This article can also be found in the Premium Editorial Download "Business Information: Today's customer service starts with mobile, social consciousness."
Download it now to read this article plus other related content.
Interest in process benchmarking has surged over the past few years. Today, more companies are measuring process speed, cost efficiency and labor productivity.
The focus of a benchmarking project depends on the problems holding a company back. A project might target procurement speed, error rates in order taking, accuracy in work scheduling or the cost of logistics choices -- say, air freight versus rail. Administrative processes such as financial reporting or getting new employees up to speed are also good candidates. The point is to identify activities that can be improved by process streamlining, changes in organizational structure, stronger governance and deployment of IT applications that automate routine transaction processing.
Smart companies understand that process benchmarking should have positive effects that ripple across the business, not just improve the functional silo under the microscope. For example, many companies are doing financial benchmarking to improve their processes so they can, in turn, improve finance's analytical yield. The idea is to free up finance people from accounting drudgery so they can spend more time analyzing operating constraints, tactics and the best ways to grow the business.
There are many ways that finance people can use their analytical skills to help managers make smarter decisions faster. Unfortunately, too many companies are mired in compliance and stewardship duties, such as closing the books each quarter. Still, a growing number of companies are now tackling the problem.
My nonprofit benchmarking firm APQC conducted research into the quarterly process known as "close to disclose," a long list of duties including balancing and reconciling accounts, finalizing financial statements and releasing earnings results to the public and to regulators such as the U.S. Securities and Exchange Commission. Research shows that companies that zip through the process are more successful than companies that struggle with it every quarter. Consider the time it takes to run through all those steps. The top performers in the study completed the process in less than 10 days -- less than half the time of slowpokes, which take 22 days or more (see Table 1).
Fast financial reporting is important for several reasons. Fast companies often want to act and look like industry leaders. They want to be the first in their sectors to release quarterly results to investors and talk publicly about their performance and the marketplace trends that are affecting their competitors. Moreover, the fast reporters are just as keen to get official performance results into the hands of operating managers as soon as possible, so performance risks, obstacles and opportunities can be addressed immediately.
For more on financial benchmarking
Financial benchmarking data shows automation does a business good
Corporate performance management, XBRL boons to financial benchmarking
How to speed things up? Whether the focus is on finance or any other transaction-oriented business process, such as order taking, companies should map out the steps in the process and identify activities that could be done sooner in the cycle or be skipped altogether. Such planning can also reveal root causes of bottlenecks that can be fixed through process redesign, resource reallocation or automation.
The good news is there are sound technologies out there that can make a major difference in the speed and accuracy of financial reporting. People working at every step of the process can enter supporting notes and documentation into application software, which tracks their progress. Reviewers can monitor the status of each task using customizable dashboards, see where problems are developing and, if necessary, reassign tasks. Areviewer of, say, 10 financial reporting items, can also get email alerts that indicate when each is done. This accelerates the workflow and cuts down on the waiting and the phone calls otherwise necessary to chase down laggards.
In all, the rigorous use of process improvement methodologies in one functional area -- finance in this example -- should aim to deliver positive, meaningful and lasting benefits for the business as a whole. Surely, when finance workers are liberated from grunt work, they can dedicate more of their valuable analytical talents to helping the business compete more effectively.
This was first published in October 2013