Finance Maturity Assessment: Is Your Team — and CFO — Equipped for Growth?

In 2006, global management consulting firm Accenture published a study that found a convincing correlation (70 percent) between a company’s mastery of a particular business function and its likelihood of consistently outperforming industry peers over multiple economic cycles. Interestingly, Accenture’s research revealed, it wasn’t always the companies with the biggest market presence, brand awareness, or highest-profile CEO that performed the best. Instead, the highest-performing companies were the ones that had mastered Finance.
That might explain why, as OpenView’s Alex Lau wrote in a recent post, more and more businesses are turning to their Finance teams — and, more specifically, their CFO — to play a bigger role in business strategy and development. In fact, CEB, a member-based leadership advisory company, has published several articles in the past year confirming that businesses are increasingly expecting their Finance teams to provide more support while reducing costs.
Of course, that’s often much easier said than done.
The reality is that great Finance teams aren’t built overnight and one characteristic is common to all of them: The mastery of baseline capabilities before progressing on to becoming a high-performing organization.

What Sets High-Performing CFOs and Finance Organizations Apart?

While the best skills and capabilities of great Finance teams can vary by company stage, size, and market, most high-performing CFOs and Finance organizations all exhibit three common characteristics:

  1. Their delivery of business support is integrated with overall company strategy
  2. The CFO plays a critical role in strategy, leadership, and execution
  3. They are proactive rather than reactive, and influence results rather than being influenced by them

For many companies, developing those characteristics requires a total transformation of the more common view of Finance’s role (traditional governance, accounting, and auditing) to more guidance-based support (advanced analytics, demand planning, pricing, etc.). That can be an incredibly difficult thing to do, particularly for growing companies that are dealing with increasing organizational complexity. But if you want to make the leap ahead of your competition it’s likely the direction you should be heading.

Introducing: OpenView’s Finance Maturity Assessment

Finance Assessment image

 Is Your Finance Team Equipped for Growth?

Download the free assessment now
To help management teams better understand where their Finance organization stands and where it needs focus to evolve into a strategic part of the business, I developed a Finance Capability Maturity Assessment tool to identify strategic attributes and skills, and evaluate key functional gaps.
This diagnostic assessment is inspired by Capability Maturity Models (CMMs), which were developed by a group of experts in the 1980s. While CMMs were originally developed as a tool for objectively assessing ability of government contractors’ processes to perform a contracted software project, the concept has evolved to apply to areas like system engineering, project management, and finance.
Within the Finance Capability Maturity Assessment tool, you’ll find a version of the five levels of capability maturity that were part of the original CMMs. They include:

  • Level 1: Non-existent, ad hoc. An organization really has no consistent way of performing its work. Processes are constantly reinvented on each project and frequently appear chaotic, reactive, uncontrolled.
  • Level 2: Repeatable, developing. Some processes are repeatable, with roughly repeatable outcomes. Basic management control of daily work is established, allowing employees to repeat practices they have used successfully.
  • Level 3: Baseline, defined. Practices are documented and integrated into a common process in which the entire organization is trained. Risks, inconsistencies, and inefficiencies are mitigated. Some process integration exists across the organization. Manual effort has been reduced to a moderate level. Capabilities are aligned with and support company strategy. Common professional practices are incorporated, and the organization shares common beliefs about the effectiveness of those practices.
  • Level 4: Managed, advanced. Processes are managed and effectively controlled according to metrics defined in Level 3. Management is able to take corrective action earlier than in previous levels. Performance is much more predictable & organization has profound knowledge that can be used to improve it.
  • Level 5: Optimized, leading. Profound, quantitative knowledge gained in Level 4 is used to make deliberate, continuous improvements in processes. The organization understands which processes can benefit most from improvement actions, and process improvement becomes perpetual.

What’s Your Goal?

If you’re on the management team of an expansion-stage company your goal should be to be operating at, or with a clear path to, Level 3 on the Capability Maturity Model.
At this level:

  • Risks, inconsistencies, inefficiencies are mitigated
  • Some process integration has been established across the enterprise
  • Manual effort has been reduced to moderate level
  • Functional capabilities are aligned with, and supporting, company strategy

The focus should be to ensure your Finance organization — and CFO — have the right capability (and the right resources), is expending the right amount of effort, and is providing the most value to support the high performance required for successful growth.
While Level 2 might be ‘good enough’ for an early-stage startup, the functional capabilities at that level are typically not adequate to support growth to expansion stage. Conversely, while Level 4 might be right for your company once it reaches pre-IPO or latter stage development, the level of predictability, integration, sophistication and automation required fundamentally do not align with most expansion-stage companies’ strategic priorities.

Getting to the Next Level: Tie Everything Back to Your Strategic Goals

Ultimately, the key to understanding when to move from where you are now to where you need to go is by understanding your strategic priorities.
So, before you invest too much time and energy into Finance transformation, be sure to step back and focus on the process and capability improvements that matter most to your company’s current stage. That alignment will allow you to establish a clear roadmap for prioritizing any initiatives, and ensure all of your efforts directly support your overall company strategy.
Get started by downloading the free Finance Maturity Assessment now.
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Photo by: Basheer Tome

Cynthia Stephens
Cynthia Stephens
Chief Financial Officer

Cynthia Stephens is CFO of call intelligence company Invoca. She has 25 years of financial management, operational, and strategic advisory experience, having most recently served as SVP and CFO of Harvest Power.
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