hindering your finance team

I was recently discussing with a colleague what differentiates our various clients. While each of them is undergoing improvement in some form, it is clear that some Offices of Finance perform significantly better than others. The basic difference often lies in their operations. Some run smoothly, with a quiet calm, timely submitted reports, and no finger-pointing; others are a chaotic mess, with deadlines always overdue, high turnover, and dirty mugs scattered around, half full of cold, bad coffee.

There are many factors that contribute to the high performance of a finance function, but in this article I would like to focus on one: managing constraints.

I remember reading about the Theory of Constraints in The Goal (Eliyahu M. Goldratt), a staple for anyone who works in manufacturing. While doing some recent reading, I was surprised to see it come up again in The Phoenix Project (Kim, Behr, & Spafford), which folded the theory into the IT workspace. It then occurred to me, why not apply it to the Office of Finance?

hindering your finance team

The Theory of Constraints states that “a chain is no stronger than its weakest link,” meaning that your business process will never be able to bear a load greater than what its busiest node can handle. If your office has a report upon which everyone is reliant, and it is only published daily at 1:00 PM, then no one will be able to start working until 1:00 PM. It really is that straightforward. So you might ask, “Well, that’s obvious, but how does it help me?”

What is Work?

The difficult part of balancing the load on your workflow chain is not necessarily improving the weakest link. Rather, it is finding that link in the first place. To do this we must understand various types of load, required effort, or more colloquially, “work,” that affect your business process.

  • Regular Output: This is the bread-and-butter type of work that your office typically does. It includes calculating, consolidating, allocating, and report building. The outputs of this work help the decision makers keep the lights on. This should be the majority of your work.
  • Internal Projects: This is the work you do to improve your internal systems and business as a whole. It can include cross-training, updating standard report formatting, training for new analysis techniques, and upgrading internal systems. While often pushed off as the lowest priority, this work needs to be maintained to keep up with the competition. Try to spend at least 10% of your resources on continuous improvement.
  • Rework: This is work done when your product was not satisfactorily completed or is not up to spec and needs to be updated, such as reloading incorrect actuals or building a report on an old template and then needing to convert it to the newest one. This work can be avoided by properly collecting requirements and having well-structured quality control processes.
  • Unplanned Work: Arguably the most destructive type of work to your office, unplanned work arrives unexpectedly and prevents your office from doing the work it is supposed to do and/or growing its capabilities. It can include building last minute surprise reports, managing unexpected initiatives, and making on-the-fly model changes for acquisitions about to be signed before the end of a quarter. This work usually comes from outside your department and cannot be avoided without interdepartmental buy-in.

When all of this work piles up, you may find your finance team in constant fire fighting mode. The work priority gets completely flipped, with other offices in the organization demanding their ad-hoc reports be prioritized, then complaining that the regular analyses you produce for them are behind schedule. You might think that this is an obvious case for increased headcount. “We have too much work for the number of people we have” is one of the most often used lines by management. It always seems true, but all of that “too much work” can usually be attributed to a lapse of work management.

Poor Work Management is a wide concept that includes:
· Over-simplified workflow methodology, such as First In, First Out (FIFO) or Whoever Shouts Loudest (WSL)
· Over-working during crunch times and under-working during quiet times
· Blaming other departments for an unexpected influx of work, instead of preempting with better communication
· Not improving work methodology in order to appear busy

The Great Work Expedition

It can take some time to find it the first time around, but try following all the work. Do this by temporarily setting up a gate through which all incoming work has to pass. Put each new, old, and recurring item on an index card or sticky note and follow that work around your office, having each link note what was done and when, until the index card leaves your department. You should find that at a certain link in your system, whether it be a computer or a person, work (and index cards) is piling up.

hindering your finance team

All of this work is called work-in-progress (WIP), and is the real cause of your overburdened system. WIP must be kept to a bare minimum in order to optimize your office’s functionality and effectiveness. While your over-stressed (bottlenecked) link is toiling away, other people are waiting to continue doing their work. In a stroke some might find counter-intuitive, this link can often be your most valued employee or your newest system that was supposed to solve everything. In yet an even more surprising twist, your best bet to improve performance is to remove work from that link!

A significant portion of the work going through that link is non-critical or can be shared with another link in your chain. By freeing up your bottlenecked link, other links in your chain that require processing from your bottleneck will get to work more quickly, improving overall efficiency.

Moving Forward

As the load begins to spread out, your first reaction might be to give your ace-in-the-hole more work to fill up the newfound utilization. It is very important not to do this. Having a buffer allows for your resource to recoup or deal with unexpected work. If utilization goes back up to 100%, then WIP will pile up again, creating a domino effect of slowdown along your entire chain. However, as you become more experienced with differentiating between critical-path versus non-critical-path work, you should focus on allocating time to those forgotten internal projects. Improving your office’s capabilities and understanding of each other’s skills will allow for even greater efficiency and reduce co-dependence.

Your last, and most difficult, task in this overhaul will be to remove unexpected work from the picture. Communication and trust will be the primary keys to this. Your customers will need to be brought into the fold to understand how your work gets done, the amount of lead-time to expect when submitting new requests, and how to best communicate what they need from your office. You will also need to do the same for them. Observe their work and learn how they come to need your services. Hold regular standup meetings to reduce surprises or catch early concerns that could snowball into disaster if left for later. With sufficient integration with the other departments, unexpected work should be drastically reduced, allowing your company to take greater strides in providing the best possible service.

Strengthening your workflow chain is not a simple one-week, one-month, or even one-year “fix.” Continuous improvement is just that, continuous. While there is no final goal that can be reached, there are intermediate goals that can be realized when you decide that you want to improve your finance team’s workflow.

Barry Berger is a Senior Consultant on Ironside’s FPM team. Barry is proud to be certified as a Lean Six Sigma Black Belt.

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About Ironside

Ironside was founded in 1999 as an enterprise data and analytics solution provider and system integrator. Our clients hire us to acquire, enrich and measure their data so they can make smarter, better decisions about their business. No matter your industry or specific business challenges, Ironside has the experience, perspective and agility to help transform your analytic environment.