Evolution is inefficient. However if you could ask an Ostrich ” Those wings, you don’t need them, they consume resources and really they are not efficient, let me cut them off ” would they agree ?

“No, they are my bloody wings and you can’t have them . If they need reduction I will do it slowly over time – naturally. I am not having someone take a hacksaw to them.” Sound familiar ?
Enough of the Ostrich and back to the question – why do transformations not meet the expectations of the management ?Learn this from our above example … what you have to remember is no one wants to perform a transformation on their own department.

1. This is their department, they have built it, it works they way they designed it to work, which had been agreed by the management team. Now you are saying it need to be transformed. It feels like you are asking them to tear it apart.

2. Transformations may lead to cost savings, but they should not actually be about saving cost. They are about changing the way you think about the function. The issue arises if you come from within the function it is very difficult to think outside the profession. To unlearn everything you take as gospel. Even stopping functional protectionism can be tough. If you do not have that broad experience in other functions or other view points, these projects can only become a head count reduction and they can so easily miss the benefits of business wide process change and the cost expectation of management.

I have done a number of transformations and a few years ago I was involved in another Finance transformation and we were looking at PO compliance as one of our biggest issue/opportunity and most significant saving. My recommendation after lots of discussions, understanding internal politics and modelling was to transfer the Cost control team (the guys who checked invoices to POs) to the purchasing department and make them responsible for driving down costs. The bottom line was no matter what finance did they could not actually meet the targets. We looked at OCR, workflow, offshore etc. They all brought potential improvements, but nothing actually fixed the root cause. Which was that Purchasing did not consider the cost of the cost control team part of the cost of sourcing and so it was never considered in vendor selection or performance.

Where we piloted it, it worked extremely well. We all agreed the number of people that were needed for an AP department with a 95% PO compliance rate. Which would have been 6 instead of 18. We then said the difference was a cost to the purchasing department, this was partly added to there savings target, just like sourcing savings on steel or plastics. Suddenly the vendor choice criteria included how they billed us, PO were set up to be matched easy. Price differences were visible and chased down with a renewed vigour. Suddenly purchasing saw the cost of paying the invoice and freight and short order charges in the same breath as the cost of the product itself. Was it perfect, No, but it was a road to success.

I know you’re thinking ‘imagine reducing a department by 2/3’s just by changing the reporting line and adding some behavioural controls’. YES, but I could not convince the finance leadership team to make the change across the board. The just said AP is a finance role and we will work with the functions to make the same savings – “what your suggesting breaks every accounting rule in my head, this isn’t thunderdome”. Many years on the finance transformation team have not made anything like the progress hoped for by inter departmental working. They attack every problem like accountants from a finance standpoint with a shared common history and values, but without enterprise wide peripheral knowledge. The sad thing is they have worked very hard, the team say they have moved mountains, but the leadership just say its not nearly enough.

All that said, how do you make it better? The take away moral of the story is transformations need a different kind of person to deliver, lead and envisage them. Probably someone from outside your company, certainly someone that will not accept the status quo, but also not just question the obvious and every statement made. You need to be able to talk with knowledge and experience about several functions with depth of knowledge. Then to be able to deconstruct and reconstruct issues from view points the team never had. Most department heads got to where they are by being good in one function – They are the black and white of purchasing, finance or supply chain. They have experience, they are good, they are solid and they understand your business, but only from one perspective.