that CFOs have a new opportunity to take the finance function to an even more strategic level, shifting their focus to better processes and productivity as the vehicles to deliver business value. They are bean counters no longer, elevating finance to a major driver of growth and competitive advantage.