Finance Onboard: Keeping up With an Agile Transformation

April 1, 2019 Focus area: Scaling Agile , Digital Transformation

Many enterprises turn to Digital transformation as a way of dealing with disruptive change. Besides the novel use of technologies, these organizations are often launching an Agile transformation to create the organizational capabilities to react to opportunities in an effective way. Aiming for Agility at higher levels, scaling Agile enterprise-wide, is often the next logical step in their transformation. However, the big question "How to successfully scale Agile?" remains many times unanswered.

Have you ever thought of involving the company’s Finance department to shape and support the Agile transformation at scale? Addressing topics like Lean-Agile budgeting, Innovation Accounting or Agile capitalization? Probably not your first ideas. 

However, the Finance organization can be more than a back-office department in an Agile transformation. Conversely, it has shown that Financial Agility - adapting financial processes to an Agile way of working (WoW) - can be a real accelerator and a crucial factor in achieving the flexibility and responsiveness that many firms are striving for.

In this blog post, you will be provided with valuable insights into what Financial Agility can do for your transformation and how to get it started.

What is Financial Agility?

Before anything else, it is fundamental to understand how Finance and Agility can go together. What we define as “Financial Agility” is to adopt various traditional financial processes within the organization to support the Agile WoW.

A typical Finance function is practicing detailed forecasting, relying on project-based cost accounting and often having tight control mechanisms in place to follow budget overruns. This is in direct conflict with Agile's core values and principles which can burden the enterprise with overhead, cause friction and ultimately restrict development throughput.

See below a comparison of exemplified financial processes and what it means to achieve Financial Agility by moving from a traditional approach to an Agile one.

Finance processes: traditional vs. agile

Financial challenges when Scaling Agile

Our observations in scaled Agile transformations show that long-established financial processes typically become a concern once the organization reaches a certain tipping point in the transformation. This is generally the moment when Agile is scaled to the whole value chain and yearly finance cycles hinder flexibility in portfolio planning or budgeting. Soon a sense of urgency will arise on an enterprise level to make necessary arrangements in support functions like Finance to redesign financial processes.

At that stage, the list of challenges to be addressed could look like this:

  • How can we combine relative estimations of the workload with objective KPI measurements?
  • How can we create end-to-end accountability to demonstrate value delivery and enable more educated investment decisions?
  • How can we shift our focus from (reactive!) budget monitoring towards a model that empowers decentralized decision-making and flexible funding?

If Finance professionals start challenging the status quo by raising such questions themselves, embarking on the Agile journey, then they are clear frontrunners. But the reality is different. Most of the time, Finance professionals are too busy with their everyday business and not challenging Agile implications on their processes. In fact, Financial Agility is complex, broad and can be painfully slow to achieve. However, it is important enough not to be ignored.

Four ways to launch Financial Agility

Through my first-hand experience on kick-starting Financial Agility with large-scale Agile transformations I come to know four ways that might help your organization to get Finance professionals and processes up to speed:

One: Train your people

Behind every financial system are real people. Those professionals have to be made aware of the implications of the Agile transformation on the financial processes. Therefore, it is truly important to go back to the basic Agile values and to openly address challenges in the context of Finance. The goal is to trigger the right discussions. You will be surprised how open they are for changes once they grasp the concept!

Two: Show the benefits

When you want to become a truly Agile organization, relying on business as usual from the Finance function is no longer viable. However, putting some pressure on Finance and asking for immediate changes to cope with the Agile WoW will not help. Instead, show them the benefits from their perspective.

Think: Might the new process simplify their administration? Can we reduce manual data processing by linking to an Agile project management tool? Or what kind of new data could we use to make better investment decisions?

Three: Simplify and visualize

Changing accounting approaches or funding value streams can be quite big undertakings. Too often employees say, “this is not possible in our organization”, “we are different” or “we need to see the Return on Investment” and they become doubters. What helps in such situations is to simplify the complex processes and visualize alternatives. Seeing is believing here.

As an example, what about introducing the mindsets of Venture Capitalists (VCs) and their investment strategies? VCs aim for a diverse portfolio that fits their strategy, they mostly invest in teams they believe in and have frequent feedback loops where the startups can demonstrate their value. In other words, VCs are planting a seed, but even if they can’t harvest the fruits yet (see direct revenues), they do not cut the water. Not so different from Agile, is it? Such a scenario can be easily drawn and can trigger the right discussion.

Four: Be realistic

Turning long-established financial processes around in a few weeks? Very unlikely. In a few months? Hard to achieve as well. Bravely challenging the status quo and making small steps here and there? This is the way! Most often a hybrid version is the right first step. The goal is not to disrupt all the financial processes within the company to make them fit the Agile value delivery. Rather it is vital that Finance has a constructive role to play in supporting the business to be more effective, be it in quick funding decisions or intelligent process automation.

Make the move: a final comment

For a scaled Agile transformation to be truly successful, all departments within an organization need to be part of the journey. Particularly the Finance function, an essential part of every business, can leverage the organizational change and should have a more active role.

Finance is mostly still a report factory because of the control that higher management claims to need. But Finance teams being part of an Agile transformation have shown that Finance should be encouraged to be a truly supportive function again – a value promoter. And Financial Agility is the keyword here.

It can be driven by unlocking the curiosity of Finance professionals about the new Agile WoW and their willingness to make changes in their daily routines. The power of simplifying complex financial structures, adapting financial processes in a pragmatic way and can turn Finance teams into real strategic business leaders who co-drive the transformation. One step further, financial processes should not be the solitary domain of the Finance function. On the contrary, these processes could be shared with others in the value chain, for example with Portfolio Managers.

There is no question that the start will be difficult, uncertain and slow. Financial Agility requires a fundamental mindset change but as Ingvar Kamprad, founder of IKEA, said: “Only those who are asleep make no mistakes”

So, push your Agile transformation to the next level and take Finance onboard - your ship will become nimble and outmaneuver the storms.