Edward: Hello and welcome to the WNS business insight podcast series. This Podcast series brings to you the latest trends and concepts in your industry and in the field of business process management.
My name is Edward and I will be the host for this podcast with Mr. Krishnan Raghunathan - Chief Capability Officer at WNS.
This time around, we will discuss with Krishnan the topic ‘Benchmarking Best-in-Class Practices to Enhance Performance’
Hello Krishnan and welcome to WNS Podcast series!
Edward: So this is about benchmarking and a very interesting topic as to how companies across the globe can really look at best-in-class practices. So we would like you to first tell us even before we jump into the topic, this pertains to the chief financial officers of every organization, would you like to throw some light on how has the CFO’s office evolved over a period of time?
Krishnan: Absolutely. So over a period of time, CFO’s office has been evolving but the changes have been a lot more dramatic in the last 4-5 years, not just driven by global financial crisis like we all think but more by the opportunities that are being created with the geographical expansion. Now, product lifecycles are shorter for the traditional products, but there are so many new products coming into the market that’s opening up new avenues but that also means that competition is coming in from many different ways versus traditional competition. The growth is coming from new sources. Unlike the traditional sources of growth in developed economies, they are actually now coming from newer sources. We talk about BRICS (Brazil, Russia, India, China, South Africa), we talk about growth emerging in Africa.
So, all of this has created a scenario where a much larger part of the CFO’s role is forward-looking versus earlier there was a larger component which was deeper analysis of past. The reliance of past performance for future budgeting, forecasting and planning is far more lower as compared to what we used to have in the past. And as a result, the CFO’s role is becoming more and more business partnering, helping businesses take right decisions which are futuristic; and therefore, a larger part of his office or her office is now focused towards forward-looking analysis and that’s the key change the way I see in how CFO’s office has been evolving and it has been evolving quite rapidly.
Edward: Thank you. Moving on to the next question… with such evolution I am sure that there is also a need to constantly measure up and see whether you are just going with the wave or are you doing something that is very relevant and impactful in each of your organizations, and in that light how does benchmarking come into play with this changing face of the CFO’s office?
Krishnan: Sure. Benchmarking in one way or the other has been part of something that CFO’s office has been doing always is the way I see. Whether they benchmarked current year’s performance against past year’s performance or they benchmarked one unit versus the other within the company, there has always been that relative comparison that CFOs have focused on primarily with the goal of enhanced efficiency and effectiveness of their processes. However, that has now gone through a lot of evolution so to say because first of all there are now benchmarks available that you can buy that give you cross industry information on what is best-in-class. Besides there is also expectation that benchmarks by just as a form of data, which is comparison from X with Y, do not serve the purpose of driving a change. What you also need to know is what are the three things you can do to move the performance from X to Y after you have done the benchmark. And as these needs have been evolving, the response from the market has also been evolving and bringing in the comparison of best practices, providing more granular benchmarks, cross industry benchmarks. So, it has always been part and parcel of what CFOs did to continuously evaluate the company’s performance one way or the other. However, it’s becoming more and more evolved now, so to say, with expectations around cross industry benchmarks, more granular benchmarks, and also a comparison of benchmark best practices that can be used to enhance performance.
Edward: Thank you. Moving from the topic of a CFO’s office across any industry that we can think of, I am also thinking of the business process management or BPM provider, who also works with the CFO’s office regardless of the industry. Why and how do you think BPM companies are best suited to provide cross industry benchmark as a roadmap to best-in-class?
Krishnan:That’s the most interesting question actually. See, what’s really happening is we talked about the CFO’s role changing and evolving. We also talked about how benchmarks have always been part of what CFO’s office did and continues to do to enhance the efficiency and effectiveness, overall performance of the organization itself. What is now happening is at first level a large part of CFO’s team, which earlier had a lot of bandwidth, it was either the controller’s office or financial planning and analysis teams that used to work closely with the CFO, who did this kind of analysis for the CFO around comparisons versus different units, different channels of sales, different departments to drive effectiveness, to share best practices are actually now choked for bandwidth because the expectations from them are becoming larger around analysis of new geographies, analysis of new investment avenues, analysis of market for competition. So, their role is getting pulled a lot more into forward-looking analysis and rightly so because there is a larger payback in those areas, which is directly linked to the existence of the business and that’s actually creating a need for CFO to look outside their organization instead of continuing to invest because there is also shortage of analytical talent, that’s one level.
The other level is always when CFOs did this kind of comparative studies within their own organization, they were driving performance towards best-in-class within and that’s when they felt the need to actually go outside and take industry level benchmarks to define the new best-in-class standards for their own company. Eventually, what’s happening is… I talked about why it is important to make them more granular and link them with best practices benchmarks because it’s important not only to know where do I stand compared to where the benchmarks are but it is also important to know what do I need to do to get to those benchmarks. And this is where not just benchmarks, the operating experience of delivering on that performance becomes extremely relevant and that’s were BPM companies started becoming more and more relevant towards this whole benchmarking exercise helping CFO’s office because, for example, if I do benchmarking within WNS, we have worked with 83 different customers in finance and accounting space, my ability to compare and contrast performance at a very granular operating metrics across 83 different companies from different industry groups is far more effective than some company which does surveys and gets benchmarks through surveys. And also my ability to exactly pinpoint the best practices and the effort it takes to implement those best practices and the payback those best practices generate. So, not only I am able to get more granular benchmarks, I am also able to benchmark the best practices and create payback on implementation of those best practices.
The third piece, which I want to talk about, is as this benchmarking is evolving and people are beginning to use it, it’s becoming clear that both cross industry and industry-specific benchmarks are extremely important. What I really mean by that is when you are talking about Record-to-Report and days it takes to close the business, depending upon the geography you belong to, there is a benefit at looking cross industry for best practices and benchmarks. However, if you are going to compare performance of electronic invoice penetration in your Accounts Payable process, the benchmark in retail industry versus benchmarks in media industry are going to be completely contrasts. So, there is no use of looking at that benchmark metrics until I know that’s the benchmark best-in-class for me. Otherwise, it gets discarded because it’s not relevant for me.
Another example can be how do you compare and contrast DSOs between manufacturing and a retail industry, right? So, it’s extremely important that these benchmarks are compared and contrasted within the relevant groups. The relevant groups is not just industry verticals but also the size and scale of the company, and what I really mean by that is a billion dollar company can spend in the right manner an X amount on the infrastructure that is required around implementation of best practices as compared to a 200 billion dollar company. So what may be the right benchmark for a 200 billion dollar company may not be the right benchmark because it is not generating enough payback for a billion dollar company. So, it’s a combination of this operating experience that BPM companies have, cross industry experience and best-in-class practices benchmarking ability combined with the investment and the effort around industry specific and size and scale specific benchmarks that’s making it extremely relevant for the CFOs to use these studies. And when you put on top of this the fact that people who traditionally do benchmarking and comparison or performance within the CFO’s office are choked for bandwidth because they are needed for business partnering roles, this whole piece of using BPM companies especially like companies where they have invested in granular industry-specific size and scale benchmarks is becoming very, very relevant here.
Edward: Thank you, Krishnan. It’s been a pleasure speaking with you, and thank you for the insights.
Krishnan: Thank you!