Choosing the Starting Point for a Finance Transformation Effort

When discussing potential transformation opportunities with clients, the question that inevitably comes up is "Where do we start?"  Given the myriad of challenges in the typical finance organization, it's a natural question to ask.  And often the answer is not the obvious one people often expect.

Many companies, particularly if they have a benchmark project commissioned as part of a transformation project, will often focus on the areas that offer the greatest cost savings or perhaps meet a critical delivery need that is not currently being addressed.  Under appropriate circumstances, these may not be bad choices.  However, there are other considerations for the leadership group evaluating a portfolio of improvement opportunities.

Generally speaking, the following factors should be evaluated as part of the decisions as to how and where a transformation initiative should be launched.  In my experience, a company should choose an initial transformation project where:

• There is strong executive support for change.  Very little will happen if the senior executives in the area under consideration won't back the project in word and deed.  Transformation teams should find a specific area: a business unit, a region or a specific process, where the executives in charge of that area have publicly recognized the need for change and are clearly willing to support transformation efforts.

• The barriers to successful change are not huge.  Let's face it.  Some transformation opportunities are tougher than others.  It often makes sense to get a transformation program started by choosing an initiative that doesn't have huge obstacles to change.  Typically, transformation programs that involve large technology implementations can take a year or more to fully compete.  Project like that can take too long to build momentum. Or perhaps a particular initiative lacks executive support.  That can make it difficult to get the budget and personnel to make the project successful.  The point is, you and your project team don't have to climb Mt. Everest on your first hike.

• The scope can be clearly defined.  Actually coming up with a proposed scope is typically not the problem.  Far more often the team proposes a scope and then over time the scope increases, typically because management is pushing for the greatest value for as little investment as possible - without a corresponding increases in the budget and project team.  There's nothing wrong with challenging the assumptions in the business case, but projects with constant scope creep after deliver less than expected. It's critical to define the scope in such as way that it is clearly defined and relatively achievable.  Which brings me to the next point.

• The initial project has a strong chance of succeeding and can succeed in a relatively short time frame.  Nothing is more frustration to senior management and to the project team than to be a part of a project that drags out with no discernible benefit to the organization.  I personally believe that first victory should occur within six months.  Any longer than that and you risk grumblings in the company about how money is being poured into a project with no realized benefits.  This first win is critical to prove to the broader organization that the transformation team can in fact deliver value.  Once that occurs, you'll find more managers jumping on the bandwagon.

• The chosen scope of work has a strong project team members behind it who actually have time to be involved.  Few things can stall out a project faster than a "dedicated" project team that in reality is working their day job and performing transformation opportunities on the side.  Your company's first project should have sufficient resources dedicated to the project to virtually ensure success.  Some positions may need to be back filled on a temporary basis, but that is a cost of successful transformation.

• The project chosen can serve as a model for future transformation efforts.  The transformation program should look for a project that can serve as a model for future efforts.  That means the project has to be large enough to make an impact, but not so impossibly large that benefits are delivered late, if at all.  This initiative needs to be your "case study" of how your team can transformation finance and drive real benefits to the organization..

No project has a 100% guarantee of being successful and delivering on the promised value.  However, by following these steps, the project team has a good change of success, driving confidence from future project sponsors that tangle benefits can be realized within a reasonable timeframe.

Finance Transformation Gone Wrong - Inadequate Project Management

Note: This post is part of a series on the challenges of transformation and how to overcome them.

Inadequate project management.

Too many transformation initiatives either fail outright or don't achieve all of the goals due to poor project management.  One of the challenges I've seen in a number of organizations is that it's assumed a single person can be both intimately involved in the effort, perhaps as a subject matter specialist, and somehow manage the project "on the side". 

Even a relatively small transformation effort requires a full-time project manager.  Too often I've seen a person who is splitting their time between project manager and team member activities focus on the urgent needs of the project while unintentionally ignoring the important, but longer-term requirements of project management. The project manager must be able to step back from the urgent activities of the day to look at the longer term plan.  They need to see the forest for the trees, so to speak.

A second issue is that a person might be a good general manager in their organization but be a poor project manager.  There is some overlap in the skillset but there are also some key differences.  Most transformation efforts require a full-time project manager who's been down the road before.  The best project managers are the ones who can lead people and manage projects.  It's sometimes difficult to find those two roles in one person, but the project and the organization will be better for it if that type of person can be found.

The last point I should make is that while separate roles for Project Manager and Team Member is ideal, projects can still be successful if both roles are combined into one, which typically occurs on small projects.  When this does happen, however, it's critical that the Project Manager set some time aside each day to look at the longer-term implications of the project and to stay on top of the risks that can derail a transformation initiative.

Finance Transformation Gone Wrong - Inadequate Stakeholder Engagement

Note: This post is part of a series on the challenges of transformation and how to overcome them.

Inadequate Stakeholder Engagement

A good way to ensure that a transformation effort will fail is to exclude the stakeholders that will ultimately be impacted by the transformation.  It's rare that stakeholders are completely excluded. It's far more common for there to be token lip service to integrating stakeholders into the project.

An essential act for any engagement is to identify the major stakeholders that are impacted by the proposed change.  Remember that important stakeholders are not only those who have a formal title, but also those individuals who have significant influence on "public opinion" and who can derail a project if their concern are not considered.

The word to remember here is "RACI".  OK, so it's not really a word, but a way of remembering the role of the project stakeholders.  RACI stands for Responsible, Accountable, Consulted and Informed. At the start of a project, the project team should identify the individuals, by name and position, that fall into these four categories.  This will help the team draw the stakeholders into the engagement and ensure that their input is incorporated as the project progresses.

By identifying the significant stakeholders for a project and including them throughout the duration of the project, it's far more likely that the stakeholders will embrace the transformation rather than sabotaging it from the outside.

Finance Transformation Gone Wrong - Lack of Senior Level Support

Note: This post is part of a series on the challenges of transformation and how to overcome them.

Lack of Senior Level Support

Every project has a senior sponsor, at least in name.  But here's the rub - people aren't stupid.  They understand when a project has the backing and support of senior management and when someone's just there for window dressing. 

The Executive Sponsor plays an important role by setting the tone of the engagement and ensuring the project has the right skills and funding to be successful.  A common shortcoming in senior level support is the Sponsor who attends the kick-off, says a few words, and then disappears from sight.  Sure, they may show up at the steering committee meetings once a month, but the regular troops rarely see or hear from the sponsor again.  Real sponsorship is present in word and deed, and is highly visable to the people on the front line engaging in transformation.  What are some of the things an Executive Sponsor can do to ensure a successful transformation initiative?  Glad you asked.

1. Create a compelling vision and effectively communicate that vision.  People need to know where they're going and what value they will be creating.  A lack luster vision usually leads to lackluster results, as it's difficult to sharply focus energy and attention on a vaguely defined mission.
2. Create a guiding coalition.  Yeah, I got this from John Kotter at Harvard University, but he's a pretty smart guy.  An Executive Sponsor can't do it alone.  He or she needs a team of experienced and influential leaders who know how to get things done.
3. Pave the way with resources.  That could mean getting the budget to bring in the proper skills to a project or ensuring that a company's IT systems have what they need to be properly built, tested and deployed.
4. Overcome organizational resistance. In any project there will be those that benefit from the status quo.  The Executive Sponsor should be aware of resistance to the initiaitve and work to overcome it.

This list is by no means exhaustive, but strong project sponsorship can mean the difference between success of failure for transformation initiatives.

Finance Transformation Gone Wrong - Inadequate Project Resources

Note: This post is part of a series on the challenges of transformation and how to overcome them.

Inadequate Project Resources

Even projects that are launched with a great deal of planning can fail if the staffing is inadequate.  Sometimes the inadequate part comes from the number of dedicated resources and sometimes it's the quality of the people assigned.  On a really bad engagement it can be both.  Companies that manage projects well understand that a transformation effort should be staffed by the company's best people, not their worst. 

One challenge that companies often have is that it's difficult and expensive to backfill positions.  The willingness of a company to backfill key positions is essential on most projects so that personnel assigned to the project don't also have to perform their "day job".  If backfilling doesn't happen, project staffing plans will have to maintain the fiction that these personnel will devote half a day to the project and half a day to their regular job - 12 hours each.  On major projects, the reality is that there will need to be a core group of individuals who are focused solely on the success of the project. 

In addition to an adequate level of staff who are focused on the project as their primary job, it's essential to choose individuals for both specific capabilities and their ability to lead initiatives.  Many of these project resources will have to use their influence to drive change in the organization, as they won't have direct managerial oversight of the many people required to successfully engage in transformation.  Individuals, particularly at the team lead level or higher, have to be comfortable pushing the envelope and engaging disparate stakeholders.  Companies that don't choose the best people because the departments "can't afford to let these people go" end up paying for it in the long-run (and ocassionally the short-run).  Do yourself a favor and pick the best people for the project and you'll likely be rewarded with an on-time and on-budget project that meets your intended goals.

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Finance Transformation Gone Wrong - Unrealistic Project Timelines

Note: This post is part of a series on the challenges of transformation and how to overcome them.

Unrealistic Project Timelines

It's been said that when it comes to project management, you'll want it to be cheap, fast and right.  Unfortunately, you only get to choose two of those dimensions.  It's an unfortunate reality of life that timelines are often chosen for political considerations rather than basing the time frame on the objectives of the engagement, the defined scope and the number and quality of the resources assigned to the project. 

Project timelines should be built from the bottom up, with a detailed analysis of all the tasks that need to be completed, the key interdependencies between phases and tasks and the number of hours estimated to complete each task.  Extra time needs to be added for project management, vacation, and non-project related training.  Additionally, if something comes up during the project that pushes out the critical path, it's imperative that the project be reset, either through extending the timeline or by adding additional resources if that's feasible.

One of the fastest ways for a transformation project to go bad is to improperly prepare for the actual initiative.  Too many times a project is launched and no one wants to "waste time" with all that preparation stuff.  The reality is that preparation is key to a successful project.  And that includes everything from clarifying the objectives in the Project Charter to figuring out where people are going to sit and how they'll gain access to the virtual project team room.

Another challenge I see with tight project timelines is that key resources are often scheduled for multiple tasks that run concurrently.  This should be eliminated as part of the resource leveling exercise, but often these conflicts are dismissed with a "it'll all work out" mentality.  Project timelines are notoriously unrealistic when they double book resources and don't consider activities such as meeting and vacations.

Through proper preparation and realistic consideration of key activities, dependencies and resources, the project team can substantially reduce risk to the project by establishing a realistic project schedule.

Finance Transformation Gone Wrong - Vaguely Defined Project Scope

No one plans for a project to jump the track. They're all launched with the best of intentions. However, somewhere along the way something happens. Often, it's multiple "somethings". I once had someone land on my blog with the search term "Finance Transformation Gone Wrong". I had to laugh, as anyone who's been in the business of transformation has seen good projects turn bad for a variety of reasons.

For those engaged in the art of transformation, this series will discuss some ways a project can head south, along with the appropriate remediation strategies to increase the probability of project success. One of the first ways a project can run into trouble is through vaguely defined project scope.

Vaguely defined scope

There are times when a transformation effort goes wrong before the project even starts. If a transformation project is planned badly, it will be difficult to make up during the actual project. One of the chief culprits is scope. It's one of those things that sounds like it should be easy but in practical terms is difficult to define. The devil, as they say, is in the details. This is an area that should be thought through very carefully during the planning stage, agreed by the major stakeholders, and committed to in writing.

A key to keeping a sharp focus on scope is to keep the project's ambitions manageable. Picking a scope such as "let's revolutionize Finance" is bound to create problems since everyone has a different idea of what it means to revolutionize Finance. Heck, people can have different ideas of what it means to optimize the accounts payable invoice entry process. To boost project success, sharply define project scope and keep it in manageable chunks.

The second point is related. It isn't enough for the Project Manager or Executive Sponsor to have a sharply defined project scope. The important stakeholders who can support or derail a project must also agree on the project scope and its intended impact on the organization. And this is an area where silence definitely does not equal consent. There must be overt agreement of the scope of the transformation effort and its expected results.

A third point to keep in mind is to manage "scope creep". This can kill an otherwise solid project. Scope creep occurs when a project is expanded beyond the original scope as set out in the Statement of Work or other project documents. As the phrase "scope creep" implies, it often occurs in very subtle ways that may seem reasonable at the time but that, with time and volume, can weigh down a project and keep it from coming in on time and on budget. There should should be a very strict change control process in place so that when the inevitable scope issues come up, there is a defined process for managing scope changes. Any proposed change should be supported by a business case that provides a compelling business and/or economic reason for the proposed change. A business case doesn't have to be huge, but if there is a good reason for a scope change, it should be documented and approved according to the project's governance structure.

By creating manageable transformation initiatives, gaining agreement amongst critical stakeholders, and implementing a strong governance process for scope changes, a finance organization can begin the process of successful transformation.