Peter Hucker: Digital transformation

12 Mar 2024 Expert insight

Fear of change can be a major concern for the charity finance function, says Peter Hucker.

By sdecoret / Adobe

This content has been supplied by a commercial partner.

Speak the words digital transformation and you are likely to receive one of two reactions. You’ll either be met with open arms and open minds. Or concern, worry and mistrust. There doesn’t seem to be much by way of a middle ground. But although it can seem a complex and daunting process, digital transformation can radically improve the way a business operates. This is particularly true within the finance function.

In 2021, Xledger commissioned a research project, the Future CFO, which explored the evolving role of the CFO. Digital transformation was, naturally, a common recurring theme within the C-suite. Our most recent research project takes this further, exploring the uptake, or lack thereof, of digital transformation across finance teams. Fundamentally, what it shows us is that there are still many concerns and hesitations... and we see a lot of these running through the charity sector.

Digital transformation: what the data is telling us

Some 78% of charity finance professionals believe that digital transformation would be helpful to their organisation. Only 8% believe that it would be detrimental, while 14% stated neither. However, we’ve also found that only 16% of charity finance professionals feel equipped to forecast ahead of a potential recession.

With that in mind, we can say with a fair degree of certainty, that the charity finance function can see the benefits of digital transformation within their organisations; sounds perfect, but after this we start to see issues arise. Almost a third also stated that digital transformation causes them concern, on the grounds that the tools they have are familiar.

The issue of familiarity has long been an issue in finance, as those within this area are naturally risk averse. But there comes a point in the lifecycle of a company when things have to change, and this kind of mentality can actually be damaging for future progress and success. So why do these hang-ups exist, and how can we get over them?

The hang-ups

Our research goes further, exploring the reasons behind some of these digital transformation hang-ups, and helping to paint a more detailed picture of the lack of uptake in this critical area. Over one-fifth (22%) told us that they fear a long changeover period could cause problems, delays backlogs and productivity issues.

Whether it’s fears around a negative impact on productivity, or something else holding the sector back, what is clear is that short-term concerns are having a sacrificial impact on long-term gains.

Digital transformation is all about the bigger picture. The “if it’s not broken then don’t fix it” argument cannot, and should not, be brokered as an excuse to not advance your organisation. Because something doesn’t have to be broken, to be improved.

But, before we go further, it should be noted that these concerns are not unfounded. It genuinely is difficult to navigate change. Especially for a function that’s built on stability and surety. In finance, change can be a slow process. Because the finance function is quick to learn, but slow to trust, we are seeing that people and teams would rather stick with something that isn’t working, than run the risk of trying something entirely new. When it comes to digital transformation, the real issue at hand is the fear of change.

A fear of change? Or a fear of getting it wrong?

When it comes to changing finance software, it can be a time-consuming process, which is why the partner selection is crucial. We see this in our research too, as one in 10 in the charity sector stated that they were not concerned about digital transformation, but only if they had the right product or vendor.

But, when facing macroeconomic uncertainty, a short-term mindset may hinder future success. Apprehension and change are all important challenges to confront and address. Because, after all, the digital transformation journey is less about the technology itself, than it is about the people and the process.

Gartner’s Top 5 Priorities for HR Leaders in 2023 gives us some valuable insight into the concept of change fatigue within businesses. It tells us that employees are losing their willingness to cooperate with change and that change fatigue is contributing to greater levels of turnover.

The more change teams are experiencing, the more their willingness to embrace and adapt reduces. What this tells us about the digital transformation journey, is that it must be a concerted and thought-out strategy, rather than ad hoc pivots. Which is why digital transformation needs to be a fully thought-out and road-mapped concept. With a clear digital transformation roadmap and concise instructions as to the changes in process, organisations can better manage their digital transformation journeys.

With C-suite leaders bringing their whole teams on the journey with them, change fatigue can be mitigated and digital transformation strategies successfully executed. Productivity issues can be minimised, and everyone can be brought onto the same page. This is true because the evidence is already there to support it.

Digital transformation in action

Those who are utilising technology and committing to digital transformation are seeing the benefits. The findings of Xledger’s Charity Digital Finance Report mirror that. Some 40% of charities stated that their biggest challenge was how to use data to inform strategy and decision-making. Over half also state that rising costs are putting more pressure on their day-to-day functions and taking their attention from more strategic planning.

But we’ve found that 60% of charities that have already adopted cloud computing can access real-time data ‘very quickly, whereas the two-thirds that have not implemented cloud computing cannot access their financial data as quickly as they need. When it comes to data-led strategic decision-making, the speed of access to data is critical. These numbers prove that technology is making a difference here.

Research aside, we’re also seeing this within our customer base, with Comic Relief for example. What’s interesting here is that Comic Relief had been using the same processes and software for nearly 25 years – knowing that it could be better, but not wanting to commit for fear of affecting productivity. Here were some of the key takeouts from its experience:

Identify the red flags.

Road mapping your journey is important. Hindsight is always 20/20, but do everything you can to get ahead of potential issues and sticking points, and implement realistic expectations and achievable outputs to meet these challenges.

Look beyond the go-live date

It can be all too easy to focus on the go-live date, and nothing beyond that. But this brings a certain level of jeopardy. Take integrations for example, if you’re only testing these out after they go live, what happens if you find bugs or inefficiencies? This will just lead to bad data, so make the time to test everything prior to going live. Even if this means a longer process, it’s better in the long term.

Who’s training who?

Consider how you’re sharing knowledge of new systems. Having super users, who undertake all the training, but are then responsible for rolling out internal training is one approach. But it may not work for everyone. Often there’s a lot of information for just a few people to take on and then distribute.

Simplify the integration process

Ideally you would have someone to lead and maintain the integration side of things. If you have the capability to have this kind of support internally, then it can make the process a lot easier. However, if you find yourself lacking in this department, your finance software provider should be able to guide you towards other solutions such as third-party integrators.

Don’t be tempted to just retrofit

Spend the time to plan out and consider what good looks like for you. What do you want your new process to look like once you’ve implemented a new system? Don’t just put a new system and try to retrofit your old processes around it.

Taking a forward-looking approach

It’s worth recognising that every organisation is different, so approaches will always differ. This is why the most important digital transformation decision you make is the supplier you choose.

Of course, you should choose a provider that’s an expert in their field. One whose project managers, consultants and support teams should be with you every step of the way, ensuring implementation is as seamless as possible. But, don’t just pick something off the shelf, or the first provider you speak to. You need to take the time to ensure you’re picking a vendor, or a partner, that works for your business.

If growth is part of your strategy, then you need to factor in how you scale with that supplier. Because you may find yourself in a situation later down the line, where you need to implement a whole new digital transformation strategy. All because, in hindsight, you went with the wrong partner.

This brings us full circle, to the idea of change fatigue. Perhaps it isn’t a fear of change fuelling digital transformation concerns; maybe it’s the fear of getting it wrong and ending up right back where you started. But whatever the concern, there’s a simple answer. Take the time to develop your digital transformation strategy. As members of the finance function, do what you do best – be strategic, be analytical, be detail-orientated and plan it out.

Peter Hucker is CEO at Xledger

Charity Finance wishes to thank Xledger for its support with this article 

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