Ep. 38: Steve McNally - Business Transformations

Steve McNally, CMA, CPA, is the CFO of PTI Family of Companies. He is a Finance Executive, Transformational Thought Leader, and Business Partner who is results-driven and experienced in leading transformative projects for overall continuous improvement. Steve is recognized for his expertise in governance, risk management, and internal control, and uses that expertise along with his global work experience to optimize performance and add value across organizations. In this episode, he explains his perspective on business transformations and shares some best practices for those considering any one of the various business transformations that are popular in today's business environment. There are a few keys to ensure a successful business transformation, and Steve McNally is here to make sure you are aware of them all! Download, listen, rate, and review now.
Steve's Articles:
  1. https://sfmagazine.com/post-entry/november-2018-business-transformation-no-pain-no-gain/
  2. https://sfmagazine.com/post-entry/october-2018-catalyst-for-change/
: (00:00)
Hey everyone, this is Count Me In, IMA's podcast about all things affecting the accounting and finance world. I'm your host, Adam Larson and I'd like to welcome you back to another episode filled with valuable insight from an industry leader. Steve McNally is a CFO, board director and thought leader who joined Mitch to talk about business transformations. While business transformations may not be new to accounting and finance, Steve provides practical steps, best practices for setting up implementing and completely successful transformations for your organization. Keep listening as we're going to head over to their conversation now. 
Mitch: (00:40)
How do you define business transformation? 
Steve: (00:50)
Typically based on my experience, transformations are big, complex, expensive, time consuming and at least theoretically you hope so to have a significant positive impact because simply I believe transformations are all about trying to change the way you do business with on a global enterprise wide scale well on one is more limited 
Mitch: (01:14)
And what is the current nature of business transformations.
Steve: (01:19)
In terms of current nature? My first remark is transformations have been around for a long time. Maybe the word itself is used a whole lot more, but transformations had been around for quite a while. One of the most typical examples of transformations would be ERP and or software implementations. For example, SAP. I know that's one of the big ones I did in my career. That's it. Other kinds of transformations include keeping up with regulations, whether you know, a couple of years back, Sarbanes-Oxley more recently from a finance accounting perspective, the revenue recognition standards, the lease standards, other gap changes under other regulations and these kind of regulation changes really force in some cases a company wide change in how they do business. Other typical transformations would include, for example, in house versus outsourced services type decisions, uh, within finance and accounting. For example, decisions around, you know, typical plant finance and accounting responsibilities. Should they be done in house or is it more efficient, more effective to outsource and offshore them and in some cases, is it more efficient and effective to bring them back in house. Another kind of transformation occurs when there's been a major change in key leadership. Whether your CEO, your CFO, other personnel changes, like head of a division anytime there's a significant personnel change, it's going to change not just that person and that team, but it'll have ripple effects throughout the organization. Also, there could be outright end to end process changes within a company organization. For example, a services company that does engineering work for others might be rethinking this project process flow, trying to optimize that activity. And that really will affect all the different individuals in the company. All the different functions and partners within that company. Another type of transformation would be M and a mergers and acquisitions, whether you're on the acquisition end or you're the company being acquired, but when there's a merger of these two different companies and cultures, it's going to be a significant transformation. And lastly, one thing that drives transformations is keeping up with growth. If you're a small startup and things are going really, really well, you're going to have to keep up with that from a personnel perspective and manufacturing perspective, a process and policy and procedure perspective, a financing perspective. So all these are different things that could drive a typical transformation or need for transformation. 
Mitch: (04:05)
So in your opinion, from the different reasons that businesses have gone through business transformations, can you explain some of the best practices that you've seen for setting up and initiating the overall transformation? 
Steve: (04:18)
Sure. I think there's really three, three key best practices or three things that feed into that. First of all, you really need a compelling business needs. So what is the problem you're trying to solve? What are the underlying root causes? Are you trying to overcome the tough competitive environment and you delay investments for a number of years and now you need to catch up or the new regulatory requirements. So what is that compelling business need to initiate this transformation? And of course the transformation requires significant investment in time and the resource people and money. So you want to be sure it's the right thing to do. The second thing is your case for change. So you as the leader, you may have the vision, you may know that you need to make a change within your company, within your organization. However, you're not going to get there alone. You need a core team that's going to work with you and you know, day to day make this transformation happen. And then you need other champions who are going to be out there, the key stakeholders to buy in and to support the initiative that you're focused on. But you need to create this case for change to make sure that you win the hearts and minds of all these individuals who are going to make the industry initiative. They'll make the transformation a success. And then the third thing, the third best practice I would say is project plan. So in general, a project plan really helps you articulate what you're trying to do. Gain alignment at all levels within the organization and alignment on project scope, on milestones and timelines on the budgets. So overall, make sure that you have clear line of sight of what you're trying to devote to deliver and how you're going to deliver it. That's it. A solid plan. It's all a project plan to be highly motivational. It can help you celebrate the milestones as you're going along and it can also help you quickly identify if you're going off track. That's what a good solid project plan will do for you. But you also do need to be flexible. So a project plan, in my opinion, the project plan that you've managed centrally. Depending on how big, how complex your initiative is, the core project plan should be, the highlights should be the big picture of what you're trying to accomplish. And then there's various sub teams and those sub teams should really manage their own details. And the other way that a project plan should be flexible, especially if you're dealing with a project that could last, I don't know, 1212 months or more, even two or three years. In that case, you're not going to detail out the plan from start to finish. But rather I would suggest you should detail out the plan for the first, is it three, six, nine months, but have milestones along the way and go no go points along the way. And as you approach a note, well at that point then you detail out the next phase in the next phase. So a project plan can be really helpful and insightful, but you also need to be flexible with it. 
Mitch: (07:42)
Now I know a project plan typically incorporates a lot of cross functional needs and what you need from other departments. So from your experience, which functions of a business typically realize the greatest effects of a business transformation following the implementation of this project? 
Steve: (08:00)
Well, that's a hard question to answer in that it really depends on the nature of the transformational initiative itself. As we said, it could be a software implementation, it could be, an in house versus outsource services type project. It could be impacting a specific function, a specific division, or it could be impacting the entire company. So it really depends what the initiative is. That's it. For example, let's assume you, you're running an initiative to change your, your go to market strategy in terms of trade spend. So you're a CPG company and you know that based on benchmarking, you're spending way more on trade spend than your competitors are. So in that case, the core project team is, is going to be sales related, field for example, and they're going to be the ones that had the direct impact. However, as you roll out that change, it's going to have implications for the support functions as well. So if for example, that project changes how the field sales organization is structured and or how they fund their customers with trade spend projects, well then you may need to change your systems, you, which could impact your it folks, you could change or impact your financial folks could impact your HR folks as well. So that's one example where the core is the sales organization is going to be impacted, but the support services as well in addition. Another example I would throw out would be the company's decided to implement a global services group. So historically, human resources and supply chain and finance services and market research and other functions. Historically that was all within the respective divisions. But going forward, the company wants to create a global shared services group. So first the people that are directly impacted first are those in those functions who are performing those roles and responsibilities because now they're being pulled out from where they were and they're all being centralized into this new group. And centralized could be physically centralized or it could be personally centralized. But the point is there's now new reporting structures for the HR, the finance and supply chain, the market research and other, individuals. So they're directly impacted. However, this global shared services group, it's still going to be benefiting and supporting those divisions. So those divisions are clearly impacted as well, those other stakeholders. So, and in those divisions you'll have maybe a small group of human resource or finance or supply chain or market research or it folks that are still in the division, but now they need to interact different with those that are in the shared services group. So it really depends on the nature of the transformation, but there's a core group that are directly impacted but almost always is going to be support functions. And or customers who are impacted as well. And you really need to think through, think through that new relationship 
Mitch: (11:31)
In planning for the overall business transformation. What challenges should an organization expect or what potential pitfalls do you think they should be aware of? 
Steve: (11:42)
From my perspective, there's really five potential pitfalls that could impede transformational success. So the first is neglecting the people. So as we already discussed, your people ultimately will make or break a transformation. You can't get there alone. Your people include that director core project team that's making it happen. And the people also includes the cross functional stakeholders and individuals impacted by the change. And ultimately the people include truly all levels of individuals within your organization depending on what the change is that said your people either for or against the initiatives. And that's why it's so important that you sell in what you're trying to do upfront to that compelling business needs. And to that really effective case for change. And then as you're working through the initiative and go live with the transformation and you know our post go live, you need to be focused on change management. You need to communicate throughout the process. You got to keep those people on board. You got to continue day by day winning their hearts and minds to support this initiative. The second pitfall is that the initiative, the transformation, maybe bigger, a bigger challenge than anticipated, whether give you poor planning. So if you didn't invest the time upfront to really think through what you're trying to accomplish and what it would take to get there, it could be a simple scope creep. I'm sure we've all seen projects where upfront you've defined the scope, but then things change and they're just small increments. But you know when there's ten, twenty, a hundred, thousand small increments, all of a sudden that little scope creep becomes a big deal. And or , it might be a bigger challenge than anticipated due to unintentional business changes. So unfortunately, you know, the world doesn't stay still. Business is changing. The markets that we play in are changing and therefore sometimes we need to react despite our best plans up front. The third pitfall is unexpected vocal law. So for example, you might have the best team in the world focused on your initiative. However, if a team member leaves, whether they move to another department within the organization or whether they leave the company outright, that has an impact. Another unexpected roadblock, you might be implementing new software. You've clearly defined your, your requirements. And then the software developer comes back to you days before you expect it to go live to say, Oh, we just couldn't deliver it or we couldn't deliver it time and you need to react to that. And then the third thing is, um, new business needs might be identified. So again, business is always changing. And despite our best efforts, sometimes we just need to be agile and react. In fact, more often than we need to be agile and react. The fourth pitfall or would identify is the inability to execute. So you might have a great strategy, a great plan, but you might be unable to execute it. Why? Maybe you don't have enough resources or maybe have the wrong resources or maybe you're dealing with poor leadership, but any of those things could cause you not to deliver. And then the last pitfall I'd highlight is the the sustainability challenge. So all the time and focus is on that go wide getting there. And how many initiatives have we seen where we do a great job identifying who's going to be impacted, we effectively train them for that go live and then everyone goes on with their life. Well unfortunately people are gonna leave. And what's your plan to retrain them for requirements are going to change as the business changes. How are you going to deal with those requirements? And or if it's software that you're talking about, upgrades will be needed. Well, who's going to manage the upgrades and what are the implications of that? So you're really, if you're not careful, the sustainability challenge, you've done a great job, made this great investment, but then you're going to be burned in the long run because you don't adapt accordingly. So sum it up, there's really five key pitfalls. Neglecting your people. The challenge is bigger than anticipated. Yeah, identify unexpected roadblocks. You have an inability to execute and the sustainability challenge. 
Mitch: (16:29)
What are the keys to a successful transformation? 
Steve: (16:33)
In my opinion, there are seven keys to a successful transformation. The first is a clear, having a clear vision clearly seen where you want to go, what the end goal is, what the deliverable is. Second is alignment. Ensuring that you have clearly articulated the goals and objectives and the resource requirements and have aligned with senior management and aligned with the different teams that are impacted. And the other stakeholders. Third is change management and communication. So you as an individual may see where you want to go or may know where you want to go, but you need to bring others along with you because only with the support of others will you be successful. And to do that, you need to effectively communicate what you're trying to do and work through change management. So once you get to that go live of your initiative of your transformation, people are prepared for that new reality. The fourth key to a successful transformation is trust. Trust within your immediate team, trust throughout the organization. The fifth is seizing opportunities. So sometimes you might think you know exactly where you want to go, but as you're along that journey, ideas pop or or new possibilities pop in front of you and you need to make a choice. Do you seize those opportunities or do you pass them by? And I would suggest you need to be prepared to seize those unexpected opportunities. The six key is having a highly engaged team and having that highly engaged team goes back to quite frankly, having the trust, having really prepared them through a compelling business need and case for change and communication. Having that clear vision and getting them to work with you. And then the seventh key is a having a continuous improvement mindset. Always being open to the belief that you're never there completely. There's always going to be opportunities to do it a little bit better, a little bit more efficient, more effective, quicker, whatever it is. So overall, I would say there are seven keys to successful transformation, a clear vision, alignment, change management, communication, having trust within the team, seizing opportunities, having a highly engaged team, and always maintaining a continuous improvement mindset. 
Mitch: (19:08)
And finally, how about those who are leading business transformations? Which skills are most valuable and how do you think, a person or a leader can develop and apply these skills? 
Steve: (19:22)
I would say there's a couple key skills that really helps one be an effective leader in terms of leading to transformation. So first is be an effective business partner, especially as a financial person. If you're the financial leader on an initiative or the outright leader of an initiative, but you're the CFO or the finance director, taking that role, being an effective business partner is first and foremost. Second, in general business acumen. The more you know about your business and the operations and the environment in which you work, the more effective you'll be in defining the case for change. And the compelling business need and leading the project throughout to go live. The third thing is strong communication skills. So as we've been talking through this, that has been a pretty consistent theme I believe you need to ensure upfront that you get people to buy into this initiative that is the right thing to do throughout the initiative. You want to keep them on board, you want them to be supportive and you want to be preparing them for the changes that are coming down the line. And that's all about communication, leveraging every communication skill you have or there's written verbal meetings. The fourth thing is a positive do attitude. So there will be hiccups. We will be roadblocks along the way and maintaining that positive attitude and even instilling that positive attitude in your core team and throughout the organization becomes critical. Another key skill is being are key qualities, being inquisitive, asking questions. And part of that is you might go into the initiative thinking you know the answers or the direction you want to take. However, as you go through it and there's more learnings because you're inquisitive, asking questions, you might realize there's a different direction you want to go that's more efficient or more effective or will allow the business to be in a better place. And then the last, well another thing is attention to detail. So that's one of the qualities we have finance folks really have to offer is our attention to detail. And when you're dealing with a significant project, you know, multiple sub-teams, multiple milestones that attention to detail, ensuring that all the sub teams are on track or moving forward, that all the pieces are coming together. Managing that project effectively and providing that oversight is absolutely critical. And then lastly is having a continuous improvement mindset. So big picture, you know where you're going, but along the way there's always going to be opportunities to do things more efficient, more effective, whether it's in the project management itself or the deliverables of the transformation you're doing. Even once you get to go live, that's not the end. There's going to be further changes. And therefore having that continuous improvement mindset enables you to stay ahead of it versus falling behind it. 
Announcer: (22:40)
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