Towards world-class finance organisations: Why, what, and how?

Recently the CFOs from some 30 large Finnish companies met to explore what collaborating on finance competence development could look like. The outcome was clear: there is both a need and an appetite to act. The result is a Finance Development Consortium — a joint effort to reach, and sustain, world-class performance in finance organisations.

This article examines that ambition from three angles: Why aim for world-class now in these volatile times? What does world-class actually mean? And how can we realistically get there?

Why aim for world-class now?

Beneath all the tiresome volatility we currently have several big shifts ongoing. Prompted by wars and crises, uncertainty, sanctions and tariffs, a major realignment of supply chains is taking place. Regional resilience is being emphasised at the expense of global cost efficiency. At the same time the rise of, in effect, a totally new class of technology, powerful AI, is impacting business. 

The potential impact of powerful AI in the medium and long term is to some extent obscured by the volatility surrounding it. We have AI accelerationists and AI doomers, whose sometimes very shrill pronouncements seem totally unrelated to the mundane and not very productive world of Copilot and free ChatGPT versions.

At the same time, we indeed have an ongoing very rapid change in the practice and economics of developing and deploying software. Because AI models and their harnesses are at heart software, we are seeing a rapidly increasing pace of improvement in their capabilities.

What finance functions are, and how they do it, are right in the middle of the impact zone. There are many models. All the big consultancies have their own variants, but what finance functions do boils down to three things:

1. They run processes effectively and efficiently, from high-volume transaction processes to more specialised ones like tax.
2. They process information and provide it in refined form to the rest of the organisation as reports, analyses, and models.
3. And they help keep control and manage risk in different ways.

They are knowledge organisations, which means that they do their job with exactly two classes of resources: people and information systems.

Powerful AI changes the economics of software development, making it much easier and less costly to automate and build new tools. It leverages competence. If you know what's needed, it's easier to get it done, and create more value. 

Powerful AI changes the economics of software development, making it much easier and less costly to automate and build new tools. It leverages competence. If you know what's needed, it's easier to get it done, and create more value.

On the other hand, more and more things are no longer worth doing manually. So, while turbulence and fundamental changes in the business environment demand support from finance in all the three dimensions of what finance does, there is an opportunity for finance to step up and generate significantly more value with existing resources. But leveraging competence rests on the ability to build and maintain competence to leverage. The alternative is inefficiency and obsolescence.

What is world-class?

There is a temptation to think that having a world-class finance function equates to coming up top in all the benchmarks: lowest costs per transaction, most intricate reports provided to management, fastest close of every period. It is tempting partly because it tends to correlate well: world-class finance functions do tend to come up top in many of the benchmarks. But it is also a trap. 

Being world class does not mean that we must be the best, or even very good, at everything, or that we would need to do everything ourselves. But it does mean that across all the different domains where the finance function operates, we must maintain the competence and the capability to operate in an effective and efficient configuration.

A world-class finance function works with partners and consultants of many different kinds, but it knows what it's doing, and what it's buying, and why. It knows enough to be able to focus resources on business-critical processes and analyses where quality really matters, while being good enough elsewhere and cost-efficient throughout. World-class means optimally fit for purpose.

Being world class is not a state; it's a process of staying relevant and fit for purpose. A world-class finance function continuously evolves, learns, and adapts. It doesn't just react to new demands from business, new regulations, new software and systems. It proactively develops and experiments with new ways of doing things and new things to do. And when necessary, it moves fast.

Being world class is not a state; it's a process of staying relevant and fit for purpose.

How do we become world-class?

Finland is a relatively small economy, which means companies operate at a smaller scale than global peers. There are maybe five companies in Finland who, on their own, are big enough to have the resources to proactively develop innovative, world-class solutions for finance on their own. We have worked intensively with four of them at Hanken & SSE. All of them are good, in different ways. None are perfect.

Becoming, and staying, world-class really comes down to building and maintaining competencies that can be leveraged, and having the capability and capacity to leverage them. The only reasonable way to do this systematically over time is to cooperate. Use consultants and academic experts to stay informed about where the cutting edge currently is, in different fields. Work together building competence and capabilities, benchmarking and networking, not reinventing the same wheels needlessly. 

We are setting up the  Finance Development Consortium to make this happen. Hanken & SSE will bring deep academic and practical knowledge, extensive pedagogical experience, a platform for collaboration, and a clear point of view on where we are headed. Participating companies will bring their people, their experience, their needs and issues. Together we will go for world-class finance performance!

Becoming, and staying, world-class really comes down to building and maintaining competencies that can be leveraged, and having the capability and capacity to leverage them.

A note on where this stands

The response at the founding meeting was overwhelmingly positive, the need is real, and the appetite to act is there. The Consortium is designed to be a long-term, evolving structure that grows with the needs of its members.