Finance Executive Insight

Study Results Analysis

September 16, 2014

Four Key Practices That Improve

Planning and Analysis Performance
in Finance Operations

By Lynne Schneider and Erik Dorr

Executive Summary
For finance operations, just as in other business services, superior planning and analysis drive superior function
performance. The Hackett Group’s recent Business Services Planning & Analysis Performance Study identified four
practices that have the greatest potential impact on performance:
1. Adoption of advanced new analytical methods to support planning and analysis
2. Adoption of performance management methods
3. Process standardization, forward-looking focus and KPI definition
4. Process integration within and between planning domains

The study also reviewed a fifth practice – optimal placement within the organization of the resources providing
analytical support and of the owners of planning and analysis processes – that failed to result in any performance
differentiation, indicating clear best practices have not emerged yet in this area.

Achieving planning and analysis top performance in finance operations

In addition to HR, IT and procurement, The Hackett Group’s Business Services Planning &
Analysis Performance Study examined finance operations – specifically, the planning and
analytical processes of the function itself, and not those owned by the finance planning
and analysis (FP&A) organization that support the broader enterprise. Results indicated
both good and bad news for finance operations.

On the one hand, planning in finance operations is more effective than that of the cross-
functional peer group in terms of alignment with enterprise strategic and operational
objectives and agility to respond as business conditions change (Fig. 1). Yet planning and
analysis performance levels in finance operations are still below the performance levels
of the study’s top performers. And finance operations actually lag the cross-functional
peer group and top performers in terms of functional planning efficiency, i.e., their ability
to develop plans for key processes such as risk, capital planning and tax while consuming
a minimum amount of resources.

© 2014 The Hackett Group, Inc.; All Rights Reserved. Finance Executive Insight I The Hackett Group I 1
 FIG. 1 Finance operations planning efficiency and effectiveness compared with cross-functional
About the data used in this
peer group and top performers
report
This report is based on findings from Planning efficiency and effectiveness
(Percent of companies ranking level of agreement with statement at 4 or 5 on a 1-5 scale)
The Hackett Group’s 2013 Business
Services Planning & Analysis 86% 86%
Performance Study. 73%

The study analyzed ways to enhance 46% 45%

38% 36%
planning and analysis within business
18% 21%
functions (finance operations, as well
as HR, IT and procurement operations),
as opposed to those processes the Finance Peer Top Finance Peer Top Finance Peer Top
functions conduct in support of the operations group performers operations group performers operations group performers

overall company. For finance, the Functional planning effectively Functional planning allows for Functional planning is highly
aligns function with strategic and swift readjustment of the functional efficient, consuming the minimum
study looked for ways to enhance financial business plans plans in response to changes amount of resources needed to
planning and analysis in the function and objectives in business conditions develop the plan

itself, rather than the finance planning

Alignment Agility Efficiency
and analysis (FP&A) organization that
supports the broader organization.
Source: Business Services Planning and Analysis Performance Study, The Hackett Group, 2013

In particular, the finance operations Analysis of analytics effectiveness and efficiency in finance operations produced similar
component of the study examined findings (Fig. 2). Finance operations analytics perform better than cross-functional
processes that are critical to planning peers in terms of improving the quality of decision making and identifying opportunities
and analysis capability: for value creation, although they again have room for improvement relative to top
performers. And again, they lag both peers and top performers in terms of having highly
• Finance operations performance efficient functional analytics.
management
FIG. 2 Finance operations analysis effectiveness and efficiency, compared with overall peer group
• Finance operations resources and and top performers
capability planning
Analytics efficiency and effectiveness
• Working capital and cash (Percent of companies ranking level of agreement with statement at 4 or 5 on a 1-5 scale)
management
86%
• Credit and collections management
64% 64%
• Financial and risk management 53%
45%
(including hedging strategies) 36%
29%
• Capital structure management
15%
9%
• Tax planning
Finance Peer Top Finance Peer Top Finance Peer Top
operations group performers operations group performers operations group performers
Functional analytics improves Functional analytics effectively Functional analytics is highly efficient,
the quality of business identifies opportunities for business consuming the minimum amount of
decision-making value creation related to the function resources needed to provide analysis

Decision-making Value-creation Efficiency

Source: Business Services Planning and Analysis Performance Study, The Hackett Group, 2013

To support enterprisewide performance management and contribute business value,

finance organizations must develop strong internal planning and analysis capabilities.
The following four practices were identified as the ones that contribute most to top
performers’ ability to excel.

© 2014 The Hackett Group, Inc.; All Rights Reserved. Finance Executive Insight I The Hackett Group I 2
 Practice #1: Adoption of analytical tools and methods
Business services functions’ high level of interest in planning and analysis is driven
partly by the emergence of new tools and methods and the maturing of existing tools.
According to the study, adoption of the most mature tools and methods (self-service
analytics, reporting and performance scorecards and dashboards) is widespread,
far exceeding adoption of emerging tools and techniques like predictive modeling,
multidimensional analysis, risk analysis and data mining (Fig. 3).

FIG. 3 Availability of analytical methods to support planning and analysis in business functions

Percent of companies

13%
19%
21%
22% 22% 16%
29% 6%
32% 15%
35%
56% 21% 20%
50% 46%
38% 32% 207% 43% 89%
34%
138% 43%
33%
560% 18% 18%
14%
5%
Peer Top Peer Top Peer Top Peer Top Peer Top Peer Top
group performers group performers group performers group performers group performers group performers

Self-service analytics Scorecards / Predictive Multi dimensional Risk analysis Data mining
and reporting performance modeling analysis
dashboards ("slice and dice")

TODAY IN 2-3 YEARS TODAY IN 2-3 YEARS

Source: Business Services Planning and Analysis Performance Study, The Hackett Group, 2013

Across the four functions studied – HR, IT, procurement and finance operations –
projected growth in emerging tools and methods greatly outpaces that of mature tools
and methods. The gap between top performers and the peer group in the adoption of
predictive modeling, for example, is 560 percent – a 6.6-fold difference. Note that the
rapid growth projected for all analytical methods will result in a convergence of adoption
levels within three years.

Adoption of tools is a cardinal factor in delivering high-quality planning and analysis

performance. But putting sophisticated analytical tools and methods in the hands of staff
who do not possess the right skills and training to use them is a recipe for failure. For
example, the study’s cross-functional top performers cite a lack of availability of mature
tools as a major impediment to better planning and analysis performance, while for the
peer group, the absence of appropriate skills and talent is a bigger concern.

Clearly, getting the right talent in place is a precondition for effective leverage of tools
and methods, and top performers are ahead in this area. As finance organizations
develop more sophisticated applications for analytics tools and methods, skills need
to mature accordingly. Also, for advanced analytical methods to be effective, finance
organizations need to be able to convert insight and intelligence gained through the
analysis into high-quality decision making and execution – e.g., using predictive modeling
in credit management to better predict credit risk.

In addition to more advanced tools and methods, top performers have broader adoption
of technologies that complement the still pervasively used spreadsheet (Fig. 4). More
than three-quarters (78 percent) of companies use at least one other tool – best-of-breed
applications, business intelligence platforms, integrated business application suites and
homegrown tools – in addition to spreadsheets to support finance operations planning
and analysis processes.

© 2014 The Hackett Group, Inc.; All Rights Reserved. Finance Executive Insight I The Hackett Group I 3
 FIG. 4 Percent of planning and analysis processes in which at least one other tool* is used in
addition to spreadsheets

89%
78% 79%
74%
66%

44%

Peer group Top performers Finance HR Procurement IT

operations

* Best-of-breed application, BI platform, integrated business application suite and/or homegrown tool

Source: Business Services Planning and Analysis Performance Study, The Hackett Group, 2013

Practice #2: Adoption of planning and performance management methods

As with analytical tools and methods, a large difference exists between cross-functional
peers and top performers in adoption levels of generic performance management
methods (Fig. 5). By inference, then, adoption of these methods improves planning
and analysis performance. And as with analytical methods, the right talent must be in
place to effectively use the method, and finance organizations must be able to apply the
insights obtained to make better business decisions.

FIG. 5 Adoption of performance management methods

Percent of companies

Today In 2-3 years

Peer
15% 59% 100% 68% 32% 100%
group
Continuous
improvement
Top
40% 60% 100% 82% 18% 100%
performers

Peer
23% 59% 82% 66% 31% 97%
group
Strategic
planning
Top
60% 40% 100% 100% 100%
performers

Peer
46% 46% 50% 29% 79%
group
Business
value analysis*
Top
14% 57% 71% 77% 15% 92%
performers

Peer
8% 53% 61% 56% 33% 89%
group
Balanced
scorecard
Top
27% 40% 67% 67% 25% 92%
performers

FULLY IMPLEMENTED PARTIALLY IMPLEMENTED

* Quantification and optimization of value contributed by the function to the business

Source: Business Services Planning and Analysis Performance Study, The Hackett Group, 2013

© 2014 The Hackett Group, Inc.; All Rights Reserved. Finance Executive Insight I The Hackett Group I 4
 The rapid growth in adoption of business value analysis is especially notable. At
present, finance operations and other business services functions are in the process of
rebalancing their service portfolio from commodity-type transactional services to higher-
value-added analytical and knowledge-centric activities. To guide this transition, they need
methods for measuring and managing value delivery. This explains the strong growth
projections for business value analysis.

Practice #3: Process standardization, forward-looking focus and KPI definition level
The general principle that information needs to be standardized to optimize performance
applies in full force for planning and analysis in finance operations, as it does for all the
business services studied. Twice as many cross-functional top performers as peers have
mature process standardization, and 47 percent have standardized KPI definitions in
place, compared to just 19 percent of the peer group (Fig. 6). Top performers also have a
much stronger forward-looking emphasis in their planning and analysis processes. While
many peer-group companies are stuck in a pattern of backward-looking performance
reporting and variance analysis, top performers are exploring predictive modeling and
decision making aimed at anticipating and addressing performance issues, reducing risk
and exploiting emerging opportunities.

FIG. 6 Maturity of planning and analysis processes

Percent of companies ranking maturity at 4 or 5 on a scale of 1-5

30%

Peer group 30%

19%

60%

Top performers 50%

47%

KPI DEFINITION LEVEL FORWARD-LOOKING FOCUS PROCESS STANDARDIZATION

Source: Business Services Planning and Analysis Performance Study, The Hackett Group, 2013

Practice #4: Process integration

The level of process integration is an extremely important attribute of planning and
analysis for business services functions. Inadequate integration within and between
different business domains is one of the main factors impairing companies’ ability
to effectively manage enterprise performance. One example at the highest process
level is a lack of integration between strategic, operational and financial planning and
analysis. Going one level deeper into the organizational hierarchy, operational planning
breaks down into sales, marketing, operations, R&D, and the business services
functions, including finance operations. Further planning and analysis complexity arises
when geographical dimensions or multiple strategic business units, each with its own
products and services, are added to the mix. As the organization and operating model
increase in complexity, the interdependencies between planning and analysis domains
grow exponentially.

Synchronizing planning and analysis activities can be a monumental task. Full integration
within finance operations presents its own set of challenges. For example, capacity
planning should be integrated with any planning activities that specify resource
requirements during the planning period. In practice, this is rarely done, and capacity
plans do not fully reconcile with the resource needs defined in other plans.

© 2014 The Hackett Group, Inc.; All Rights Reserved. Finance Executive Insight I The Hackett Group I 5
 The research indicates that the extent of planning and analysis process integration,
both within and between planning domains, is a significant differentiator between
cross-functional top performers and peers (Fig. 7). Just 46 percent of peer-group
companies have integrated or synchronized planning and analysis processes within
planning domains, versus 74 percent of top performers. For integration or synchronization
between planning domains, the corresponding percentages are 40 percent (peer group)
and 69 percent (top performers).

FIG. 7 Planning and analysis process integration

Percent of companies

4% 8%
14%
22%
22%
23%

40%
37% 38%

52%
27%
25%
37%
19% 15% 17%

Peer group Top performers Peer group Top performers

Between processes within function Between processes within and outside function

INTEGRATED SYNCHRONIZED AD HOC DISCONNECTED

Integrated = Common planning calendar, integrated data

Synchronized = Common planning milestones, shared data
Ad hoc = Informal collaboration, ad hoc data sharing
Disconnected = Disjointed planning, siloed data

Source: Business Services Planning and Analysis Performance Study, The Hackett Group, 2013

Achieving full integration of planning and analysis is rare. The cost and effort of fully
integrating the data model of certain planning processes would be prohibitive and would
add unnecessary complexity and little value. However, there is no doubt that in most
business services organizations, including finance operations, the level of integration of
planning and analysis is far from optimal.

The strong correlation between performance and integration confirms that integration
within finance operations and between it and other planning domains should be a critical
objective for planning and analysis transformation.

Resource placement: No clear best practice has emerged

A recurring question in any design process for a service delivery model revolves around
optimal placement of the resources that own and support processes. Planning and
analytical processes are no exception.

Business services organizations often struggle to decide which staff to embed in the
function and which in the finance organization. Accordingly, the research looked at
resources providing financial analytical support to the core business, that is, operations,
sales and marketing, and to the four business services functions studied: IT, HR,
procurement and finance operations (Fig. 8). Financial analytical support for the core
business tends to be embedded within that business to a greater extent than for any of
the business services functions studied, with the exception of procurement. Likewise,
support by the decentralized finance organization is more common in the core business
than in business services functions. So, financial analysts supporting the commercial
domains of the business are more likely to reside in the business or close to it (for
instance, decentralized finance). On the other hand, financial analysts supporting
business services tend to be more centralized in corporate finance and, increasingly, in
global business services (GBS) organizations.
© 2014 The Hackett Group, Inc.; All Rights Reserved. Finance Executive Insight I The Hackett Group I 6
FIG. 8 Placement of resources providing financial analytical support, by business area

Percent of companies

Core business Business services

7% 9% 10% 8% 10%
15% 18% 16% 13% 14% 18%
23% 25% 20%
18% 20%
15% 22% 20% 24% 16% 14%
16% 16%
12% 18%
13%
25% 10% 21%
25% 22% 25% 14% 24%
31%
32% 33%
35% 27%
43%
41%
60%
50% 47% 52% 48%
45% 47%
36% 40% 37%
31% 35%
21%
13%

Peer Top Peer Top Peer Top Peer Top Peer Top Peer Top Peer Top
group performers group performers group performers group performers group performers group performers group performers

Operations Sales Marketing Finance HR Procurement IT

operations

EMBEDDED IN BUSINESS AREA CORPORATE FINANCE DECENTRALIZED BU FINANCE GBS/SHARED SERVICES

Source: Business Services Planning and Analysis Performance Study, The Hackett Group, 2013

Companies studied tend to place financial analytical support for finance operations within
the business to a lesser extent than for any of the other business services functions or
core business areas and are more likely to place such resources within corporate finance.
There is little difference between the peer group and top performers.

The practice of placing financial analysts in a GBS organization has grown significantly
among business services, especially finance operations, but far less so in the core
business. Fully one-quarter of cross-functional planning and analysis top performers
locate their analytical support resources for finance operations in a GBS or shared
services organization – higher than any other group studied.

The study also examined placement of resources who own and support planning and
analysis processes for each of the four business services studied. Fig. 9 shows the
location of primary ownership based on analysis of four discrete planning and analysis
processes: functional planning, functional annual budgeting, functional analytics and
functional performance reporting. The study found that 40 percent of primary owners of
finance operations planning and analysis processes reside within the FP&A organization.
In particular, annual financial budgeting for the function and functional performance
reporting are well suited for moving primary responsibility into the FP&A organization.
Doing so allows the function to focus on higher-value-added activities. Finance operations
is leading the way in adopting this practice, creating a precedent for other functions to
explore it.

© 2014 The Hackett Group, Inc.; All Rights Reserved. Finance Executive Insight I The Hackett Group I 7
 FIG. 9 Placement of resources that own and support planning and analysis processes

Percent of companies

8% 1% 7%
6% 8%
13% 13%

40% 14%

93%
79%
65%
52%

Finance operations HR Procurement IT

FUNCTIONAL BUSINESS SERVICES ORGANIZATION FP&A ORGANIZATION

GBS/SHARED SERVICE OTHER

Source: Business Services Planning and Analysis Performance Study, The Hackett Group, 2013

Strategic implications
Finance organizations, like all business services functions, operate with a continual
mandate to deliver greater value to the business, and to do so faster than ever and
at a lower cost. To promote integrated enterprise performance management that in
turn drives business performance, the finance function must continue to transform its
planning and analysis capabilities to improve both effectiveness and efficiency.

All companies studied reported at least some level of effort to transform finance
operations planning and analysis, with some taking significant and further-reaching
steps than others. Regardless of magnitude, improvement plans should address current
shortcomings in skills, technology, data and processes. Moreover, these efforts must
focus on improving the planning and analysis capabilities of the function itself, rather than
focusing just on financial planning and analysis services it provides to the enterprise.

The research isolated practices that strongly correlate to planning and analysis
performance in business services functions, including finance operations. However,
all of these practices will be ineffective in the absence of the right talent with the
right skills for mining insight from large amounts of structured and unstructured data,
grasping implications of multiple complex issues, and articulating options for business
performance improvement. Indeed, this is a key hurdle to better planning and analysis
capabilities. Organizations seeking to transform finance operations planning and analysis
processes should factor the importance of these practices and the need for particular
kinds of talent into the design of their future service delivery model.

A fifth practice – the placement of resources providing analytical support (whether in a

GBS center, in the business function or at corporate) and organizational placement of
the owners of planning and analysis processes – was found to make no real difference
in performance. This finding indicates a lack of mature best practices in the placement
of planning and analysis resources. Their placement must be designed carefully and
deliberately, but in this area, finance organizations need to rely mainly on an assessment
of the unique needs and constraints of their company rather than best practices in use at
other organizations.

© 2014 The Hackett Group, Inc.; All Rights Reserved. Finance Executive Insight I The Hackett Group I 8
About the Advisors

Lynne Schneider
Senior Research Director
The Hackett Group (NASDAQ: HCKT), a
Ms. Schneider is responsible for leading the development of research global strategic business advisory and
and other intellectual property for The Hackett Group’s Executive Advisory operations improvement consulting firm,
Programs in Finance and Enterprise Performance Management. She has is a leader in best practice advisory,
worked in consulting and related research for over 20 years. Her previous business benchmarking, and transformation
positions included Director of Research for Kennedy Consulting Research consulting services including strategy and
and Advisory, as well as a variety of internal and external consulting operations, working capital management, and
positions with international companies. As Director of Business Process Improvement globalization advice.
at American Greetings, Ms. Schneider managed a portfolio of strategic and operations
projects, including both staff and line functions. She was also a senior consultant in Utilizing best practices and implementation
Towers Watson’s Organization Effectiveness practice and a consultant in the Change insights from more than 10,000 benchmarking
Management practice at Accenture. studies, executives use The Hackett Group’s
empirically-based approach to quickly define
Erik Dorr and implement initiatives that enable world-
Vice President, Research class performance. Through its REL group,
The Hackett Group offers working capital
Mr. Dorr has over 20 years of experience in consulting, research and solutions focused on delivering significant
advisory roles in information technology strategy, enterprise application cash flow improvements. Through its
suites and business process reengineering. Before being named to his Archstone Consulting group, The Hackett
current position, he was Senior Enterprise Research Director. Prior to Group offers Strategy & Operations consulting
joining The Hackett Group, he held a number of senior management services in the Consumer and Industrial
positions, including Vice President of IT at a global manufacturing company, Products, Pharmaceutical, Manufacturing, and
where he was also a member of the executive leadership team. Financial Services industry sectors. Through
its Hackett Technology Solutions group, The
Hackett Group offers business application
consulting services that help maximize
returns on IT investments. The Hackett Group
has completed benchmark studies with over
3,500 major corporations and government
agencies, including 93% of the Dow Jones
Industrials, 83% of the Fortune 100, 87% of
the DAX 30 and 48% of the FTSE 100.

Founded in 1991, The Hackett Group was

acquired by Answerthink, Inc. in 1997.
Answerthink was renamed The Hackett
Group, Inc. in 2008. The Hackett Group has
global offices in the United States, Europe
and Asia/Pacific and is publicly traded on the
NASDAQ as HCKT.

Email: info@thehackettgroup.com
www.thehackettgroup.com

Atlanta +1 770 225 3600

London +44 20 7398 9100
Sydney +61 2 9299 8830

Amsterdam, Atlanta, Chicago, Frankfurt,

Hyderabad, London, Montevideo, New York,
This publication has been prepared for general guidance on the matters addressed herein. It does not constitute professional advice. Paris, Philadelphia, San Francisco, Sydney,
You should not act upon the information contained in this publication without obtaining specific professional advice.
Vancouver
© 2014 The Hackett Group, Inc.; All Rights Reserved.