 "Gap In Process Performance Affects Competitiveness Of Cos: Study")
Made to Measure, a study released by Genpact Limited, the business process and technology management company, has found that many companies must close a performance gap in their business processes to boost competitiveness. The research, conducted by CFO Research Services, sought to dig deeper into metrics that are useful to managers to guide their business, surpass their competitors, and, ultimately, deliver value to stakeholders.
A relationship between the use of external benchmarking and process performance emerges from the results of the study. The research found that executives acknowledge the benefit of improving processes, with more than 60 percent of respondents agreeing strongly that improving their financial and administrative process performance would yield meaningful financial benefit to their companies. Although companies recognise this, only 34 percent of companies make extensive use of external benchmarks to assess and improve their performance.
The study also found that making extensive use of external benchmarks is linked with higher performance in financial and administrative processes. Respondents at companies that make extensive use of benchmarks are more likely to report that their companies excel at a variety of planning, consolidation, and reporting activities, compared with companies that make only some or limited use of benchmarks.
“Companies rely on return-based metrics to measure their performance, and while these are very important, they tell only part of a company’s financial and operating story,” said Sasha Sanyal, Senior Vice President, Smart Enterprise Processes and Lean Six Sigma at Genpact. “Performance metrics on core processes reveal how effectively a company carries out these activities—and how well they deliver return to shareholders. By combining robust process metrics with measurement from external benchmarks, executives can close the information deficit that too often keeps companies from achieving their best performance.”
The use of benchmarks varies by region. According to survey data, companies in North America are more likely to make extensive use of external benchmarks than companies in other regions. Almost half of respondents based in North America (46 percent) say that their companies make extensive use of benchmarks, compared with only 35 percent of respondents based in Asia/Australia/New Zealand, 30 percent of respondents based in Latin/South America, and only 23 percent of respondents based in Europe and the Middle East.
Genpact’s study also reveals inefficiencies in companies that decentralise their processes. Companies that placed their source-to-pay activities within shared services centres deploy less labour within their accounts payable department compared to their peers with decentralised source-to-pay organisations. Those companies that utilise shared service centres are 40 percent more efficient than decentralised models for source-to-pay processes and nearly twice as efficient for consolidate-to-report processes.
“The present economic climate has created a set of unprecedented challenges for the CFO. With rising finance costs, dwindling margins, and increased shareholder expectations, the CFO is under constant pressure to optimise business processes,” said Shantanu Ghosh, Senior Vice President, Practices, Solutions and Transitions at Genpact.
“Amid this environment, a robust, quantitative comparison of activities, processes, performance, and business outcomes reveals an analytically sound view of how processes can perform and the business implications of reaching a higher level of performance. Maximising the effectiveness of these processes leads to improved management of product lifecycles, higher service levels, more satisfied customers, greater sales volume, and lower inventory and distribution costs,” Ghosh said.
Made to Measure is the latest in a series of studies that Genpact has commissioned to gauge CFOs’ needs and help them to leverage more effective processes for optimal business outcomes. Recent studies include From Efficiency to Effectiveness: Transforming the Finance Delivery Mix (2011) which addresses the services delivery mix, and Going Beyond Process Efficiency to Process Effectiveness: The CFO’s Role in Standardising Global Processes and Improving Business Outcomes (2010) which explores how CFOs see process measurement. Given the consistent volatility in the global business landscape, Genpact helps CFOs to create greater value for their organisations through the development and execution of better processes.
This research surveyed more than 400 senior executives in finance and procurement functions at companies with annual revenues in excess of $1 billion. It also included a selection of in-depth interviews. Respondents were distributed across all major global regions.