Finance Transformation Playbook

The need for Transformation

Why step-change is needed

Every organisation or department needs to periodically review what it is doing, what it does and how its work is performed.

Times change, technology advances, the market and consumer preference evolves. Salary arbitrage can be attractive. Covid-19 has altered how business operates for good. What used to be ‘business as usual’, undertaken by the same team that has always done this work, is no longer the case; the Finance function is just as caught up in this swirling imperative to change as any other department.

Every CFO will have their own reasons to need or want to refresh how things are done, but we live in a world where priorities are constantly changing, and the imperative to keep on delivering a high standard of service to the business remains. Some of the wider reasons to initiate an operational transition programme include:

Disruption can force change – digital disruption has turned many traditional business models into legacy operations. Many companies need to pivot how they structure their workforce – from a hierarchical functional construct to a cross-functional capability – so that they can build the internal value chain that serves the customer. When this happens then Finance must flex too.
Long term strategy – visionary leaders will be constantly horizon-scanning to see potential new opportunities and challenges, and will be revising their strategy to make the most of supposed future trading conditions. This could, for example, see an initiative to co-locate similar work in one location.
Process excellence – cross-functional processes, those that deliver customer value, must be constantly evaluated and improved in the light of their efficiency, effectiveness and flexibility. This will introduce changes to how and where people work, and the work that they do.
Rationalisation – after a period of sustained operation, it makes sense to re-look at the relevance of previous operational decisions and evaluate if efficiencies now gained allow the process to be rationalised. In global organisations this is often the tension between a central shared service activity vs in-country capability, and can result in jobs and/or activities being moved to different locations.
Cost efficiency – in line with the cost challenges faced by most organisations, and as part of a wider efficiency drive, it can make sense to locate staff where the salaries are cheaper. Care is needed to balance lowering one cost, but then having to spend on a separate quality-of-service layer.
Automation – once processes are improved and staffing cost and capability refined, then transactional or repetitive activities may be automated. This often delivers a very good return on investment, and frees up staff to do more of the value-adding work.

The remainder of this post focuses on understanding why a corporate Finance function might need to change, and exactly what that change might be. From recognising the challenges faced, gaining clarity on identifying the ideal end-state and the target operating model design principles, through developing the new operating model itself we then move onto advice as to how to successfully transition to that new structure and ways of working, and to make it stick.

The business rationale for change in Finance

An independent advisory team is best placed to review how Finance currently operates and how it serves the business – with full cooperation from the Finance Leadership Team.

The Initial Advisor Review will be time-bound and high-level and will, of necessity, make a number of assumptions on current and desired business outcomes, activities performed and the staff who perform them (number, grade, job title location, salary etc).

In our experience this review normally finds that:

There are too many P&Ls, and often too many instances of Accounting Systems.
There are too many Business Partners who, in reality, perform transactional support, not true business partnering.
Leadership rarely has any true dashboard or overview of what work is or has happened, or insight into the implied workflow.
There are too many junior, generalist roles - with the person in post lacking the experience or close support to provide value.
There are nearly always more people in Finance than might be expected in an organisation of this size and complexity.
There are already one or more shared service centres, but they seem to work at a degree of separation from the remainder of Finance.
Too much work is reactive.
Too little work is value-adding.
Too much work is transactional and repetitive. Often, salary arbitrage is used to add people, when process improvement or technology could remove manual ways of working.
Data cannot be relied upon, and the latest data is rarely available in a cleansed and timely manner.
The shortcomings of data invariably mean that true and relevant commercial insight is not available when needed.
Reconciliation, matching, journals and inter-company are real challenges.
R2R is more difficult than it should be. Month End Close targets are consistently missed.
There is no effective internal Governance and Controls function.
There is a lack of clarity and consistency in roles and accountabilities.
Roles in one geography do not necessarily do the same work as a role with the same job title in another location.
The tooling is not uniformly fit for purpose. Lack of coverage greatly increases risk.
Few of the workforce know what they need to do to progress their career.
Far too many critical procedures are known to only one person, or are buried in complex Excel spreadsheets.
The management style tends to be more command and control rather than trust and inspire.
People are suspicious of change.

The Finance Leadership Team normally realise all of the above, but they rarely have the time to do more than fire-fight.

So, even if there is no compelling corporate need to change, there is usually plenty that a CFO needs to do to make sure that the Finance function can truly give the rest of the organisation the best possible support.

What needs to change

Taking into account all of the findings and the Finance Leadership Team’s wishes, it is often the case that the focus of Finance needs to move from processing transactional and reactive tasks to more effective business partnering and higher-value work, and to become an agitator for growth.

In addition, there must be greater clarity and consistency on roles and responsibilities, across different locations and level of responsibility, with role holders upskilled. There must be clarity and understanding of the activities within all processes in the Finance Taxonomy. Master data, business intelligence, standardised reporting and centres of excellence must all be improved.

These conclusions are often presented in a Summarised Findings and a Statement of Intent document.

Together, these imperatives, when wrapped in appropriate governance and change leadership within a process excellence programme, will result in a new operating model which enables high-value business partnering – where relationships are built, data is turned into insights and the numbers are brought to life.

Create the Strategy – identify the desired End States

The Finance Leadership Team should identify what good looks like. This is likely to emerge as a result of an independently facilitated Finance Leadership Team Awayday when the rationale for change (as outlined above) is discussed. Our experience is that the Finance Leadership Team are likely settle on the following (or similar) Desired End States to aim for:

Ensure that the right activities are performed in the right place. Commercial Partnering should provide business performance insights to internal and external customers, and should build strong relationships, listening to and acting upon feedback. Group Finance should be responsible for adhering to laws and for meeting statutory requirements, for taxation and for a minimum level of compliance. Operational Finance should work alongside each strategic business unit and assist with its commercial strategy and execution, reporting performance against output, and providing the high-value business partnering service which can add so much to the relationship. One or more Shared Service Centres (SSCs) should undertake the activities which deliver effective and efficient standard procedures, and which result in the necessary ongoing operational outcomes. These activities should be automated where possible. These SSCs should be located where they can best support the customer base. In time, with a mature process and the right tooling, the SSCs may become boundaryless - that is they orchestrate capability and outcome utilising colleagues based in multiple locations and working in a way which suits theit lifestyle.
Ensure that the right people are doing the right job in the right way. There should be full capability at every level, with clarity on responsibility and commitments, known deputies and a longer-term succession plan. Individuals should be trained to perform roles - collections of related activities with the Process Taxonomy - given their activities using workflow, and regularly re-certified that they are capable of performing those activities.
Functional efficiency, which results from process excellence, proper tooling (including a minimum number of ERPs, ideally one), embedded controls and people who work across an effective operating model. Activities orchestrated by workflow tooling will be reported upon in a Dashboard, providing leadership with a clear statement of work in progress and work completed.
Create Centres of Excellence (CoEs) for Finance activities which have a profound impact on business operational performance or profitability. CoEs extend the SSC construct and concentrate knowledge, increase efficiency and allow automation. For example, a Purchase Order CoE, an Accounts Reconciliation CoE, a New Building Funding CoE, a Product Costing CoE, a Master Data CoE, a Global Regulation/Taxation CoE, an Investor Relations CoE.
Streamline the organisational structure by removing layers, increasing span of control, aligning jobs to the process taxonomy and salary grades, and then aligning job titles across all locations.
Rationalise reporting and business intelligence. Assuming that basic financial accounting will be performed to an acceptable level, then information and insights must be improved to increase the confidence and effectiveness of business partnering. Speed to Insight is a necesary KPI.
Improve the strategic planning capability so that Finance can become an effective business partner. This means providing input to business plans which are linked to corporate strategy, and creating a Finance function with the insight and flexibility to correct the direction, as assumptions become fact. This is an evolution of simply reporting or analysing financial data, towards building sufficient trust with business operations to influence their decision making, with insights derived from reliable data which connect strategy with execution. Finance business partnering should be evident in all corporate investment decisions.
Governance and controls are upgraded so that policies are known and followed across all locations, controls are built into daily ways of working and each local team includes someone responsible for checking adherence to procedure and outcomes. All risks are surfaced and mitigated.

End-State Design Principles

Once the ideal End-States have been discussed and documented it is then good practice to identify a number of End-State Design Principles to guide the team who will propose the actual Target Operating Model. Experience suggests that the proposed design principles may include those in the list below. The initial list must be discussed at an initial Design Authority Forum and augmented as necessary.

Design Principles

Remove organisational layers.
Standardise roles and job titles.
Work to a standard process and taxonomy.
Base roles on the taxonomy.
Create competencies for each role.
Create job descriptions based on the taxonomy.
Capture current activities at L5 level.
Map the L5 activities back to L4 and the taxonomy.
Stop doing activities which are not needed, or transition non-Finance activities out.
Do similar activities the same way, by the same roles across different regions.
Set rules on which activities must be retained and which can be done at a distance or outsourced.
Reduce organisational management layers and the number of managers.
Aim for an average span of control at least 1 above what it is at present (ie 5 not 4).
Upskill the workforce – teach them new skills or hire at a higher grade.
Normalise grade distribution – to give a clearer career path.

If the TOM design principles are successful in guiding creation of the TOM, then the activities performed by the roles, the commitments inherent in the roles and the people who perform the roles will result in a significantly improved organisation.

Create Value

Application of the Design Principles will create value in Finance by making sure that the right people, with the right skill set do the right activities in the right way.

Give clarity on roles and responsibilities
Have consistent roles and responsibilities across similar teams
Have a clear relationship throughout roles in the reporting hierarchy
Build a sense of place in the internal value-chain and of customer-centricity
Separate out transactional and repetitive activities
Create centres of excellence to centralise knowledge
Give people the right tools to do the job
Use workflow tooling to orchestrate standardised and simplified ways of working
Improve the quality of master data
Implement standardised reporting
Give people personal development and a career path.

All of which results in a new ability to build relationships with operational business colleagues by turning data into insights, and by bringing intention and action to life.

Create a Business Case

The return on investment needed to move to a new operating model must be assessed. A High-level Business Case should be built to determine the costs and benefits of proceeding with the Process Excellence / Transformation Programme. In many cases, experience suggests that the over-riding benefit will be the ability for Finance to provide a much higher quality service to the business, rather than confirmed operational expenditure (P+L) reduction.

The business case should include the cost of enabling work, the salary of early hires, and search and selection agency fees for rapidly filling any vacant roles.

Be realistic about salaries for the organisation you want to build, and model the cost accordingly. Paying less than median for your sector or city will result in trained and capable staff leaving, which will make the Transition harder.

The challenge of costing a much improved Finance operation is that the savings or greater revenue generated to the business overall tend to be at a degree of separation from Finance, which makes it difficult to include a quantitative figure in the calculations. As a minimum, the business case should provide sufficient operational cost saving to balance the capital expenditure on the Transformation Team.

It may be that high-level discussions have been held about moving some capability offshore or being outsourced to a third-party. In this situation the Business Case should also model the costs and benefits arising from the Third-Party involvement, which it may be assumed would be a prime reason for taking this route.

Note that at this time it would only be appropriate to share a Letter of Intent with a Third Party - the detail and therefore a more accurate financial model will not be possible until the Target Operating Model has been proposed, and no binding commitment should be entered into until the business case is approved.

Setup Governance

Once the preliminary investigations are complete, the business case indicates that a viable programme of work exists and the Finance Leadership Team are in agreement to proceed, then it is likely that the initiative is viable and work may be started to gather the detail needed to propose the target operating model.

A formal Governance Structure should be published, identifying the oversight groups and roles within each of the directing, controlling and doing layers, and the responsibilities of each group / person involved. As a minimum a Steering Board, a Design Authority Forum and a Transformation Leadership Meeting will be established.

Gather Information to be able to propose the TOM

With governance in place, the next stage can begin.

Current Organisational Structure

The current organisational structure chart should be obtained and reviewed for what insights are apparent, especially in terms of functional split, organisational layers, spans of control and identity of key members of the Finance function.

A note should be made of individuals who are a flight risk or a special talent.

It is also helpful to understand the organisational structure of the wider organisation, for clarity on who Finance interacts with, across other business departments.

It is possible that non-Finance headcount is paid for from a Finance cost-centre, or vice-versa, so it is useful to understand the reporting lines of these people.

Experience suggests that acquiring an existing complete view of who works for the department is not likley, and some effort may be needed to create the current organisational structure chart.

Master List of Staff

The organisational structure charts are a start, but we need to know exactly who is in the organisation, and key information about them, such as job-title, location, grade, salary, cost-centre, length of service etc.

It may be expected that HR have this detail, but it is sometimes the case that they are unlikely have a complete, accurate picture. HR are normally grateful for the additional information that our enquiry surfaces, especially when it is shared discretely.

Experience suggests that the most effective approach to capturing a master list of staff is to use the discovery process to create an Establishment Headcount Role for each role that is found to have a person in post, linked to the Process Taxonomy. This approach greatly aids proposing a new operating model because it is based on a role, and the current role holder may be replaced by another, with absolute certainty on which role they occupy, and the grade/salary band associated with that role. It is also beneficial well after the programme has completed, in the normal course of attrition and recruitment.

The Master List of Staff, and its establishment headcount roles will form the basis of the Target Operating Model, and therefore, when the whole TOM is agreed, that frees up the Finance Leadership Team to recruit into any role on the agreed terms for that role. The benefit continues once the programme is complete – if the role and its terms remain as agreed in the TOM, then immediate action can be taken to fill the position. Only when it becomes apparent that a role or its terms must vary is it necessary to gain approval from the Design Authority Forum.

HR Support

It is a considerable effort to capture all of the information in the Master List of Staff, and it must be kept up to date. For the duration of the programme an HR junior should be seconded to the programme for this purpose.

Looking ahead to the Announcement, Consultation and Transition phases, it is normally essential to have a dedicated HR Associate to cope with the workload – our experience suggests 1 for every 50-70 affected staff. A named Talent Acquisition person is also needed, and they must have sufficient bandwidth to cope - a 10% attrition rate means that 1 person a month needs hiring in a department of 100 people, and there will be a greater need to find fresh talent during the Consultation period. Not having anyone in a role means that Transition cannot start, which may delay the programme, and it increases pressure on colleagues who may have to take on extra work. Our experience suggests that their shoul be no delay in seconding this role to the programme.

Market Salary Benchmark

Making sure that the correct person is in the correct job is greatly influenced by the salary associated with the role, and by any discrepancy to a market rate for that role.

Too great a gap will result in resignations, and quite apart from that concern, it may prove impossible to recruit the quality of person required into a role, to upskill the department as a whole.

There will be salary arbitrage across different global locations, and it is essential that the salary and benefits on offer is attractive to that location. In cities with full employment, it may be necessary to provide the Finance Leadership Team with authority to offer improved terms to candidates, outside of the normal corporate compensation guidelines.

If a Finance function is to be outsourced, then reassurance is needed that the Third Party expects to pay market rate salaries, and that salary flex is still possible within profits inherent in their likely commercial proposal.

Our experience suggests that the need for a Market Salary Benchmark should not be deferred. The transition to a new operating model cannot happen if people are not in post to receive their training and perform the activities.

Process Taxonomy

Many Finance activities are recognisable from one company to another. Nevertheless, having a standardised taxonomy provides a common language and gives a consistent approach to organising Finance processes and in documenting them to a standard format.

Typically, a process taxonomy will list out the core Finance capabilities, such as strategic planning, working capital management, risk management or operational accounting. Each of those capabilities is then broken down into L2 Processes, such as Manage Treasury Operations, which in turn may, for example, be decomposed into L3 Manage Cash and L3 Manage Bank Accounts. The Level 3 sub-processes may be further described as L4 Activities which themselves comprise of L5 tasks.

If no Finance Process Taxonomy already exists, then seconded staff or an independent analyst can usually build a draft taxonomy from talking to the Finance Leadership Team and the local Finance Directors.

When staff are asked to record what they actually do each day, as they will be, they usually respond with a mix of L4 Activities and L5 Tasks, some of which are performed regularly, some of which are only done as a remedy for some imperfect scenario or are in response to an ad-hoc enquiry. An analyst in the Process Excellence / Transformation Programme Team will need to carefully assess all of the responses and build them into the ‘current’ taxonomy. The process of doing this is very informative in highlighting, gaps, overlaps, unnecessary tasks and poor capability, and areas ripe for improvement.

A further benefit of a well-structured Process Taxonomy is that it will often describe the proposed operating model – in particular, the Level 3 groupings will often align to a role in the new organisation, with the relevant Level 2 category suggesting a role managing those people performing the L3 processes within it.

Experience indicates that the creation of a Finance Process Taxonomy should not be deferred. It is valuable resource which informs many aspects of process excellence and the wider transformation.

Capture and Analyse Current Activity

Many Finance transformations are entered into on the basis of a ‘lift and shift’, that is in the full knowledge that the process is poor, but it is judged that it is better sorted out in a cheaper location or by ‘someone else’. More enlightened organisations, and those who are, in effect, strengthening their internal capability often take a ‘fix and shift’ approach. That is, they take the opportunity to resolve many of the people, process and tooling challenges as part of the Process Excellence / Transformation Programme.

Either way, there is an absolute need to know exactly what everyone in the organisation does – the Distinct List of Activities. Capturing and analysing current activity, and the accuracy and completeness of that data is the biggest single determinant of overall transformation success.

It is important to structure the Activity Capture Request carefully, to ensure that the responses accurately describe the tasks performed. When individuals are capturing their activities, they must do so to a reasonable level of detail. They should understand why they are being asked for this information and break it out – for example, if they prepare a file, but someone else reviews it, and another approves it, then they should be clear which part they do, and who does the other parts.

Process Mining tooling is available to capture transactional activity in systems, and this can be useful input, but it does not include Task Mining, an industry term for capturing what people do outside of systems - for example, opening emails, uploading files, updating excel spreadsheets.

The activity data captured needs to be validated within the responding team, by successive layers of their management and by all stakeholders – including relevant suppliers and customers who sit outside of the function under investigation.

There are many points for the Transformation Team to look for within the data:

Activities that should not sit within Finance, or that part of Finance
Activities which are done by different groups in different geographies
Activities which have risen-up the org structure, but need to be pushed back down again
Activities which are no longer needed
Activities which may be better done in a different location
Identification of complex or critical activities
Etc.

The outcome is the Distinct List of Activities.

Current Activity – matters for consideration.

Very early on, before even the Activity Analysis has started, it is important to identify who are the weak/poor performers in the organisation, and to make sure that their work is cross-learned by team mates. Then, if they are not part of the new organisation, the impact is minimal.
Our experience suggests that it may be necessary to hire some key staff now, well before any announcement of a new operating model is made. This may involve increasing headcount in the short term, so that cost should be built in, and accepted, but it will ensure that operational performance does not suffer, and will make the transition phase easier. Any new staff hiring should be done with a strong expectation that they will map into a new role in the new organisation structure – it would be unfair to have to let them go or to move them to a different job
Systemic process problems must also be identified and tackled in a separate timeframe, probably by a separate initiative.
So much transactional activity could be rationalised and/or automated. Consider if this should be done first, or, perhaps after the work has been moved to a cheaper location.
When there is a team of people and the activities reported are the same, then we must take time to record exactly who does what in each team, taking care to consider the grade / seniority of each person. For example, how responsibility is shared across a tranche of activities, and that there is a suitable separation of duties – if one prepares, then another must review. Similarly, who looks after which account, who does what on, say Working Day 1, to ensure coverage to make sure that all contractual commitments are met.
Consider Activity push-down. So often, Supervisors and Managers take on tasks that should have been done by their team members. For various reasons they do the activities themselves. They need to transition these tasks back down.
Analysis of the data captured will highlight a number of challenges with the current operating model, each of which may be taken forward to the creation of the Target Operating Model phase.

All of the findings should be taken to the Design Authority Forum for challenge and/or ratification.

Understand Current Organisation

Now that the structure of the current organisational is known, details of all staff are available, salary benchmarking has been done, a process taxonomy built and all activity captured and analysed, then it is time to reflect on the capabilities, strengths and weaknesses of the current organisation.

This will include summarising the observed skills inherent within the workforce and offer a commentary on likely gaps to the aspirational capability desired in the likely Target Operating Model. Other findings can be matched against the Finance Leadership Team’s vision of the desired End State and the End State Design Principles.

Now is a good time to consider if the likely transformation initiative is primarily about People, Process or Tooling. People are 80% of the cost of a company, so many transformations focus on the people. Success may be harder to see if too much process or tech is included in the scope. If the desired outcome leaves the majority of people in their current post, but significantly improves their processes, then this needs a different communication approach.

The outcome of this work is the Summary of the Current Operating Model. The Steering Board should approve progression to the next stage.

Create the Target Operating Model

As the follow-on activity from Understanding the Current Organisation, taking into account the accumulated knowledge to date, and with full awareness of the Desired End State, the revised organisation structure may be proposed.

This proposal could be a simple rebalancing of internal resource through to a full-scale outsourcing proposal. Matters will fall into place and a view of what the Target Operating Model should look like will emerge, which can be rapidly iterated until the Finance Leadership Team is confident that a transitioned Finance organisation will deliver on all of the improvement imperatives and that a much stronger organisation will result.

Creating the different components of the TOM is time-consuming and needs the right people in the Transformation Team.

A high-level view of the proposed TOM should be taken to the Design Authority Forum for tacit approval, and then the detail filled out by creating the deliverable that will bring it to life - as set out in the sections which follow.

Target Operating Model - Structure

Process Taxonomy – The Level 1 to Level 4 taxonomy previously created will be reviewed and updated) in preparation as input to creating the Proposed Organisational Structure. Note that Level 4 may be refined at this point in time. Ideally the Level 5 Activities will have been added once the Distinct List of Activities has been signed-off, but if time is tight, then they may be added after Transition has completed.

Current Organisational Structure – Previously created for the Transformation Team’s clarity and Finance Leadership Team/Design Authority Forum reference, with names and grades of those in post. A second version is now created, without grades, and is the only version published.

Proposed Organisational Structure – a full organogram for the department, showing roles only (not names), broken down by function, tiers and grades. When the TOM is accepted (at a future date), these roles become the ‘Establishment Headcount Roles’ and people may be mapped into them, or given the role as a suitable alternative to their current position. Or the role may be filled by other internal or external staff. A second version, without grades, is the only version published.

Finance Competencies. Each role in the Proposed Organisational Structure should be rated against an agreed set of Finance Competencies. Each competency may be thought of as a fundamental ability to be held by a member of the Finance department. In the more junior roles, the base competencies are closely allied to subject matter expertise, with the more junior roles only expected to have a foundation or intermediate level of knowledge. As length of tenure increases or the role becomes more technically complex then the competency displayed should tend towards expert.

More senior roles will require competencies which exhibit wider commercial awareness, good judgement and leadership.

Our experience suggests that the creation of a Finance Competencies Matrix should not be deferred. It is invaluable for the insight it gives to the level of competency needed when mapping current staff into new roles, and in informing individual’s Development Plans. It also provides a standardised and consistent set of competencies for inclusion in each Job Description.

Target Operating Model – Roles and Responsibilities

A RACI Matrix should be created. RACI is an acronym for Responsible, Accountable, Consulted and Informed. When used at the intersection of a RACI Matrix - with roles on one axis and L4 activities on the other – the letter R defines the responsibility for undertaking the activity, the letter A for which role is accountble for making sure that the activity is done, etc.

RACI Matrices are particularly helpful when re-organising responsibilities during a transition to a target operating model, to check that there are no gaps between roles and no duplication across roles, particularly so when roles are based on the Process Taxonomy. There is additional importance when work is moved out of an individual’s team, helping avoid confusion; similarly, a RACI helps avoid misunderstanding when an activity overlaps more than one team. It is also a good control-check to make sure that no one role is over-burdened.

Separation of Duty (SOD) is an important controls construct. For example, different people should prepare, check and authorise a payment. It is particularly important to look at the L4 activities to consider if any might cause loss because controls are weak, may be subject to unintentional error or deliberate misconduct. Where this may be the case, then the relevant RACI Matrix must reflect the additional control needed.

Job Descriptions should exist for each role in the target operating model. All Job Descriptions should be in a standard format, starting with Job Title, Grade, and which Role it reports into. There should then be an open narrative which describes the purpose of the role, in natural language. This is followed by a bulleted list of the L4 Activities for which this role is responsible, and a list of the Finance Competencies relevant to this role and its grade. Finally, there may be some Essential/Desirable qualities in the candidate, such as having a degree, being a Qualified Accountant or having X years experience.

Job Level (Grade) and Salary Banding Approval. In many organisations, it is a requirement to level-set the roles in any given department against the organisation as a whole. When a new operating model is proposed, the roles will need to be assessed (graded) and aligned against corporate wide grading and salary structures. The Proposed Organisation Chart and the Job Descriptions will be a prime input. Our experience suggests that the approval request should not be deferred. Corporate reviews cannot be hurried and may require a minor rethink of the proposal. Any delay in receiving the approval can have a knock-on effect on making the Announcement.

Target Operating Model – Activities

When the TOM is finalised then a Transition Plan must be created for each role to set out what activities are associated with that role in the new operating model, and to test out how viable the role is.

The transition plan is based on the agreed Activity Analysis captured and reviewed during the information gathering phase.

The transition plan essentially sets out the L5 tasks within each L4, including who the activity is to be transitioned to, the time that each task typically takes, how frequently the tasks are performed etc.

The activities for a particular role are usually laid out grouped as Stop, Start or Continue.

Stop – what activities that the roleholder will train someone else to do and then stop doing;

Start – what activities that the roleholder will take on and learn from another;

Continue – what activities that the roleholder currently does and will carry on doing.

Note that the accuracy of these groupings is in large part a function of the accuracy of the activity data gathered in an earlier phase. This detail in the Detailed List of Activities will need to be updated as assumptions become fact.

When activities are largely being reallocated within an existing Finance function, then it is often helpful and time-saving to work out who is giving or receiving activities by creating a visual model of L4 activities, based on the agreed Distinct List of Activities. With some people having to interact with perhaps 7 or 8 others, it can rapidly become difficult to know who should be doing what. It is more straightforward if the work is to be outsourced, where it is likely to be a 1 to 1 training situation.

If a role is being made redundant, then all of the activities in the transition plan will be ‘Stop’ activities. Some roles may essentially not change, in which case, the majority or all of the activities in the transition plan will be retained - ‘Continue’. Essentially there is no need for transition, but there is the option for the Finance Leadership Team to impose the requirement for the role-holder to document what they do, to be held as a team asset. If the role is essentially new, or the eventual role holder has been recruited into the team/company then most, if not all, of the transition plan will be concerned with tasks to learn.

Some roles will have both Stop and Start activities; some will need to pass-on and learn-from 2 or more other roles, so there will need to be some careful planning to make sure that the eventual roleholder can cope.

The transition plan will also have placeholder columns to assign what dates each task will be taught/learned when the plan is later assigned to a named individual, and to track status and percentage complete for reporting purposes.

Transition Plan Verification

One the Transition Plans have been created for all of the roles, then they must be extensively cross-checked and verified. Time spent now will pay back x10.

Make sure that the total time spent on activities by each role is within normal working hours, plus a monthly / seasonal reasonable stretch. If there are unacceptable peaks, then investigate ways that tasks can be moved outside of that peak.
If the transition is to be to a distant or outsourced workforce, then check that, overall, at least 70% of all activities are transitioned. There is often a tendency to retain activities that are thought to be key, but really are transactional.
Look out for activities which are essentially the same, but done by different business units in different locations. For example, tracking the supply of a raw material may be done by Finance in Europe, but by Procurement in the US and Customer Services in Asia.
Check if any of the activities captured are really only just what people currently in that role happened to be doing at that time, perhaps one-off actions or project related tasks that are not regular operational commitments.
Remove any activities that are not specific to the Finance Taxonomy. For example, some activities only be being done in Finance for long-lost historic reasons. Do not include generic ‘tasks’ such as attending team meetings, sorting through an email inbox, updating documentation, taking holidays etc.
Some activities can be poorly described, often of few words, or they are colloquial to the team/department. This means that the Transformation Team cannot really place what that activity is or where it should sit. Before too much time passes, the original activity description must be verified.
Challenge that the activity now assigned to a role is truly one that that role should do.
If any work is moving location, then the activities and role should be discussed and verified with a qualified representative of the organisation taking on the work.
In so far as is possible, check the ‘transition load’ on each role. When names are assigned to roles, some people may have an excessive, temporary requirement to either teach or learn at the same time, something which may not be possible, especially if the tasks are time-relevant or on Working Day 1.
Pull all of the findings together. Verify the Transition Load Model and the Transition Plans Verification Findings at the Design Authority Forum.

If necessary, circle back to the RACI and Job Descriptions, and update them, as well as the Transition Plan.

Target Operating Model

All of the information and considerations explored to date should be collated into a draft Target Operating Model document and taken to the Design Authority Forum for interim approval.

Road test the Target Operating Model

Once the draft TOM has been agreed by the Design Authority Forum, then it can be populated. This is when the initiative changes from being role-based, to one where real names are used. All of a sudden, reality bites.

People Mapping, Pooling and Vacancies

The first step, and one of considerable importance, is to see how many people in the current organisation fit into the proposed roles in the new organisation structure.

This is a sensitive programme responsibility, which demands great care – each decision has the potential to affect an individual and their family.

The main driver for mapping an individual into a new role is to assess the activities currently undertaken by individual, and to compare them to the activities associated with a role in the proposed operating model. This is done based on the actual activities that they perform at this point in time, not what they supposedly do in the theoretical role of their current Job Specification, so it is very important that the Distinct List of Activities created earlier in the programme is correct. Care and judgement is needed on who best matches each of the Establishment Headcount roles in the target organisation.

Individuals not immediately mapped may be given a role as a suitable alternative to the role they undertake now or, later in the Consultation Process, may be selected into a role. Failing that, they may be successful at interview for a role that they applied for.

Those people with no initial assigned role may be said to be ‘at risk’ of redundancy.

How staff are treated during a time of job uncertainty does vary around the world, but many employers choose to treat their employees to a high common standard, which is usually paid back many times over in increased employee engagement.

Summary of the process of Mapping, Pooling and filling Vacancies

There is more detail on this process in Making People Redundant, (thankfully redundancy isn't inevitable) but, in summary, staff usually fall into one of four categories when considering a possible future operating model:

Mapped. Individuals for whom their current role has approximately 70% or higher match to the activities in the proposed future organisation will Map directly to that role. If they map, they are not considered ‘at risk’ of redundancy.

Suitable Alternative. Individuals for whom there is a role of broadly similar grade and workload, and where their experience and ability means that they are likely to be a success in that role, may be placed in it. They are then deemed to have been offered a Suitable Alternative role. They are not considered ‘at risk’ of redundancy.

Closed Pool. This situation arises when there is a possible future role for an individual which is the same or largely the same as the work they do now, and they would normally ‘map’ into the role, but there is now an organisational requirement for fewer of these roles. The individual will become part of a selection process to choose the most appropriate of their peer group. People in a Closed Pool remain ‘at risk’ until they are selected for a vacant role.

General Pool. Individuals for whom their role has disappeared in whole or large part will be considered ‘at risk’ of redundancy. They will be invited to apply for any vacant new role, and the extent to which they are deemed suitable will be determined during a selection panel or an interview.

Note that eligibility to apply for vacant roles in the proposed operating model is not limited to those who are ‘at risk’ of redundancy. These roles may be opened to colleagues from other parts of the organisation who are attracted for reasons of career interest or promotion.

Note that it is often considered less stressful for an individual to not be required to have a face-to-face interview when seeking a new role. When the applicants are known to a significant proportion of the members of a selection panel, then the chair may decide that the decision is made by a formal process of selection. Any external applicants must be interviewed.

Note that the proportion of staff being Mapped vs being in a General Pool differs significantly depending on the nature of the proposed operating model. If the transformation initiative is essentially concerned with reorganising the existing Finance function, then it is likely that a high proportion of people will quickly be reassured that they have a future role. If the transformation initiative is essentially an outsource, then perhaps only 25% of the workforce will find suitable new work with the same organisation. If the transformation initiative is concerned with relocating capability to a captive delivery centre, then the opportunity to take up a new role in a new location may appeal to some staff. For example, consider a project to relocate a Call Centre from Central London to the Canary Islands. The chance of a major lifestyle change, albeit at a lower salary, can be a significant attraction for a number of affected employees.

Name-Role Mapping. All of the decisions and considerations from the mapping processes should be collated into one document, ordered by the staff member currently in post, which sets out all the information relevant to their role in the current and future organisation, a short statement on the reasons behind any decision and a summary of actions going forward.

Creating the Name-Role Mapping deliverable also acts as a control – the information within it can be filtered by job title, location, functional group etc, to make sure that the Design Principles have been adhered to.

Consultation Periods by Country. Countries vary on the legal requirements to consult with staff on the company’s proposal and the terms of any redundancy, if any. At this point, it is important to make contact with the nominated HR Associate in each country where staff may be let go, to explicitly determine the rules of that country. It is also importance to build a relationship with that same HR Representative, because they will need to be very responsive during Consultation, and then later, during any Exits or recruitment into vacant roles. The list of Consultation Periods by Country, including the relevant HR Contact for that country should be kept up to date.

Vacancies. Once the Transformation Team have concluded the theoretical mapping of individuals to roles in the proposed organisational structure, then it is important to take the time to prepare a separate list of likely vacancies. A Proposed Vacancy List ensures that the need to fill these roles is kept front of mind. Filling the vacancies is key, but it is normal protocol not to advertise them until Individual Consultation is complete and those ‘at risk’ have had their chance to be selected.

Although likely to be some months in the future, once a role needs to be advertised, there can be delay whilst the Talent Acquisition team understand the role and write the Job Advert. If these are done in anticipation of being needed, then actually advertising the role internally or externally will be much smoother. It is also good practice to get ahead and create the formal selection criteria and scoring mechanism, and to write interview questions relevant to each particular role which may need them.

There will be a point after the Announcement when those ‘at risk’ will be feeling upset, and we need to be ready to reassure and take action. Preparing as much as possible in advance will relieve the pressure.

Similarly, now is a good time to set out aspirational timelines of consultation expectation for each of the classes of individual outcome (those at or not ‘at risk’). In any case, an explanation of the process and relevant timelines will need to be prepared ahead of the upcoming Consultation Announcement.

Update the Proposed Organisational Structure with Names

Once the major task of People Mapping, Pooling and Vacancies is complete, at least in draft, then a second version of the Proposed Organisational Structure must be created. This is a full organogram for the department, this time showing names as well as roles, broken down by function, tiers, but with Grades removed. There may be blanks instead of names if certain roles are to be undertaken by a different organisation – not least because it is unlikely that the final commercial agreement has been signed.

Be careful when upskilling a team by adding in a more senior role, possibly to lead it. It is essential that the new role holder is in post immediately, to mitigate against the remaining team members suffering through uncertainty, and a lack of resource to cover the work that must still be done. It is even smarter to make this change ahead of any announcement of the company proposal, and if it needs external recruitment, then it should be done without delay, not forgetting that senior people are likely to have 3 month notice periods.

Care must be taken with this version of the Proposed Organisational Structure. It is needed for discussion with the Finance Leadership Team and by extension the Design Authority Forum and the Finance Directors in global locations. This version should not be included in communication packs until the Consultation Phase has concluded.

Update the Transition Plans for each Role

Mapping people to roles in the new organisational structure will inevitably lead to a reassessment of what activities each role is to perform, and updates to the detail of the placeholder Transition Plans may also be needed, based on the activities that a particular individual currently does or will do, duly considering their fit to a certain role.

It is likely that the RACI Matrix will need updating at the same time.

Make sure that every individual has the time to do their new work, not only within a working month, but during peak times – for example, Monday mornings, a during a seasonal increase or WD1 in Finance teams. This should be modelled at an early stage, based on the proposed Roles – well before any names have been suggested to fill those roles. Ideally, make this visible by graphing expected peaks in their work and make sure that it is a realistic ask.

One technique to reduce peak workloads is to work out what preparation work can reasonably be done earlier. When turnaround time is tight, then creating a dummy deliverable can help, leaving only to populate with actual data on the day.

Operating Model Implementation Approach

It is important to set out an aspirational plan of the roadmap to the target operating model. Plans always change, but an produce outline what the next 12/15 months will look like.

At this stage the audience is likely to be the affected staff as a whole, so they will be interested in timelines for Consultation and Transition or Exit. There will be plenty of programme detail already shared with the Finance Leadership Team, but this outline should be presented at a level that makes most sense to the staff in the department.

The actual plan may vary considerably depending on if the new operating model is essentially a reset of the current function or a more far-reaching outsource. The extent of global spread and the number of staff/locations affected will lengthen the schedule with multiple/sequential Transitions. There may be a need for a number of enabling projects and the opportunity for some quick wins.

The Roadmap and Explainer should be approved by the Steering Board.

Enabling Projects

Whilst the main focus is on delivering the desired End State outcomes identified early on in the programme, sometimes there is an opportunity or a necessity to take action to remove a possible impediment to success ahead of kicking off the main works. For example, Finance may wish to upgrade their General Ledger to the Cloud version, or implement a new Chart of Accounts. Alternatively, Finance may wish to sponsor the upgrade of telecommunications links to a remote office, so that the same standard TOM may be rolled out across all locations. These opportunities or necessities should be documented as possible Enabling Projects.

Similarly, the early investigation work may offer some Quick Wins – likely to suggested by the new operating model - which can be done now. For example, returning non-Finance work to a suitable (and accepting) part of the business. Or writing to all Suppliers who still insist on sending in paper invoices in addition to their electronic invoices, and asking them to stop doing so.

There will be several opportunities to get some momentum and early benefits, and these should be taken.

Frequently Asked Questions

At this point in the initiative, the CFO will be close to confirming the date of Announcement of the company’s proposal to move to a new Finance operating model.

Preparation for the Announcement in its many forms and the collateral which must be created to share with all staff is outlined in a follow-on section (hyperlink).

There will be diverse questions raised by those affected by the proposal - and by colleagues in their organisational neighbourhood. The questions likely to be raised will be about the Company Proposal at first, and then over time will track each stage of the transition journey. Once again, it’s good to get ahead of the need to provide answers, and to craft a representative set of the FAQs and approved responses. This approach will buy time to properly answer the actual questions asked after the Announcement and during Consultation.

Typically, FAQs are raised about:

The Company Proposal
The Consultation Process
How Selection works
How Application and Interview works
Grades and Salary
What Redundancy Packages are on offer
How Staff will be Communicated with, and when
What support is available from HR.

The Frequently Asked Questions should be reviewed by the Finance Leadership Team. It may only be necessary to publish responses to the first two categories to begin with.

Company Proposal

The work to date is summarised, and the key points are consolidated into the Company Proposal. This is the main document / presentation pack which sets out the reasons why the Finance function needs to change and presents a view of the Target Operating Model, together with some statements on possible implications for the workforce and indicative timelines to transition to it. It is important that the CFO and the Finance Leadership Team stand behind the proposal, as should the wider Exec. It is not announced until the leadership team is supportive of what is being proposed and confident that it will lead to genuinely improved performance.

The costs of implementation should be signed-off. The Business Case should be updated and approved, along with the Company Proposal, by the Steering Board.

When presented, during the Announcement event, most of the audience will immediately think about what it will mean for their careers and that of their friends. With this in mind, the material presented should be clear on the proposal, but should not try to answer every question which may be asked. Experience indicates that it is better that the actual Announcement is a short, factual meeting, and that managers then take their staff aside to discuss in groups what they have learned.

Transition to the Target Operating Model

Once announced, the genie is out of the bottle, and the engagement with the workforce truly begins. Respect and empathy are important traits, backed up by a competent Transformation Team who lead on daily activities, pulling in Finance Leadership Team and HR resource as necessary.

Consultation

The Consultation period is started by the Announcement - the CFO announcing the Company Proposal to the relevant Works Council, Employee Forum and/or directly to a meeting of Employees called at short notice.

The period of Consultation will vary depending on the relevant laws of the country that the staff work in. There is often a Collective Consultation period with a Works Council or an Employee Forum at which the Company Proposal is discussed and challenged over a period of time. Sometimes it is necessary to elect or co-opt representatives from the group of those affected onto these representing bodies.

Given the usual understanding of meaningful consultation, in the UK it is likely that this consultation period will last for 45 days. The company proposal does not have to be agreed during this period, but genuine consultation must take place. At the end of this period, the first individual consultations will start, focusing on what the company proposal now means for each person ‘at risk’ of redundancy.

The intention is always to avoid redundancy, but if that becomes inevitable, then an exit date is agreed and Outplacement advice is offered. In some organisations, redundancy and/or retention payments are subject to Settlement Agreements, in which the company offers payment above the statutory minimum in exchange for the recipient being a ‘good leaver’.

There are a great many paths through the Consultation period, and several matters will rise and need to be resolved. These considerations are discussed in more detail in the Making People Redundant article.

Vacancies – Selection and Interviews

The design of the Target Operating Model will have considerable bearing on the number of roles available for people to have been mapped into, and the number of vacancies then left to be filled. For example, if the TOM is essentially about outsourcing part of the function to a separate legal entity, then it will be that company’s responsibility to fill the roles it has agreed to carry, in order to provide the services.

Closed Pool Selection. If there are more people who are capable of, and have been doing, a role, yet there is now an organisational need for fewer of them, then those at risk are subject to a ‘no interview, select out’ process, whereby a small number of their leadership team (plus HR) who have a good knowledge of the individuals in question undertake a formal assessment of their technical capability and fit to the future organisation.

There may be more than one Closed Pool; only those placed in a particular pool will be assessed for that pool. Employees in a Closed Pool do not need to apply to be considered.

Candidates will be assessed by at least 3 people from their management hierarchy or that hierarchy’s peers. They will be assessed against the 5 most relevant competencies for the new role, chosen in advance by their manager and verified with HR. They will also be assessed on performance exhibited to date and a more subjective fitness to be part of the future organisation. The assessment criteria will be scored, and the raw scores checked to ensure that it results in an appointable outcome.

This selection process can and should now happen as soon as possible to give those selected in early comfort that their position is secure, and to allow the person or people selected ‘out’ to quickly enter the General Pool for those ‘at risk’ in the hope that they will find another role from those vacant.

General Pool Selection. People placed in a General Pool are not aligned with any particular vacant role, and are encouraged to apply for up to two which they think best suits them. The Job Descriptions for all roles, not just those that are vacant, should be freely available from a central site, and the relevant one will be appended to the Job Advert. Other people from across the wider function or company who are not ‘at risk’ may also apply. At first, internal candidates are usually given a preference, with the role only advertised externally if no suitable internal candidate is found.

This is a ‘no interview, select in’ process; an objective decision will be made by the Selection Panel which will be made up of people who will know, collectively, all of the applicants.

Applicants’ knowledge and suitability for the role will be assessed against their responses to 5 standard questions in a covering letter, submitted along with their CV. Guidance on How to write a CV should be available for those who need it.

The 5 Criteria:

Why you are interested in this role
How your experience and skill makes you suitable for this role
How this role would benefit your future career aspirations
How you would make an impact in this role
Give examples from your career to date to demonstrate likely ability to succeed in this role.

The responses to the 5 criteria are scored and the CV, match to the Job Description and evidenced knowledge and skills form the basis of a second score. The raw scores are aggregated and checked to ensure that it results in an appointable outcome.

If an employee is successful in more than one role, the Selection Panel will discuss both roles and will come to an agreement on which role will be offered. For this reason, it is helpful to put aside a specific day to cover selection for all vacant roles. Matters to be considered include:

Is one role more business-critical than the other?
Is there anyone else in the business who could fulfil one of the roles?
Which role did the applicant score more highly on?
Which role is the applicant’s preference?
Which role better aligns with the applicant’s career growth?
Which role will stretch the applicant’s personal development?

Specific and objective feedback must be collated on why an applicant has or hasn’t been selected for a particular role, and that feedback shared with HR, and with the applicant at an appropriate time and place.

Vacancy Interviews. If certain roles in the new operating model remain unfilled, then Talent Acquisition will be asked to advertise the jobs externally, using the existing Job Advert. Preference is often to use Job Boards or Linked In to find suitable candidates at low cost. The Finance Leadership Team, with the help of HR, should consider the differing recruitment norms in different global locations, and assess likely ability for those local methods to produce quality candidates. The Business Case should allow for some roles to benefit from being sourced by recruitment agents.

Applicants are likely to be external, but there is nothing stopping an internal candidate applying at this late stage (unless they have already applied and not been selected). The application process is simpler – a CV and a covering letter. Talent Acquisition will shortlist suitable candidates in discussion with guidance from the hiring manager.

Some or all of those on the shortlist will be invited to a face-to-face interview (perhaps via a video call). Most hiring managers will have done many interviews in their careers, and this is no different. At least two people must be present, in addition to the applicant.

The Transformation Team will assist by highlighting the relevant Competencies in the Job Description and creating a Competency Based Interview Question Bank, relevant to the roles, so that there is consistency across interviews.

If an applicant makes a good impression, then they will be invited back for a second interview with a different interviewer. Key or senior hires may be asked back for a third interview.

The successful applicant will be offered the position verbally, which will be followed up with a formal letter and term of employment. The Transformation Team will track that this has happened and will ask for confirmation that notice has been given and that a Start Date has been agreed.

Filling Vacant Roles. Filling vacancies is, perhaps surprisingly, one of the more difficult challenges for the Transformation Team to manage, and may extend into and through the actual Transition phase. The Finance Leadership Team will always want to help those ‘at risk’ of redundancy find a new role, either in Finance or elsewhere in the organisation. A small number of vacancies created in the new operating model will be filled from within Finance, but those successful are likely to come from outside of the group that has the vacancy. Why? The question is more about ‘why was the vacant role not considered to be a ‘suitable alternative’ for someone at risk?’ … and the answer is usually that that person is not considered to be a high-enough performer.

It is essential to understand the local job market and to make sure that the company can recruit in it. Is the office location, the company image / brand / Glassdoor reputation, the salary on offer attractive to potential recruits? Is there full employment in that city such that it is difficult to find new hires? Is there salary inflation, caused by a shortage of skilled staff, such that your new hire will be offered a 20% higher salary elsewhere?

It is fallacy to think that the world is queuing up to fill the vacant roles. It is likely that there will be some early momentum from internal people who have their eye on the internal job board for a role that would give them career progression. External candidates are harder to find, the harder still if the organisational pays median or lower salaries in that market. Some companies think that the prestige of working for them, and the CV ‘shine’ that gives, will balance a mid-market salary; but many people really do want to maximise their income, and will not trade jobs unless there is some sort of salary increase.

Don’t forget the earlier advice to recruit for key roles well before the Company Proposal is announced. Often, one of the key Desired End States is often that the average capability of individuals in the function is raised, and it may be that it is highly unlikely that someone of the right calibre will be found internally, or externally, for a handful of key roles. If no early action is taken, the TOM will be missing an essential post-holder and operational performance may suffer.

The desire to fill a role must be tempered with the objective to find the right person at the right level for the role. Do not compromise and offer to a person who is ‘OK’; rather work with Talent Acquisition to target higher calibre responses. As noted earlier, having performed a Market Salary Benchmark is key to knowing that it is not the salary which is deterring applications.

Transition Readiness

Whilst the Consultation is underway, it makes sense to review the original Distinct List of Activities once again, especially if more than 3 months have passed since sign-off, to make sure that, for example, that no one has swapped activities with someone else in their team.

With people mapped into their new roles and the announcement made, the early draft of the Transition Plans based on proposed roles can now be updated to relate to the individuals who have been placed in the relevant role. Similarly, the relevant RACI Matrix can be updated to include the individual’s name, rather than the role.

As soon as Collective Consultation has concluded then the Transition Plans and the RACI Matrix should be reviewed with the individuals who now are in the relevant role. It is often effective to gather a small group who work alongside each other – they will be able to add value to each others' plan review.

It’s important that each person should recognise the need to STOP / START / CONTINUE the activities in their personal plan, and they should also be able to identify certain things that need to happen, such as setting up new logins, or making them an electronic signatory, for example.

If any individual does not recognise the need to learn, train or carrying on doing certain activities, then the Distinct List of Activities should be consulted, and perhaps updated. Most Transition Plans have a contra-entry in someone elses’ Transition Plan, so the need for an update to any Transition Plan should be confirmed before a change is made.

During this review, they will become aware of colleagues’ names - those who they will newly teach or be taught by, and those names which are missing. Prior to this review it is important to hold a team meeting to present the Proposed (now ‘new’) Organisational Structure which shows both Names and Roles. Any one still in the team who does not yet have a role in the future organisation should receive a private viewing of the structure before everyone sees it.

Don’t forget to update all IT/HR systems with new grades, Job Title and reporting lines.

If vacancies remain to be filled, then it won’t be possible to review those particular Transition Plans. Mitigations must be developed, which include the SLT accepting that some transitions may have to complete after the programme has concluded.

Embedding new behaviours

In parallel with Transition Readiness, there must be time spent with all of the individuals who will be part of the new organisation on the impact of change and to explore the activities that will both prepare them for the change and to make that change to the target operating model successful. Just as important is tutoring the Finance Leadership Team and local Finance Directors on how to embed change in their areas.

This is how operational process excellence is made to work. There is no point just having new people do the same things in the same way

Leadership Change Workshops

Change must be led by the Finance Leadership Team and the local Finance Directors. Change Leadership is different to Change Management, which is what the Transformation Team do.

Change Management has a process focus and is concerned with systems, processes and structures:

Managing change involves…

Making the case for change
Setting milestones and creating the plan
Monitoring progress.

Change Leadership is about people, their mindsets and behaviours and the overall culture.

Leading change is about being intentional in how others are led…

Engage
Inspire
Inform
Involve
Support.

It’s achieved through communication, collaboration and commitment.

Leading Change is a subject in itself, and the detail is covered elsewhere. Suffice it to say that:

Many of the leadership team may not realise that they must step up and demonstrate change leadership. Competent though the Transformation Team are, they should only manage change, not lead it.

The Transformation Team will arrange for a series of Leadership Change Workshops to be delivered to the appropriate audience.

Of course, every Leader needs to be good at managing the business-as-usual work and well as change. It helps if they have a second-in-charge who is complementary to their leadership style. For example, a gentle, person-focused leader needs a process-biased enforcer to work with them on every day work and on getting the need for process excellence across to the team.

Business Readiness Activities

It is one thing to learn a new activity, but it is much more important that new things are done in new ways, and that the context and consequences of the activity are understood by the person performing it. We all get set in the way that we work, and all change requires us to think about what we do and to adjust our behaviour accordingly. Therefore, in parallel to any activity transition phase of the transformation, there must also be a number of business readiness activities.

This is doubly importance because many of the Desired End States in the TOM are works of process excellence and are key to improved operational performance.

Experience is that the list below summarises what additional outcomes must be realised in order to attain operational process excellence. These matters are most effectively led by the Finance Leadership Team or local Finance Directors, but absolutely must involve everyone in the department, so that they realise their part in the whole of what has become the new operating model.

Process & Controls

Separation of Duty exists.
Team are aware of Policies & Controls and know how to comply with those that are relevant to their role.
Team understand the Finance Taxonomy and which processes are applicable to their role.
Team know what ‘good’ looks like.

Roles, Responsibilities & Logistics

Team know their workplace and work pattern.
Each team member has a Job Description and knows what is expected of them.
Individuals know who their colleagues are and what each of them do.
Individuals have access to the systems and tooling they need, and appropriate authority for their role.
Rosters cover essential activity.

Communications

Managers hold regular 1-1 Meetings with each team member.
Team Meetings are held weekly.
The cadence of all operational meetings is known and in diaries as relevant. A Meeting Cadence graphic is on the wall by the coffee machine.
SIPOCs are produced and referenced for all work which is a key operational outcome, such as a Trial Balance.
The template and data source for each Report must be known and checked as available.
A Departmental Calendar shows activities which must be completed and/or reports submitted on any given Working Day, by each layer in the reporting hierarchy.
A Day Tracker is kept by a nominated person, to check that activities were performed on the given Working Day.
A Dashboard summarises what commitments have been met each month.
A Team Awayday is held once or twice a year.

Organisational Performance

The right people with the right skill and the right mindset are in the right job for them.
Each team member knows how to do each aspect of their job, and is confident in how to troubleshoot, as needed.
Activities are cross-trained so that they can be picked up at short notice if a colleague is absent.
Personal / Team Checklists exist to prove that BAU work is done to time and to the expected quality.

Learning

Tacit knowledge about the activities undertaken should be captured to allow the individual to confidently perform their work – and to create a company asset ahead of when they (inevitably, in time) leave the team.
Standard Operating Procedures should be reviewed and approved by management, and stored in a central, easily accessible area - and used.

Stakeholders

Each team member should know who their stakeholders are, and what they receive from, or produce for, each one.
Each team member should build a relationship with each of their stakeholders (internal or external), through regular contact.
Managers should arrange occasional ‘Meet and Greet’ sessions with the department’s stakeholders, so that the whole team is aware of who they, and their colleagues, have commitments to.

Competencies and Skills

Each team member should receive a set of cascaded or catchball objectives so that that have clarity on what they need to do to contribute to overall team success.
Each team member should have a nominated deputy, and be sharing knowledge with more than one person who could become a successor to them in that role.
Each team member should have a personal development plan, so that those with intrinsic ability are stretched and those who need to improve their performance have guidance on what to do.

Not everyone of these activities needs to have been completed within the timescale of the Process Excellence / Transformation Programme, indeed some are ongoing commitments to improving performance. If each manager has a clear plan of when their staff are doing each readiness activity, then the programme transition milestone has not been missed.

Transition Period

Consultation is concluded, people are still in post, transition plans are in hand and business readiness activities have started. There is never a perfect time to start transitioning to the new operating model, but 'now' is as good as any other.

This is the period in which knowledge is acquired and then performed by the person new in post. It’s the time when the talk turns to action for many people and is a realisation ‘that this is really happening’. The transition period is often a busy and stressful time for those involved and needs daily hands-on trouble-shooting and sensitive support.

Depending on the commercial imperative, the time when knowledge is acquired and then transferred in the new operation (internal or external) covers 2, 3 or 4 Month Ends. There is rarely a good time of year for this to happen, but over a Financial Year End or a major holiday such as Christmas, only adds to the challenge.

Observations on Transition Plans

A few people will remain in the same role, with the same activities, so no Transition is needed. They should still be included in the transition uopdate meetings and take a full part in the business readiness activities.
Several people, especially within the same team, will already know how to perform an activity that is proposed to transition to them. This is usually because teams are cross-trained to support each other and to cover planned and un-planned absence. If this is the case, then the transition is very easy.
Similarly, an individual may have moved teams, and their knowledge is judged to now be in the correct team. For example, a Management Accountant moves to a GL Accounting team.
Many people will take on new activities that are well within their professional capabilities to undertake, and all that is necessary is a conversation to give context and a few helpful pointers; a full transition effort is not needed. Similarly handing over the activity of participating in a meeting requires only a simple conversation.
There will be some activities where we are unclear as to how best to pass it on, often this is the case for new joiners or people in new teams where there must first be a meeting to determine the ways of working, and how the new team members split the work between themselves.
There are some situations where clarity is needed on the relationship with the customer, particularly relationships to people outside of the team. These boundaries are often not part of the scope of any transition, but must be thought through in the early stages, and not left to work out when the transition to the new operating model has begun. Business Partners need to build a relationship with the operational teams they serve, and agree who is responsible for what, and how the data flows.
There needs to be agreement on where boundaries lie. These aren’t transition actions, but a meeting to agree key principles will be helpful. Clarity will come over time. For example, FP&A does reporting, forecasting and budgeting. Business Partnering is about building relationships, turning data into insights and bringing numbers to life.
In a Finance transition, performing a ‘half-year’ – or equivalent – will properly exercise more activities that need to transition, those from WD5 to WD15. A half-year includes additional activities to take the monthly reporting and add more granularity and commentary.
There will be several activities that may not be performed within the Transition Period, such as Budget Setting, KCQs, Stocktake etc. These should be the subject of a simple explanation to the person who will newly perform the activity when it happens, and the relevant manager should accept that it will be transitioned later, during BAU.
It is essential to truly understand the complexity of activities undertaken by staff members. Some activities may be complex, even though the current incumbent is coping well, and take considerable time to learn, and longer to master, and perhaps longer still to teach others. These types of activity may not fit into an ‘observe once, perform once/twice’ model, and may need 3 or 4 months of observation. In this case, the addition of new staff, and their ability to take on really complex activities must be carefully thought through.

The Transition Period is a vital time – staff need to come to terms with new colleagues, new activities and new ways of working. It is tempting to want to get the new operating model up and running as quickly as possible, but the human condition is such that change will take a certain amount of time to embed, and a reduction in support will just mean that the transition continues un-tracked and operational outcomes may be compromised. It is sensible to set a number of Transition Exit Criteria, and to be open-minded if some criteria, for some aspects of the transition, take a little longer than hoped for. Each transition milestone should be signed-off by the Steering Board.

For much more detail and guidance, please read the Operational Transformation Considerations article.

Procedures and Process

During the Transition Period, staff are encouraged/required to write standard operating procedures to capture the new activities that they are learning. This is a key activity, both to capture that knowledge as an organisational asset and to provide an aide-memoire when performing the activities.

Our experience is that staff find it difficult to find time to capture the detail necessary to perform the activity without guidance. Leadership will need to constantly reinforce the need to write up new knowledge and the transformation team should ideally look at the transition workload of each individual, to ascertain where bottlenecks may be.

In outsourced transitions, where the requirement is often to hand over the whole of one job to one new person, the knowledge transfer is relatively straightforward.

In an internal restructure, as is often the case with implementing a target operating model, then one individual may have to teach one or more people and be taught new activities by one or more other people. Simply having the time to learn or teach and then write up/ check documented knowledge becomes a real challenge, particularly during the Monthly Close period.

Writing detailed procedure manuals is an industry in itself. It is essential as the legal basis for performance when outsourcing, but in an internal restructure, when many of the same people will remain in the organisation, then capturing key knowledge nuggets is often an acceptable compromise. Consider too that, in an internal restructure, many individuals may retain the bulk of the activities that they currently perform, so a decision is needed on if these activities are also documented at this time, or if a more considered documentation phase follows the transition stabilisation period.

Activities and their SOPs are a bottom-up approach. The Taxonomy and process flow is a top-down initiative. At some point, the two must be melded into a whole.

Some jurisdictions insist that organisational process is documented and then submitted to a regulatory authority; with annual attestations that the process is followed. If this is the case, then the business case must also cover the cost of a process analyst within the Transformation Team for much of the duration of the programme.

Whatever the approach, it makes sense to follow any major transformation with an initiative to marry the process and the activity analysis together, and to complete the Level 1 to Level 5 (or Level 6 if DPMs exist). If the Finance Process Taxonomy is explored and agreed as part of the early stages of the then creating a levelled set of process flow documentation becomes an order of magnitude easier.

Staff Join New Teams, Outplacement and Exit

Once the Transition Period proper starts, those without a future in the Target Operating Model will increasingly be thinking about their next steps. If they are fortunate enough to be offered a new role, either within the organisation of without, then they will want to know when they can leave.

It is usual to communicate a likely Exit Date during Individual Consultation, and this date may be used as a backstop. As that date approaches, it would be expected that the person leaving would have completed training their replacement in their activities and will have reviewed their trainee’s Standard Operating Procedure documents. They will also be expected to clear their desk, cupboard and any personal data on a shared drive. It may be that there is a strong need to keep them until the Exit Date, but it is normal to allow them to either leave for a new job or go on Garden Leave once they have helped their trainee through a second Month End.

If an individual has been at the company for many years, they may need Outplacement support to help prepare for and adjust to the world outside what they have been comfortable with.

There is more information in the Operational Transformation Considerations article.

Conclusion

A Finance Transformation programme can deliver significant benefit to the Finance function and to the business that it serves. Like any major change initiative, there is much that can go wrong, but with the right guidance the upside outweighs the risks. The root of success is making sure that the initiative is being done for all of the right reasons, and to that end, it is important that the need for transformation is understood. Then there must be sufficient time to gather information about the current organisations and more time to identify all of the potential improvements. Then the draft Target Operating Model can be created and road-tested. Once all is agreed then the Announcement can be made and the process of engaging with the staff and leading them through the change can begin.

David Seacombe

Turning your company Digital

Making people redundant

Operational Transition Considerations