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Why Finance is Becoming Increasingly Central to Organizational Agility

— March 1, 2022

In times when conventional planning is changing and phrases like “promised,” “planned” and “expected” are no longer applicable in many organizational models, agility is stepping up.

In the 21st century, workplace dynamics are still changing. Finance plays a huge role in many aspects of the business as we know it, and one of them is organizational agility. 

By definition, organizational agility is the ability of an organization to renew itself, adapt, change quickly, and succeed in a turbulent environment. Despite its contrast with stability, agility requires a dose of stability, paired with dynamic capability, to move fast but not change. When force or stress is applied to it, organizational agility should thrive and get stronger – becoming a source of real competitive advantage. As such, agility is a trait of sound organizational development.

The market turbulence occurring in the 2020s has foreshadowed a new phase of globalization, where volatility is likely to remain constant. Whether it’s the changes in currency rates, fluctuations in energy and commodities, companies nowadays must rely on finance to make their processes more flexible and figure out the best ways to make revenue.

Today, modern environments require a very strong orientation towards delivering greater value to customers. The entire organization must match and reflect customer-centricity. In agile organizations, customer value delivery is being prioritized – all functions, roles, and processes are organized in a way that is optimal for client value delivery. So, an agile finance function focuses on continuous improvement and unique value that it can add.

Finance: Its Role & Impact on Organizational Agility

As we mentioned above, finance has evolved and is nowadays playing a bigger role in business than ever before. Continuous access to finance translates into valuable strategic insights, guidance, and the creation of new skills and tools that support rapid decision-making and performance management.

We are referring to a new model that is already known as the “agile finance organization” – driven by all these new capabilities and modeled to make businesses more agile. Whether it’s technology, people, or processes, organizations simply need uninterrupted access to finance in order to remain profitable.

To thrive in the new landscape, organizations have been migrating financial apps to the cloud. Examples include apps that hold predictive analytics, flexible consumption-based billing, a financial modeling template, or anything that would power the digitally-driven businesses and help them save money and time. We are also seeing increasing interest in cloud transformation, where implementations drive finance efficiency gains through the redesign and standardization of many processes.

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To sum things up, today’s levels of uncertainty, ambiguity, volatility in the markets, and globalization, all lead to a drive for agility and quick response to changes. Companies need to benefit from the change, and in most cases, doing that is dependent on funding various innovations.

Hiring Talent for the Future

Organizational agility is also driven by finance through HR or the talent that organizations hire for their future. Nowadays, the ideal finance worker has to do a lot more than their counterparts of the past. In addition to strong accounting and analytical skills, future finance teams also need to be proficient in the latest systems management, regulated customer data management, and understanding modern finance.

Hiring talent like this will lead to slow and steady progress, aided by positive testimonials from customers who will find value in such experiences. The right mix of talent in finance includes people who have a strong financial, data analytics, operational, and statistics acumen, along with a mix of softer skills and an understanding of financial services marketing to recognize what banks, lenders, underwriters, and insurers can do to aid their companies quickly.

Looking a decade ahead, forecasting will change, simulating different outcomes in the future and relying on finance teams and people who will look beyond top-line numbers to analyze, predict, and imagine what lies on the road ahead.

Can All Organizations Use Finance to Become Agile?

Theoretically, every company can raise initial capital and use it to redesign its processes and become agile. However, the reality is that big and successful companies find it very difficult to get agile. These businesses have grown, and have been successful using their managerial hierarchy – which is essentially a way to “manage from the top”.

As a result, large businesses need both stability and dynamic capability. They also require greater capital, and can’t take advantage of their scale in this regard. So, reinventing the wheel for a large company requires detailed organization and leaders who can think about the independent foundation that won’t change (at least not very much) and only then, the things that are changing.

In practice, CFOs and finance directors should delegate their authority to small, autonomous, and functional teams. Many large organizations facilitate agile growth by separating distinct sections of their companies to operate separately, such as setting up offshore tech development units or manufacturing facilities, each responsible for their own financial management, including scaling for growth. This direct local responsibility also eases communication and enables teams to quickly capitalize on collective brainpower. Working in independently managed settings and using short production cycles also enables companies and their financial analysts to make adjustments quickly on the basis of trends, feedback, and new financial insights.

Final Thoughts

In times when conventional planning is changing and phrases like “promised,” “planned” and “expected” are no longer applicable in many organizational models, agility is stepping up. This leads us to a new way of planning and accounting for financial performance, especially in the face of the evolving market and government changes we have never seen before.

The basis for finance agility is a mix of new skills that are influenced by planning, forecasting, and making sense of data in different ways. Most importantly, agility is something that all businesses, regardless of their size, should implement and respond to the changing dynamics in a robust way. It’s the only way they can weather the current and other storms that might come in the future.

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