1. business and industrial

POINT OF VIEW
Are you missing the boat on
How to improve
your operations?
Shantanu Ghosh
Senior Vice President and Global Head
Enterprise Services, Solutions, Transitions
and Lean Six Sigma
CFOs depending on workforce reduction and automation to achieve cost savings
are likely doomed to disappointment. The real competitive advantage lies in
better processes—but without the proper metrics, your organization might still be
performing at less than its potential.
Little doubt now exists that global economic uncertainty will
continue indefinitely. European CFOs are planning to hold cash
amid liquidity concerns and the need to drive productivity, with
cost efficiency also now paramount to a company’s ability to
remain competitive. Traditional productivity levers,
such as workforce reduction and automation
that have been used extensively over the
last three years of the downturn, are
now reaching diminishing levels of
return.
Efficiency should not be a goal
in and of itself. With companies
looking even further for
differentiation and a competitive
advantage, continually improving
processes in terms of overall
effectiveness and efficiency is now
the strongest value lever for executives
and a critical imperative in today’s
challenging business environment. To achieve this,
companies must consider and focus on three key elements:
what to measure, relative versus absolute performance, and the
optimum framework for improvement.
How do you measure success?
In examining what to measure and relative performance, it
is crucial to use a robust benchmarking process. According
to Genpact’s recent CFO Research study of more than 400
senior finance professionals at companies around the world,
60% agree that improving process performance would yield
financial benefit to their companies, but only 34% of them
actually assessed their processes through external benchmarks.
Faced with current demands from stakeholders, companies’
senior finance teams must focus on the effectiveness of key
enterprise processes as a lever for business performance.
Most organizations depend on metrics which provide insights
into efficiencies, but they rarely measure process
effectiveness. Additionally, limited availability of
comparative benchmarks makes it difficult
to assess how good or bad a process
truly is, so senior finance executives
face an information deficit.
Companies across all industries do
share four core financial processes
that can be benchmarked: business
planning, source-to-pay (S2P),
order-to-cash (OTC), and consolidateto-report. By addressing these areas,
finance executives can ensure their key
processes are benchmarked to measure and
drive greater effectiveness, while improving overall
corporate performance.
Metrics that provide competitive
advantage
With regard to business planning, 40% of our survey
respondents reported their companies’ actual revenue
performance differed from their forecasted performance by
6% or more over the past year. Our experience indicates
that – when sophisticated forecasting tools are combined
with integrated, well-designed processes that are centralized
in some form – companies can increase forecast accuracy to
best-in-class performance in their industries, compared with the
30-50% confidence levels typically seen.
One important measure of S2P process performance is a
company’s ability to manage the timing of its
payments to suppliers and vendors. This serves as
a useful gauge of a company’s negotiating skill. It
also measures the degree of control it is capable of
exerting over its payments, especially when considered
against the tendencies of its peers. We’ve seen
that persistent early payment of 10-20% of
invoices can lead to a float loss of
1.5% of total spend value, along
with a host of other working capital
management problems.
According to our survey, a solid
majority (71%) of companies have
an automated, reliable way to track
customer satisfaction, the most welltracked OTC-related benchmark.
When presented with a list of possible
OTC improvements, 29% of respondents say that improving
communication and cooperation between sales, operations and
finance would yield the greatest benefit for their company over
the next year.
Only two in five respondents said their companies complete
each stage of the quarterly consolidateto-report process within one week, and
companies that use a greater number of
charts of accounts take much longer to
complete each stage of their quarterly
closing process. Using a single global
chart of accounts as well as centralizing
this function has improved the process
effectiveness through less labor and reduced
cycle times.
Benchmarking core financial processes to
gauge and ensure effectiveness has a direct
effect on the bottom line through enhanced
liquidity, cash flow, revenues and working
capital.
Corporate finance leaders can no longer
afford to ignore the simple, but extremely valuable, scientific
framework for enterprise process management. Delivered
correctly, it can result in significant competitive advantage and
financial benefit within economically constrictive environments.
About Genpact
Genpact Limited (NYSE: G), a global leader in business process management
and technology services, leverages the power of smarter processes, smarter
analytics and smarter technology to help its clients drive intelligence across
the enterprise. Genpact’s Smart Enterprise Processes (SEPSM) framework, its
unique science of process combined with deep domain expertise in multiple
industry verticals, leads to superior business outcomes. Genpact’s Smart
Decision Services deliver valuable business insights to its clients through
targeted analytics, reengineering expertise, and advanced risk management.
Making technology more intelligent by embedding it with process and data
insights, Genpact also offers a wide variety of technology solutions for
better business outcomes.
For more information, visit www.genpact.com.
Follow Genpact on Twitter, Facebook and LinkedIn.
Copyright © Genpact 2013. All Rights Reserved
For More Information, Contact:
Shantanu Ghosh
Senior Vice President and Global Head
Enterprise Services, Solutions, Transitions and Lean Six Sigma
shantanu.ghosh@genpact.com