Five ways for Finance to know it's time to engage in organizational redesign
/In an increasingly global environment, a hallmark of leading finance organizations is the ability to reorganize to meet changing demands. But how does Finance leadership know when it's time to make a major change in the structure of its organization? Here are five ways to know it's time to realign organizational resources:
- Change in strategic direction. Each organization has a basic strategy that guides its focus in the market. These strategic intents focus on differentiators such as product innovation, customer intimacy or operational excellence. A change in focus could warrant a redesign. And it doesn't have to be a wholesale change. Even a change in emphasis between the various dimensions of competitive advantage should drive changes in the organization.
- Acquisition or divestiture. Mergers, acquisitions and divestitures can change the economics of previous design decisions. An acquisition might bring with it certain in-house expertise that wasn't previously available. A change in focus that comes with a major acquisition could drive the decision to outsource a number of finance functions.
- Expansion into new product markets. The introduction of new products or product lines could drive organizational change to align finance resources more closely with the business. Business units focused on industries with faster product introduction and obsolescence rates would likely warrant a higher degree of finance support embedded in their business.
- Expansion into new geographic markets. Entering into a new geographic market where the company has little to no experience may warrant a redesign. In this situation a business case could be made to partner with a 3rd party service provider to facilitate the learning curve in a new market, as well as to assist with the development of a captive service center, if that's the long-term direction of the company.
- Finance needs to improve its game. Even if none of the above are true, it may still make sense to engage in organizational redesign if the Finance group isn't meeting expectations. This could be in the area of business partnership, or cost efficiency, or both. The Finance organization should be continuously evaluating its performance through benchmarking and customer satisfaction surveys to monitor performance and improve accordingly. An organizational redesign may be necessary to improve service delivery effectiveness and drive down cost to world-class levels.
Leading finance organizations focus on aligning their structure with corporate strategy. By evaluating these five factors, finance leadership can stay on top of changes in their organization to drive lasting value creation.
