Finance directors need reality check on transformation ambitions

A new report from PwC on the effectiveness of the public sector finance function highlights the scale of the challenge facing finance professionals in the sector, if they are to fulfill their ambitions to transform their role from scorekeeper on financial issues to a high performing business partner.

Above the Parapet researched the views of 90 finance directors and professionals across the UK, in central and local government, agencies and health bodies. PwC examined how the function manages itself, how it is perceived, how equipped it is to handle the challenges it faces and whether it has the right people with the right skills.

In the research reported three years ago, 60% of public sector finance directors surveyed said they believed they would be high performing finance functions by 2012. Yet in this year’s research only 4% of those said their functions had reached this level.

Respondents said the critical issue holding back the finance function from being perceived as business partners is a lack of resources and skills, coupled with the challenges of managing significant change. Culture continues to get in the way of an effective, efficient and insightful finance capability, particularly in central government.

The report highlights how challenging the people issues are in achieving the government’s ambitions for a finance transformation across central government, instilling more commercial thinking and cost conscious decision making*. 

60% of respondents said they now had plans for training and staff development in the year ahead compared to just one in six last year. A third of respondents are not at all confident that the appropriate commercial and business skills currently exist within their finance team, with communication skills identified as the biggest gap.

Roger Marsh, partner and Northern Leader for Government and Public Sector, said:

“Six out of ten respondents now aspire for their finance functions to be high performing within three years, but the gap is so large that there is a need for some sort of reality check as to timescales. There is still a huge amount of work needed to translate ambition and aspiration for the finance function to be seen as an insightful business partner, into plans, action and change.”

 Amongst other findings:

• Eight out of ten respondents said increasing the influence finance had on their organisation was the biggest challenge, overtaking cost savings from the previous year’s research
• Overall 30% of their time is spent on efficiency, 40% on compliance and control and 30% on providing insight
• Only 7% rated their procurement activities as high performing; 10% assessed themselves as poor performers.
• 13% of central government respondents reported that a cost conscious culture is embedded in their department ‘to a large extent’, but the remaining 87% said it only existed to ‘some extent’
• Just under two thirds of central government respondents said the simplification of processes would be the single most important action HM Treasury/Cabinet Office could take in helping improve the central government finance function effectiveness

Respondents in the healthcare sector reflected the pressure in delivering up to £20bn in savings over three years, with a lessening of confidence in the finance function’s ability to meet their three year financial targets. 38% said they were not at all confident of meeting their three year cost target, compared to 16% who were not at all confident of meeting their target in the coming 12 months.

 In conclusion, Roger Marsh said:

"If change is to be secured then there are critical ingredients to be addressed. The finance function needs to reshape itself into a more insightful and agile business partner, fundamentally becoming a far more outward looking organisation, seeking out and learning from the best in the public or private sector. This needs the support of the public sector as a whole to develop and retain the finance professional of the future, if the ambitions for a broad finance transformation are to get traction."

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