Updates from McKinsey

Why isn’t your transformation showing up in the bottom line?
The success rates of large change programs vary widely. Finance teams can make a big difference in the outcome of these initiatives by articulating and validating the link between transformation efforts and long-term value.
By Ryan Davies, Douglas Huey, and David Kennedy – “Transformation” is the buzzword of the day for companies in most industries, but for many it carries an asterisk: studies show wide variation in companies’ rates of success with organizational transformations—whether they are changing how they go to market, updating back-office processes, automating production systems, or otherwise making significant changes in how their businesses are structured and run.

In some cases, this variation exists because executives propose fundamental changes in how the business operates but don’t go through the hard process of setting commensurate performance targets. They often set targets too low, aiming for incremental change. When they do set their sights appropriately high, they often fail to adequately make clear to key stakeholders who owns the goals and responsibilities associated with various elements of the transformation. As a result, value can end up “leaking” even from good initiatives, which can sap companies’ efforts to meet bottom-line targets, drain momentum from good investments, and impede buy-in for change efforts generally.

CFOs and finance teams have a critical role to play in not only setting ambitious targets but also providing the discipline to mitigate value leakage and fully deliver transformational benefits to the bottom line. more>

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