Power Up the Design and Ensure Robust Finance Transformation

In our last post in this nine-part series, we delved into the crucial aspect of Understanding the Context. We emphasised the significance of comprehending the environment in which your Finance Transformation is taking place. We introduced lenses that aid in identifying potential influences on your transformation, ensuring you are well-informed and prepared to drive readiness in the organisation.

This post will focus on the seventh of the nine steps: Design and Prepare for Delivery. We will touch on project and change management and focus on what is particularly pertinent to Finance Transformation.

Preparing for Successful and Sustainable Delivery

If you have been following the Loughridge Transformations method, you will, by now, have covered the following steps:

As we transition into the design and deployment phases of Finance Transformation, specifically the Design and Prepare for Delivery phase, you may find yourself eagerly anticipating this stage. While the preceding steps are undoubtedly valuable, this is the moment when your plans start to take shape and become a reality.

Get the Delivery Basics in Place

Before discussing the project specifics of Finance Transformation, it is worth mentioning a few project and change management elements that are vital for a successful and sustainable transformation.

Design and Prepare for Delivery: Sponsorship

At Loughridge Transformations, we rarely advise undertaking projects or programmes without clearly defined and active sponsorship. It is vital for transformative projects or programmes to identify and work with engaged sponsors throughout the change. A transformational activity cannot be delivered “behind the scenes” or “bottom-up.” Without the right kind of well-deployed sponsorship with the right level of authority and proactivity, the transformation is unlikely to be completed on budget or schedule.

Design and Prepare for Delivery: Implementation Readiness

In our last post, we discussed Understanding the Context. That is part of implementation readiness. In addition to sponsorship, it is crucial to take the preparatory change actions for transformation. Different methodologies will tackle this in a variety of ways. Select whichever method suits you and your organisation’s culture, but assessing and investing in readiness is essential. Take time to consider the perceptions and experiences of your targets for change:

• How many changes have occurred previously?
• How were they managed?
• Does this change require different skills?

Investing in readiness will save time and energy as you progress and the resistance emerges.

Design and Prepare for Delivery: The Programme Management Office

Finance Transformation nearly always has several components on, at times, conflicting timelines. Depending on the size and complexity, deployment may be on a roll-out schedule.

Furthermore, Finance Transformation programmes can be complex to navigate, with multiple components, touchpoints with other programmes, external regulatory compliance, ongoing operations, and often conflicting timelines. This is where an experienced and well-resourced Programme Management Office (PMO) comes in. At Loughridge Transformations, we know that a robust PMO brings a sense of order, attention to budget and schedule, and the ability to facilitate the dilemma decisions that Programme Leads and Sponsors will inevitably face. 

Design and Prepare for Delivery: Tools from the Toolbox

A top-notch PMO will support the Programme Lead in deciding on the right project and change tools. Knowing the sponsors’ and stakeholders’ perceptions and preferences in the organisation and organisational culture also enables appropriate tool selection. In addition, the characteristics of Finance Transformation require robust structures. That does not necessarily mean avoiding agile approaches, particularly if the organisation has already embraced that way of working. However, Loughridge Transformations has found that a StageGate method within a Project Delivery Framework (PDF) is a sound choice.

Design and Prepare for Delivery: Fundamental Design Steps

Before we examine the PDF application, it is a good idea to introduce the fundamental steps in Finance Transformation. In this post, we will only cover design and look into the subsequent steps next time.

Click to scroll through the entire sequence:

We will use a practical example later to explore these steps in detail, but now we will discuss where they fit within the PDF’s StageGates.

Project Set-Up (SG1)

In addition to the critical project set-up deliverables we covered earlier in the post, it is also time to define the scope of the transformation.

Often, defining the scope for Finance Transformation is easier said than done. Objectives for the transformation are usually cost reduction, outsourcing, improvement in business-partnering capacity, or other things discussed in this series. First, however, the scope must be defined in process terms. That is even more challenging in organisations that lack an enterprise or functional process model. That, however, is why we take the Functional Fit and Baseline Assessment steps well before this point in the transformation. Process and Data go hand-in-hand, so the scope definition must include both.

The scope definition will also need to reflect the frame of reference of your targets; for example, you cannot assume that “removing” busy work” will be well received. Some may see it as a threat to job security. However, if you have adequately invested in readiness, your scope definition will follow that.

Analyse & Define (SG2)

The main deliverables at this StageGate are confirming the current situation – building on and deepening the Baseline Assessment, where necessary – and assessing risks to create a Risk Register.

Design (SG3)

In the design phase, you work up design principles in more detail, using the levers chosen earlier as input. The main piece of design work then follows.

Once the scope of processes is agreed upon, the work to define the process steps can begin. At this stage in the design, at least the Operational Process Description, commonly known as Level 5, should be targeted. In addition, Depending on the organisation’s process maturity, Level 7 Work Instructions may be in scope.

We will use a real-life example for the remaining Design and Prepare for Delivery steps. The StageGates beyond Design will be part of the next post.

Design and Prepare for Delivery: Putting the Fundamental Design Steps into Practice

The Scenario

For this example, we will return to the mid-large-sized global organisation. Following an earlier strategic decision, shared-service centres are already operating. The distinction between shared-service centres and outsourcing is irrelevant in this case. More concerning is that the returns on this decision are not materialising as anticipated. Consequently, there is increased noise about this within the organisation. Discussions on “back-sourcing” the migrated activities are starting to take place.

Luckily, despite the ongoing challenges, the organisation has decided to conduct a thorough analysis of what is not working. They partly suspect that “halfway” migration could be part of the root cause. As a result, they remain potentially open to deepening the migration.

You are leading this project. Given this project’s size and wide-ranging organisational implications, you must ensure a fit-for-purpose project and change management approach. As discussed above, this is not the moment to scrimp on the project and change deliverables. You select a PDF with StageGates and recruit an experienced PMO.

Project Set-Up

You are ready to start preparing for StageGate One: Project Set-Up. With the PDF selected and PMO recruited, you can work on finding the right sponsor. This project will have an impact on both on-shore and off-shore organisations. They have different reporting lines, so you approach the person in the organisation with the right influence, authority and ability to remove any potential stumbling blocks that may come up.

With different organisational cultures, sponsors expect different ways of working. Typically, you can expect to be responsible for a hands-on style of running and leading the project daily, including minor decision-making. You would, however, involve your sponsor when it comes to major decision milestones, removing significant hurdles or actively supporting change management. In this case, you have a well-respected sponsor with a delegating leadership style. She leaves you to get on with things but is always there to actively support you with actions and decisions when needed.

Analysing the Data

Onto StageGate Two: We will analyse and use data from the Baseline Assessment as a starting point to deepen our understanding of the shared-service centres’ current performance.

Initial Investigations

You discover that the shared-service centre is focused on data processing rather than touching the more complex parts of the processes. When looking at the process steps within the migrated processes, you learn that the process steps relating to initiation, preparation, and review have remained with the on-shore organisation. The migrated process steps are primarily data input and processing. Looking at, for example, Manual Journal Entries, you find the following:

Sub-Task	Complexity & Time Spent	Operated
Initiate & Prepare Entry	High	On-Shore
Input to ERP	Low	Off-Shore
Review & Approve Entry	Medium	On-Shore

You can see that the shared-service centre team only performs the process step with the least time-consuming and complicated activities. Unfortunately, this is not uncommon. Because these activities are the least time-consuming and have minimal training requirements, many organisations migrate these activities first.

As a rule of thumb, organisations do not achieve the cost or process performance improvement sought with such migrations. On the contrary, costs are most likely to increase. This cost increase happens because of a lack of process ownership, fragmented responsibilities, and other inefficiencies.

Further Investigations

You then discover that the ERP-input tasks were not intended to be migrated in isolation. On the contrary, a more extensive and complete scope was migrated. For manual journal entries, for example, all three sub-tasks were scoped for migration. However, due to poor handover, lack of communication and inadequate definition of accountabilities and responsibilities, the on-shore teams have been drawn into assisting with error correction and issue resolution.

Over time, these behaviours led to duplication of work and other inefficiencies. However, no one has addressed the root causes. We have seen many real-life examples of unhealthy “master-servant” relationships between on-shore and off-shore organisations.

Risk Register

One of the essential StageGate two deliverables is the risk register. In no particular order, you determine the following risks based on an “as-is” analysis:

Risk	Consequence
Fragmented Accountability versus Responsibility	Blame culture and limited sense of process ownership.
Insufficient attention is paid to the requirements for new ways of working.	Weak, ineffective communication and building frustrations between on- and off-shore teams
Overlooking data clean-up requirements at the time of migration.	Migrating “dirty” data and partly or wholly broken processes results in neither on-shore nor off-shore teams taking ownership.
A lack of Process Expertise due to the removal of the original onshore process experts and the lack of definition of offshore process expert roles.	Difficulties in process issue resolution
Poor quality, or no, work instructions were produced, approved or handed over at the time of migration.	Many basic errors from off-shore team members and subsequent duplication of work in the on-shore teams

We assume that at StageGate Two, you propose re-migrating existing processes and migrating additional processes. The aim is to deliver optimised, end-to-end processes with standardisation, clear boundaries, roles and responsibilities/accountabilities and new ways of working. You obtain approval for this and move to the next phase!

Design Principles

StageGate Three is the Design phase. Before starting the detailed design, you must determine the critical design principles by referencing the chosen levers. In this project, you select:

• Migrate (where possible) the end-to-end process
• Where associated controls exist, they migrate together with the process
• Clear hand-offs between on- and off-shore organisations
• Eliminate, Simplify, Standardise, and Automate Process Design
• Clear responsibilities/accountabilities in the on-shore organisation: With increased process maturity, the focus of the jobs in the organisation will change.
• New ways of working leveraging more effective communication based on a better understanding of behavioural preferences and systemic solutions 

You are now ready to start the design journey with these design principles. But, of course, these principles are not universal. Instead, each transformation will have different principles stemming from the specific choice of levers at an earlier stage.

Process Design

Systems & Technology Design

Risk & Control Design

Organisation Design

Design and Prepare for Delivery: What’s Next?

Finally, with this detailed work complete, you are ready to move to StageGate Three and seek approval for the integrated design. You are well on the way to successful and sustainable delivery. In our next blog, we will continue with the deployment steps.

Has our blog piqued your interest, and are you curious to learn more? Contact one of our expert consultants to explore how we can support you on this journey.

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