Why finance should be at the table for process improvement

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Last week, I mentioned that business process improvement is becoming increasingly popular as growing companies seek to improve operating efficiency. This time, let's explore how finance can contribute to the success of business process improvement.

Before taking on any business improvement initiative, it's important to develop a project charter that clearly defines the business problem, the desired goal, and the intended scope—and to be able to pitch the project to senior management. Finance can help with the pitch by providing financial insights on how the business problem is consuming the company's financial resources and how achieving the desired goal can contribute to the company's overall performance. This ultimately helps senior management make an informed decision on whether to pursue an initiative.

Moreover, finance can generate financial data that enables senior management to evaluate which solution best serves the company's interests, while also serving as an objective indicator of whether a business improvement initiative is successful.

To illustrate, consider the comparison below of a sample project charter excerpt with and without finance inputs:

Without finance inputs

Problem: It took Department A 10 days to complete Process XYZ from July to October 20XX. As a result, the service level agreement of 5 days has not been met, and five employees need to render overtime of 3 hours per day during this period.

Goal: To reduce processing time of Process XYZ from 10 days to 5 days by December 20XX and eliminate the need to render overtime hours.

With finance inputs

Problem: It took Department A 10 days to complete Process XYZ from July to October 20XX. As a result, the service level agreement of 5 days has not been met, and five employees need to render overtime of 3 hours per day during this period. The customer can impose a penalty of $200,000 for not remediating the deficiency by December 20XX. The cost of compensating employee overtime hours is $56,000 (or $14,000 a month).

Goal: To reduce processing time of Process XYZ from 10 days to 5 days by December 20XX, eliminate the need to render overtime hours, and save the company from the $200,000 penalty exposure and the $14,000 monthly employee overtime compensation from then on.

Without finance inputs, the problem and goal are operational. With finance inputs, they become financial—quantified and measurable. That's the value finance brings.  And that's why finance deserves a seat at the table for any business improvement initiative. 

If you're navigating growth and need finance function guidance, contact VMC.

VMC's views are general insights—not one-size-fits-all advice. Every company's situation is unique.