Britain’s productivity is taking a beating. The Office for National Statistics recently reported that the UK’s productivity had fallen to 2007 levels, with output per hour amongst the worst in the G7 – and 36 percentage points behind Germany.
The fact that the productivity gap is wider now than it has ever been since modern records began is a real risk to the economy, holding back wages and preventing competitive performance and growth.
Business groups such as the CBI have analysed what’s driving this disparity. The five areas the CBI and other economic commentators have highlighted are: slow decision making, failure to invest in technology, lack of employee engagement, requirement for clear leadership and resistance to change.
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Improving productivity is not just a matter of making people work harder. It involves training, investment, innovation and leveraging technology to find smarter ways to achieve objectives. And this is where the office of finance can take the lead and influence.
Investment in new technology
At a time when the public purse is tight, encouraging new technology take-up is one of the most effective routes to raising productivity.
The cost of efficiency-driving technologies like enterprise resource planning (ERP) would have been prohibitive for many organisations in the past, but the advent of cloud and the software-as-a-service (SaaS) model have made ERP and the applications that rest on it accessible to businesses of every size.
As the keepers of business data, finance is the natural hub for managing tools like these, which make employees more productive by reducing the burden of inefficient processes and ensuring the benefits are felt across the business.
Faster decision making
Finance is also becoming a strategic business partner with access to information and insights that shape the direction of the entire business. Boards and CEOs are expecting more value from CFOs and FDs. As a result, they are often the first to recognise a productivity gap.
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Corporate performance management (CPM) applications make it easier to capture and communicate employee output numbers across departments and functions, and share data with end users who don’t have to worry about its validity. Issues are flagged sooner and action can be taken to address productivity dips without having to wait for month-end close.
Finance can also help ensure that strategic decisions are based on a single version of the truth – cutting through potential misunderstandings so that different departments are always comparing apples with apples when evaluating results.
Better collaboration and employee engagement
In a survey of employee engagement involving 7,000 respondents by research firm ORC International, The UK ranked 18th out of 20 leading countries. Only 37 per cent of UK workers surveyed felt they were encouraged to be innovative and fewer than half felt valued at work.
Technology can’t solve endemic issues with the wave of a wand but it can create the basis for better collaboration, and provide a platform to enable organisations to share accountability for decision making. Teams that share information are in a better position to produce innovative solutions using shared knowledge, and combine expertise across silos.
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Technologies like ERP make it easier to create and automate standardised operational processes. They can improve shared workflow by giving all employees access to the information they need, when they need it, from a single source of truth.
Leaders in top-performing organisations set and communicate the organisation’s strategy, inspiring their teams through a culture of progress and innovation. Leadership is also becoming more data-driven, with an expectation that objectives be subject to constant measurement and open to adaptation based on current market conditions.
In this regard the CFO is fast becoming the CEO’s right-hand advisor – someone who understands how to quantify results in context, and calculate the market opportunity with a perspective that cuts across departments.
With a clear view of the big picture and limited bias toward any one aspect of performance, CFOs are also in a unique position to actualise the board-level vision and strategy. They have the data, information, insights and oversight of tools that put them into action. They develop KPIs and understand performance trends, and are increasingly empowered to implement strategies to improve them.
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Willingness to embrace change
In times of austerity a certain recalcitrance can seep into organisations, and that affects people’s willingness to embrace new systems, techniques, technologies or methodologies that promise to do things better. In the long recovery post-2008, lack of resources and budget constraints have also trained people to be frugal and squeeze every bit of value out of existing investments.
Then the familiarity everyone has with legacy systems like spreadsheets makes them very difficult to dislodge – even when it’s clear that the size of the business or its growth trajectory make the old tools unfit for purpose.
Because the office of finance touches every department, it’s ideally placed to demonstrate the benefits of more effective processes and become a change agent within the organisation.
Wrapping it all up
As far back as 2001, studies have shown that companies investing in solutions like ERP and CPM were able to achieve higher revenues with fewer employees. The same businesses could produce their goods at lower cost after implementation.
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Productivity is strongly linked to revenue. Investing in technology that makes employees more productive is an investment in future profits. By automating and simplifying formerly labour-intensive processes, employees have more time for the tasks that deliver value and revenue. Using the latest tools and systems can also help with talent acquisition and retention. Ambitious finance pros want to be at the forefront of professional and industry best practice.
The best performing finance functions are elevating their role by leveraging ERP and CPM. These advances have also allowed finance to be fully integrated with other business functions, from sales operations to HR and supply chain management.
Leadership is key to the mix, and the productivity challenge means CFOs have a new opportunity to take the finance function to an even more strategic level, shifting their focus to better processes and productivity as the vehicles to deliver business value.
Sourced by Kirit Patel, regional managing director, EOH