Mckinsey Global Survey Results How Finance Departments Are Changing

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How fnance departments are changing

McKinsey Global Survey Results

Given the current economic situation, it’s not surprising that fnancial executives saythey’re more ocused than ever on planning and cost cutting. What’s surprising, though,is a reluctance to adjust the fnance unction’s structure.

All eyes are on corporate-nance departments as they are asked to cut costs, reassessrisks, and cope with the deep uncertainty generated by the current economic crisis. Inthis survey,

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we asked nance and other senior executives how their nance departmentshave changed since the crisis began: what new challenges these departments are acing;which activities are taking up more, and less, o their time; whether their centralizationor outsourcing plans are being modied; and how the CFO’s ocus has shited.The results suggest that, at least so ar in the current economic crisis, not manycompanies have made the kinds o structural changes that could most help the nanceorganization to boost its perormance. Few respondents report that their companieshave modied the organizational structure to give CFOs ormal responsibility or moreactivities through solid-line reporting relationships. Fewer still report any increase in thedegree or pace o centralization. Moreover, ew respondents report plans to increase theoutsourcing or oshoring o nance activities.

What does fnance do?

We dened our possible roles or the nance unction in a corporation. At one endo this spectrum, the unction ocuses primarily on reporting and compliance, withmost o its time devoted to transaction management in nancial accounting. At theopposite extreme, nance serves as an integral part o the management team to supportthe creation o value by identiying opportunities and providing critical inormationand analysis to make superior operating and strategic decisions.

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The largest groupo respondents report that in their organizations, the nance unction alls into the

How fnance departments are changing

McKinsey Global Survey Results:

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The survey, in the eld in Februaryand March 2009, generatedresponses rom 591 executives.Most specialize in nance; the restare C-level executives with otherspecialties. The respondentsrepresent the ull range o industriesand regions.

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Between these extremes, nancedepartments may providemanagement with decision supportand nancial analysis or nancialand operating decisions or ocus onprocesses and risk minimization,typically with key capabilities inmanagement reporting, tax, audit,and treasury.

J e a n- F r a n ç oi s M a r t i n

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How fnance departments are changing

McKinsey Global Survey Results

latter category, though—not surprising—the unction’s role varies considerably acrossindustries (Exhibit 1). CFOs in manuacturing, or example, are signicantly more likelyto be value managers than those in the nancial-services industry, where the nancesta ocuses more on transactions.

Exhibit 1

A strategic role

Current role of ﬁnance at organization’s corporate level,% of respondents,

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n = 591

RoleDescription



Respondents who answered “don’t know” are not shown.

Valuemanagers

Are integral part of management teamto support value/wealth creation byidentifying opportunities, providing criticalinformation and analysis to make superioroperating, strategic decisions

Businesspartners

Provide decision support, sound ﬁnancialanalysis to management for making ﬁnancialand operating decisions

Processmanagers

Focus on processes and risk minimization,typically with key capabilities in managementreporting, tax, audit, treasury

Beancounters

Focus on the reporting and compliancefunction, spending most ofthe time on transaction managementin ﬁnancial accounting

Total,

n = 59143221815

Business, legal,professionalservices,

n = 7049211215

Manufacturing,

n = 10148201912

Financial,

n = 14630202420

By industry

Respondents note a marked increase in the amount o time CFOs are spending inareas that are critically important during a crisis—particularly, nancial planning andanalysis, nancial-risk management, strategic planning, and credit decisions (Exhibit 2).These areas o responsibility are quite consistent with the most pressing challenges thatrespondents say nance stas ace: orecasting business results or upcoming periods(31 percent), implementing cost-saving measures (27 percent), and reeing up cash romworking capital (18 percent). CFOs are spending less time on responsibilities more easilylet to others.

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How fnance departments are changing

McKinsey Global Survey Results

Exhibit 2

Devoted to planning and managing risk

% of CFOs or other ﬁnance executives, n = 452

Areas within scope ofcompanies’ ﬁnance functionbefore global economic turmoil

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Change in responsibilities by end of June 2009because of global economic turmoil

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

Respondents who answered “other” or “don’t know” are not shown.



Figures may not sum to %, because of rounding.

Financial planning and analysis86

6827

5Financial-risk management75

6331

6Treasury81

5045

5Credit decisions60

5537

8Strategic planning51

5637

8Payroll56

1083

8Accounts receivable75

4252

5Optional-risk management46

4644

10General accounting84

1778

4Tax77

1976

5Accounts payable79

2669

6Internal audit49

2863

9Travel and expense processing65

3163

7Business development23

3453

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IncreasedresponsibilityDecreased responsibility/don’t knowNo change

What’s surprising, while respondents see a signicant increase in the time CFOs spendin key areas, those shits have not been supported by changes in the structure o thenance organization. Looking ahead, very ew respondents expect greater centralizationo any nance responsibilities (Exhibit 3).

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